Deal Cut To Expedite Miami Arts Center Job

Source: http://enr.construction.com, August 30, 2004>

Owner, contractors and architect settle claims and set new schedule for much-troubled project

The owner, architect and builder of the $419-million Miami Performing Arts Center have reached a $44-million settlement that is expected to put the high- profile project on positive footing after years of delays and big cost overruns. The two-building complex is 600 days over its original schedule and more than $67 million over budget, but the pact resolves all claims and carves a finish date in stone.

Under the settlement reached last month, contracts among the parties are restructured so they can work collaboratively to move the project forward, says Tim Ackert, program manager for URS Corp., San Francisco, who was brought in last year by owner Miami-Dade County to help put the project back on track.

Cesar Pelli and Associates, New Haven, Conn., designed the 600,000-sq-ft center, which includes a 2,400-seat opera-ballet building, a 2,200-seat symphony hall and a smaller 200-seat theatre. A joint venture of Odebrecht Construction, Coral Gables, Fla.; Ellis Don Construction, Northville, Mich.; and The Haskell Co., Jacksonville, Fla., was awarded a construction management-at-risk contract to build the center in September 2001. Odebrecht is managing partner of the construction team, which also includes 12 major subcontractors and 60 smaller subs.

Two years into construction, the project already was spiraling down. “There was a state of complete distrust between the architect, county and the contractor,’’ says Bill Johnson, assistant county manager who took control of the project in 2003. “The architect was worried about construction quality and the contractor thought the plans had significant issues.” He says mounting claims could have reached $100 million if nothing were done.

A year of effort to fix the project culminated July 27 when the county Board of Commissioners approved a settlement reached through “torturous” negotiations, says Johnson. “We needed an approach that would protect the overall objective, which was to build a quality set of buildings,’’ he says.

Architect Pelli, which had about $9 million outstanding in claims for additional services, agreed to settle for $4.2 million. The contractor joint venture, which sought $9.8 million in additional costs, also agreed to $4.2 million. The estimated value of subcontractor claims was $75 million. The 12 largest subs settled for $25 million, with remaining smaller firms agreeing to take $6 million.

Parties also settled on a fixed completion date of Aug. 4, 2006, and agreed to work until the project is finished for no additional profit. If the center is not completed by the agreed date, the architect and contractors must pay completion costs. “That could be as much as $200,000 a month, which is an incentive to get it completed on time,’’ says Ron Austin, the county’s director of construction, who joined the project nearly a year ago at the contractor’s request to help straighten it out. He had worked on two successful Pelli projects in the past.

Under the settlement, the architect, contractor and the county have agreed not to sue each other and to set up a dispute resolution system. In addition, the project’s guaranteed maximum price was removed and its CM-at-risk contract replaced with an agency CM contract. Going forward, the county will reimburse the contractor for hourly costs and those related to general conditions.

“It was a pretty exceptional reinvention that had an immense positive psychology on everyone,” says Steven Halverson, Haskell president. “A consortium was built out of competing entities.’’ Participants say that they have learned the hard way that having a contractor at risk is no way to build a public performing arts center. “It is an opportunity to control costs, but there are many parties who each have a different vision of how the buildings should perform,’’ says Austin.

Participants are hopeful the change will work. “I hope this can be a case study to look at the success of different delivery methods,’’ says Halverson. “It’s the same project with the same people, but half of it will have been built with CM at risk, the second half using a design-build type collaboration.” Halverson credits the county with accepting a radically different approach.

The architect also is pleased with the outcome. “Fundamentally, we’re very excited. For the first time, a public-sector project will be done on a collaborative basis,’’ says Fred Clarke, principal at Cesar Pelli and Associates. “A performing arts center is a very complicated building type, and when done as a public project, it becomes even more so.’’

Clarke says the original contract made it impossible for the architect and builder to work together as a team. “There was no mechanism to resolve disputes except to build a legal case,’’ he says. “We were quite concerned from the beginning.’’

Small but symbolic changes at the site remind participants of the single purpose now. “No one can wear a company shirt, only project shirts are allowed,’’ says Halverson. How well the approach will catch on is unclear, but principals will not be tolerating much resistance. “If they haven’t made the mental conversion in a month, they’ll be gone,” says Halverson. “We have to take that kind of harsh attitude.’’

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