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Memo - Lake St Bridge Project Public Warks Department . Memorandum To: Honorable Mayor and Members of the City Council Copy: Steven C. Mielke, City Manager cJv From: Steven J. Stadler, Public Works Director Date: August 23, 2002 Subject: Lake Street Bridge Project Update The purpose of this worksession item is to update City Council on outstanding issues regarding the Lake Street bridge project. The City and Lunda Construction Company are still at odds regarding three pay issues on this project. Lunda has requested additional payment for: extended sewage pumping costs, a 15% .ontractors fee for work performed by Lunda subcontractors, and extended office overhead costs. These requests total approximately $44,000. The attached August 13 City Attorney letter describes each item and the City's position. City staff has requested mediation in an attempt to resolve these issues, and is awaiting Lunda's response. If mediation isn't successful, the contract states that arbitration is required. Another issue that came up toward the end of construction is in regards to the location of the Lake Street right-of-way. The owner of the commercial property just northwest of the bridge has contested our determination of the right-of way line. The new bridge construction resulted in the loss of two parking stalls (the sidewalk required the use of additional right-of-way) and the property owner is short of parking for building tenants. City staff is attempting to remedy the problem without going to court. We have responded to the owner's attorney claim - see attached letters. . ~ ~4-0:dler ,- MILLER, STEINER & CURTISS, P .A. ATTORNEYS AT LA W . 400 WELLS FARGO BANK BUILDING 1011 FIRST STREET SOUTH HOPKfNS, NfN 55343 JERRE A. MILLER JEREMY S. STEINER'" WYNN CURTISS (952) 938-7635 KIRSTEN A. HOLSETH FAX (952) 938-7670 $Real Property Law Specialist, certified by the Minnesota State Bar Association Writer's Direct Dial No. 952-938-6219 August 13,2002 Mr. Christian Fox Corporate Counsel Lunda Construction VIA FACSIMILE AND 620 Gebhardt Road FIRST CLASS MAIL Black River Falls, WI 54615 Re: City of Hopkins Lake Street Bridge Project e Dear Mr. Fox: 1bis letter responds to your letter of hme 28 to SRF Consulting Group and your follow up letter to me, dated August 2, 2002. I believe the following are the three substantive issues in dispute between our clients: 1. Whether Lunda Construction Company ("Lunda") is entitled to a $14,357.11 adjustment to the Contract Price for the cost of pumping sewage after the eight inch gravity flow sanitary sewer line was broken. 2. \Vhether Lunda is entitled to receive a 15% "Contractors Fee" fee for extra work performed by its subcontractors on a cost plus basis. 3. Whether Lunda is entitled to receive $18,91 7.12 for extended office overhead costs claimed to have been incurred as a result of suspension of the project after the existence of the underground telephone conduit maintained by Qwest Communications was discovered. Stated below are the City's responses to the above three issues. . -- . Mr. Christian Fox -2- August 13,2002 1. Whether Lunda is entitled to a $14.3 57.11 ad iustment to the Contract Price for the cost of pumping sewage after the eight inch gravity flow sanitary sewer line was broken. These costs were incurred to pump sewage through a temporary line after Lunda's personnel negligently drove a sheet pile through the eight inch gravity flow sanitary sewer line located on the easterly side of Minnehaha Creek. I have been ad vised by the City's Public Works staff that Lunda drove the sheet piling through this sewer line in a location where it was correctly shown on the plans for the project. In other words, the damage to the eight inch gravity flow sanitary sewer line resulted from the negligence of Lunda or its personnel. I am also advised that Lunda was given an option of excavating and repairing the break in this sanitary sewer line when it was damaged by the sheet piling, but, instead, elected to install and operate the temporary sewage pumping facilities. Section 6.20 and Paragraph 6.20.3 of the General Conditions of the Construction Contract fortrns project specifically provide that Lunda, as the Contractor, assumed responsibility to "provide the necessary protection to prevent damage, injury or loss to:. . . utilities and underground facilities. . .... In addition, Section S-5 of the Special Provisions states: . "S-5 (6.5) PUBLIC AND PRIVATE UTILITIES It shall be the Contractor's responsibility to be informed of the exact location of all utilities in the area by contacting all of the utility owners, including any utilities not shown on the Plans. The contractor shall be responsible for any damage to said utilities that occurs as a result of the operation oftheir equipment on the site." In addition, Section 