Commission approves settlement with Clark Construction on Miami Beach Convention Center work

City commissioners this week approved a settlement agreement with Clark Construction regarding fees owed and the scope of work remaining to complete renovations to the Miami Beach Convention Center. In a joint note to the mayor and the Commission, City Manager Alina Hudak and Acting City Prosecutor Rafael Paz recommended the settlement which they said “eliminates the risk of a potentially unfavorable judgment of a much higher amount. the settlement amount ”and the costs associated with a lawsuit and a lengthy appeal process while getting the City what it needs – the final completion of the project.

The agreement provides for the City to release $ 6.4M retained in holdback for work previously performed by Clark as well as payments totaling $ 27.1M to $ 9.09M that the City withheld from Clark as damages. -interest for project delays as payment for work performed on the project and ‘an additional total amount of $ 18,010,000 in full satisfaction of all project-related claims claimed by Clark in the litigation, including, without limited thereto, additional work and change orders, Clark’s claims for supplemental terms and conditions and subcontractor claims, ”according to the Hudak and Paz memo. Payments will be phased in between October 15, 2021 and December 31, 2022.

The city is seeking county approval to use Miami Beach Redevelopment Agency (RDA) bond funds under its interlocal deal with Miami-Dade County to pay Clark.

The settlement brings the total cost of the Convention Center project to $ 677.8 million.

There is also $ 1.6 million in performance-based payments for Clark to complete work on unfinished items, the most important of which is the completion of the cooling tower. A neutral third party will determine when the remaining projects are completed.

“The monetary terms of this settlement are just and reasonable, and consistent with the reasonable range of possible outcomes at trial if litigation were to continue,” said Hudak and Paz.

Clark filed a lawsuit against the city in January 2020, claiming it owed it more than $ 90 million for work done by it and nearly 30 contractors on the facility. The city counterattacked by saying that Clark had not honored his contract. Hudak and Paz’s memo states that Clark’s claims amounted to $ 100 million.

The City signed agreements with Fentress Architects and Clark Construction in 2014. As “Construction Manager at Risk”, Clark started working in December 2015 with 65% designs prepared by Fentress. In this capacity, Clark has assumed certain responsibilities “including scopes of work that are” reasonably deductible “from the construction documents,” wrote Hudak and Paz. “Under these conditions, the City assumed certain risks, such as those related to the conditions hidden on the site, as well as the changes brought about by the competent authorities (AHJ) (v., And Miami-Dade County departments such as DEMR, DEP and Miami-Dade-County Traffic, among others). “

The expansion and renovation of the Convention Center totaled 1,435,000 square feet and was to be completed while the facility continued to host events, including the annual Art Basel fair. It included a new 60,000-square-foot ballroom, a new 10,000-square-foot kitchen, 127,000 square feet of new meeting space, 500,000 square feet of refurbished exhibit space and rooftop parking. 796 places. The original completion date was August 23, 2018.

The complexity of construction and event management as well as unforeseen circumstances that included hurricanes and COVID-19 along with insufficient contingency contributed to delays, cost disputes and the need for additional funding, according to the note from Hudak and Paz.

“The phasing and scheduling of the work was among the most complex in the construction industry, as it required continuous operations in and around an active construction site, similar to the complex construction undertaken with large airport projects.” , they wrote.

“From the start, the project faced a unique set of challenges that increased the risk for both the owner and the construction manager,” they say. “The catalyst for this risk was the decision of the Municipal Commission in 2014 to keep the building operational by organizing events throughout the construction period. This included organizing events in a half hall at all times and Art Basel events in a full hall every year, regardless of the condition of the building.

“To achieve this goal,” the note continued, “the public had to be protected by the construction of two-hour separation walls which had to be installed and demolished twice during the construction period. Over ninety events took place during construction, including the NFL Experience (LIV) and the “Fanfest” for Major League Baseball. These events drew tens of thousands of visitors to the facility and required a significant and unforeseen number of life safety requirements, including fire watch and additional support to the show, which were greatly under- estimated.

