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LTC 056-2020 Lawsuit Filed by Clark Construction MIAMI BEACH OFFICE OF THE CITY MANAGER NO. LTC# 056-2020 LETTER TO COMMISSION TO: Mayor Dan Gelber and Members of he City Co mission FROM: Jimmy L. Morales, City Manager DATE: January 31, 2020 SUBJECT: LAWSUIT FILED BY CLARK C NSTRUCTION The purpose of this Letter to Commission is to provide an update with respect to the filing this week of a lawsuit by Clark Construction Group LLC ("Clark"), the construction manager at risk that was tasked with building and delivering the Convention Center("Center") project to the City. The City became aware of the lawsuit this past Wednesday when a member of the media emailed a copy of the Complaint to the City. Despite the fact that City staff and Clark staff communicate regularly, no one from Clark gave any advance notice that a lawsuit would be filed. It was only this morning that Clark finally served the complaint on the City. While it is normally not our practice to comment on litigation, Clark's attorneys, and the complaint itself, have made a number of unfounded allegations which were picked up by the media. Fairness requires that I respond to at least some of those falsehoods. As you all know, Clark was contractually obligated to achieve "substantial completion" of the Center and thereby obtain a "temporary certificate of occupancy" (TCO) by August 23, 2018, but it obviously failed to do so. The City and its consultants worked judiciously with Clark in an effort to complete the work as quickly after the deadline as possible,to no avail. Finally, on July 9, 2019 –almost one year after the substantial completion deadline with the work still not complete- I was left with no recourse but to formally serve notice to Clark that it was in default,of its contractual obligations. Attached please find a copy of the Notice of Default that was delivered to Clark. The letter outlines a series of failures by Clark that represent a breach of the Construction Manager at Risk(CMAR) agreement. Though Clark had represented to the City that the Project was substantially complete as of July 2019, the project architect, whose responsibilities include determining when substantial completion is reached, disagreed. Attached to the default letter is the architect's letter confirming that, not only was the Project not complete, but that substantial additional work needed to be performed. In short, Clark's representation that substantial completion was reached was false. As I noted in the only public statement I have made thus far on this litigation, Clark has a lot of nerve to file this lawsuit. As we sit here today, nearly seven months after Clark was placed in default, Clark has still not delivered a building that is "substantially complete" nor achieved a "temporary certificate of occupancy". We are eager to demonstrate in Court that Clark's misfeasance, inaction and delay has cost the city millions of dollars. It is for that, among other reasons, that the City continues to hold retainage—something it is legally entitled to do—in order to protect its financial interest. The City hired Clark because Clark represented itself as a world class construction company that could deliver this kind of large, complex and sophisticated construction project on time. From the very beginning, Clark knew that much of its work would have to be performed while the Convention Center was in use, and it assured the City that the Convention Center's continuing events would not prevent timely completion. Unfortunately, Clark has failed to deliver on the promises and assurances it made, and on which the City relied. Due to Clark's inability to progress the work and cure the default, the City was left no other option but to remove a portion of the scope of work from Clark and directly engage the fire alarm contractor, Honeywell, to facilitate certain fire alarm work that is critical to obtaining a TCO. The discreet scope of work is at no additional cost to the City as it has been charged to Clark via a deductive change order. The City continues to do everything within reason to assist Clark in bringing the project to final completion, while reserving its rights and remedies under the CMAR agreement. While Clark's delays have caused untold complications and damage to the City, I do want to assure you that the lack of a TCO does not prevent us from holding events in the Center. If you recall, when this project was first approved by the City Commission in 2014, we were given the directive to use our best efforts to keep one half of the building open to host shows and events during the construction and the entire building for Art Basel each year. As such, the Center has been operating without a TCO since 2017, while under construction, and has hosted dozens of events with special event permits. The Center is permitted to host events through a Special Event permit and enhanced Fire Watch throughout the building during the event. For example, for the Super Bowl Experience, we have a Fire Watch in the building, where firefighters are stationed throughout the building to act in place of any life safety systems that have not yet received official approvals. Fire Watches also take place at any large-scale event (e.g. Art Basel, Food & Wine, etc.). Of course, the extraordinary steps necessary to obtain special events permits would have been unnecessary after August 23, 2018 had Clark performed as it promised. As noted above, we are working diligently to obtain the TCO and complete the project. We hope to begin fire alarm testing in the spring. In