Resolution 2024-32978 RESOLUTION NO! 2024-32978
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA, AUTHORIZING THE ADMINISTRATION TO
ENGAGE IN NEGOTIATIONS WITH RIC-MAN CONSTRUCTION FLORIDA,
INC. TO DEFINE THE PARAMETERS OF AN ARBITRATION PROCESS TO
BE USED BY THE PARTIES TO RESOLVE DISPUTES RELATED TO THE
WEST AVENUE PHASE II IMPROVEMENTS NORTH OF 14TH STREET
PROJECT IN AN EXPEDITED MANNER, WITH THE FINAL TERMS AND
CONDITIONS FOR SUCH PROCESS TO BE SUBJECT TO THE APPROVAL
OF THE MAYOR AND CITY COMMISSION.
WHEREAS, the West Avenue neighborhood is one of the lowest lying 'areas in the City
with elevations as low as 1.7' NAVD, with certain areas of West Avenue having experienced
flooding from high tides 58 times (NOAA Virginia Key tidal gauges) since 2017; and
WHEREAS, flooding is expected to worsen, as the City faces 14-30 inches of sea level
rise over the next thirty years (Southeast Florida Regional Climate Change Compact, 2019);
WHEREAS, a high groundwater table and intense rain events result in additional
compound flooding concerns and without the deployment of temporary pumps, segments of the
neighborhood flood regularly during intense rain events and king tides;and
WHEREAS, Miami-Dade County is planning for 2 feet of sea level rise by 2060, and the
United States Army Corps of Engineers is planning for 3 feet of sea level rise by 2070; and
WHEREAS, concurrent to the Florida Department of Transportation's renovation of Alton
Road, in 2014 the City executed a design-build agreement for Phase I of the West Avenue Project,
making utility and roadway improvements along West Avenue, north of Lincoln Road and south
of 8th Street; and
WHEREAS, the West Avenue Phase II Improvements Project— North of 14th Street (the
"Project") represents a comprehensively defined neighborhood improvement program, focused
on resolving challenges associated with climate impacts and aged infrastructure; and
WHEREAS, the scope.of this neighborhood improvement project includes replacement of
the existing water distribution/transmission systems and gravity sanitary sewers, installation of a
new robust storm water drainage collection and pumping system including new bi-fuel axillary
generators, raising of the paved roadway and harmonization to the adjacent properties,
installation of new street lighting, pedestrian lighting, replacement of existing and installation of
new traffic and pedestrian signals at intersections, new landscaping, irrigation and construction
of a new segment of the Bay Walk;and
WHEREAS, the limits of the improvements are West Avenue and Bay Road between 14th
Street and Collins Canal, including side streets; and
WHEREAS, on March 22, 2017, the Mayor and City Commission adopted Resolution No.
2017-29800, awarding design/build services (the "Design/Build Agreements" or "Agreements ")
to Ric-Man Construction Florida, Inc ("Ric-Man" or "Contractor"), for the West Avenue Phase II
Improvements North of 14th Street with the guaranteed maximum price of$29,669,344, including
a 10% contingency; and
WHEREAS, on January 11, 2018, Change Order No. 1 was executed for a 30-day non-
compensatory time extension due to the impact of Hurricane Irma; and
WHEREAS, on March 16, 2018, Change Order No. 2 was executed in the amount of
$3,270,932 for funding of the above-ground improvements to the project, with no additional time
extension, increasing the cost of the Agreements to $32,940,276; and
WHEREAS, on December 12, 2018, the City Commission adopted Resolution No. 2018-
30652 authorizing the City Manager to negotiate Change Order No. 3 for additional design and
construction changes associated with the recommendations made by the Columbia University
Resiliency Accelerator Program, the Urban Land Institute(ULI)and for additional scope for a total
of$17,763,900, including contingency; and
WHEREAS, on April 30, 2019, Change Order No. 3A was executed in the amount of
$579,752 as the first partial request from Ric-Man of the approved Change Order No. 3 for the
costs incurred in support of the Columbia University Resiliency Accelerator Workshop, re-start
impacts after a 1 year delay and 10-year storm drainage modeling to allow for further design in
order to be able to negotiate the price of the remaining change order scope; and
WHEREAS, on June 16, 2019, Change Order No. 3B was executed in the amount of
