WATSONVILLE, Calif., July 11, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Granite Construction Incorporated (NYSE: GVA) today announced that Granite Construction Company, a wholly owned subsidiary, and the Oregon Department of Transportation ("ODOT") have reached an agreement in principal on a negotiated temporary suspension of the US 20 Pioneer Mountain to Eddyville Design-Build project.
ODOT awarded the $130 million highway realignment contract to Yaquina River Constructors ("YRC"), a joint venture team comprised of Granite Construction Company and Wilder Construction Company (a majority-owned subsidiary of Granite Construction Company) in July 2005. The design for the new seven-mile roadway included eight bridges to be constructed over creeks, rivers, and a railroad. During the course of construction, numerous and massive landslides at critical sections of the project were discovered. As a result of additional anticipated costs and time related to these landslides, in March 2007, Granite requested that ODOT either terminate or suspend its contract.
After several months of negotiations, Granite and ODOT have agreed that in lieu of terminating the contract, it is in the best interest of the parties to temporarily suspend work. This suspension will allow time for both parties to jointly complete additional geotechnical site investigations and explore alternative, less expensive landslide mitigation solutions. Under the terms of the agreement, construction work on the project will be suspended beginning on or 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 on the project to ensure that all environmental protection measures are maintained. Costs associated with the temporary suspension will be shared between ODOT and Granite.
The negotiated temporary suspension agreement, however, does not stipulate responsibility for the landslide mitigation costs. Both parties have agreed to take the issue to the standing Dispute Review Board ("DRB") under the dispute resolution provisions of the contract. Upon resolution of this issue, and agreement on the final cost and schedule to complete the project, Granite will restart construction under a signed change order issued by ODOT with no associated unresolved revenue issues or disputes.
At March 31, 2007, the US 20 project was forecasted at a loss of approximately $20.0 million. Although Granite believes there is the potential for this amount to be reduced, there is remaining uncertainty surrounding the ultimate determination of responsibility for the landslide mitigation costs. As a result, we do not anticipate recording any adjustments to our project forecast during the quarter ended June 30, 2007.
Granite Construction Incorporated is a member of the S&P 400 Index, the Domini 400 Social Index and is the parent company of Granite Construction Company, one of the nation's largest heavy civil contractors and construction materials producers. Granite Construction Company serves both public and private sector clients through its offices nationwide. For more information about Granite, please visit its website at http://www.graniteconstruction.com.
SOURCE Granite Construction Incorporated
Investor relations, Jacque Underdown of Granite Construction Incorporated, +1-831-761-4741
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