8-12 of the Special Provisions includes the following sentence: "The Contractor shall detennine the location of the existing utilities in all construction areas and make such arrangements as may be necessary to protect existing structures against damage from the Contractor's operations." Under the above contract provisions, it is beyond dispute that Lunda must absorb the sewage pumping costs, which resulted from its negligence and/or failure to comply with the terms of the Contract. I understand it may be LWlda's contention it is entitled to recover a portion of the sewage pumping costs because the duration of the pumping was extended due to redesign of the relocated gravity flow sewer line. The City is unable to accept this position for two reasons. First, we believe Lunda is responsible for all of the consequences that resulted from its negligence, including the possibility the sewage pumping would continue longer than expected. Second, Lunda was given the option to uncover and repair the break when it occurred, ';Vhich would have avoided the pumping costs, but elected to install and operate the temporary line instead. · The $14,357.11 claim for sewage pumping costs is rejected by the City of Hopkins. Mr. Christian Fox - 3 - August 13, 2002 . 2. Whether Lunda is entitled to receive a 15% Contractor's Fee for extra work performed bv its subcontractors on a cost plus basis. It is my understanding that proposed Change Order No. 1 is for work performed by subcontractors of Lunda that was outside the original scope of work for this project and, therefore, falls under Articles 10 and 11 of the General Conditions. It is also my understanding there is no disagreement the value of this work and the corresponding adjustment to the Contract Price are to be determined under Paragraph 11.3.3 of the General Conditions, namely: "On the basis of the Cost of the Work. . . plus a Contractor's Fee for overhead and profit. . .". Finally, it is my understanding the extra work covered by proposed Change Order No.1 was performed primarily by a subcontractor or subcontractors of Lunda. Lunda is maintaining it is entitled to add a 15% "Contractor's Fee" payable to Lunda to the amount(s) owed to its subcontractors who actually performed the extra work. I believe we are in agreement that Paragraph 11.6.2.2 of the General Conditions of the Contract is the Contract provision to be applied in determining the amount of the Contractor's Fee due to Lunda for the extra work performed by its subcontractors that is described in Change Order No.1. The first clause of Paragraph 11.6.2.2 expressly limits the Contractor's Fee payable to Lunda for extra work performed by its subcontractors on a cost plus basis to 5% of the "Cost of the Work". The second clause of Paragraph . 11.6.2.2 caps the amount of "overhead and profit" charges imposed by Lunda's subcontractors for extra work performed on a cost plus basis at 15%. Thus, Paragraph 11.6.2.2 actually establishes two limitations. The first limitation is that "the Contractor's Fee shall be 5%". The second limitation is that the aggregate amornlt of "overhead and profit" charges payable to Lunda's subcontractors for extra work performed on a cost plus basis may not exceed a cumulative total of 15% ofthe "Cost of the Work". There is no dispute regarding the overhead and protit charges of Lunda's subcontractors included in proposed Change Order No.1. The City does dispute the 15% Contractor's Fee that Lunda wishes to include in this Change Order. Based on our analysis of the applicable contract language, the City of Hopkins is prepared to approve Change Order No. I with a 5% "Contractor's Fee" payable to Lunda for the extra work performed by its subcontractors. The City will not approve a 15% Contractor's Fee for this work. As you and I discussed over the phone, the City is also prepared to approve a modified Change Order No.1 to which a provision would be added reserving Lunda's claims for a Contractor's Fee of greater than 5% for this work and any other claims you wish to specifically reserve, subject to approval of this provision by the City Attorney and the City's Public Work staff. During our telephone conferences of July 19 and July 30, you indicated Lunda is not willing to approve Change Order No.1 as we have proposed. 