2004-24765A Reso
RESOLUTION NO. 2004-25765A
A RESOLUTION OF THE MAYOR AND CITY COMMISSION
OF THE CITY OF MIAMI BEACH, FLORIDA, APPROVING
SETTLEMENT, IN THE AMOUNT OF $4.9 MILLION, FROM
ST. PAUL FIRE AND MARINE INSURANCE COMPANY, IN
FULL AND FINAL SETTLEMENT OF THE FOLLOWING
CASES REGARDING THE CITYWIDE WATER AND
WASTEWATER PUMP STATION UPGRADES PROJECT: 1.)
FELIX EQUITIES. INC. V. CITY OF MIAMI BEACH. UNITED
STATES FIDELITY & GUARANTY. AND ST. PAUL FIRE AND
MARINE INSURANCE CO. CASE NO. 03-016109 CA 22; 2.)
IN RE: L1NC. NET. INC.. ET AL.. CASE NO. 02-16987 BKC
RAM; AND 3.) CITY OF MIAMI BEACH V. UNITED STATES
FIDELITY & GUARANTY. CASE NO. 03-19303 CA 03.
WHEREAS, in 1992, the City initiated a Citywide Infrastructure improvement
Program to address rehabilitation and upgrades to the water, sewer and storm water
systems; and
WHEREAS, on August 8, 1998, the City issued Invitation to Bid for the Water and
Wastewater Pump Station Upgrades Project (Bid No. 99-97/98) (the "Project"), and on
February 3, 1999, awarded the construction contract for the Project to Felix Equities, Inc.
("Contractor"), in the amount of $17,692,568 (the "Contract"); and
WHEREAS, from very early in the Project, conditions arose due to unforeseen
events, lack of Contractor manpower, issues with permitting, etc., which created delays on
the performance of the work and caused additional costs; and
WHEREAS, on May 21, 2001, the Contractor submitted a Request for Equitable
Adjustment (REA) to the City and the City's Consultant, Camp Dresser & McKee, Inc.
(COM), alleging the additional costs the Contractor attributed to the delays; and
WHEREAS, the REA was not properly substantiated, could not be properly
evaluated, and was eventually rejected by COM and the City; and
WHEREAS, numerous discussions, meetings and exchanges occurred during the
course of more than a year between the parties in an attempt to resolve the differences
and obtain an amicable resolution to the REA; and
WHEREAS, the Contractor continued to fall behind in the Project schedule, did not
present an adequate plan of action to correct the situation, and eventually stopped making
proper payments to the sub-contractors on the Project; and
WHEREAS, due to the events mentioned above, on June 7, 2002, the City
terminated the Contract with Contractor, and pursuant to Article 8.8 therein, the
Administration certified the Contractor to be in default; and
WHEREAS, on July 10, 2002, the Mayor and City Commission ratified the
Administration's default of the Contractor; and
WHEREAS, the Contractor and its parent corporation, Linc Net, Inc., filed a Petition
for Relief under Chapter 11 of the Bankruptcy Act on July 9, 2002; and
WHEREAS, the City submitted a claim to the Contractor's surety company, United
States Fidelity & Guaranty (USF&G), demanding that USF&G complete the Project under
the terms of the bond requirements of the Contract; and
WHEREAS, the parties agreed to determine what the cost of completing the Project
with a replacement contractor would be in order to establish the final value of the claim to
USF&G; and
WHEREAS, after several meetings, the parties were not able to agree on the value
of the obligations of USF&G, and the City proceeded to award the completion of
construction to a replacement contractor; and
WHEREAS, subsequently, the City was engaged in the following related litigation
against the contractor and USF&G under those certain cases styled: 1) Felix Eauities, Inc.
v. City of Miami Beach, United States Fidelity & Guaranty. and St. Paul Fire and Marine
Insurance Co., Case No. 03-016109 CA 22; 2) In Re: Linc. Net. Inc., et al.. Case No. 02-
16987 BKC RAM and 3) City Of MiamiSeach v. United States Fidelity & Guaranty Co..
Case No. 03-19303 CA 03; and
WHEREAS, during the course of the litigation, the parties agreed to settle the
aforestated cases, in the amount of $4.9 million, payable to the City of Miami Beach by St.
Paul Fire and Marine Insurance Company; and
WHEREAS, the City has received said settlement payment; and
WHEREAS, the Administration recommends approval of the settlement, in the
amount of $4.9 million.
NOW, THEREFORE BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City
Commission hereby approve a settlement, in the amount of $4.9 million, from St. Paul Fire
and Marine Insurance Company, in full and final settlement of the following cases
regarding the Citywide Water and Wastewater Pump Station Upgrades Project: 1) Felix
Equities. Inc. v. City of Miami Beach. United States Fidelity & Guaranty. and St. Paul Fire
and Marine Insurance Co.. Case No. 03-016109 CA 22; 2) In Re: Linc. Net. Inc.. et al..
Case No. 02-16987 BKC RAM and 3) City Of Miami Beach v. United States Fidelity &
Guaranty Co.. Case No..03-19303 CA 03.