$17,171,211 as the second partial request from Ric-Man of the previously approved Change
Order No. 3 and includes emergency generator sets, street end enhancements, additional pumps,
additional street improvements; and
WHEREAS, on September 17, 2019, Change Order No. 4 was executed in the amount of
$327,093 to account for the 10% contingency for the above-ground improvements, which were
previously added to the Agreement as Change Order No. 2; and
WHEREAS, on April 4, 2020, the City Commission adopted Resolution No. 2020-31243
authorizing the City Manager to negotiate Change Order No. 5 for design services associated
with additional water quality treatment, as required by the Miami-Dade County Regulatory and
Economic Resources Department (RER) for a total not-to-exceed of $1,147,037, including
contingency and the City negotiated a final change order of$1,101,959; and
WHEREAS, on June 23, 2021, the City Commission adopted Resolution No. 2021-31752
approving and authorizing the City Manager to negotiate and execute Change Order No. 6 with
Ric-Man Construction Florida, Inc., for the West Avenue Phase II Improvements North of 14th
Street, for construction of additional water quality treatment, revised storm water criteria,
relocation of the pump station, cost escalation, and a reduction in previously authorized owner's
contingency in the net change amount of$17,568,384, as well as an increase in contract time of
1,961 calendar days; and
WHEREAS, on April 27, 2022,the Administration received a letter from Ric-Man indicating
that it had instructed its legal counsel to prepare a declaratory relief action seeking termination of
both Design-Build Agreements and inviting the City to negotiate a "Termination for Convenience"
of the Design-Build Agreements; and
WHEREAS, the City has the right to terminate the design-build agreements for its
convenience in addition to the right to terminate in the event of a breach by Ric-Man; and
WHEREAS, the City had not elected to exercise either of these options and per the terms
of the Agreements, Ric-Man can terminate the Design/Build Agreements only upon the
occurrence of one of two conditions (i. e., the issuance of a stop work order by a court or other
public authority for a period of more than 90 days due to no act or fault of Ric-Man or the City' s
nonpayment of an undisputed amount owed), neither of which has occurred; and
WHEREAS, in a subsequent letter dated May 6, 2022, Ric-Man reiterated its request that
the City"should issue a Termination for Convenience,"claiming "continuing project support costs,
and escalation" and
WHEREAS, on May 11, 2022, Ric-Man filed suit against the City(the "Lawsuit"); and
WHEREAS, on October 26, 2022, the City Commission adopted Resolution No. 2022-
32384, approving and authorizing the administration to finalize, consistent with the conditions set
forth in the resolution, a settlement agreement relating to the Lawsuit ("Settlement Agreement"),
Amendment No. 1 to the Design/Build Agreement (Amendment No. 1) and a corresponding
Change Order No. 7; and
WHEREAS, Amendment No. 1 and additive Change Order No. 7 modified the terms and
conditions to the Design/Build Agreement between the City and Ric- Man Construction Florida,
Inc. for the Project,for additional design and engineering services, cost escalation of construction
commodities and labor, extended pre-construction services, escalation of general conditions as
a result of a seventeen (17) month delay, addition of three micro-pump stations at certain low
lying properties, other miscellaneous.scope, extension to the contract time of 521 calendar and
for a total value of $12,726,291 plus a 10% owner' s contingency in the amount of $1,272,629,
resulting in an'increase of the total contract amount to $83,687,596; and
•
WHEREAS, Amendment No. 1 also included a deductive Change Order No. 7 modifying
the terms and conditions to the Design/Build Agreement between the City and Ric- Man
Construction Florida, Inc for the West Avenue Phase II Improvements South of 14th street project
(the "South Project"), for a credit for work not performed in the amount of$13,998,920; and
WHEREAS, the Settlement Agreement, Amendment No. 1 and Change Order No, 7 were
executed in December 2022; and
WHEREAS, by October of 2023, Ric-Man again began seeking termination or recission
