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Agenda 03/22/2022 Item #16K5 (Mediated Settlement Agreement - Tri-Party Construction Agreement)03/22/2022 EXECUTIVE SUMMARY Recommendation to approve: (1) a Mediated Settlement Agreement and Mutual Release resulting from the pre-suit dispute resolution process in the Tri-Party Construction Agreement between WPM-Southern, LLC, the City of Naples, Florida, Collier County, Florida, and the design engineer on the Project, Q. Grady Minor & Associates, P.A., (2) an Interlocal Agreement acknowledging the City’s relinquishment of $300,000 in funds the County had appropriated to reimburse the City for construction costs on the West Goodlette-Frank Road Area Joint Stormwater-Sewer Project, (3) the attached budget amendment, and (4) to authorize the Chairman to sign the attached agreements. _____________________________________________________________________________________ OBJECTIVE: To approve the attached Mediated Settlement Agreement (the “Settlement”) resulting from the pre-suit dispute resolution process provided in the Tri-Party Construction Agreement between WPM-Southern, LLC (the “Contractor”), the City of Naples, Florida (the “City”), Collier County, Florida (the “County”), and Q. Grady Minor & Associates, P.A. (the “Design Engineer”) (collectively, the “Parties”), a separate Interlocal Agreement between the City and County acknowledging the City’s relinquishment of previously-appropriated County funds as part of the West Goodlette-Frank Road Area Joint Stormwater-Sewer Project (the “Project”), and to approve the attached requested budget amendment. CONSIDERATIONS: Summary of Settlement The proposed Settlement represents the Parties’ recommended compromise of disputed monetary claims raised by the Contractor in the amount of $2,249,999.31, and includes a process to correct existing alleged Contractor deficiencies on the Project. The recommended Settlement i nvolves payment to the Contractor as follows: the Design Engineer agrees to pay to the Contractor $175,000.00 and the County agrees to pay the Contractor $525,000.00. Separately, the City is agreeing to forego reimbursement by the County of $300,000.00 in funds the County previously appropriated towards the City’s general construction costs on the Project. The Contractor’s bid on this Project was $1,074,672.50 lower than the second lowest bid, so notwithstanding any unexpected issues, the Settlement will resolve all existing monetary claims and allow the Project to still close out well below the second lowest bid. The County’s longtime construction law outside counsel, Paul Ullom of Carlton Fields, and its scheduling expert, recommend the proposed $700,000.00 settlement as within the recommended range to favorably resolve this dispute. Factual Background The Project On September 14, 2015, the County formally requested the City’s joint participation in affecting a comprehensive solution to provide sanitary sewer and stormwater improvements in an area west of Goodlette-Frank Road and east of US-41 that was un-sewered and historically experienced significant flooding. On September 27, 2016, the County approved an Interlocal Agreement with the City to commence a joint project to design and construct stormwater and sanitary sewer facilities for the Project. That Agreement was subsequently amended by the County and City to provide further specificity of their respective duties and responsibilities on April 24, 2018. The engineering plans for the Project were prepared by Q. Grady Minor & Associates, P.A. in response to a Request for Proposals, and a contract was awarded on July 11, 2017. The County advertised Invitation to Bid No. 18-7322 to solicit for the construction of all elements of the 16.K.5 Packet Pg. 1484 03/22/2022 Project (both the City’s sewer portion and the Count’s stormwater portion), which included some shared costs primarily related to the road construction (the “Shared Costs”). The Contractor’s low bid of $13,353,480.00 was approximately $1,074,672.50 lower than the second lowest responsive bidder, and approximately 9% less than the Design Engineer’s opinion of probable cost. The total contract amount, including a $1,016,520.00 contingency for unanticipated underground conditions, is $14,370,000. That total contract sum included an $88,761.00 mathematical error in the public agencies’ favor, which the Contractor agreed to accept. The County’s stormwater portion of the contract amount, including the Shared Costs, is $6,715,239. The City’s sewer portion of the contract amount, including the Shared Costs, is $7,654,761. On July 10, 2018 (Agenda Item 11G), the County approved the contract with the Contractor contingent on approval by the City of an Assessment to fund the Project within 120 days of the recommended award. At the Board’s July 10, 2018 meeting, it also accepted and approved County staff’s recommendation that the County assume a portion of the City’s engineering design costs in a sum not to exceed $313,000.00, and to appropriate an additional $300,000.00 of County funds to subsidize a portion of the City’s general construction costs for this joint project. During the course of the Project, the County satisfied its agreed upon portion of the City’s engineering design costs, but the funds the County appropriated for the City’s general construction costs remain outstanding and have not been reimbursed by the County to the City. The Dispute On or about October 13, 2020, the Contractor wrote both County and City staff seeking to renegotiate unit prices for several line items of materials that had been extremely underestimated (in excess of 25% and in some instances much higher) by the Design Engineer. Although the Agreement allows the discretion to re-negotiate unit prices where the actual quantities exceed 125% at the time of bid, there is no obligation to do so. At around the same time, the Contractor also claims the Design Engineer sent an email that stayed the Project until a formal change order was approved memorializing an increase to