order to obtain full TCO, the life safety systems must be tested for a continuous 30 days and the building must be 100% dark. We have identified a continuous 30-day period to conduct the testing. The success of that testing and the attainment of the TCO will be contingent on Clark finishing a series of items that remain open. If those items are still not resolved at the time of testing, the City will explore other remedies. I will close by pointing out that going forward, we intend to respect the dignity of the judicial process and deal with issues through our attorneys in the Courtroom. We are confident in our position that Clark has failed in their role as construction manager at risk, and that said failure has prejudiced the City, thereby entitling the City to damages. c Attachments MIAMI BEACH City of Miami Beach, 1700 Convention Center Drive,Miami Beach,FL 33139 Tel.305-673-7010 Fax:305-673-7782 Office of the City Manager July 9, 2019 Sent Via US Certified Mail Return Receipt No.: 9214890194038385889315 Mr. Sidney Jordan CEO—Northern/Southern Division Clark Construction Group, LLC 2502 North Rocky Point Drive, Suite 200 Tampa, FL 33607 Re: Miami Beach Convention Center Renovation and Expansion Project Notice of Default and Opportunity to Cure Dear Sid and Greg: On June 10, 2019, Clark Construction Group, LLC ("Clark") notified the City of Miami Beach ("City")that the Miami Beach Convention Center Renovation and Expansion Project(the"Project")was substantially complete and that Clark satisfied the requirements for a Temporary Certificate of Occupancy ("TCO"). Clark asked that the City cause the Project Architect, Fentress Architects ("Fentress"), to perform its substantial completion inspection. Though I had serious doubts about the accuracy of your characterization that the Project was substantially complete, I wrote you back on June 11, 2019 accepting your representations, and directed Fentress to proceed with substantial completion inspections. I also asked you to work with the Authority Having Jurisdiction ("AHJ") to immediately obtain a TCO. On July 8, 2019, in response to my directive that substantial completion inspections proceed, Fentress wrote back (copy of the letter attached) to advise the City that inspections have been ongoing and that, contrary to your representations, the Project is not substantially complete. Moreover, it is now July 9th, a TCO has not been issued and Clark is now 320 days behind the required substantial completion date of August 23, 2018. In the meantime, we engaged in a good faith and concerted effort over the last several weeks to reach an accommodation which would clear the way for Clark to finish the Project. Clark responded by rejecting our proposals; and, instead, made demands for exorbitant payments and imposed other terms that are clearly outside of the CM at Risk Agreement(the"Agreement"). The City cannot agree to those terms, and it is now evident that Clark will not complete the Project unless the City accedes to its extra-contractual demands. Accordingly, and pursuant to Article 13.4 of the Agreement, the City hereby serves notice on Clark that it is indefault of its contractual and other obligations, as more particularly set forth below. Despite its representation on June 10, 2019 that the Project was substantially complete and ready for a TCO,the Project Architect continues to identify We are committed to providing excellent public service and safety to all who live,work,and ploy in our vibrant,tropical, historic community. Clark Construction Group, LLC Notice of Default Page2of4 building systems that are not substantially complete or even ready for inspection due to significant incomplete work on the Project, and the AHJ has yet to issue a TCO. Accordingly, the City is left with no alternative than to place Clark on notice,without limitations, of the following additional defaults: • Failing to properly coordinate the work of the subcontractors, causing or contributing to delays and claims from subcontractors; • Failing to defend City against subcontractor claims; • Failing to comply with the terms of the Agreement or to perform the Work within the time and in a manner consistent with the requirements of the Contract Documents; • Failing to properly manage changes,subcontractor PCOs, CCDs or Claims resulting in delays and inefficiencies that delayed the work and required significant, additional administrative work by the City and its staff, including failure to review proposals in the best interests of the City; • Failing to meet required Milestone Dates, including key Art Basel Milestone; • t=ailing to meet the Substantial Completion deadline; • Failing to progress the Work in accordance with the Project Schedule and/or Construction Schedule or the monthly schedule updates; • Persistently disregarding laws, ordinances, or rules, regulations or orders of the AHJs and failing to minimize the impact of AHJ changes; • Failing to adequately supervise the work, resulting in defective work that required hundreds of NCRs; • Failing to provide documents to the City pursuant to the audit obligations of the Agreement; • Failing to properly handle and store City furnished materials resulting in loss or damage to equipment and materials due to the negligence of Clark or its subcontractors; • Failing maintain agreed upon key personnel throughout the Project; • Failing to manage the QA/QC process per the terms of the Agreement; • Failing to manage the GMP funds per the terms of the Agreement; • Failing and/or refusing to remove, repair and/or replace nonconforming or defective Work within the