County Withholds Funds for Airport Work

In a rare move, Orange County officials have withheld $111,000 in payments due the prime contractor on the new, $48-million John Wayne Airport passenger terminal because of a dispute between the firm and a subcontractor.

County officials said, however, that withholding some payments on the already beleaguered project is not expected to delay its April 1, 1990, opening date.

The money involved in the dispute involves construction problems that arose months ago and are already being corrected, officials explained. They also said that, under state law, they had no choice but to withhold the money.

“Withholding funds from a prime contractor happens once a year, if that,” said Charles Niederman, director of facilities, property and transportation for the county General Services Administration. “Generally our contractors have very good relations with the people who work for them.”

County officials took the unusual step of withholding money a week ago Friday, project supervisors said, after a subcontractor, Structural Beton Inc. of Rancho Palos Verdes, filed a formal stop payment notice with the county to halt disbursement of funds to the prime contractor, Taylor Woodrow California Ltd.

Ed Shahnazarian, president of Structural Beton, is the same subcontractor who last week accused Taylor Woodrow of violating state law by hiring subcontractors for major work that Taylor Woodrow was obligated to do itself. Taylor Woodrow has declined to comment on the accusation.

In a letter to the county Board of Supervisors, Shahnazarian said that Taylor Woodrow’s hiring of his own firm was proof of such violations and that he knew of other examples as well. But county officials said their decision to withhold funds had nothing to do with that issue, which is still under investigation.

“Under the law involving stop notices, we have to withhold funds whether we agree with it or not,” said Richard Begley, airport expansion project manager.

Last fall, the county withheld more than $1 million from the airport terminal’s architects in a dispute about cost overruns and alleged design mistakes.

Also, subcontractors recently threatened to walk off the job because of slow payments from the county to Taylor Woodrow and hence the subcontractors.

Shahnazarian’s dispute is more complicated. He says that Taylor Woodrow has reneged on a severance agreement in which he was supposed to receive $111,000 after completing a third of the work on the terminal’s concrete foundation. Taylor Woodrow officials, however, say Shahnazarian’s firm failed to install certain anchor bolts properly in the foundation, resulting in fixes that are expected to total $200,000. Shahnazarian has strongly denied any wrongdoing on the project.

Chris Elliott, Taylor Woodrow’s project chief, said he expects his firm to secure bonding for the disputed $111,000, a move that would allow the county to release funds to his company.

County officials last week deducted the disputed $111,000 from a payment of more than $1 million to Taylor Woodrow for work completed as of Dec. 31. “We tore up one check and wrote another after deducting the $111,000,” said Begley.