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HomeMy WebLinkAboutCommittee of the Whole Minutes 12.15.1992 Al 11 MINUTES CITY COUNCIL COMMITTEE OF THE WHOLE December 15, 1992 6:30 p.m. Council Chambers MEMBERS PRESENT: Chairman - Chuck Rodgers Ron Marshall Norman Orr Albert Ehrlick Gay Easton Donna Kilpatrick L.D. Collins Lonnie Kellogg OTHERS PRESENT: Joe Bradley Jim Worthington Mike Atkinson Don Hackmann Dave Michael Andy Forsythe The Mayor stated that Andy Forsythe was asked to attend this meeting to update the committee on the progress of the Volk Construction settlement. Andy explained that this has been a lawsuit that Laurel has been involved in for many years now. Before it was a lawsuit, it was what was called a plain arbitration claim. When the wastewater treatment plant was built, the contractor asserted claims against the City of Laurel in the amount of about $ 750,000.00. There was a lot of evidence, disputes and problems associated with this claim. Andy stated that during meetings four or five years ago between Bob Gauthier and the attorney for Volk Construction, the city tentatively agreed to settle these claims for $ 250,000.00, contingent on EPA funding 75% of it. EPA refused to fund that much of the settlement and suggested they fund a little less. Andy explained that the EPA, in providing the grant to the city, provided a given amount of money under their grant program. They were not legally obligated to provide more than their grant, however, terms of their grant said they would look at and perhaps approve some legitimate adjustments in price or changes in work. But, they would not help the city with any problems that may have arisen because of administration of the contract due to the relationship between the city, the contractor and the engineer. The refusal of the EPA to fund this ultimately lead to the filing of a lawsuit in district court and that's where the push and pull came in. We finally concluded, during consultation with Bob Gauthier, Jim Worthington and myself, that it was to the city's advantage to settling this claim Page 2 Council of the Whole minutes without the additional money spent on attorney fees and the likelihood of paying some of those claims. It was Andy's prediction that the contractor would win some money, although not as much as this settlement. But if it went to court, the city would also have additional expenses for attorney and engineering fees and Andy feels we would have spent more in the long run than what the settlement is for. Andy said an important part of the consideration to settle was based on what EPA would pay in this settlement. After meeting with them, they will pay approximately $ 92,000.00 out of the total claims of $ 150,000.00. A definite factor in this decision was getting some assurance from EPA that they would agree the payments which have resulted in the $ 92,000.00. Andy explained projects that later on. This provided to the should be. If back. that on many of the large public works the EPA funds there is sometimes an audit audit determines whether the money the EPA city was all spent just the way they feel it they do not agree, they may get the money In light of this, Andy said one of the things they asked when they met with the EPA representative was what is the likelihood of the audit and how will they view the settlement. The representative felt that the way the settlement was structured was as safe as we could do it and the project looked good from an audit standpoint. We have good reason to hope there will be no problems down the road with EPA, either because of the way the project turned out or because of the settlement. Bob Gauthier explained the financial end of the case and said this settlement amounts to $ 150,000.00. The city currently has $ 130,000.00 in the sewer plant construction account and we are expecting another $ 49,000.00. We will pay the settlement amount and the majority of the remaining money will go to our attorney. In regard to the audit, Bob said they have already done a desk audit and they seem to think that what has been done so far is satisfactory. At this time, if the settlement is finalized, EPA does not feel that they would do an audit unless something unusual turns up in the next three years. Bob said the reason this has taken so long and he has not pushed on it is because he does not feel the claim is justified and he was hoping EPA would just throw the whole thing out. Page 3 Council of the Whole minutes • Bob said the city has paid Andy approximately $ 43,000.00 and nothing has even went to trial. Don Hackmann, City Clerk, stated that the latest figure he has seen regarding EPA participation was at $ 41,000.00. Andy said the difference may come in because he is counting what is called liquidated damages. This is the amount the EPA paid the city but the city did not pay the contractor. Andy explained that when this job was completed, the contractor was late. Under the contract, $ 53,000.00 that he was owed was not paid to him, but simply kept in an account. That is part of the money that is being used to settle the case. Lonnie Kellogg questioned whether most of this revolved around change orders. Bob explained that change orders must be brought to the council for approval and the contractor did this up until about the last six months. From there on he did not present any change orders and his recourse was to come back with this large claim in the amount of $ 750,000.00. Lonnie stated that the council approved the change orders on . the advise of the engineers and he asked if the city has any recourse against the engineers. Andy commented that he did an opinion letter on the city two years ago and he researched this issue. Change orders that were executed and approved by the council were adjusted to the contract and are not a part of the dispute that we're talking about. We are talking about requests for change orders that the engineer refused, for various reasons. The contractor's recourse was to request arbitration. Andy said that although it is possible to sue a professional engineering company for professional negligence, he checked with lawyers who handle this sort of thing and it is very difficult to win. Andy said the city could do it but it would be very expensive. Andy said there are many lessons to be learned from doing a project such as this. He suggested that in the future on any major projects, the city should consider not having a binding arbitration provision agreement. When you don't have this and you go to district court first, sometimes the city may be able to bring the engineer into the lawsuit and benefit from it. Bob said that the engineering firm, HKM & Associates, who handled the project have not charged the city any fees for settling this claim. If they were to, the fees would be around $ 40,000.00. R Page 4 Council of the Whole minutes Discussion followed regarding other cases throughout the area where this same type of thing is happening. Andy stated that with acceptance of the settlement, there is no claim existing. Mike Atkinson stated that he has a safe sitting at the FAP that is of no use to him and he would like to get rid of it. He was told it would take council action to do so. Darrell McGillen stated that he attended a class this past weekend that dealt with the new fire and building codes that the state adopted in 1991. The meeting was adjourned at 6:52 p.m. Respectfully submitted, Don Hackmann City Clerk •