the unit prices of the underestimated materials. The County disputes the Contractor’s characterization of that email, but it creates an issue of fact as to the Contractor’s claim that its work on the Project was actively interrupted by the alleged stay thereby entitling it to extra days and monetary damages. The Project also intermittently experienced payment flow issues. At times those issues were exacerbated by the Contractor’s failure to submit required back-up documentation with its payment application, but those issues could have been partially assuaged had County staff timely sought partial payment where back-up documents had been submitted. Without admitting any culpability, this issue also impacted the Project. Ultimately, because of payment dispute issues, the Contractor stopped working on the Project entirely on July 9, 2021, claiming that the Project was substantially complete, and that very few tasks remained to conclude the work. As of today’s date, the project (not including correction of any existing deficiencies) is approximately 96% complete. Since that date, the parties actively engaged in efforts in an attempt to resolve the dispute and keep the Project moving forward to completion, eventually resulting in all day mediation sessions on December 23, 2021, and February 4, 2022, which culminated in this recommended Settlement. The Details of the Claims and the Recommended Settlement a. The Claims During mediation, the Contractor’s claims consisted of : 16.K.5 Packet Pg. 1485 03/22/2022 1. A request for 257 days of additional contract time based upon five alleged events of delay. 2. An asserted monetary claim of $2,249,999.31 consisting of a $1,444,825.48 claim seeking reimbursement for (a) mobilization and maintenance of traffic costs for the 257 day alleged period of delay, and increased unit costs for underestimated quantities of stabilized subgrade, limerock base, and asphalt, and (b) a $805,173.83 claim based on additional inaccurate quantity estimates by the Design Engineer related to HDPE Pipe and other related materials pertaining to the stormwater portion of the Project. The County rejects the Contractor’s above claim for $805,173.83 because, among other reasons, it was not timely asserted as required by the contract. Therefore, the monetary claim comes down to an analysis of the Contractor’s remaining $1,444,825.48 claim for damages. The remaining claim is based upon the Contractor’s allegation that it was interfered with and delayed in completing the work over a non-consecutive period of 257 days. The Contractor’s $1,444,825.48 claim, not including $144,352.50 in markup and bond expense, breaks down as follows: • $404,723.60 Mobilization for 257 days at $1,574.80/day. • $374,266.53 Maintenance of Traffic for 257 days at $1,456.29/day. • $266,314.18 Increased Unit Cost of Stabilized Subgrade for all 50,534 SY used. • $187,163.07 Increased Unit Cost of Limerock Base (6-inch) for all 42,239 SY used. • $ 68,005.60 Increased Unit Cost of Asphalt (2.5 inch, 2 lifts) for all 40,240 SY used. Outside counsel and staff’s recommendation for settlement, without admitting any liability, is roughly based on recognizing approximately 144 days of delay resulting in additional mobilization and maintenance of traffic costs of $436,476.46, and premium price increase adjustments to the unit cost of the underestimated materials in excess of 100% of the bid schedule amounting to $157,049.45 (for a total amount of $593,526.41). The recommendation to settle for $700,000.00 is also based upon the additional costs that will be incurred in attorneys’ fees, professional consultants, and other costs such as electronic discovery expenses should this matter proceed to litigation, as well as the inherent risks and uncertainty of such litigation. If this dispute is not settled, the conservative cost estimate to litigate this case through trial is approximately one million dollars ($1,000,000.00). b. The Recommended Mediated Settlement Agreement The attached Mediated Settlement Agreement proposes to settle the Contractor’s claims as follows: 1. In consideration of the full settlement and release of the Contractor’s claims, the Design Engineer, and the County agree to pay to Contractor the amount of $700,000.00, as follows: a. Design Engineer $175,000.00 b. County $525,000.00 The City’s separate monetary contribution lies outside the Mediated Settlement Agreement and is set forth in the attached Interlocal Agreement. As previously discussed, the County agreed to appropriate $300,000.00 to reimburse the City for a portion of its general construction costs on the Project. The Interlocal Agreement provides that the City waives reimbursement of the $300,000.00, which can now be directed towards settlement and represents a 57.14% share of the amount designated paid by the County. 2. The Contractor agrees to remobilize its construction forces within ten (10) days after 16.K.5 Packet Pg. 1486 03/22/2022 its receipt of any portion of payment on its last two payment applications (including any short payments), complete all remaining work under the contract, and correct any defective, deficient, and/or incomplete work on the Project. The Settlement includes a deficiency list of remaining work and a mechanism allowing an independent third party engineer to resolve disputes if the parties are unable to agree on whether work on the list requires correction or completion by the Contractor. 