The VA "has maintained that if KT can show that KT is entitled to additional money under the contract, it will be able to recover associated costs,” said the department.
How Kiewit-Turner could collect additional funds isn’t clear. Kiewit-Turner claims there isn’t enough money in the project’s budget to compensate the contractor for the extra costs. Thus, the risk to the joint venture is substantial.
Kiewit is the lead partner. In response to questions from ENR, the joint venture pointed out in a statement that the two companies had worked on prior Dept. of Veterans Administration projects and both have experience in the hospital market.
Will the joint venture keep working on the project until the final ruling by the board?
Kiewit-Turner replied, “Counsel will consult on a proposed scheduling order, which will be discussed the first week in September."
Importance of the Handwritten Note
Andrew D. Ness, a partner in the Washington, D.C.-based office of law firm Jones Day and the immediate past chair of the American Bar Association Forum on the Construction Industry, says a key fact issue is what was actually agreed in the November 2011 handwritten deal and then incorporated into the subsequent contract modification.
Taking both side's story at face value, "they had an absolutely massive miscommunication that goes to the heart of what the project would be and what each side's responsibilities would be," says Ness.
He says one possible lesson of the dispute is that an "integrated project delivery" structure like the department says it set up here "can still become mired in a very tangled dispute if the parties don't communicate clearly with each other and clearly document their agreements."
That said, "The documents on the November 2011 deal, and the department's January 23, 2013 letter to the A/E seem to support Kiewit-Turner's version of what happened. No telling what other evidence is out there, but those are strong documents for Kiewit-Turner."
Both sides are making some legal arguments that are untested and aggressive, adds Ness.
Under the contract, according to the department, Kiewit-Turner was “required to collaborate with the Architect/Engineer on all phases of the design, determine the constructability of the project, and assist VA in achieving the goal that the project be completed within budget.”
Another prominent construction attorney, Robynne T. Parkinson of Thaxton Parkinson in Mercer Island, Wash., sees some basic problems in the way the contract was set up.
“What they have attempted to do is enter into what looks like a CM-at-risk agreement and shift the responsibility for the design to the constructor without allowing the constructor to have control of the design and without a clear understanding from the parties as to their respective responsibility for those costs,” says Parkinson. “If the agreement is not a true integrated agreement, then it is difficult to believe that the constructor actually took full responsibility for the design.”
(Parkinson provides legal expertise to the Design-Build Institute of America, but like Ness, says her opinions are her own and not DBIA’s or those of another client.)
Both Ness and Parkinson also note that they are not involved with the project and do not know anything more than what is in the public record. But Parkinson is troubled by some of what she sees so far.
In a true integrated-project-delivery (IPD) contract, the parties manage the project via committee and the owner takes responsibility for the final cost with no upper limit, says Parkinson. Although the owner makes final decisions if the parties cannot achieve consensus, the contract contains heavy requirements for discussion and dispute resolution.
