Work on a segment of the 38-mile U.S. 290 widening project has stopped after state transportation officials declared the contractor in default, raising the possibility that time spent replacing the company could delay completion of the $1.8 billion project.

The notice of default issued May 1 by the Texas Department of Transportation, akin to a breach of contract lawsuit, is one of three issued in the past two months to The Woodlands-based Tradeco Infraestructura - the North American wing of the Mexican building giant Grupo Tradeco. The company's offices remain open, and its leaders said the default, attributed to delays, was not warranted. They also defended Tradeco's decision to walk away from a job widening Interstate 10 in El Paso.

Grupo Tradeco faces court judgments that are holding up company assets in the United States. Officials in the company's Mexico City office did not return calls for comment.

For Houston commuters, the effect of Tradeco handing the work off to another contractor is unclear. Most of the lanes included in the widening of U.S. 290 to Waller are expected to open in late 2017, said Quincy Allen, TxDOT's district engineer in Houston. A slight delay to replace Tradeco is unlikely to jeopardize that schedule, he said, though Tradeco was six months behind project benchmarks.

"We have some flexibility here," Allen said. "We are in different phases along the corridor, and we have some time to get a contractor in."

Lack of progress

How long this might take is uncertain. Tradeco, like all contractors that do major work for TxDOT, was bonded by a surety company. In a default, the surety company is responsible for finding a new contractor that meets TxDOT's approval.

Allen said a significant delay in getting that new contractor in place could push back the date when lanes open.

"Default is painful not only for the contractor, but for TxDOT," Allen said.

Tradeco won the job to widen U.S. 290 from Pinemont to West Little York in mid-2013. Construction on the $156.5 million job started in October of that year.

The segment is one of 13 in the freeway-widening project from Loop 610 to FM 2920.

Drivers have spent the past four years dodging construction barrels along U.S. 290, or nearby on Loop 610. In many spots, crews are able to work without affecting the three main lanes of U.S. 290 in each direction. Numerous overpasses and new entrance and exit ramps are included in the work.

By earlier this year, however, problems were evident on Tradeco's portion.

"The work wasn't progressing at an acceptable rate and there were some payment issues to others," Allen said, summarizing the reason for the default.

Carlos Gonzalez Macias, director of Tradeco Infraestructura and vice president of Grupo Tradeco, said delays occurred because TxDOT never turned over crucial right of way.

"We were driven to lose millions of dollars under those circumstances," Macias said, noting the lack of right of way led to problems sequencing work.

He said Tradeco is considering challenging the default notice and is working with AIG and XL, the surety companies.

'The bottom line'

Allen acknowledged right of way issues along that portion of U.S. 290, but he said state officials and the company agreed that crews would widen the main lanes of the freeway before starting work on the frontage road.

"We didn't ask them to work faster, or do more faster," Allen said. "The bottom line after everything was done was, they were behind schedule."

As of Tuesday, Tradeco had been paid $32.4 million for work on U.S. 290. Officials estimate the project is 20.7 percent complete.

Allen, who has worked for TxDOT in Houston for 30 years, said he could recall only one previous instance when a contractor defaulted on a major Houston area highway project.

TxDOT officials also cited slow progress when they declared an $11.3 million Tradeco project in Beaumont in default. As with the Houston project, the company faced questions about its timely payment of subcontractors and workers.

A smaller Tradeco project near Lufkin was also defaulted by the local TxDOT district. Tradeco, meanwhile, stopped work voluntarily last week on a $154 million project widening Interstate 10 west of downtown El Paso.

Tradeco projects halted in Texas

Macias said the I-10 decision was based on the surety company telling the builder to walk away, fearing similar delays due to inability to complete the job.

"We did not abandon the project," he said, noting the U.S. 290 default and dispute over right of way were factors in the I-10 decision. "Despite that it was going very well … none of that was enough for the sureties."

AIG is a surety on both the I-10 and U.S. 290 projects.

Financial challenges

The projects and payment issues are not the only financial challenges Tradeco faces. As part of the larger company, the Woodlands company is involved in a lawsuit over use of a ship by Grupo Tradeco, mired in intricacies of maritime law.

The suit claims Grupo Tradeco companies owe Houston-based Ranger Offshore nearly $20 million for use of the vessel. Ranger has asked to garnish payments from Tradeco's American businesses, including money it was paid for TxDOT work. A judge ordered garnishment of various Tradeco assets on Wednesday.

Despite the defaults and legal issues, Tradeco remains open for business, Macias said.

The company is working on three other TxDOT projects in the Houston area. Two involve improvements to the Interstate 45-Loop 610 interchange and a the third calls for rebuilding portions of Interstate and Spur 5 near the University of Houston. The three projects, whose total projected cost is $101.9 million, have paid Tradeco around $5 million combined so far.

Allen said the default on U.S. 290 does not affect those projects.