PASSED AND ADOPTED this 8th day of
~+fM~
CITY CLERK
MAYOR
T:\AGENDA\2004\Dec0804\Regular\Felix Settlement Reso. doc.doc
APPROVED AS TO
FORM & LANGUAGE
& FOR EXECUTION
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~ Uate
CITY OF MIAMI BEACH
COMMISSION ITEM SUMMARY
lQ
Condensed Title:
A Resolution Accepting Payment In The Amount Of $4.9 Million From St. Paul Fire And Marine Insurance
Company As Settlement For The Following Cases: Felix Eauities. Inc. Vs. City Of Miami Beach. United
States Fidelity & Guaranty. A Foreian Corporation. And St. Paul Fire And Marine Insurance Co.: In Re:
Linc. Net. Inc., Et AI.; And City Of Miami Beach Vs. United States Fidelity & Guaranty Company For The
Citywide Water And Wastewater Pump Station Upgrades Project; Appropriating The $4.9 Million; Allocating
Funds In The Amount Of $2,124,891 To Replace Funding Previously Appropriated For AlE Fees And
Contingency For The Project; Allocating $596,692 As Additional Contingency For The Project; And
Allocating The Remaining Funding In The Amount Of $2,178,417 To The General Trust Fund For
Pur oses To Be Determined At A Later Date For A roval B The Cit Commission.
Issue:
Shall the City Commission accept and appropriate payment in the amount of $4.9 million As Settlement For
The Following Cases: Felix Eauities. Inc. Vs. City Of Miami Beach. United States Fidelity & Guaranty. A
Foreian Corporation. And St. Paul Fire And Marine Insurance Co.: In Re: Linc. Net. Inc.. Et AI.; And City Of
Miami Beach Vs. United States Fidelity & Guaranty Company For The Citywide Water And Wastewater
Pum Station U rades Pro'ect?
Item Summary/Recommendation:
In 1992, the City initiated a citywide infrastructure improvement program to address rehabilitation and
upgrades to the water, sewer and storm water systems. On August 8, 1998, the City issued Invitation to
Bid for the Water and Wastewater Pump Station Upgrades Project (Bid No. 99-97/98) ("Project"), and on
February 3, 1999, awarded the construction contract for the Project to Felix Equities, Inc. ("Contractor") in
the amount of $17,692,568. On June 7, 2002, as a result of Felix Equities default, the City was required to
terminate the contract, and shortly thereafter, Felix Equities and its parent corporation, Linc. Net, Inc. filed
its Petition for Relief under Chapter 11 of the Bankruptcy Act. The City was engaged in litigation against
the contractor and its surety bonding company. During the course of the litigation, all sides agreed to settle
the cases, in the amount of $4.9 million payable to the City of Miami Beach by St. Paul Fire and Marine
Insurance Company. The City has received said settlement payment, and now must appropriate and
allocate the funds.
Advisory Board Recommendation:
I N/A
Financial Information:
Source of
Funds:
$4.9 million
Approved
D
Finance Dept.
$4.9 million
Ci Clerk's Office Le islative Trackin :
Kristin L. McKew, Capital Projects Administrator
n-Ofts:
epartment Director
ENDA\2004\Dec0804\Regular\Felix Settlement Appropriation and Alloc
City Manager
AGENDA ITEM
DATE
Rr-rr
J2.-~-OV
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
www.miamibeachfl.gov
To:
From:
Subject:
COMMISSION MEMORANDUM
Mayor David Dermer and
Members of the City Commission
Jorge M. Gonzalez ~. _. ~
City Manager 0 V"- D
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA, ACCEPTING PAYMENT IN THE AMOUNT
OF $4.9 MILLION FROM ST. PAUL FIRE AND MARINE INSURANCE
COMPANY AS SETTLEMENT FOR THE FOLLOWING CASES: FELIX
EQUITIES. INC. VS. CITY OF MIAMI BEACH. UNITED STATES FIDELITY
& GUARANTY. A FOREIGN CORPORATION. AND ST. PAUL FIRE AND
MARINE INSURANCE CO.; IN RE: LlNC. NET. INC.. ET AL.; AND CITY OF
MIAMI BEACH VS. UNITED STATES FIDELITY & GUARANTY COMPANY
FOR THE CITYWIDE WATER AND WASTEWATER PUMP STATION
UPGRADES PROJECT; APPROPRIATING THE $4.9 MILLION;
ALLOCATING FUNDS IN THE AMOUNT OF $2,124,891 TO REPLACE
FUNDING PREVIOUSLY APPROPRIATED FOR AlE FEES AND
CONTINGENCY FOR THE PROJECT; ALLOCATING $596,692 AS
ADDITIONAL CONTINGENCY FOR THE PROJECT; AND ALLOCATING
THE REMAINING FUNDING IN THE AMOUNT OF $2,178,417 TO THE
GENERAL TRUST FUND FOR PURPOSES TO BE DETERMINED AT A
LATER DATE FOR APPROVAL BY THE CITY COMMISSION.
