Source: http://www.paloaltoonline.com, September 17, 2014
By: Gennady Sheyner

City launches legal proceedings against Flintco Pacific after years of delays, errors

Palo Alto is seeking more than $9 million from a contractor that the city deems primarily responsible for the botched reconstruction of the Mitchell Park Library and Community Center.

The City Council on Monday authorized in a closed session the filing of a legal claim against Flintco Pacific, the construction firm that the city hired in 2010 to build the Mitchell Park library, the flagship project in a $76 million bond package voters approved in 2008. The city fired Flintco in January after months of acrimony, a stack of change orders that drove up the project’s costs and numerous failed inspections. The city had repeatedly accused Flintco of performing sub-standard work and for failing to bring adequate work crews to the site.

Initially slated to open in spring 2012, the library is now set to open on Dec. 6. The construction firm Big D Construction Company took over the project and is now in the final stages of completing the work. The city’s legal dispute with Flintco, meanwhile, is expected to drag on for many more months, with each side recently filing a claim against the other. In July, Flintco submitted a claim accusing the city of breaching its contract and of “wrongful conduct.” The company claimed that the city’s plans for the new library were “filled with errors, omissions, conflicts, ambiguities, lack of coordination and noncompliance with applicable code requirements.” Flintco also argued that the city often had failed to respond to the company’s change-order requests or simply denied them, denials that Flintco called “wrongful, arbitrary and capricious.”

This week, the city fired back by sending Flintco a “notice of contract dispute” that sets the stage for the city’s claim. The notice invokes the “liquidated damages” provision in its contract with Flintco, which requires the company to pay $2,500 per each calendar day occurring after the expiration of the contract time. The scheduled date of the project’s completion was April 20, 2012, which brought the liquidated-damage amount sought by the city to $2.2 million.

Palo Alto is seeking another $3.3 million for work that the city says did not comply with the project contract. In some cases, Flintco was notified of the non-compliant work but did not address the city’s concerns. The non-compliant work was discovered after Flintco was fired, according to the notice signed by Public Works Director Michael Sartor. In addition, the city is seeking $3.1 million for the costs of repeated inspections and of hiring consultants to assist with identifying and correcting the defective work. The claim also includes $726,995 for work that the city deleted from the scope of the project’s contract, thereby reducing the contract’s sum.

In the formal notice, Sartor wrote that in seeking $9.4 million, the city “believes that its current calculation of its damages is suitable to proceed with discussions in an effort to seek informal resolution.”

The letter notes that Flintco was terminated on the grounds that it “failed to pursue and prosecute the work in a timely manner, failed to comply with the city’s Notice of Default, failed to provide quality control over the work performed on the Project, and other significant and material breaches of the Project Contract.”

“Now that the Project is near final completion, it is time to resolve the City’s claims arising from Flintco’s failure to perform its work in accordance with the requirements of the Project Contract,” the notice states.

Palo Alto City Attorney Molly Stump said in a statement that the city believes that “Flintco’s continued failure to make progress on the project, delays in construction, shoddy work and inadequate staffing made it virtually impossible for them to complete the job.”

“We believe Flintco owes the City for the totality of all these delays.”

She added that she expects the city and Flintco “to be involved in this legal process for some time.”

The notice of contract dispute triggers a 10-day period in which the two sides have a chance to meet. The dispute will then go to non-binding mediation and, ultimately, binding arbitration.