of the Design/Build Agreements, based on further alleged delays and added costs and again
retained counsel, threatening to file a lawsuit to seek such relief; and
WHEREAS, the notice to proceed to start the construction of the pump station at the City's
parking lot on West Avenue was issued and the construction began on January 2, 2024, and; and
WHEREAS, the Project is in final design and permitting phase and coordination with the
community continues as the private property harmonization designs are being prepared and
presented to the individual property representatives; and
WHEREAS, the West Avenue, Phase II Improvements Project is a large multi-year
construction project with a complicated scope of work; and
WHEREAS, with any project of this nature and complexity, it is expected that numerous
challenges will arise during the planning, design and construction phases; and
WHEREAS, during the life of the project, due to unexpected events,there are complicated
issues that result in complex disputes and claims, which cannot be resolved by negotiation
between the Contractor and City staff; and
WHEREAS, while the City's project team has worked diligently to address those
challenges as they arose, it is undeniable that certain challenges became nearly insurmountable;
and
WHEREAS, Ric-Man claims, among other things, that due to the need to apply for new
permits for some of the disciplines for the project due to the revision to the design drawings and/or
expiation of the old permit(s), and changes as a result of the community request for parking
modifications, the project construction start date has been delayed; and
WHEREAS, Ric-Man has been submitting delay claims requesting additional time and
cost associated with staff and equipment; and
WHEREAS, the City disagrees with many of Ric-Man's claims, including claims for
compensable time which are not permitted pursuant to the terms of the Design-Build Agreement
absent a showing of fraud, bad faith or intentional interference; and
WHEREAS, these disputes have not been resolved; and
• WHEREAS, Ric-Man has refused to execute Contingency Draws which are the means to
compensate the design/build team,within the contract amount, for necessary scope changes and
provide the necessary construction documents to start the roadway portion of the Project; and
WHEREAS, these types of claims normally remain unresolved until the end of the project;
and
WHEREAS, in a typical project, this timing fosters efficiency because any claims—which
are usually relatively minor—can all be resolved on the back-end of the project, and the contractor
will continue working in the interim; and
WHEREAS, with respect to this Project, waiting to resolve all disputes until the end of the
Project could result in undue delays and costs, as well as a very large claim amount, as the Project
will not be completed for several years; and
WHEREAS, under the existing terms of the Design-Build Agreement, mediation of
unresolved claims occurs following Substantial Completion, however, the City may determine, in
its sole and absolute discretion, to require mediation of claims prior to Substantial Completion,
but mediation is a non-binding, non-adjudicative proceeding; and
WHEREAS, both Ric-Man and the City's Office of Capital Improvement Projects
Department, with the advice and counsel of the City Attorney's Office, have agreed that it could
be beneficial to explore a modification to the Agreements that would provide for arbitration (which
is a binding, adjudicative proceeding), if such arbitration proceedings could be accomplished on
an expedited basis and without inordinate cost or delay; and
WHEREAS, it is anticipated that the City and Ric-Man would agree on hiring an arbitrator
(or an arbitration panel for claims exceeding a threshold to be determined), who has appropriate
experience and expertise, to review the disputed issues with both parties and provide a conclusive
decision; and
WHEREAS, the expedited arbitration as an alternative dispute resolution process would
help resolve disputes in a "real-time" manner so as to avoid project delays that frequently arise in
complex projects such as West Avenue, when the parties do not agree on cost and time impacts
of scope changes; and
WHEREAS, for the foregoing reasons, the Administration recommends the adoption of
this Resolution by the Mayor and City Commission.
