HomeMy WebLinkAbout2007 01 22 Consent 404 Utility Public Works Facility
COMMISSION AGENDA
ITEM 404
CONSENT
January 22, 2007
Meeting
MGR /DEPT
.
Authorization
REQUEST: Utility/Public Works Department Requesting Approval for an Additional
Authorization for the Utility/Public Works Facility project to cover pending
change orders including a contractor delay dispute settlement.
PURPOSE: The purpose of this Board item is to request an additional authorization of $20,000 for
pending change orders 8 and 9 for the Utility/Public Works Facility project which
includes $50,000 for a delay settlement.
CONSIDERATIONS:
This agenda item is needed to finalize work on the Utility/Public Works Compound
project and settle a delay claim by the contractor. The project is approximately 95% complete
with completion projected for March 1, 2007. The quality of the work to date by the contractor
has been very good and the progress once the building permits were issued has been on
schedule and within budget.
The City Commission approved on January 2,2006 the base contract with Ruby
Builders of$3,657,157.00 for buildings 2 (garage), 3 (operations), and 4 (storage) with
complete site infrastructure including a 3% contingency. The City Commission approved on
February 13, 2006 a supplemental appropriation of$302,534 for a 2nd storage building as
change order #1 with a 10% contingency for a total contingency of $139,968.30. To date, 7
change orders have been approved (including the additional building) at a cost of$381,887.00,
most at the request of the City.
Two additional change orders, 8 and 9, are pending which would slightly exceed the
original authorization if approved. Change order 8 is for $50,000 to settle a delay claim by the
contractor. Change order 9 is for $18,118 for underdrains, fire glass, and other site changes. A
012207_ COMM _ Consent_ 404_ Addl_ Auth _ Utility-PW _Compound _ Utility-PW _Compound
Consent Agenda Item 404
January 22, 2007
Page 2 of 4
summary of the total project construction costs including the new change orders is detailed as
follows:
Original Bid Award
Change Order #1 Approved -2nd Bldg
Approved Contract Amount
$3,657,157
$302.534
$3,959,691
Change Order #1 Additional
Change Order #2
Change Order #3
Change Order #4
Change Order #5
Change Order #6
Change Order #7
Change Order #8 (pending)
Change Order #9 (pending)
Total Change Orders
$8,634
$2,020
$25,000
$6,531
($5,200)
$10,299
$32,069
$50,000
$18.118
$147,741
Original Contingency
Additional Authorization Requested
Total Proposed Authorization
Total Contract w/CO's 1-9
$139,981
$20,000
$4,119,672
$4,107,162
Scooe
Building Site work
Add'l Soils Testing
Remove Unsuitable Mat'ls Bldg 3
Remove Unsuitable Mat'ls Bldg 4/5
+Dumpster Enclosure, -Garage Doors
Elec changes, +insulation, +painting
Add'l Paving, Storage Bins
Delay Settlement
Underdrain, fire glass, site changes
(Within 3.9% of Approved Contract)
The delay settlement constituting change order #8 primarily arose from the amount of
time it took for the contractor to receive building permits for the four buildings. The project
was originally created as a single project - one set of plans for all seven proposed buildings and
the associated site work. When the bids were received, it was determined that insufficient
funds were available for all the buildings and the administration building and two storage
buildings were dropped to bring the project within budget. However, during a courtesy plan
review by the Building Department prior to bid award, it was recommended that separate plans
be submitted for each of the four remaining buildings to avoid the confusion generated by
deleting some components (three buildings) of the project. Separately permitting each building
also had the advantage that Certificate of Occupancy certificates could be issued as buildings
were completed rather having to complete all before any occupancy could occur.
