A non-standard coating specification decision will cost Canada’s Greater Vancouver Water District $4 million, after the coating failed along nearly two miles of new water pipe, a judge has ruled.
British Columbia Supreme Court Justice Laura Gerow ruled that the coating failure was the fault of the water district’s specification, not the supplier, North American Steel and Pipe (NAPSteel), or the coating inspector, Moody International.
Therefore, Gerow ruled, the water district must pay for the pipe (plus interest), which it had refused to do.
2 Water Projects
At issue was a total of 1.7 km of 60-inch diameter pipe and 1.15 km of 84-inch diameter pipe manufactured for two large projects in the British Columbia water district in December 2005.
NAPSteel, with offices in Canada and Washington State, received a $3.66 million contract to supply the pipes. The water district then retained Moody in January 2006 to provide inspection services during manufacture of the pipes by Dong Yang Steel Pipe Co. Ltd. in Korea.
According to the 47-page court order issued Thursday (Jan. 13), the supply agreement included these specifications:
3.1 Coal Tar Enamel Coating
.1 The exterior of the pipe shall be cleaned, sandblasted, primed and coated with coal tar enamel wrapped fiberglass wrapper, seal coated and finished with a single wrap of kraft paper according to AWWA C203.
.2 The resultant construction of this exterior protection in order of application shall be:
.1 Coal tar primer, Type B, (primer to extend to the ends of all pipe).
.2 Coat tar enamel, Type II, 2.4mm + 0.8 mm (3/32 inch + 1/32 inch) thick.
.3 Bonded coat tar coated fiberglass felt (AWWA C203 126.96.36.199).
.4 Coal tar enamel seal coat, 0.8 mm (1/32 inch) minimum. The seal coat may be omitted, if in the Corporations’ opinion, sufficient tar has bled through the felt.
.5 Kraft paper finish coat.
However, the judge noted, the AWWA C203-02 standard—an internationally recognized standard for the supply, inspection and repair of CTE coating—“does not contemplate the application of a seal coat over a glass fiber mat outerwrap.”
Nevertheless, the water district signed off on Manufacturing and Mill Inspection Procedures forms (MIPs) provided by Dong Yang, and the district received weekly progress reports and photos during manufacturing.
The pipes were delivered between April and June 2006, when they were visually inspected, underwent a peel test, and were accepted by the water district.
‘A Widespread Problem’
The pipes were then stored until June 27, when one of two installation contractors notified the water district that the anti-corrosion CTE coating on the pipes appeared to be deficient.
The next day, the water district investigated and determined that there was “a widespread problem with the CTE coating due to a lack of proper bonding between the fiberglass felt and the CTE, and some instances of a lack of proper bonding between the CTE coating and the steel,” according to the court.
The water district then filed suit against NAPSteel and Moody over the problem, alleging breach of contract and refusing to pay for the pipe. The water district claimed that the anti-corrosion CTE coating was delaminating and would reduce the life of the pipe by up to a third.
Both firms countersued, however, arguing that the coating had been manufactured and inspected in accordance with the specifications in the Supply Agreement, and that any defects in the coating were caused by the specifications.
The water district argued, in turn, that the suppliers had guaranteed the pipes would fit the intended purpose and that it was entitled to rely on the supplier's skill and judgment.
"The problem with this argument is that it ignores that NAP (North American Pipe and Steel) was also contractually obliged to build the pipe according to the GVWD's specifications," Gerow said in her judgment.
She dismissed the water district's claim and awarded NAPSteel $3,899,857 plus interest.
The pipes had to be stripped and recoated before installation, the district said.
Neither company nor the water district responded to a request Monday (Jan. 18) for comment.