1 need to again emphasize that we believe Lunda's position on this issue is not only contrary to the applicable contract provisions, it is also unreasonable and clearly disregards the legitimate interests of its subcontractors in receiving prompt payments. I will reiterate the City's request that Lunda approve Change Order No. I with a 5% Contractor' ~ Fee. As stated above, the City will agree to add language by which Lunda reserves its claims to any additional fees or charges allegedly due to Lunda, subject to the City's approval of the specific . language to be added to the Change Order. r . Mr. Christian Fox -4- August 13, 2002 3. Whether Lunda is entitled to receive $18,917.12 for extended office overhead costs claimed to have been incurred as a result of suspension of the proiect after the existence of the underground telephone conduit maintained by Owest Communications was discovered. Your letter of June 28 to SRF Consulting Group maintains the project was delayed .'as a result of delays and disruptions due to plan and design errors and other issues." The assertion that "plan and design errors" caused the project to be delayed is simply incorrect. Instead, the significant delay in commencement of work on the project was the result of the discovery of an underground telephone conduit maintained by Qwest Communications that was located within the construction site. Through no fault of the City or the City's consultants, the existence and location oftffis telephone conduit was not discovered until just before construction for this proj ect was to have commenced, and after the plans and contract documents had been completed. You are referred to Section 4.3.2 ofthe General Conditions, which addresses the parties' rights and responsibilities, "(i)f an Underground Facility is uncovered or revealed at or contiguous to the site which was not shown or indicated in the Contract Documents and which Contractor cannot reasonably have been expected to be aware of." Section 4.3.2 then describes the procedure for determining adjustments, if any, in the "Contract Price" and the "Contract Time" required as a result ofthe discovery of the Underground Facility. Any dispute regarding these adjustments is to be determined under the . procedures outlined in Articles 11 and 12 of the General Conditions. In your June 28 letter, you take the position Lunda is entitled to damages for delays under the 1958 Minnesota Supreme Court case of McCree & Company v. State of Minnesota. The McCree case is not applicable to the dispute between the City and Lunda for a number of reasons, including the following. First the suspension of the project did not result from improper project specifications nor did the City attemptto require Lunda to adhere to improper specifications. When the existence of the telephone conduit was discovered, the City took action as promptly as possible to require Qwest to relocate the telephone conduit outside of the project construction area. Through no fault of the City, commencement ofthe bridge construction project was suspended pending relocation of the telephone conduit. Perhaps most importantly, suspension of the project as a result of discovery of the telephone conduit occurred before Lunda had begun any significant construction activities for this project. Therefore, it is our belief Lunda ' s additional costs resulting from the suspension of the project were minimal or non-existent. It is my understanding that when the existence ofthe underground telephone conduit was discovered, it was apparent the bridge construction project could not be performed during the year 2000 construction season, but would, instead, have to be performed during the 2001 construction season, after Qwest had relocated the telephone conduit. Therefore, Lunda was able to delay and suspend the commencement of construction activities, knowing the project would not be performed in the 2000 construction season, presumably redirecting its personnel to other projects. This is an entirely different set of facts from those of the McCree case, in which, the duration of the time period in which the contractor was actually performing its work was extended due to the State's insistence on a faulty contract specification. When . Lunda actually performed the work for this project in 2001, it recovered its office overhead costs when the work was paid for. Mr. Christian Fox - 5 - August 13,2002 . Despite the City's previous requests for such information, Lunda has yet to demonstrate it maintained additional personnel, purchased or leased equipment or incurred other costs attributable to this project as a result of its unexpected suspension that would not otherwise have been incurred in the ordinary course of business by Lunda. We believe it is likely Lunda maintained the same level of staffing and incurred the same office overhead expenses during the suspension of this project that it would have maintained and incurred had it never contracted to construct the Lake Street Bridge. Lunda has not demonstrated otherwise. Therefore, Lunda's claim for $18,917.12 for extended office overhead is rejected by the City of Hopkins. If you can document Lunda did incur personnel, equipment or other costs specific to this project that it would not have incurred but for suspension of work on the project, please submit an itemized description of these additional costs and