After discussions with the architect and Building Official, it was determined that a
practical solution would be for staff to manually segregate each building from the master set to
avoid the costs and time delays associated with generating new drawings. With only one bidder
for the project, we were concerned about losing the bidder by not being able to award the bid in
Consent Agenda Item 404
January 22, 2007
Page 3 of 4
a timely manner and having to rebid the project. The Notice To Proceed was issued to the
contractor on February 27, 2006 and the contractor submitted the plans for building permit
within 10 days. However, it became apparent after several resubmittals and reviews that the
plans would indeed to be recreated to create a cohesive, understandable, constructible and
inspectable set of building plans. This ultimately resulted in the first building permit ready for
construction being issued on July 18, 2006. All building permits were issued by August 15,
2006.
The building permit issuance delay is the basis for the contractors delay claim.
Negotiations last fall broke down resulting in the attached letter from the contractor's attorney.
They provided information attempting to substantiate $190,000 in claims but would settle for
$90,000. The City disputes the extent of the alleged delay damages and believes that a
settlement of $50,000 based on our review of the issues is appropriate to avoid future litigation
and attorney's fees.
FUNDING:
No additional Budget Authority is required to fund the delay dispute settlement
agreement. An additional authorization of $20,000 will be required for Change Order #9 and a
small contingency to finish the project from the Public Facility Capital Project Fund - 311-
65000-30037. Sufficient funds are available in this line code for these costs.
RECOMMENDATION:
The recommendations are as follows:
1) Delav Dispute - It is recommended the City Commission approve the contractor
delay dispute settlement with Ruby Builders, Inc. in the amount of $50,000 subject
to terms and conditions approved by the City Attorney.
2) Additional Authorization - It is recommended that the City Commission increase the
construction authorization by $20,000 to $4,119,672 for the Utility/Public Works
Facility project.
All funds are to be payable from the Public Facility Capital Project Fund - 311-65000-30037.
IMPLEMENTATION SCHEDULE:
The change orders will be processed upon approval and the delay settlement paid as
stipulated in any terms and conditions negotiated by the City Attorney.
Consent Agenda Item 404
January 22, 2007
Page 4 of 4
ATTACHMENTS:
1. Ruby Builders, Inc. Attorney letter
COMMISSION ACTION:
PLEASE REPLY TO: ORLANDO
E-MAIL ADDRESS
DIRECT LIllIE
(407)418-1313 EXT. 126
January 3,2007
Via Hand Delivery
Mr. Anthony Garganese
City Attorney - City of Winter Springs
Brown, Garganese, Weiss & D'Agresta, P.A.
P.O. Box 2873
Orlando, Florida 32802
Re: Ruby Builders, Inc. Claim for Delay/City of Winter Springs Public Works
Facility
Dear Mr. Garganese:
This firm represents Ruby Builders, Inc. ("Ruby Builders") which entered into a written
agreement dated January 24, 2000 with the City of Winter Springs to construct a Public Works
Facility (the "Project"). As you may know, Ruby Builders has provided written notice to the
City of its delay claims arising out of the Project. Since that notice, there has been ongoing
correspondence between the City and Ruby Builders regarding the delay claim. Unfortunately,
the parties have reached an impasse. The last letter from the City dated November 13, 2006
from Kipton Lockcuff, P.E., Director of Public WorkslUtilities (copy attached as Exhibit 1)
explained the City's position. That letter referenced an earlier letter from the City to Ruby
Builders from Greg Bishop, where on behalf of the City, the total compensation offered to Ruby
Builders to settle this matter was $31,895.47 (copy of that letter is attached as Exhibit 2). In
response, by letter dated October 31, 2006, from Ruby Builders to Mr. Lockcuff (copy attached
as Exhibit 3), Ruby Builder's stated its total claim to the City for extended general conditions
(exclusive of home office overhead and prejudgment interest) of $102,391. Ruby Builders'
claim amount has now been revised and reduced to $58,968 (for a reduced delay period of 84
days; from 130 - exclusive of home office overhead).