3. As part of the Settlement, the Contractor agrees to first make payment to any subcontractors that may be owed any outstanding amount for performing work on the Project. This provision is a material condition under the Settlement. It is also worth noting that the County received grant funding in the amount of $800,000 from the South Florida Water Management District / Big Cypress Basin for its stormwater construction on the Project. If the recommended Settlement is not approved, it is unlikely that the Contractor would be willing to independently remobilize and return to the work site to address the various remaining identified deficiencies, resulting in further delay and inconvenience to the residents of the community. The net result of the recommended Settlement is that this low bid contract will still cost substantially less than the second lowest bid, even after payment of the Settlement proceeds. The r ecommendation to approve the Mediated Settlement Agreement is based upon the favorable resolution arrived at by the parties and the potential costs and always present risks associated with proceeding with litigation. FISCAL IMPACT: A budget amendment in the amount of $ 525,000 is required to transfer funding within the Stormwater Bond Fund (327) from Reserves to Project 60142 to cover the cost of the mediated Settlement Agreement. The source of funding is stormwater bonds. GROWTH MANAGEMENT IMPACT: There is no Growth Management Impact associated with this Executive Summary. LEGAL CONSIDERATIONS: The Mediation Settlement Agreement and Mutual Release has been reviewed and approved by the Transportation Management Services Department staff, the County Attorney’s Office, and the County’s outside counsel, Carlton Fields. In the event that the recommended Settlement is not approved, the County can expect to incur significant additional costs associated with future litigation including attorneys’ fees and retaining expert witnesses, and a positive result can never be guaranteed with any degree of certainty. This Settlement is reasonable based on the totality of the circumstances. The subject of this Settlement is a matter of potential future litigation a nd should not be discussed pending Board action. This item is approved as to form and legality and requires majority vote for Board approval. -SRT RECOMMENDATION: Recommendation to approve the attached Mediated Settlement Agreement and Mutual Release, Interlocal Agreement with the City of Naples, the attached budget amendment, and authorize the Chairman to sign the attached agreements. Prepared By: Scott R. Teach, Deputy County Attorney ATTACHMENT(S) 1. Interlocal Agreement pdf 031422 srt (PDF) 2. Mediated Settlement Agreement 032222 Final (PDF) 16.K.5 Packet Pg. 1487 03/22/2022 COLLIER COUNTY Board of County Commissioners Item Number: 16.K.5 Doc ID: 21696 Item Summary: Recommendation to approve: (1) a Mediated Settlement Agreement and Mutual Release resulting from the pre-suit dispute resolution process in the Tri-Party Construction Agreement between WPM-Southern, LLC, the City of Naples, Florida, Collier County, Florida, and the design engineer on the Project, Q. Grady Minor & Associates, P.A., (2) an Interlocal Agreement acknowledging the City’s relinquishment of $300,000 in funds the County had appropriated to reimburse the City for construction costs on the West Goodlette-Frank Road Area Joint Stormwater-Sewer Project, (3) the attached budget amendment, and (4) to authorize the Chairman to sign the attached agreements. Meeting Date: 03/22/2022 Prepared by: Title: – County Attorney's Office Name: Madison Bird 03/14/2022 2:33 PM Submitted by: Title: County Attorney – County Attorney's Office Name: Jeffrey A. Klatzkow 03/14/2022 2:33 PM Approved By: Review: County Attorney's Office Scott Teach Level 2 Attorney Review Completed 03/15/2022 8:18 AM Growth Management Department Trinity Scott Transportation Completed 03/16/2022 9:25 AM Office of Management and Budget Debra Windsor Level 3 OMB Gatekeeper Review Completed 03/16/2022 9:42 AM Office of Management and Budget Susan Usher Additional Reviewer Completed 03/16/2022 10:05 AM County Attorney's Office Jeffrey A. Klatzkow Level 3 County Attorney's Office Review Completed 03/16/2022 10:14 AM County Manager's Office Amy Patterson Level 4 County Manager Review Completed 03/16/2022 12:00 PM Board of County Commissioners Geoffrey Willig Meeting Pending 03/22/2022 9:00 AM 16.K.5 Packet Pg. 1488 16.K.5.aPacket Pg. 1489Attachment: Interlocal Agreement pdf 031422 srt (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal Agreement) 16.K.5.aPacket Pg. 1490Attachment: Interlocal Agreement pdf 031422 srt (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal Agreement) 16.K.5.aPacket Pg. 1491Attachment: Interlocal Agreement pdf 031422 srt (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal Agreement) 16.K.5.aPacket Pg. 1492Attachment: Interlocal Agreement pdf 031422 srt (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal Agreement) 16.K.5.cPacket Pg. 1493Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated 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Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1606Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1607Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1608Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1609Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1610Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1611Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1612Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1613Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1614Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1615Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1616Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1617Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1618Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1619Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1620Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1621Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1622Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1623Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1624Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1625Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1626Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1627Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1628Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal 16.K.5.cPacket Pg. 1629Attachment: Mediated Settlement Agreement 032222 Final (21696 : Mediated Settlement Agreement, Mutual Release and an Interlocal