WATSONVILLE, Calif., July 11 /PRNewswire-FirstCall/ -- GraniteConstruction Incorporated (NYSE: GVA) today announced that GraniteConstruction Company, a wholly owned subsidiary, and the Oregon Department ofTransportation ("ODOT") have reached an agreement in principal on a negotiatedtemporary suspension of the US 20 Pioneer Mountain to Eddyville Design-Buildproject.
ODOT awarded the $130 million highway realignment contract to YaquinaRiver Constructors ("YRC"), a joint venture team comprised of GraniteConstruction Company and Wilder Construction Company (a majority-ownedsubsidiary of Granite Construction Company) in July 2005. The design for thenew seven-mile roadway included eight bridges to be constructed over creeks,rivers, and a railroad. During the course of construction, numerous andmassive landslides at critical sections of the project were discovered. As aresult of additional anticipated costs and time related to these landslides,in March 2007, Granite requested that ODOT either terminate or suspend itscontract.
After several months of negotiations, Granite and ODOT have agreed that inlieu of terminating the contract, it is in the best interest of the parties totemporarily suspend work. This suspension will allow time for both parties tojointly complete additional geotechnical site investigations and explorealternative, less expensive landslide mitigation solutions. Under the terms ofthe agreement, construction work on the project will be suspended beginning onor about September 1, 2007 and will resume no earlier than June 1, 2008.During the suspension period, a small team of YRC management will remain onthe project to ensure that all environmental protection measures aremaintained. Costs associated with the temporary suspension will be sharedbetween ODOT and Granite.
The negotiated temporary suspension agreement, however, does not stipulateresponsibility for the landslide mitigation costs. Both parties have agreed totake the issue to the standing Dispute Review Board ("DRB") under the disputeresolution provisions of the contract. Upon resolution of this issue, andagreement on the final cost and schedule to complete the project, Granite willrestart construction under a signed change order issued by ODOT with noassociated unresolved revenue issues or disputes.
At March 31, 2007, the US 20 project was forecasted at a loss ofapproximately $20.0 million. Although Granite believes there is the potentialfor this amount to be reduced, there is remaining uncertainty surrounding theultimate determination of responsibility for the landslide mitigation costs.As a result, we do not anticipate recording any adjustments to our projectforecast during the quarter ended June 30, 2007.
About Granite
Granite Construction Incorporated is a member of the S&P 400 Index, theDomini 400 Social Index and is the parent company of Granite ConstructionCompany, one of the nation’s largest heavy civil contractors and constructionmaterials producers. Granite Construction Company serves both public andprivate sector clients through its offices nationwide. For more informationabout Granite, please visit its website at http://www.graniteconstruction.com.
SOURCE Granite Construction Incorporated