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
of the City of Miami Beach, Florida, authorize the Administration to engage in negotiations with
Ric-Man Construction Florida, Inc. to define the parameters of an arbitration process to be used
by the parties to resolve disputes related to the West Avenue Phase II Improvements North of 14th
Street Project (the "Project") in an expedited manner, with the final terms and conditions for such
process to be subject to the approval by the Mayor and City Commission.
PASSED and ADOPTED this 3 day of A1" , 2024.
•
Steven Meiner, Mayor
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Resolutions-C7 A
MIAMI BEACH
COMMISSION MEMORANDUM
TO: Honorable Mayor and Members of the City Commission
FROM: Alina T. Hudak, City Manager
• DATE: April 3, 2024
SUBJECT:A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA, AUTHORIZING THE ADMINISTRATION TO
ENGAGE IN NEGOTIATIONS WITH RIC-MAN CONSTRUCTION FLORIDA,
INC., FOR THE WEST AVENUE PHASE II IMPROVEMENTS NORTH OF
14TH STREET PROJECT TO DEFINE THE PARAMETERS OF AN
ARBITRATION PROCESS TO BE USED BY THE PARTIES TO RESOLVE
DISPUTES IN AN EXPEDITED MANNER, WITH THE FINAL TERMS AND
CONDITIONS FOR SUCH PROCESS TO BE SUBJECT TO THE
APPROVAL OF THE MAYOR AND CITY COMMISSION.
RECOMMENDATION
The Administration recommends adopting the Resolution.
BACKGROUND/HISTORY
The West Avenue Phase II Improvements North of 14 Street project(The Project) is designed
to enhance quality of life with aesthetics and infrastructure, and to reduce flood risk to this
vulnerable neighborhood both now and in the future. This neighborhood is one of the lowest
lying areas in the City with elevations as low as 1. 7' NAVD. Since 2017, low-lying areas of West
Avenue have experienced flooding from high tides 59 times (NOAA Virginia Key tidal gauges).
Flooding is expected to worsen, as the City faces 14-30 inches of sea level rise over the next
thirty years (Southeast Florida Regional Climate Change Compact, 2019). A high groundwater
table and intense rain events result in additional compound flooding concerns. Without the
deployment of temporary pumps, segments of the neighborhood flood regularly during intense
rain events and king tides. Miami- Dade County is planning for 2 ft of sea level rise by 2060, and
the United States Army Corps of Engineers is planning for 3 ft of sea level rise by 2070.
The Project represents a comprehensively defined neighborhood improvement program,
focused on resolving challenges associated with climate impacts and aged infrastructure. The
scope of this neighborhood improvement project includes replacement of the existing water
distribution/transmission systems and gravity sanitary sewers, installation of a new robust storm
water drainage collection and pumping system including new bi-fuel axillary generators, raising
of the paved roadway and harmonization to the adjacent properties, installation of new street
lighting, pedestrian lighting, replacement of existing and installation of new traffic and pedestrian
signals at intersections, new landscaping, irrigation and construction of a new segment of the
Page 382 of 1445
Bay Walk. The limits of the improvements are West Avenue and Bay Road between 14th Street
and Collins Canal, including side streets.
On March 22, 2017, the Mayor and City Commission adopted Resolution No. 2017-29800,
awarding design/build services (the "Design/Build Agreements" or "Agreements") to Ric- Man
Construction Florida, Inc ("Ric-Man" or "Design-Builder"), for The Project with the guaranteed
maximum price of$29,669,344, including a 10% contingency.
On January 11, 2018, Change Order No. 1 was executed for a 30-day non-compensatory time
extension due to the impact of Hurricane Irma.
On March 16,2018, Change Order No.2 was executed in the amount of$3,270,932 for funding
of the above-ground improvements to the project, with no additional time extension, increasing
the cost of the Agreements to $32,940,276.
On December 12, 2018, the City Commission adopted Resolution No. 2018- 30652,
authorizing the City Manager to negotiate Change Order No. 3 for additional design and
construction changes associated with the recommendations made by the Columbia University
Resiliency Accelerator Program, the Urban Land Institute (ULI) and for additional scope for a
total of$17,763,900, including contingency.
