Federal board: Army Corps at fault for moldy duct work at StratCom HQ

The decision could potentially cost the corps (and taxpayers) more than $40 million.

A three-judge panel of the Armed Services Board of Contract Appeals determined the corps’ defective design led the mold to grow “like ants following a line of honey” on an adhesive used in fiberglass duct work that lined the interior of the HVAC ducts.

The discovery of the mold in September 2015 — three years into the construction of StratCom’s $1.3 billion headquarters — forced the lead contractor, KiewitPhelps, to tear out and replace about 3 miles of duct work.

The snafu set back construction on the trouble-plagued project by 209 days, according to court documents. The building finally opened in 2019, three years behind schedule.

KiewitPhelps (a partnership of Omaha-based Kiewit Corp. and Colorado-based Hensel Phelps) sought damages from the corps totaling more than $40.7 million. The Omaha district commander denied the claim in 2017, alleging that the mold was caused by the negligence of the KiewitPhelps subcontractor in charge of installing the duct work.

The same year, KiewitPhelps appealed to the Armed Services Board of Contract Appeals, a federal administrative tribunal tasked with hearing contract disputes between government contractors and the Defense Department.

The board heard testimony during a hearing that lasted nine days.

The project’s contracting officer, Ann Young, testified that lined duct work was part of the original design by HDR, an Omaha architecture firm. She said insulation was essential for security so that sounds could not travel between spaces in the building, which she described as “a large SCIF,” or Sensitive Compartmented Information Facility.

“It’s the mission that’s sensitive and the documentation and the discussions that people have,” Young testified. “So (SCIF buildings) are built in such a fashion that ... information cannot be detected or heard in other areas.”

The plan called for insulating duct work in the building with a rigid fiberglass liner, using an adhesive to insulate joints and seams. Both HDR and KiewitPhelps argued against the use of lined duct work, which is generally forbidden by federal construction guidelines because of the risk of bits of fiberglass floating loose inside the ducts.

The corps disregarded their advice, for reasons that aren’t explained in the board’s ruling. KiewitPhelps selected an adhesive called CP-135, and the corps approved its use.

Nobody, though, foresaw the mold infestation that would bedevil the StratCom project at the end of the wet summer of 2015. On Sept. 9, a corps inspector discovered mold inside joints and seams of some of the duct work (as well as a dead mouse). He also found mold in trash piles, wood panels, drywall and buckets of water.

Two days later, the corps issued a stop-work order pending an investigation and remediation plan.

The mold wasn’t the first problem to plague the StratCom project.

Soon after groundbreaking in October 2012, the high water table on the 80-acre site — a short distance from the Missouri River — caused moisture to seep into anchor points in a bathtub-like retention wall surrounding the building’s underground command center.

Then, in fall 2014, engineers discovered that some of the concrete floors hadn’t been properly designed to withstand a progressive structural collapse of the type that brought down the Alfred P. Murrah Federal Building in the 1995 Oklahoma City bombing.

Each problem took several months to correct.

The costly delays hit the project hard, in part because the corps had awarded KiewitPhelps as a “high-risk” project with only 1.1% in contingency funds for changes or emergencies. That forced the corps to ask Congress for an extra $37 million in funding even before the mold was discovered.

The type of mold that settled in the ducts required very little moisture, according to an expert’s testimony, and it found an excellent food source in the CP-135 adhesive. In fact, it grew only in the joints and seams where the CP-135 had been applied, prompting one witness to make the ants-to-honey comparison.

In late 2015 and early 2016, KiewitPhelps inspected and removed thousands of feet of moldy duct work. It once again recommended using unlined ducts, but the corps instead approved new ones that used a different adhesive.

Later inspections showed no mold in the new duct work.

In its decision, the board rejected the corps’ contention that KiewitPhelps was to blame for the mold because it selected the defective adhesive, and because a subcontractor allowed some of the duct work to be stored outside in the rain.

Instead, the board concluded, KiewitPhelps was essentially following the corps’ orders when it chose the CP-135. And the mold would have formed even in a dryer environment.

The board directed the two sides to come up with a financial settlement. By law, KiewitPhelps is entitled to accrued interest, which could push the figure higher than the $40.7 million originally claimed.

It’s not clear whether they have reached an agreement, or if Congress will have to appropriate new funds to cover the damages. Both the corps and Kiewit Corp. declined to answer questions about the ruling.

Kiewit released a brief statement noting the board had found the corps’ duct work design was defective, adding, “The panel ordered that KiewitPhelps is entitled to compensation ... for construction changes directed by USACE to correct the defective design.”

A spokesperson for the corps said it “does not comment on ongoing litigation.”