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1997-06-10 Special MeetingKODIAK ISLAND BOROUGH Special Assembly Meeting June 10, 1997 A special meeting of the Kodiak Island Borough Assembly was held June 10, 1997 in the Assembly Chambers of the Kodiak Island Borough Building, 710 Mill Bay Road. The meeting was called to order at 7:30 p.m. There were present: Robin Heinrichs, Tom Abell Bob Johnson Gary Stevens Jerome Selby, Mayor Donna Smith, CMC /AAE, Clerk Presiding Tuck Bonney Mike Milligan Wayne Stevens comprising a quorum of the Assembly; and Presiding Officer Heinrichs recessed the regular meeting to convene to the hearing. 1. Hearing on Contract Dispute Resolution in the Matter of MKB Constructors, J.V. v. The Kodiak Island Borough. A. Legal Representative for MKB Constructors, J.V. B. Michael Schestopol, representing MKB Constructors, J.V. on the Peterson Elementary School remodel project, elected to not address specifics as Mr. Beck covered them in considerable detail in the findings and conclusions that were rendered after three days of his review. In addition, there were in excess of 200 pages of trial and pre- hearing documents. Mr. Beck was proposed by the Borough and nominated in the Assembly's stead. Mr. Schestopol's office had experience with Mr. Beck, who had been adverse to the firm and, therefore, objected to the appointment of Mr. Beck and lost. MKB's complaints were a result of GDM, the architect. Mr. Schestopol was present to relay the position of MKB and their willingness to abide by and accept the findings and conclusions with no intention to appeal. He presented a history of the project. The contract was bid in December, 1993, awarded on December 20, 1993, and work commenced on January 14, 1994. The school opened August 30, 1994 with final completion Special Assembly Meeting June 10, 1997 REGULAR MEETING ROLL CALL HEARING Volume XXII Page 258 of the project in October, 1994. Additional requests for change orders were submitted; some were paid, others were not. An appeal in April 1995 was presented to Mayor Selby. Due to a lack of response from the Borough and the architect, in August 1995 MKB filed suit for the contract balance, retention, and change orders. In October 1995, the Borough answered interrogatories under oath stating all sums due were paid. Upon discovery in June 1996, the judged ruled arbitration or the case would be sent back to the Assembly; the Borough declined to arbitrate so the case was referred to the Assembly. The Borough appointed Mr. Beck, to whom MKB objected, but was disallowed. Mr. Schestopol enumerated the issues and dollar amounts claimed by MKB to be considered. Because it had been two years and three months since the school was completed, Mr. Beck also found that MKB was entitled to additional amounts of $83,508, interest since June 1, 1995, and additional interest of $58,947. MKB has not been paid. There was no way MKB would come out whole with attorney fees, discovery costs, etc. Now was the time to settle as the Borough had possession of the school with no warranty claims. He urged adoption of the findings of fact and conclusions of law. Responding to Assemblymember G. Stevens, Mr. Schestopol said his comment that MKB would not be whole was because the award was not what MKB thought, and there were additional attorney fees and discovery costs. He remained to answer further questions. B. Legal Representative for Kodiak Island Borough. Joel Bolger, Borough attorney, recommended the Assembly adopt the findings of fact and conclusions of law proposed by Mr. Beck as the issues were debated and litigated. There was $187,000 representing money in the original contract, $155,068 representing retainage, and $32,416 representing change orders unpaid at the time of the dispute. After reviewing the change orders, the consultant suggested the Borough pay an additional $65,875. The Borough proposed payment to MKB in June of 1996; MKS declined at that time. Mr. Bolger recommended payment of the approximately $83,000 interest as recommended by the hearing officer Mr. Bolger focused on the delay claim. There was a short timeframe to complete the remodel contract. The hearing examiner identified a two month delay of Special Assembly Meeting June 10, 1997 Volume JLXII Page 259 initial site work and execution of additional masonry on new addition. The hearing officer found MKB was attributable to the approximately 54 days