On April 30, 2019, Change Order No. 3A was executed in the amount of $579,752 as the first
partial request from Ric- Man of the approved Change Order No. 3 for the costs incurred in
support of the Columbia University Resiliency Accelerator Workshop, re-start impacts after a 1-
year delay and 10-year storm drainage modeling to allow for further design in order to be able to
negotiate the price of the remaining change order scope.
On June 16, 2019, Change Order No. 3B was executed in the amount of $17,171,211 as the
second partial request from Ric-Man of the previously approved Change Order No. 3 and
includes emergency generator sets, street end enhancements, additional pumps, additional
street improvements.
On September 17, 2019, Change Order No. 4 was executed in the amount of $327,093 to
account for the 10% contingency for the above-ground improvements, which were previously
added to the Agreements as Change Order No. 2.
On April 4, 2020, the City Commission adopted Resolution No. 2020-31243, authorizing the
City Manager to negotiate Change Order No. 5 for design services associated with additional
water quality treatment, as required by the Miami-Dade County Regulatory and Economic
Resources Department(RER)for a total not to exceed $1,147,037, including contingency. The
City negotiated a final change order in the amount of$1,101,959.
On June 23, 2021, City Commission adopted Resolution No. 2021-31752, approving and
authorizing the City Manager to negotiate and execute Change Order No. 6 with Ric-Man
Construction Florida, Inc., for the West Avenue Phase I I Improvements North of 14th Street,
for construction of additional water quality treatment, revised storm water criteria, relocation of
the pump station, cost escalation, and a reduction in previously authorized owner' s contingency
in the net change amount of $17,568,384, as well as an increase in contract time of 1,961
calendar days. The total contract value, subsequent to Change Order No. 6, is $69,688,675.
Page 383 of 1445
On April 27, 2022, the Administration received a letter from Ric-Man indicating that it had
instructed its legal counsel to prepare a declaratory relief action seeking termination of both
Design/Build Agreements and inviting the City to negotiate a "Termination for Convenience" of
the Design/-Build Agreements. The City has the right to terminate the design-build agreements
for its convenience in addition to the right to terminate in the event of a breach by Ric-Man. The
City-had-not-elected to exercise-either-of-these options and per the terms of the Agreements,
Ric-Man can terminate the Design/Build Agreements only upon the occurrence of one of two
conditions (i. e.,the issuance of a stop work order by a court or other public authority for a period
of more than 90 days due to no act or fault of Ric-Man or the City s nonpayment of an
undisputed amount owed), neither of which has occurred. In a subsequent letter dated May 6,
2022, Ric-Man reiterated its request that the City"should issue a Termination for Convenience,"
claiming "continuing project support costs, and escalation." On May 11, 2022, Ric-Man filed suit
against the City.
On October 26, 2022, the City Commission adopted Resolution No. 2022-32384, approving
and authorizing the administration to finalize, consistent with the conditions set for the resolution:
1)Amendment No. 1 and additive Change Order No. 7, modifying the terms and conditions to
the Design/Build Agreement between the City and Ric- Man Construction Florida, Inc., for the
West Avenue Phase I I Improvements North of 14th Street Project, for additional design and
engineering services, cost escalation of construction commodities and labor, extended pre-
construction services, escalation of general conditions as a result of a seventeen (17) month
delay, addition of three micro-pump stations at certain low lying properties, other miscellaneous
scope, extension to the contract time of 521 calendar and the Change Order No. 7 total value of
$12,726,291 plus a 10% owner' s contingency in the amount of $1,272,629, resulting in an
increase of the total contract amount to$83,687,596;
2) The Amendment No. 1 also included a deductive Change Order No. 7 modifying the terms
and conditions to the Design/Build Agreement between the City and Ric- Man Construction
Florida, Inc for the West Avenue Phase II Improvements South of 14th street project, for a
credit for work not performed in the amount of$13,998,920; and
3) Execution of a settlement agreement dismissing the lawsuit filed by Ric-Man Construction
Florida, Inc., against the City asserting claims arising out of the West Avenue Phase I I projects.