One of the purposes of this letter is to address and challenge some of the defensive
arguments raised by the City to hopefully cause the City to reconsider its position and increase
MATEER IlARBERT
Anthony Garganese
January 3, 2007
Page 2
its offer. The other purpose is to notify the City of Ruby Builders' revised claim of $58,9681
(exclusive of home office overhead of $152,154.15 discussed below) - reduced from $102,391,
and the reasons for this reduction. However, in the event Ruby Builders' delay claim is not
settled in writing by January 19, 2007, please let this letter serve as written notice pursuant to
paragraph 25 of the written agreement for the Project that Ruby Builders desires to immediately
mediate its claim. Please note there is no contractual requirement that the Project be completed
to initiate and hold mediation. However, as a practical matter, if impasse continues, it is likely
that the Project will be complete by the time a mediator is agreed upon and the mediation is
scheduled.
Below are the primary legal and factual reasons why Ruby Builders will prevail on its
delay claim for the sum of $58,968 (exclusive of home office overhead, prejudgment interest,
and attorney's fees):
1. Ruby Builders' Entitlement to Delay Damages:
In the written agreement between Ruby Builders and the City, there is no contractual
defense by the City to Ruby Builders' entitlement to delay damages. The only question is
how much is due Ruby Builders. If negotiations and mediation are unsuccessful and
litigation ensues, pursuant to the Contract, Ruby Builders will be entitled to recover
attorney's fees as the prevailing party.
2. City's Allegation - Ruby Builders only Entitled to a 42 Day Extension of Time
(and associated Delay Damages):
In the City's September 6,2006 letter to Ruby Builders, the City alleges that the actual
number of days of delay to Ruby was only 42 days.
Ruby Builders' Response:
First, Ruby Builders acknowledges an error in Ruby Builders' earlier claim by using 130
days as the period of delay (however, Ruby Builders maintains the delay period is not 42
days as asserted by the City in prior correspondence but rather 84 days). In revising its
claim, Ruby Builders acknowledges the City's logic that the duration for completion of
Building 2 is longer than Building 3. Accordingly, as further explained below, Ruby
Builders' period of delay is from December 6,2006 to February 26,2007, a total of 84
days. At Ruby Builders' extended general conditions of $702.00/day, Ruby Builders'
revised monetary claim (exclusive of home office overhead) is $58,968. For the reasons
discussed below, it is Ruby Builders' position that the City will likely agree with this
revised delay period.
I 84 days at $702/day = $58,968
MATEER IlARBERT
Anthony Garganese
January 3, 2007
Page 3
Attached as Exhibit 4 are several different schedules (different formats) Ruby Builders
submitted to the Owner dated April 6, 2006. At the beginning of the Project, Building 2
was planned to take longer because of the long lead time on the metal structure. Building
3 had a different type of structure. When the permit delay allowed time for the ordering
to be finished and thereafter the permit was issued for Building 3 first (June 30th), Ruby
Builders was unable to proceed with Building 3 due to the soil debris issue. The permit
for Building 2 was issued July 18th and Ruby Builders proceeded with construction. The
structure at this point was laying on the ground so all Ruby Builders had to do was
construct the foundations and slab. Building 2 was now ahead of Building 3.
In addition to the other reasons discussed in other sections of this letter, the problem with
the September 6th letter from the City can be summarized as follows:
1. The City states that Ruby Builders' delay ended on June 30th when the
permit for Building three was issued. However, the City fails to recognize
that Building 3 was still delayed by the soil issue. This delay was over by
August 8.
2. The schedules Ruby Builders provided on April 6 indicated that the
Building 2 finish date was December 5, 2006, not December 8 as the City
says.
3. The difference in the Building 2 and 3 finish dates November 10, and
December 5, is 18 working days.
3. City's Allegation - 20 Days to Secure Permit Unreasonable:
The City has alleged that the initial time of 20 days allotted by Ruby Builders for the City
to secure the permits was unreasonable.
Had the City not decided to change the number of permits from one permit to four
permits, the 20 days allotted for the City to secure a permit was more than reasonable.