required contract time; We are committed to providing excellent public service and safety to all who live,work,and play in our vibrant,tropical, historic community. Clark Construction Group, LLC Notice of Default Page 3 of 4 • Failing to manage the RFI process per the terms of the Agreement; • Failing to submit subcontractor certifications reflecting subcontractor agreement with monthly schedule updates; • Failing to manage submittals per the terms of the Agreement; • Failing to perform the Work with sufficient manpower or materials, resulting in delays to the Project schedule; • Failing to make payments to subcontractors or suppliers for materials,or labor in accordance with the respective Subcontracts and Purchase Orders (a "Monetary Default"); • Failing to exercise a diligent good-faith effort in performing the Work to minimize interference with the business operations of the City and properties/businesses adjacent to and around the Project site; • Failing to submit accurate monthly schedule updates; and • Failing to enforce the terms of its agreements with its subcontractors. This list is not exhaustive, and the City reserves the right to make additional claims as circumstances warrant. Pursuant to Article 13.4 of the Agreement, Clark has fifteen (15) days from service of this Notice to promptly commence and thereafter complete the curing of the defaults set forth above. Should Clark fail to cure the above defaults within the time permitted,or otherwise fail to present the City With its plan to undertake measures to cure the non-monetary defaults that cannot be cured within such period, each of the above shall be deemed an Event of Default under Section 13.4 of the Agreement, and constitute sufficient grounds for the City to terminate Clark for cause. As has been confirmed by Fentress and the City's Owners Representative, there are dozens of open NCR's; hundreds of inspections to be conducted; thousands of Base Scope and punch-list items to be completed; and millions of dollars of remaining work, all of which Clark has failed to diligently prosecute. Unless Clark cures these defaults in accordance with the Agreement, the City will be left with no alternative but to terminate Clark for cause pursuant to Article 13.5 of the Agreement. The City reserves all of its rights and remedies under the Agreement, at law and in equity. Nothing herein shall be deemed or construed as an election of remedies or as a waiver of any rights, claims, demands or defenses, all of which are expressly reserved and any one or more of which may be pursued hereafter. Si cerely, Ji my L. orales Ci Manager We ore committed to providing excellent public service and safety to all who live,work,and play in our vibrant,tropical, historic community. Clark Construction Group, LLC Notice of Default Page 4 of 4 Cc: Clark Construction Group, LLC, 2502 North Rocky Point Drive, Suite 200, Tampa, FL 33607 Federal Insurance Company 15 Mountain View Road, Warren, New Jersey 07059 Travelers Casualty and Surety, One Tower Square, Hartford, CT 01683 Fidelity and Deposit Company of Maryland, 1400 American Lane, Schaumburg, IL 60196 Zurich American Insurance Company, 1400 American Lane, Schaumburg, IL 60196 Greg Colevas, Clark Construction Group, LLC(via email only) Harold Roach, Clark Construction Group, LLC (via email only) Bill Calhoun, Clark Construction Group, LLC (via email only) Maria Hernandez, City of Miami Beach (via email only) • • We are committed to providing excellent public service and safety to all who live,work,and play in our vibrant,tropical, historic community. I FENTRESS ARCHITECTS fentressarchi tects.co m July 8, 2019 Mr. Jimmy Morales, City Manager City Manager's Office City of Miami Beach 1700 Convention Center Drive 4th Floor Miami Beach, FL 33139 Re: Miami Beach Convention Center Renovation Resolution No.2014-28538 Substantial Completion Project 20140021.001 Dear Mr. Morales: We are writing to inform you that Clark Construction Co. has not satisfied the requirements for substantial completion on the above referenced project. This determination is based on the following requirements located in Specification 01 7700"Closeout Procedures"of the project manual: 1. A Certificate of Occupancy or a Temporary Certificate of Occupancy has not been obtained or submitted to this office by the Construction Manager; 2. Closeout documents have not been completely submitted to this office including record drawings .and operation and maintenance manuals for building systems; 3. We have not received test and balance records for the mechanical building systems nor is the building mechanical systems commissioned; 4. We currently have 12,334 substantial completion inspection items of which only 1,607 have been resolved by the Construction Manager. Several items on the substantial completion inspection list constitute significantly incomplete work that would not typically be permitted to reside on a substantial completion punch list. Examples include: incomplete lighting and electrical work, incomplete life safety systems, etc.; 5. Complete records for the sustainable design submittals to comply with USGBC requirements for LEED Silver Certification have not been submitted; 6. Building system Owner's personnel training has not been completed The above deficiencies do not allow us to issue a Certificate of Substantial Completion for this project. Should you have questions, please do not hesitate to contact us. Sincerely, Fentress Architects J n Kudrycki,AIA, EE BD+C Principal c: Jeff Sachs, Jones Lang LaSalle DEN DC LA SF HOU i 421 Broadway I Denver CO 80203 I 303 . 722 .5000