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Bad Coating Spec Costs District $4M

Monday, January 17, 2011

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.

Coating Specs

According to the 47-page court order issued Thursday (Jan. 13), the supply agreement included these specifications:

3.0       Execution

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 4.3.4.1).

.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.

AWWA Standard

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.

‘Contractually Obliged’

"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.

Comment from Tim Johnes, (1/18/2011, 10:43 AM)

This is stupid. Sounds like a poor application, and the owner ran with the wrong argument. Owner took the advice of a lawyer instead of a coatings inspector.

Comment from Jim Brown, (1/18/2011, 11:06 AM)

Specifications must give enough application criteria and test protocol to assure field inspectors can assure performance.

Comment from Cameron Jewell, (1/18/2011, 1:46 PM)

What is the point of a spec if the owner expects the supplier/contractor to change it? It's not the contractor's job to assure a spec is correct. This is a classic example of a cya position: I'm always right, but if I'm wrong, it's not my fault.

Comment from Barry Barman, (1/18/2011, 2:31 PM)

In my opinion, based on the information provided, the judge is in error in her ruling: first, the materials as specified are proper for the intended use; next, only the nature of the problem was described - the root cause of the failure was not determined; and finally, with or without inspection, the contractor is responsible for the quality of his own work. A comprehensive failure investigation would likely find the principal cause related to one or more of the following: surface prep, ambient conditions at time of application, or application of various coats - all contractor responsibilities.

Comment from Tim Johnes, (1/18/2011, 4:33 PM)

In my first statement, I meant to type coating "expert," not "inspector." A coating expert would have found the root cause and argued from there. All points made are correct. You would think that someone would have done a simple adhesion test at the beginning of the job to check the job out before this got out of hand. Today, when the low price always gets the job, nobody cares until it's too late.

Comment from Daniel Morenings, (1/18/2011, 7:29 PM)

Barry, the Judge ruled that the contractor was not at fault, because the water system specified what they got, which does not meet the standards for the use. The company that manufactured it did so at the customer's request, per their specs. That would be like you ordering a motorhome from American Eagle without their recommended engine, because you wanted a 1.9 liter installed. Then when you get it, and it does not move, you sue them because your specs affected the performance? They delivered what was ordered. Pure and simple. They signed off on it as being exactly what was ordered. End of story.

Comment from marc chavez, (1/19/2011, 11:26 AM)

Well, here in the US of A, the following is long held and would apply: Spearin doctrine: A legal principle that holds that when a contractor follows the plans and specifications furnished by the owner, and those plans and specifications turn out to be defective or insufficient, the contractor is not liable to the owner for any loss or damage resulting from the defective plans and specifications.

Comment from kamal el sayed, (1/20/2011, 5:36 AM)

If you told the contractor how to do the work (specification), you must accept the result. Owner has wrong spec and the contractor did the work according to it so the fault is the spec, not application or martial so it is not a contractor fault.

Comment from Keith Holdsworth, (1/20/2011, 9:20 AM)

It will probably be appealed anyways.

Comment from John Bullard, (1/20/2011, 9:28 AM)

Whether or not a seal coat was applied on the outer wrap has no relationship to the observed types of failure. Loss of system adhesion to the steel typically means that the surface was not properly prepared. Loss of adhesion of the fiberglass mat indicates that the mat was not properly impregnated with coal tar.

Comment from Simon Hope, (1/21/2011, 3:34 AM)

Regardless, the contractor can walk away, the work was specified by the client, and was inspected and confirmed as compliant by 3rd-party inspection. In this case, they have Teflon-plated shoulders! If, on the other hand, they had been working to ISO 9000 criteria of self-certification, it would have been a very different situation. GVDW are just going to have to go and lick their wounds and get over it. Moral of the story is make sure you get the right advice at the start, it is then comprehensively specified without ambiguity, and ensure that the inspection makes sure that the contractor delivers exactly what is specified. In the words of the UK advertising icon Aleksandr the Meerkat, "Simples!!"

Comment from Tom Schwerdt, (1/25/2011, 9:04 AM)

Self-certification on a pipeline? Go read the NTSB report on the PG&E explosion in San Bruno, CA. I agree that a real failure investigation should have been performed to find the real root cause. Whether or not a seal coat was "contemplated" by the standard does not mean that it is the cause of the failure. It could be, but that needs to be investigated -- not presumed.

Comment from Anand Karamandi, (12/29/2011, 11:33 AM)

This is not the right spec for pipeline coating. Coal Tar Enamel? This goes back to 1950. The right product would be 100% Solvent-free Aromatic Polyurethane, ASTM D16 Type V. I will not blame the applicator for this. Every day I come across coating spec which I cannot imagine. When I try to educate or correct them it does not enter their head.So let them pay for it.

Comment from Brian Brooker, (12/29/2011, 1:09 PM)

It's sad to say but in this day and age with most companies having their people multitasking this is what can happen. Many times I have found it simply amazing the past 8-10 years where facility owners have people managing (there management people)coatings projects with little or no experience. This has become all to familiar since multitasking is now expected by everyone. As everyone knows who's careers are soley in the industrial blasting & coatings business we deal with more people this day and age who manage projects for the owner whom they work for that have for the most part limited or no true knowledge of this type business. They have usually been assigned a coatings project for one reason or another and they got stuck with the additional project outside of there main responsibilities. Now more than ever with tight budgets, multitasking & running a tighter ship within the company a coatings project is an after thought to deal with until something of this magnitude brings to light that corrosion & coatings is very important. I can understand how company owners/upper management view coatings/corrosion as an after thought for the most part. This is something I've experienced first hand for the past 31 years in this business on the contractor side, NACE certified CIP inspector and consultant. Owners need to realize that it's cheaper in the long run when it's all said and done on virtually any coatings project to bring in a contract coatings expert at the very least to review & plan it for them....