Airport contractor accused of faulty work in New York

May 5, 2008

An Indianapolis firm helping oversee construction of the city's $1.2 billion midfield terminal is facing accusations from Southwest Airlines that it failed to ensure the quality of a $12.4 million concrete apron at Long Island MacArthur Airport.

Aviation Capital Management, a 6-year-old firm with about 15 employees, is just the latest target of finger-pointing in a construction debacle at Southwest's $82 million terminal expansion at MacArthur, in Islip, N.Y. Large cracks appeared in the apron outside gates five to eight shortly after the terminal was completed in 2004.

ACM has a $7.5 million contract with the Indianapolis Airport Authority to oversee certain terminal and air-side functions of the massive Indianapolis project, including midfield's baggage system.

It is a subcontractor to parent BSA LifeStructures, the 350-employee Indianapolis architecture/engineering/design firm that is owner's technical representative for the Indianapolis Airport Authority on midfield.

Indianapolis airport officials say the New York fracas has no bearing on ACM's work on the terminal here, which they say has been satisfactory. The officials also say ACM now has different leadership than it had when it worked on the Long Island project.

Still, these kinds of lawsuits make aviation firms wince if only because of their potential to ding hard-fought reputations for quality.

"ACM has gained the trust and confidence of clients for some of the most significant aviation projects in the world, including the $1 billion Indianapolis midfield terminal program and the largest airport project ever undertaken by Southwest Airlines," the firm states in marketing materials.

The crumbling apron at MacArthur became a scandal in Long Island politics, involving everyone from paving contractors with shady pasts to New York Sen. Chuck Schumer, who blasted airport administration.

Perhaps more significant is that the cracks in the five-acre apron were considered by some a potential ingestion hazard for Southwest's Boeing 737s. Their engines droop low to the ground. Some worried the cracks could trap and conceal debris easily vacuumed by 737 engines.

A consulting firm for the town of Islip, which owns the airport, warned that delays in repairs would affect "aircraft operational reliability and safety," Newsday reported last year. Repairs are scheduled to start this spring.

Legal battle begins

Dallas-based Southwest hired ACM in 2002 to be its primary interface with various design and construction firms involved in the ramp project.

At first, it escaped litigation initiated by Southwest in 2006 against Holtsville, N.Y., contractor Pav-Co Asphalt and engineers involved in the project.

However, last February, Pav-Co and the surety company that issued it a $6.7 million performance bond, Fidelity and Deposit Co. of Maryland, filed suit against ACM in U.S. District Court for the Eastern District of New York.

Pav-Co and Fidelity argued that ACM and other groups in an oversight capacity had a duty to ensure the quality of work by contractors. Southwest took the same tack in its complaint against ACM filed April 16 in New York federal court.

"Pav-Co and F&D ... allege that to the extent any test, report or other observation indicated that any work and/or material associated with Pav-Co's work was nonconforming or defective, ACM and others owed a duty to so advise SWA and Pav-Co and breached that duty," states Southwest's suit.

Despite last month's filing against ACM, Southwest still is laying primary blame at the feet of Pav-Co and engineers. The Southwest suit offers no evidence to fault ACM.

"Southwest Airlines asserted alternative claims against ACM to ensure that it would obtain full recovery in the event a jury were to conclude that ACM has some liability as alleged by the defendants," said Whitney Eichinger, a spokeswoman for Southwest.

What it amounts to is that ACM is a third party in the MacArthur legal battle, said Don Altemeyer, vice chairman of BSA LifeStructures, which owns ACM.

Attorneys for ACM have broadly denied allegations made by Pav-Co and Fidelity and adopted by Southwest.

'Different gang'

The allegations could pose financial liability to ACM and its insurer. But it doesn't appear to have affected ACM's current work at Indianapolis International Airport.

Altemeyer and airport officials were quick to point out that ACM's work in Long Island involved a different team than the one working on the Indianapolis midfield project. The New York project was led by former ACM head Andrew Vasey, who now runs his own Indianapolis-based aviation consulting firm, Vasey Aviation.

Vasey could not be reached for comment. His firm also was named in the Pav-Co complaint but later dropped after Vasey's insurance carrier elected to provide coverage for claims, court records say.

"The work of the BSA/ACM midfield team has certainly met my expectations. The Islip, N.Y., team was totally a different group, which worked with different leadership. It is my understanding that that team no longer works for ACM," John J. Kish, midfield project director and executive director of the Indianapolis Airport Authority, told IBJ in an e-mail.

ACM is now headed by Richard Potosnak, another aviation veteran whose work includes representing US Airways in the construction of Pittsburgh's $850 million midfield terminal in the 1990s.

"That's a whole different gang," Altemeyer said of ACM's new principals.

One of the ACM senior managers who worked on the Long Island project, as identified in documents in the Southwest lawsuit, is still listed as a principal on ACM's Web site.

In a 2005 press release, ACM said its employees "are directly managing over $71 million worth of design and construction contracts held directly by and paid for by Southwest Airlines" at MacArthur.

That amount also included "planning, project management and cost-control services" for the extension of Southwest's existing terminal and addition of four new gates.

New York mess

A report issued last year by the consulting firm hired by Islip said MacArthur's apron should be rebuilt, perhaps costing $10 million or more, according to Newsday.

The consultant's report blames poor workmanship and lack of quality control for allowing water to penetrate the base under the concrete. It also blamed poor concrete quality. Pav-Co's bond firm, F&D, has said the construction firm is not responsible for deficiencies in design of the MacArthur apron.

In 2005, Pav-Co and principal William Fehr Sr. were indicted on two counts in a bid-rigging scheme in Suffolk County, N.Y., and the town of Brookhaven, according to the Federal Highway Administration, which has suspended them from participating in federal projects.

Indianapolis' 40-gate midfield terminal is set to open late this year.

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