Initially, the drawings from which Ruby Builders submitted its bid for the Project were a
single set (and only one permit was necessary). All of the Buildings were in this set. After
Ruby Builders bid on the Project and the agreement between the parties was executed,
the Owner decided it wanted separate permits for each Building. There are now four
Buildings. In Ruby Builders' opinion, the Architect utilized most of the delay time
separating the plans into four different sets. This was excessive (which we believe the
Owner would agree). However, the Architect is under the Owner's control.
Significantly, the time it took the Building department to approve the 4 sets was within
the time Ruby Builders allowed in the first 20 day schedule. For these reasons, Ruby
MATEER HARBERT
Anthony Garganese
January 3, 2007
Page 4
Builders cannot be held accountable for this Owner initiated change after Ruby Builders
bid the Project.
4. City's Allegation - Rubv Builders not Entitled to Mark-up:
In the City's September 6,2006 letter, it states that "since the delay cost is to cover your
overhead, the City does not find it reasonable to pay a "markup".
Rubv Builders' Response:
Ruby agrees that adding a percentage mark-up for overhead is redundant. However, the
City's determination that any "markup" is unreasonable is flawed. Unless a contrary
contractual provision is otherwise agreed to by the parties (not present here), as a matter
of law (and as customary in the construction field), Ruby Builders is entitled to a mark-up
for the associated profit on its extended general conditions claim.
The delay damages incurred by Ruby Builders on the Project are extended "general
conditions". These are time sensitive costs that increase due to extended performance
time (i.e. duration related economic injury for maintaining required personnel,
equipment, and services at the Project site after the originally scheduled completion date).
Since extended general conditions are directly attributable to the Project, mark-up for
profit is permitted (extended general conditions are to be distinguished from main or
home office overhead as discussed below).
5. City's Allegation - Ruby Builders not Entitled to Increase in Amount of Bond:
The City alleges that Ruby is not entitled to an increase in the bond amount primarily
because "a change order would not be issued for any payment for delay as no work or
material is being changed from the project plans or specifications".
Ruby Builders' Response:
A change order is always issued when the contract price increases. Ruby Builders'
position is supported by the general industry definition of "change order" and more
importantly, the written agreement between the parties. Paragraph 7 of the written
agreement between the City and Ruby Builders states in pertinent part:
The Owner will pay the Contractor in current funds for the performance of
the work, subiect to additions and deductions bv Change Order (emphasis
added), the total Contract Price of$3,657,157.00.
MATEER lIARBERT
Anthony Garganese
January 3, 2007
Page 5
Clearly, the above language requires any adjustment in compensation be documented by
Change Order. Moreover, Ruby Builders is being compensated for the performance of
the work during the delay period (extended general conditions). Accordingly, since the
cost of performance has increased (and therefore the bond premium), through no fault of
Ruby Builders, the contract sum must be increased.
6. City's Allee:ation - Ruby only entitled to 5 days extension of time on Change
Order 3:
The City alleges in its November 13, 2006 letter:
The debris removal for Building 3 was unrelated to the issue of
obtaining permits. This issue was not due to any part of the owner.
Greg Bishop quickly acted upon your request and recommendation to
test the pad area more thoroughly after you obtained a price for testing
and prices from your subcontractor to perform the work. The
requirements on the part of the Owner to respond to any change order
request was addressed promptly and Owner furnished materials were
available at the time required by your subcontractor. The change order
in question allowed you five days extension of the contract period.
Ruby Builders' Response:
Change Order 3 does not require Ruby Builders to be limited to a 5 day extension (as
opposed to 38 days). However, the author of that letter apparently failed to recognize
that the 5 days set forth in the Change Order 3 was limited by the written letter dated July
26, 2006 from Ruby which accompanied the Change Order. In that letter (copy attached
as Exhibit 5), Ruby clearly states:
Enclosed are four (4) copies of signed change order three. We are
agreeing to the amount with the stipulation that if the costs are exceeded
we will receive another change order. If this is not your understanding we
need to know immediately.
The Owner has already acknowledged that at least 5 days extension of time is due.
