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Increased costs, tensions

July 9, 2012
By KATIE SCHWENDEMAN - Staff Writer ( , Morning Journal News

COLUMBIANA - Tensions were high during a recent special City Council meeting to discuss a cost increase on the new water treatment plant project.

Council members met with Dave Frank and Chris Ryman of Arcadis Engineering to discuss the nearly $150,000 increase on the project last estimated at $14.6 million.

Arcadis was hired by the city on a $690,000 contract in 2008 and the plant was to be designed, bid and constructed by 2011. The plant is now targeted to be completed by 2014.

Frank and Ryman told council the delay is a result of a delay in state funding and that the cost increase is necessary to continue the project.

The city had sought and only recently received a $4.4 million grant and $10.2 million zero-interest 40-year loan through the United States Department of Agriculture Rural Development Water and Waste Disposal Program. The money was awarded after Congressman Bill Johnson (R-Marietta) interceded on the city's behalf earlier this year.

"This is an impact to us from a business standpoint. In 2007, when we estimated our fees they were estimated with direct correlation to the" project schedule, Frank said.

He added that since the project has been delayed Arcadis will need to revalidate previously issued but now expired permits in addition to making sure the same services and equipment planned for the project are still available.

"Our costs have increased and we need to recognize those increases. Our contract does include specific escalation clauses that does account for what has happened," he said, referring to a 4 percent annual wage increase included in the contract.

Included in the cost increase is $50,000 for the company to resubmit requests for the now expired building permits and design components.

Frank noted that according to the contract the company's compensation "shall be adjusted equitably" if progress on the project is impaired at "no fault of the engineer."

Councilman James King said it appeared the contract was more beneficial for the company and not the city and then asked why the company didn't approach the city during that time and communicate how the delay was affecting the project cost.

"Was there ever communication between you guys and the city?" he asked.

Frank said there was "constant communication," although there was not a "specific conversation" regarding how the delay would affect the project cost.

"They are not discussing what the delay is doing to taxpayers and the city," Councilman Bryan Blakeman said.

Blakeman was the one who suggested at the June 19 meeting council members meet with the company to negotiate the increase. He also suggested that if the company will not negotiate the city move forward with a different engineering firm.

"As you know, we have been serving the city over 20 years. It's our business, just like any other vendor. You can't control the funding agencies," Frank responded to Blakeman's remark.

Blakeman then interrupted that the company can control its costs.

"We can't tell people they are going to work for less than they did three years ago," Frank replied. "With all due respect, when you talk about our fees, you are talking dozens of people working on these jobs. Our margin is fair in industry standard."

He estimated the company runs on about 5 percent profit and the rest is covering costs.

Blakeman argued the company "didn't have incentive to move the project along because they were making money every year."

Frank again stressed the project was delayed because of state funding and not because of the company.

"I am only speaking for myself, not council," Blakeman said. "I don't care about the USDA process, I care about your relationship with us. We are looking at a $50,000 surprise. I would suggest you work with us on what that needs to be."

He again suggested the project be rebid to another company, prompting Frank to respond that there would be "several detailed things that we can talk about with your attorney" if that were to happen, leading Blakeman to believe he was making a threat.

"I am not threatening at all," Frank said," but we can't just casually accept that. We can't just casually say we'll take a loss on that."

Council President Lowell Schloneger said rebidding the project is not the answer.

"The city would lose half a million dollars they have already paid for" on Arcadis, he said.

Blakeman then told Schloneger, "I would like the company we are working with to work with us. You're choosing to just (lie) down and accept it."

Blakeman and King both stressed they did not want the company to cut its profit, but believe the wage increases could be negotiated down.

Later in the meeting King asked if some members of council could meet with Arcadis behind closed doors to discuss the fees. Municipal Attorney Daniel Blasdell said it wasn't something to be discussed in executive session, however, "The will of council can be relayed to the city manager, who can tell the company."

Councilman Tom Ferguson also advised against a closed meeting.

"I don't want three councilmen going into a meeting and then later try to relay to me what happened in the meeting," he said.

He then asked Frank and Ryman how the company decided on a 4 percent increase.

"We rely on our historical database. Going back to 1987 we have always used 4 percent. Sometimes it's been a little tight, sometimes it's the margin, but it's always" been workable, Frank said.

Councilwoman Mary Calinger asked if the percentage has ever been negotiable.

Frank replied that in his 25 years with the company he has never been in a situation where a project got delayed for three years. He then said the decision to negotiate the percentage down would ultimately fall to the regional manager.

A tense discussion then ensued between Ferguson, King, Blakeman and Schloneger, with Ferguson and King shouting at each other regarding negotiating the percentage or rebidding the project.

Ferguson seemed to believe that from a business standpoint, negotiating the 4 percent increase down was not feasible, and told King, "I can't believe that you don't understand it I don't know what world you live in."

King replied, between Ferguson's shouts and interruption from Mayor David Spatholt who was attempting to silence the two, "I can't believe you guys are sitting here complaining that we are trying to save the city money."

Later in the meeting Ferguson apologized to King, and Spatholt apologized to Arcadis and the public at the meeting for the outburst.

Calinger then pointed out that the 4 percent increase was in the contract from the beginning, "so we knew it all along, so ultimately, it's our fault, it's our responsibility."

King said he wasn't aware of the increase and asked Ferguson if he knew as well, to which Ferguson said no.

"No one up here knew there was 4 percent in the contract. Maybe Keith (Chamberlin, city manager) knew. I never knew until he presented this to us a few weeks ago," King said.

Chamberlin presented the information to council members just prior to the June 19 meeting.

Although no formal action was taken after the hour-long discussion, council members agreed that continuing to work with Arcadis while also pursuing negotiations with the company regarding the 4 percent increase would be the best route.

Chamberlin said, upon Bieshelt's suggestion, that he and Ryman would also contact USDA officials to see if the funding can be modified based on the cost changes.



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