Lynn Water and Sewer Commission fires contractor USFilter

By Thor Jourgensen
February 24, 2004

LYNN -- The Water and Sewer Commission fired sewer separation contractor USFilter Monday after the firm balked at restoring a $15 million job performance guarantee.

The commission will meet on March 8 to start the process of selecting a new contractor to finish the project, including $15 million worth of work in downtown and East Lynn and potentially $25 million to $40 million of additional West Lynn work.

Commissioners James Cowdell, Walter Proodian and Jeffery Hayward referred to a "breach of contract" clause in the commission's contract with USFilter in voting to fire the firm.

"USFilter is done. I don't want USFilter in the city," Cowdell said.

The vote brought to a climax finger pointing and political maneuvering that began in December when the commission learned that the performance guarantee, also known as a letter of credit, had expired in 2001.

The letter of credit served as security for the performance of the company's obligations, setting aside money the commission could draw on if it was dissatisfied with the company's work.

In December, the commission voted to withhold payments to the company until the letter was restored. Cowdell and Mayor Edward J. Clancy Jr. met on Jan. 22 with top company executives to attempt to hammer out differences and restore the letter of credit.

Cowdell and USFilter Vice President Christopher Hodgkins Monday offered conflicting versions of the agreement reached at that meeting.

Hodgkins said the executives understood they could negotiate disputes over pipe laid without commission approval in East Lynn and the added West Lynn work before the letter was restored.

We wanted to sit at a table and negotiate, then reinstate the letter," he said.

But Cowdell said he and Clancy made it clear during the meeting that restoring the letter was "undisputable.

"As our insurance, it's a non-negotiable item," Cowdell said.

Hodgkins acknowledged Monday that USFilter was unwilling to restore the letter as long as Ward 6 Councilor David Ellis was serving as commission chairman.

"No one was willing to turn our wallet over to Mr. Ellis," he said.

Cowdell, working with Clancy, removed Executive Director Stephen Smith from his job on Feb. 9 and yanked Ellis off the commission the next evening.

After spending political capital to ease tensions at Water and Sewer, Clancy and Cowdell were clearly miffed Monday to learn that USFilter was still insisting the January 22 meeting called for negotiations on the letter of credit.

"They lied to me. I'm from West Lynn where your word is your bond. These people aren't from West Lynn," Cowdell said.

Hodgkins said USFilter is still willing to negotiate restoring the letter. Clancy said the letter must be in place before further talks are held with the company.

USFilter has been paid $33.3 million in the last two years to lay separate storm and sewer pipe networks in East Lynn. The commission owes the firm $3.5 million in payments. That outstanding balance rose by $959,000 Monday night when the commission also voted to withhold payments associated with the pipe work dispute and the letter of credit.

Clancy attended last night's meeting along with four of Cowdell's council colleagues including Ellis, who said the vote "vindicated" his criticisms of USFilter.