behind schedule June 1. There were problems with the boiler in the school that needed repairing; however, the hearing officer discovered this did not delay the sheetrock work and, therefore, found no additional compensation was due. Another substantial delay was in response to a submittal for hollow metal door frames that the architect did not respond to for 90 days. There was warranty in the contract that there would be a 30 day turn around to which the architect did not adhere for this submittal. This was responsible for the period that preceded the substantial completion. This delay was the primary basis for the finish work delay. The hearing officer found MKB should be paid. The hearing officer also noticed a design flaw in the height of existing wall in the plans. The plans tended to show the existing exterior wall was two feet higher than actual. Although the hearing officer found MKB should have pre- verified the measurement, there were related designs attributable to the architect for an eight day delay. Mr. Bolger summed up the substantial delays attributed to MKB architect GDM. After calculation, the hearing officer determined the award of a portion of the overtime, inefficiency when the project needed to be speeded up, and additional amount of overhead for a sum of approximately $83,000 additional costs to the Borough. The hearing officer recommended no award on other items outlined and detailed. In summary, the hearing officer recommended an $407,186.13 award to the contractor to include the original amount, change orders, and interest. Responding to inquiries from Assemblymembers W. Stevens, G. Stevens, and Bonney, Mr. Bolger said MKB asserted they would pay the subcontractors. He spoke of the approval of two party checks to pay the subcontractors that MKB declined to accept. The process for the subcontractors would be to file claims against MKB if they were not paid. Responding to Assemblymember W. Stevens, Mr. Bolger noted the pending claim against GDM included all items attributed in the hearing officer's decision. Special Assembly Meeting Volume IOC Tune 10, 1997 Page 260 2. Executive Session EXECUTIVE SESSION A. Consideration of the Hearing Examiner's Proposed Findings of Fact and Conclusions of Law in the Matter of MKB Constructors, J.V. v. the Kodiak Island Borough. G. STEVENS, seconded by MILLIGAN VOTE ON MOTION Ayes: Noes: Johnson Special Assembly Meeting June 10, 1997 move to convene into executive session for consideration of the hearing examiner's proposed findings -of- fact and conclusions of law in the matter of MKB Constructors, J.V. versus the Kodiak Island Borough. Assemblymember G. Stevens felt a need to discuss the findings and conclusions with the Borough attorney. Asked to respond, Mr. Bolger felt it was not appropriate for him to appear in the executive session because, as an advocate of the Borough's position, he would not be able to advise. He was available to answer questions in open session. Assemblymember Milligan supported the motion because the process was not normal and state law allowed the assembly to convene into executive session on items pertaining to litigation. Also, because he still was concerned about the impact to local contractors, executive session would allow discussion in detail. Assemblymember G. Stevens understood the attorney's comments but felt it was important to discuss this with Mayor Selby. Abell, Bonney, Milligan, G. Stevens, W. Stevens, Heinrichs MOTION CARRIED 6 ayes, 1 no Presiding Officer Heinrichs recessed the regular meeting and convened into executive session at 8:06 p.m. At 8:24, he reconvened the regular meeting and closed the hearing at 8:25 p.m. Volume XXII Page 261 4. Resolution No. 97 -23 Adopting Findings of Fact RESOLUTION and Conclusions of Law in the Matter of MKB NO. 97 -23 Constructors, J.V. v. the Kodiak Island Borough. JOHNSON, moved to adopt seconded by MILLIGAN Resolution No. 97 -23. Assemblymember Johnson thought it was a good settlement as a result of the hearing testimony. VOTE ON MOTION Ayes: Noes: None. MOTION CARRIED Unanimous There being no further business to come before the ADJOURNMENT Assembly, the meeting adjourned at 8:28 p.m. ATTEST: ( 02 lif1 }2 C Donna F. Smith, CMC /AAE Borough Clerk Special Assembly Meeting June 10, 1997 Bonney, Johnson, Milligan, G. Stevens, W. Stevens, Abell, Heinrichs Robin Heinrichs Presiding Officer Approved: 07/17/97 Volume XXII Page 262