Amendment No. 1 and Change Order No. 7 were executed in December of 2022.
By October of 2023, however, Ric-Man again began seeking termination or rescission of the
Design/Build Agreements, based on further alleged delays and added costs. Ric-Man has again
retained counsel,threatening to file a lawsuit to seek such relief..
Under the existing terms of the Agreements, the City has the sole and absolute discretion to
require mediation of claims, but mediation is a non-binding, non-adjudicative proceeding. Both
Ric-Man and the City's Office of Capital Improvement Projects Department , with the advice
and counsel of the City Attorney's Office, have agreed that it could be beneficial to explore a
modification to the Agreements that would provide for arbitration (which is a binding, adjudicative
proceeding), if such arbitration proceedings could be accomplished on an expedited basis and
without inordinate cost or delay.
Page 384 of 1445
ANALYSIS
The notice to proceed to start the construction of the stormwater pump station at the City's
parking lot on West Avenue was issued and the construction began on January 2, 2024. The
rest of the project is in final design and permitting phase. Coordination with the community
continues as the private property harmonization designs are being prepared and presented to_
the individual property representatives.
The Project is a large multi-year construction project with a complicated scope of work. With any
project of this nature and complexity, it is expected that numerous challenges will arise during
the planning, design and construction phases. While the project team has worked diligently to
address those challenges as they arose, it is undeniable that certain challenges became nearly
insurmountable. During the life of the project, due to unexpected events, there are complicated
issues that result into complex disputes and claims, which cannot be resolved by negotiation
between the Contractor and City staff.
Ric-Man claims that, due to City review of the previously prepared design drawing leading to
comments that needed to be addressed by the design team, applying for new permits for
certain disciplines for the project due to the revision to the design drawings and/or expiration of
the old permit(s), and changes as a result of the community's request for parking modifications,
their estimated project construction start date has been delayed. Ric-Man has been submitting
delay claims requesting additional time and cost associated with staff and equipment. The City
is not in agreement with Ric-Man's claims; therefore these disputes have not been resolved.
Ric-Man has been emphasizing and re-emphasizing this issue, refusing to execute Contingency
Draws which are the means to compensate the design/build team, from the project contingency
included in the contract amount, for small design changes and provide the necessary
construction documents to start the roadway portion of the Project.
These types of claims normally remain unresolved until the end of the project. In an ordinary
project, this timing fosters efficiency because any claims—which are usually relatively minor—
can all be resolved on the back-end of the project, and the contractor will continue working in the
interim. With respect to this Project, however, waiting to resolve all disputes until the end of the
Project could result in undue delays and costs, as well as a ballooned claim amount as the
Project takes years to complete. The current Agreements between the City and Ric- Man
Construction Florida, Inc., allow for non-binding, non-adjudicative mediation; however, in this
type of scenario, binding, adjudicative arbitration would be most effective and conclusive. One
of the best practices to expedite and resolve the disputes would be implementation of an
expedited arbitration process. I n this process, the City and Ric-Man would agree on hiring an
arbitrator, who has appropriate experience and expertise, to review the disputed issues with both
parties and provide a conclusive decision toward a fair path forward. The expedited arbitration
as an alternative dispute resolution process would help resolve disputes in a "real-time" manner
so as to avoid Project delays that frequently arise in complex projects such as West Avenue,
when the parties do not agree on cost and time impacts of scope changes.
SUPPORTING SURVEY DATA
N/A
FINANCIAL INFORMATION
Page 385 of 1445
N/A
CONCLUSION
The Administration recommends that the Mayor and City Commission approve the resolution.
- Applicable Area -
South Beach
Is this a"Residents Right Does this item utilize G.O.
to Know" item. pursuant to Bond Funds?
City Code Section 2-14?
Yes No
Legislative Tracking
Capital Improvement Projects
Page 386 of 1445