The town of Lyons filed suit on February 16, Friday, against Honeywell International Inc. (NYSE: HON) and a group of subcontractors over what it alleged was a years-long failure to properly install upgrades to its wastewater plant.
In 2010 the Town hired Honeywell to upgrade the town wastewater plant, in order to reduce the amount of energy needed to run the plant. The contract was estimated to be for a maximum of $5.86 million. Honeywell worked on the designs for the next three years. The Great Flood of 2013 caused some interruption. The town gave Honeywell an additional $443,041 to replace some of the existing equipment that was damaged by the flood. The upgrades started in April 2014.
In July 2015, the Colorado Energy Office notified the Town that Honeywell’s contract as a pre-approved energy services company with the state had expired.
More changes were added to the contract over the course of construction. This brought the total maximum value of the contract to just less than $7.07 million, according to the lawsuit. But the rise in cost was not the only concern for the Town. A few months after delivery of the project, Lyons alleges that a measurement report from Honeywell and Tetra in October 2017 showed that the plant was costing the city more energy usage than it did before the upgrades were done, due to a higher level of oxygen demand from microorganisms breaking down organic matter in water. This is also a sign of worse water quality.
Add to that major problem some items that the Colorado Energy Office told Lyons officials about the value increase charges were not justified when compared to the performance on the project and that some of the provisions that the company inserted into the contract did not comply with the office’s rules. Honeywell continued to go back to the Town for more contract increases over the next couple of years.
The suit also lists that the plant produced more sludge from biosolids processing than expected, and only recovered 73% of the biosolids in the sludge versus the expected 98%, reducing the plant’s efficiency overall. This caused the Town to issue a sewer rate hike in November 2018 to cover the additional costs of processing.
The Town issued a breach-of-contract notice to Honeywell in October 2018. They backed up their claims with a report done by a water-engineering firm that examined the plant. Lyons is seeking a jury trial and damages for breach of contract and fraud and is seeking damages for the plant’s construction, operating and financing costs, along with other damages to be determined at trial.