Date: December 8,2004
ADMINISTRATION RECOMMENDATION:
Adopt the Resolution.
FUNDING:
Funds in the amount of $4.9 million from St. Paul Fire and Marine Insurance Company are
available for appropriation for these purposes.
ANALYSIS:
In 1992, the City initiated a citywide infrastructure improvement program to address
rehabilitation and upgrades to the water, sewer and storm water systems. On August 8,
1998, the City issued Invitation to Bid for the Water and Wastewater Pump Station
Upgrades Project (Bid No. 99-97/98) ("Project"), and on February 3, 1999, awarded the
construction contract for the Project to Felix Equities, Inc. ("Contractor") in the amount of
$17,692,568.
On June 7, 2002, as a result of Felix Equities default, the City was required to terminate the
contract, and shortly thereafter, Felix Equities and its parent corporation, Linc. Net, Inc.
filed its Petition for Relief under Chapter 11 of the Bankruptcy Act. The City was engaged
City Commission Memorandum
December 8, 2004
Felix Settlement Appropriation and Allocation
Page 2 of 3
in the following related litigation against the contractor and its surety bonding company
(United States Fidelity & Guaranty Company): FELIX EQUITIES, INC. VS. CITY OF MIAMI
BEACH. UNITED STATES FIDELITY & GUARANTY, A FOREIGN CORPORATION, AND
ST. PAUL FIRE AND MARINE INSURANCE CO.: IN RE: L1NC. NET. INC.. ET AL.; AND
CITY OF MIAMI BEACH VS. UNITED STATES FIDELITY & GUARANTY COMPANY.
During the course of the litigation, all sides agreed to settle the cases, in the amount of
$4.9 million payable to the City of Miami Beach by St. Paul Fire and Marine Insurance
Company. The City has received said settlement payment, and now must appropriate and
allocate the funds.
The City has since procured a new contractor to resume the work that Felix Equities had
started, and funding in the amount of $2,124,891 was used from previously appropriated
Water and Sewer Bond funds to pay for AlE fees to CDM and establish a new contingency
for the project. The Administration recommends that $2,124,891 of the $4.9 million
settlement be allocated toward these costs, replacing the Water and Sewer Bond funds.
There are several construction items that were foreseen during the re-procurement effort,
for which funds were not set aside, due to final dollar amounts for those items not being
available at the time. Since the re-procurement was completed, the City, assisted by the
Consultant (Camp Dresser and McKee, Inc.) and the contractor (Widell, Inc.), has defined
the costs for these necessary items. These items include the purchase of electronic
devices that control the speed of the motor by controlling the frequency of the voltage
called Variable Frequency Drives (VFDs), directly from the manufacturer; an allowance
originally set as a fixed amount for Wet Well repairs for which costs were estimated by the
contractor but were not final until the Wet Wells were actually opened and inspected (Wet
Wells are wells inside pump stations where all incoming flows are directed to a single flow
before screens separate solids prior to reaching the pumps); replacement of an existing
valve which was found to be not operational by the Public Works Department; and a
Change Order which includes safety enhancements required to correct code or operational
deficiencies, such as:
· Replacement of steps in lieu of refurbishing existing steps into the station pits,
· Concrete Trench at Miami Beach Convention Center with cover for underground
fuel pipes,
· Additional fencing around some stations,
· Connection of smoke alarms to SCADA system,
· Increased lighting within the stations, and
· Stainless steel sluice gates which control the flow of water through the pipes.
The Administration also recommends that $596,692 be allocated toward these costs so as
not to further reduce the contingency for these items.
The Administration recommends that the remaining funding in the amount of $2,178,417
be allocated to the General Trust Fund (fund 601). Funds would remain in this Trust Fund
until a suitable use was determined, at which time, the Administration would seek allocation
City Commission Memorandum
December 8, 2004
Felix Settlement Appropriation and Allocation
Page 3 of 3
of the funds by the City Commission.
CONCLUSION:
The Administration recommends that the Mayor and City Commission adopt the
Resolution, accepting payment in the amount of $4.9 million from S1. Paul Fire and Marine
Insurance Company as settlement for the following cases: FELIX EQUITIES. INC. VS.
CITY OF MIAMI BEACH. UNITED STATES FIDELITY & GUARANTY. A FOREIGN
CORPORATION. AND ST. PAUL FIRE AND MARINE INSURANCE CO.: IN RE: L1NC.
NET. INC.. ET AL.; AND CITY OF MIAMI BEACH VS. UNITED STATES FIDELITY &
GUARANTY COMPANY for the Citywide Water and Wastewater Pump Station Upgrades
project and appropriating the funds, allocating funds in the amount of $2,124,891 to
replace funding previously appropriated for AlE fees and Contingency for the project,
allocating $596,692 as additional contingency for the project; and allocating the remaining
funding in the amount of $2,178,417 to the General Trust Fund for purposes to be
determined at a later date for approval by the City Commission.
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