supporting documents for our review. The City is prepared to consider any such claim that you submit documenting actual excess costs incurred as a result of the suspension of the project. By forwarding a copy oftrus letter to Bob Moore and Larry Erickson of SRF Consulting Group, we are requesting that SRF, as the Project Engineer, review the matter and render a written determination under Section 9.11 of the General Conditions. After that determination has been rendered by SRF, I will contact you to discuss whether our clients are prepared to resolve the issues outlined in this letter based on the . Project Engineer's decision. In the meantime, please feel free to call me if you have any questions. Yours very truly, ft<t<#-'1 51-- Jeremy S, Steiner JSS/drs cc: Mr. Robert Moore, SRF Consulting Group, Inc. Mr. Larry Erickson, SRF Consulting Group, Inc. / Mr. Steven Stadler, City of Hopkins, Director of Public Works) Mr. Steven Bot, City of Hopkins Assistant City Engineer Hopcivil\Fox.ltr . '5, s\CQollQ r MILLER, STEINER & CURTISS, P.A. . A TTORNEYS AT LAW 400 WELLS FARGO BANK BUILDING 1011 FIRST STREET SOUTH HOPKINS, MN 55343 JERRE A. MILLER JEREMY S. STEINER * WYNN CURTISS (952) 938-7635 KIRSTEN A. HOLSETH FAX (952) 938.7670 *Real Property Law Specialist, certified by the Minnesota State Bar Association Writer's Direct Dial No. 952-938-6219 August 16,2002 Mr. John Greer VIA FACSIMILE AND Blease & Zuccaro FIRST CLASS MAIL P. O. Box 1675 1111 First Street North . 81. Cloud, I\.1N 56303-4606 Re: U gorets Properties LLC Dear Mr. Greer: . This letter responds to your letter of July 22 notifying the City of Hopkins of the claim by U gorets Properties LLC that the City has taken a portion of its property at 415 Blake Road for public right of way for Lake Street. As you and I discussed over the phone on August 7, after researching this issue and reviewing the AL T AJ ACSM survey prepared by James Parker of Advance Surveying & Engineering Co., dated July 6, 2000 ("Parker Survey"), we have concluded the Parker Survey incorrectly shows the location of the southeast boundary line of the Ugorets property, which is also the northwest right-of-way line of Lake Street. It is our conclusion the northwest right-of-way line of Lake Street is located approximately 15 feet northwest of the location shown on the ALTAI ACSM survey. Enclosed with this letter is a copy of a letter, dated August 14, 2002, from Dean Dusheck of SRF Consulting Group, Inc., the surveyor who established the right-of-way location for the Lake Street Bridge and street reconstruction project. This letter describes the research performed by Mr. Dusheck to locate the right-of-way lines of Lake Street and the basis for his conclusion that the northwest right-of~ way line is located northwest of the location shown on the Parker Survey. We believe Mr. Dusheck investigated this issue much more thoroughly than Mr. Parker and that his conclusion as to the location of the northwesterly right-of-way line of Lake Street is correct, for a number of reasons, including the following. . Since it appears the public right of way for Lake Street was established by use, and not by a deed, easement, plat dedication or other express grant, the right-of-way center line is the actual center Mr. John Greer - 2 - August 16, 2002 . line of the street improvements, such as the Lake Street Bridge and the paved area of Lake Street. Unlike Mr. Parker, Mr. Dusheck used the actual center line of the old Lake Street Bridge, which was replaced in 2001, and the roadway adjacent to the bridge to establish the location ofthe northwest right~ of-way line where it abuts the Ugorets property. Since this appears to be the correct method for establishing the center line of this public right of way, and since Auditor's Subdivision No. 239 shows a 66 foot wide right of way width for Lake Street, we believe it is proper to conclude the northwest right- of-way line of Lake Street adjacent to the Ugorets property is not in the location shovvn on the Parker Survey, but is, instead, approximately 15 feet farther to the northwest. On May 15, I sent you copies offield notes prepared by Schoell & Madson, Inc., in connection with a 1977 survey that located the right of way of Lake Street, which were obtained from the Hennepin County Surveyor's Office. Mr. Dusheck's letter states he reviewed these field notes as part of the research he completed to establish the location of the right of way of Lake Street adjacent to the U gorets property. As stated in the letter, the field notes indicate that both Schoell & Madson, in 1997, and Egan, Field and Nowack, in 1949, concluded the dimensions shown in Auditor's Subdivision No. 239 are incorrect, supporting his conclusion the right of way of Lake Street is located farther to the northwest than the location shown in the Parker Survey. Finally, Mr. Dusheck