Unforeseen circumstances, including Hurricane Matthew in 2016 and Irma in 2017, which necessitated demobilization of the site and labor, the discovery of lead-based paint in older parts of the building and walls Missing firestops shown in the drawings but not actually there, added to the work.

“Finally, and as everyone knows, a temporary acute COVID-19 hospital has been built by the Army Corp. of Engineers for the Florida Department of Emergency Management with their own contractor soon after the project received its Temporary Occupancy Certificate (TCO). Possession of the building by the Army Corp. lasted six months and blocked the final completion of the building, ”the memo reads.

In addition to the complexity of the project, Hudak and Paz note: “The project contingency, although significant in dollars, represented a contingency of only six percent (6%) of the overall project budget, significantly less than the ten standard percent (10%) contingency applicable to almost all other City capital projects. “

Although the City was able to obtain a temporary occupancy certificate in April 2020 allowing the building to open, a final occupancy certificate has not yet been issued and, in the meantime, the City is required to take measures. to protect public safety.

Who is responsible for unforeseen costs – whether due to unforeseen circumstances or order changes – was at the heart of the trial.

The extent of legal back and forth is staggering (“extensive” according to Hudak and Paz). discovery within an expedited timeframe, “they said.” More than six million pages of documents were produced during the litigation. The parties have made over sixty depositions and collectively engaged over twenty experts in multiple areas of expertise, including construction planning, timelines, design and construction management standard of care. The parties collectively filed more than forty pre-trial substantive motions, and countless other motions dealing with procedural matters. “

Once again, after all attempts at mediation failed, the trial began earlier this month. “After opening statements and several days of fact-witness testimony, the court ordered the parties to resume mediation with a stern directive that they should make a concerted effort to resolve the dispute,” according to the note. “Despite significant progress, the parties were unable to agree on a final settlement during the mediation session, but the court agreed to a brief stay of the trial so that the parties could resume negotiations. “

A deal was reached on September 13 and the court extended the suspension until September 30 pending Thursday night’s committee meeting in which the 32-page settlement agreement was approved.

Hudak and Paz claim that the settlement “equates to 4% of the initial project budget, which, with the six percent (6%) contingencies initially set for the project … would bring all project contingencies to ten percent ( 10%). the industry standard for construction contingencies and the City’s long-established budgeting standard for contingencies on capital projects.

Initial project budget $ 615,722,930
Original contingency $ 35,000,000 (6%)
Rules 27 $ 100,000 (4%)
Total amount for project contingencies ten%

There is an indemnification obligation for Fentress Architects in the regulations. “A substantial part of Clark’s claim is based on allegations that parts of the design were either flawed, incomplete, or uncoordinated,” according to Hudak and Paz. “Project design was provided by Fentress Architects and a number of consulting engineers hired by Fentress. The agreement between the City and Fentress includes an indemnity provision which obliges Fentress to indemnify the City against any loss it suffers as a result of improper work performed by Fentress or its consulting engineers. The City will look to Fentress to compensate it for the losses it has suffered, and intends to pursue its claims to recover portions of the settlement payments, plus costs and defense costs, resulting from legal issues. design.

In terms of funding sources, the Miami Beach Convention Center project “was largely funded by Miami Beach Redevelopment Agency (RDA) bonds approved by Miami-Dade County under an RDA interlocal agreement. The City’s share of the settlement is $ 27.1 million and is expected to ultimately be covered by surplus funds from the downtown RDA of around $ 28.1 million. Of the $ 28.1 million, the City part is estimated at $ 15.5 million and the County part is estimated at $ 12.6 million. Under the interlocal agreement, excess income from the Miami Beach RDA Trust Fund may only be used for the early redemption of RDA bonds or, with the approval of the County and City of Miami-Dade, to cover liabilities. costs of an RDA investment project such as the renovation and expansion of the MBCC. Project, ”the memo reads.

Discussions are underway with the county but these could take several months, according to Hudak and Paz. To cover the initial payments due in October and December of this year, the commissioners voted to “realign” the funds from the transportation initiatives capital project. If the county approves the RDA funds for the convention center project, the transportation project funds will be refunded.

The memo and the full settlement agreement can be found here.

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