However, since Ruby Builders qualified and conditioned its agreement to Change Order3
upon the above terms of the accompanying letter (if costs are exceeded, Ruby Builders is
entitled to another change order), the issue is not resolved. Therefore, Ruby Builders'
accompanying letter controls.
7. New Rubv Builders Claim - Entitlement to Unabsorbed Home Office Overhead:
MATEER HARBERT
Anthony Garganese
January 3, 2007
Page 6
Ruby Builders hereby notifies the City that in addition to extended general conditions of
$58,968, Ruby Builders is also entitled to recover unabsorbed fixed overhead and general
and administrative expenses commonly called "home office overhead" for the period of
delay. The owner, the City, is responsible for payment to Ruby Builders of a portion of
its unabsorbed home office overhead. As occurred here with Ruby Builders, a
company's management makes certain decisions as to what home office costs are to be
incurred in a particular period based upon their estimate of the volume of work that can
be accomplished as a result of these overall management expenses. As an example, a
company may decide to hire another bookkeeper or buy a bigger computer based upon its
estimate of the construction work it will accomplish. The field activity "absorbs" the
home office expenses during the course of the fiscal period. If the anticipated
construction activity does not occur because of delay or suspension of work, these home
office costs are "unabsorbed" and should be paid by the owner as part of an equitable
adjustment That is what happened to Ruby Builders on this project.
The most frequently used formula in the United States to allocate unabsorbed overhead is
called the EicWeay formula. This formula is accepted by the Courts in Florida. See
Broward County v. Russell. Inc., 589 So.2d 983 (Fla. 4th DCA 1991); cert. denied
12/24/91 (use of EicWeay formula for calculation of home office overhead damages is
proper as long as there is competent evidence of actual damages of that variety having
been sustained by party seeking relief). This formula computes the daily amount of
overhead that the contract would have absorbed had there been no delay and gives the
contractor that amount of daily overhead for each day of delay. The formula is:
Step 1: (Contract billings -+ Total company billings for actual contract period) X
Total overhead incurred during contract period = Overhead
Step 2: (Allocable overhead -+ Actual days of contract performance) = Overhead
allocable to contract per day
Step 3: Daily overhead X Number of days of delay = Unabsorbed overhead
In this case, since the project is not finished, the period of 245 days was used so all
elements in the formula match:
Step 1: Winter Springs billings by Ruby Builders = $2,898,567 from 3/6/06
through 11/6/06 -+ total billings from Ruby Builders from 3/6/06 - 11/6/06 of
$4,400,557.66 = .659 X $673,744 (Ruby Builders' home office overhead for same
period) = $443,997.30
Step 2: Allocable Overhead is $443,997.30 -+ 245 days (3/6/06 - 11/6/06)
(original project duration of245 days) = $1,811.36/day
MATEER HARBERT
Anthony Garganese
January 3, 2007
Page 7
Step 3: $1,811.36 X delay period of 84 days = $152, 154 (exclusive of profit)
It is estimated that since this City project was a significant portion of the work being
performed by Ruby Builders during the delay period (approximately 66%), the City's share of
Ruby Builders' unabsorbed home office overhead for the period of delay would be $152,154.
If this matter were litigated, Ruby Builders' total claim, including extended general
conditions of $58.968 and unabsorbed home office overhead of $152,154 (excluding profit)
would be $211,122 (exclusive of attorney's fees). It is Ruby Builder's desire to avoid the
expense and disruption of litigation. Accordingly, Ruby Builders is willing to compromise its
claim and settle its claim for payment by the City to Ruby Builders of $90,000. This offer shall
remain open until January 26, 2007 at which time it shall be deemed withdrawn.
This settlement offer and the contents of this letter constitute a compromise of Ruby
Builders' claim and pursuant to the Florida's Evidence Code is inadmissible in any proceeding.
Please let me hear from you. Feel free to call me if you have any question.
Very truly yours,
Kurt E. Thalwitzer
KET:km
Enclosures
cc: Ruby Builders, Inc.
H:\Thalwitzer, KlRuby Buikl.nIC>8fBIllOIO hr.cIoc