indicates SRF located "five pinched top iron monuments along the southerly right . of way line of Lake Street" that are consistent with his conclusion as to the location of the right of way of Lake Street adjacent to the U gorets property. Based on the items outlined above and the conclusions stated in Mr. Dusheck's letter, it appears that any parking, driveway or other improvements maintained by your client that were affected by the Lake Street Bridge construction project were located entirely within the public right of way of Lake Street. Therefore, the City of Hopkins denies your client's request for compensation for tbe alleged taking of those improvements. Please feel free to call me if you have any questions. Very truly yours, t::~llle~ ~ JSS/drs Ene. Mr. Steven Stadler, Public Works Director 1/ cc: M1:. Steven Bot, Assistant City Engineer . c:Hopcivil\Greer.ltr MILLER, STEINER & CURTISS, P.A. . ATTORNEYS AT LAW 400 WELLS FARGO BANK BUILDING lOll FIRST STREET SOUTH HOPKINS, MN 55343 JERRE A. MILLER JEREMY S. STEINER* WYNN CURTISS (952) 938.7635 KIRSTEN A. HOLSETH FAX (952) 938-7670 -Real Property Law Specialist, certified by the Minnesota State Bar Association Writer's Direct Dial No. 952-938-6219 August 12,2002 Mr. Robert Brown Allied Adjusters P. O. Box 583479 Minneapolis, l\1N 55458-3479 Re: Ugorets Properties LLC Claim v. The City of Hopkins Dear Bob: . Enclosed with this letter is a copy of the letter dated July 22, 2002, that I received from John Greer, the attorney for Ugorets Properties LLC, notifYing the City of Hopkins his client intends to bring a claim for the alleged taking of a portion of the Urgorets property for public right of way for Lake Street. Also enclosed is a copy of my letter of even date to Mr. Greer responding to his Notice of Claim. Please call me after you receive this letter to discuss any questions you may have regarding this claim and whether it will be covered by The League of Minnesota Cities Insurance Trust. Given my involvement in this matter to date, I think it would be of benefit to the City that I continue to represent it in regard to this claim. We should discuss this issue as well when you call me. Very truly yours, h 9- Jeremy S. Steiner JSS/drs Ene. ce: Mr. Steve Mielke, City of Hopkins / Mr. Steve Stadler, City of Hopkins Mr. 'Steve Bot, City of Hopkins . c:hopciv\Brown3 .Itr , . 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SlC~ner. ?ii2aS2 COnSidf:::i (i-js ltlLt:f to be 3 r~0Ti(.:: of clailn pursuant ~o IVD~- Sta.~.. 466.05 .)~j ,_j~). 1. ~.i~~ \\:c L3.Yt: P[e.'~'/iuusly C.i5cussed~ rny .~:j!~n.T .Ugorets Properrjes~ LLC s the owner ~-:I~ J. c~.JDiL:tr.:ial building 1 G cat~d 3! 41 j Bl:ii,~,_. f(:Jd;J 1~1 orttl 1i1 iJ:opkins. .'--'" . ~ - un or 6.0G0I h:l2y 13, 200:'::, [h~ City '';1' Hopbns constructed improvements Ior Lake Srree.t UpOE the Ugore::' s oropenv DJ.rkiuiZ lot '.J\!er which the eilV did not possess any easement or riEht-of-"\lr'ay . .... , '- ~ ,. '-' rights. These improvements include a "idewnlk, ,m eInbank.rnenr, and a curb. Ugorets Propenii;;;s has been damaged by this encroachment in an amount yet to be determined, ~ncludiTIE. GUT ~fJot lirrrited t::, [he value of 1.\,\/0 l{jSl' !Jark:inQ S O~tees. T!,p ]o"t "3.rk;no- s"a~p,: ~-' ..r; ......." ~ .....11.~ ..... jJ I. ~ !-' ,.'.....l.."..... r.::~;;j{l :r~ ~i !~i[t<::t J.flC slg~1irlC;lri't ~:hmjnuI~on i~-~ [~le value ortne building: ul415 BIQKe l~~'.)ad ~\lu.rrr: j....Jj-- C~ ~Drets has 1fiS1Tu~ted ~ne to i. :lke all Sl~JS ilt :;-cSS3.fY 10 0 Dlcin z:orDDt=-]S2.t~on - . . . ,-,- .,1.' " - h l ' -IX d I intend to bring an aO::clon against ~r,J.rr,i Lnf Lit.lior In~ aa..rnagts 1:.1 ~t J2.\e oeen .sUl.lere. . ,i~~' C:ity 'JfEopbns seeKing equitJole rehefin The form OfaJ1 Order Compelling the City of .i:-IupJ-:ins !Q remove the (;ncrQiichment which cDnsTiTUteS a trespass upon Ugoret's property, Of :n the altema:ive. for a V/riT of1vlandamus to compel the City to initiate Eminent Domain pr'8C'c:edings [~2.~ing to trJ.2; p~'ofJ\tfl:Y, i\.fh"T <::0'_" 9 \1'1 045 r'r-ov;de~ tJ-,-t .~ '!';c;n" -, '~~""~,--fi'llv . - -'_L i "-"' L_-L 1 - 1< y.... A .; (.d(l ..... 1-'-- L.} .)~v'l-',,-,,~J \,011 _I t.rlng)I1.g" aJ-Ll dCl]Dr1 ccrrlp.~11~1g Enlin';:;f~t D(]!Tl2.-:n proc:eedings is entitled IO reimbur3ement Inf ~~~~e~~~~ ~~~~~=;, '.:' " I j I I, _:_' ~ _r~,'_:~' \ ~ ll: ~ ;\] ~J. "1 ;~I 4 " ....." "0- ,.... . . Jeremy S. Steiner July n., 2002 Page 1- :reasonable co.st~ ::md expen.S2S, including fi;;asofiabk attorney, appraisal and engineering tees ~cluallyinCUlTtCi in binging such action. ,At rhis time damages $UffETed by Ugorets ProperJes, LLC have not yet been determined If you have any questions piease cal1. BLEASE & ZUCCf\RO, LLP Very truly yours, '. i i I ('....., \{}\J I I" 'f~ cj~ /\ ~' --. I \ I \ J~k. GREER, ESQ. . JLGJapp ':;c: f\lex 1] gOfers .