LTC 21-2003CITY OF MIAMI BEACH
Office of the City Manager
Letter to Commission No.
To:
From:
Subject:
Mayor David Dermer and Date: January 21, 2003
Members of the City Commission
Jorge M. Gonzalez r~ .A.~c-,'// Murray H. Dubl:[il]~,
City Manager ~_j~ ¢'v/~) City Attorney ~jU/~ ~[J~[/w ~ ~'~'~-~
UPDATE ON THE WATER/WASTEWATER'PUMP STATION PROJEC~
AND FELIX EQUITIES, INC.
This is to provide you an update on the WaterNVastewater Pump Station projeCt and. the
current situation with the Contractor, Felix Equities, Inc. (FEI). As you may recall, the~ity
Commission ratified the Adm n strat on's defau t of FEI and gave the City Ma~ag~'the
authority to enter into any and all contracts to complete the remaining work with associated
authority to spend up to the amount appropriated for the FEI Contract. This occurred at the
July 10, 2002 City Commission Meeting.
The day after the Commission Meeting, the City was notified that FEI had filed for
bankruptcy as of July 9, 2002. The filing of bankruptcy also constitutes a default of FEI's
contract. However, due to the bankruptcy status, any changes in the status of FEI's
contract with the City, including default, payments, additions, etc. must be approved by the
bankruptcy court. In practical terms this means that the scope of work for the contract, the
sub-contractors and suppliers, and the City's funding for the project are essentially frozen
until the bankruptcy court issues a ruling as to how the FEI Contract with the City should
be handled.
In an effort to avoid the legal issues noted above, the City then submitted a claim to the
surety company guaranteeing FEI's performance, which is United States Fidelity and
Guaranty Company (USF&G), demanding that USF&G step in and finish the project. To
date, USF&G, as well as FEI, have both taken the position that the surety is precluded from
completing the project unless the bankruptcy court provides them permission to do so.
Although the City has taken the position that the surety is legally separate from FEI, and
thus the bankruptcy, neither party has accepted the City's position.
The current situation, noted above, has caused the City to modify its approach in
proceeding with the project. Based on the July 10th resolution, the City Manager was
authorized to enter into any and all contracts necessary to complete the project with
spending authority limited to the amount of the original contract with FEI. Ideally the
project would have included some agreement with USF&G (who would cover excess costs)
to finish the job and would have been handled by the City Manager under the authority
granted in the resolution. Because of the legal issues involved, such as the pursuit of a
settlement, it is likely that the City Commission will be requested to consider a package that
will include approval of a replacement contractor that will finish all components of the
original job.
Letter to Commission
January 21, 2003
Page 2
This LTC provides a status on those elements of the project that are either not anticipated
to be subject to potential litigation or are issues to which all parties have previously agreed.
Individual verbal briefings can be provided by the City Attorney and myself should a
broader overview be requested.
In order to move towards a settlement, all parties have agreed that it should be determined
what the cost to complete the project with a replacement contractor will be. In moving
towards this goal, the City is in the process of updating the construction documents to a
point where potential replacement contractors can price the remainder of the job. This
process requires the design firm (Camp Dresser McKee (CDM)) and FEI (as the contractor)
to modify/edit the existing construction drawings to clearly reflect what has been
constructed and what has not been constructed. From there, specifications and quantities
of materials must also be updated. Finally, since the project is approximately 37.5%
complete, a considerable amount of equipment and materials have already been
purchased, which must also be identified within the updated construction documents. With
this updated set of construction documents, it is believed that sufficient information will
exist for a replacement contractor to price the job.
Once a price is established for the completion of the project, all parties will be able to
calculate the cost of the project over and above the existing contract price with FEI. With
this information, the intention would be for FEI, USF&G, and the City to enter into
settlement negotiations that would address the issues of all parties and allow the project to
proceed. Any settlement proposal would need to be approved by the Bankruptcy court and
then by the City Commission.
In order to price the job, it is proposed that three contractors be chosen, who have a
successful history with the surety and the design firm (CDM) for this type of work, and who
also do not have a negative history with the City. CDM was asked to provide the names of
three contractors with whom they have successfully completed problem projects and the
surety and City staff were provided the opportunity to reject the contractors based on
previous experience. CDM was asked to consider all the contractors it has worked with, as
well as contractors that had expressed an interest to the City for this work.
The nature of this project and the conditions under which a replacement contractor would
be coming into the job create a situation where we believe it is imperative that the number
of potential replacement contractors be limited to a small group. Further, the City should
be reasonably assured that potential replacement contractors have experience with
assuming partially completed projects of this nature. By way of illustration, the nature of
the work includes inheriting a highly complex project that is only partially complete, where
the construction documents utilized for pricing are modified original documents (not new
documents), and where the successful contractor will need to assume responsibility for the
work of the previous contractor. Accordingly, the three contractors identified through the
process are (in no particular order): Poole & Kent, Project Integration, and R.J. Sullivan.
Letter to Commission
January 21,2003
Page 3
CDM delivered the updated construction documents in a satisfactory form on January 17,
2003. ClP is reviewing the CDM submittal for completion and will transmit them to USF&G
for their review. USF&G will then transmit these documents to the three selected
contractors and then schedule a walk-through of the project with the documents so that all
three contractors have an in-depth understanding of the project, including what has been
constructed by FEI and what remains pending. The walk-thru is now expected in the last
week of January, depending on the promptness with which the surety reviews the
submittal. The contractors will be asked to submit their pricing for the project, within three
weeks of the walk-through, to the City and to the surety. The successful contractor,
chosen from the above named three contractors, will be the best and most responsive and
will provide the lowest price.
Upon the receipt of the pricing, the City, FEI, and USF&G will finalize the discussions on
how, what, and whether a final package will be submitted to the bankruptcy court and then
to the City Commission for approval. If the parties are unsuccessful in coming to a mutual
agreement that will allow the project to move forward, then the City will need to explore its
remaining legal remedies.
This is provided for your information. Please let me, or the City Attorney, know if you have
any questions or concerns about the information in this LTC or the direction in which the
City is.,~a~ng regarding this project.
JM~M~rH
c: Robert C. Middaugh, Assistant City Manager
Fred Beckmann, Director of Public Works
Tim Hemstreet, CIP Director
F:\CAPI\$alI\TIMHEMS~LTC - Status Update on FEI 010203.doc