Dilemma. Although "beautiful," the planned terminal is not within its allotted budget, says airport manager. (Photos courtesy of Terminal Design Team)

Months of "bad blood" between the design team of a new $688-million international terminal at Atlanta’s Hartsfield-Jackson International Airport and city officials led to the team’s firing earlier this month, the designers’ countersuit and a flurry of bitter allegations by both sides.

Sources say the planned Maynard Jackson Terminal could be delayed for up to three years, with legal costs and design changes possibly marring the airport’s $5.4-billion expansion program. Others say the battle may stem from a slowdown in the terminal project linked to the precarious finances of Hartsfield’s key tenant, Delta Airlines, now teetering on the brink of bankruptcy.

The city of Atlanta, which owns Hartsfield, on Aug. 15 terminated the $34-million contract of Terminal Design Team (TDT), the design consortium led by Omaha-based Leo A Daly. It also includes Anthony C. Baker Architects & Planners, New York City, and two Atlanta firms, KHAFRA Engineering Consultants and Browder + LeGuizamon and Associates. The city claimed the team defaulted.

The team sued Atlanta in Fulton County Court on Aug. 16 for breach of contract, seeking $10 million for payments owed the team and $50 million for damage to its reputation. That was followed three days later by a written demand from outside city attorney Joseph Henner, a partner in the local office of Kilpatrick and Stockton, for the team to drop the suit, claiming the city is exempt from damages. "There is no right to punitive damages against the city under Georgia law," he says. TDT attorney Chip Ingraham says the team will not drop the suit.

Airport officials claim that TDT failed its obligation by not delivering a terminal that could be built within the $688-million budget. The design team counters that the airport is contractually obligated to adjust that figure to account for owner-driven scope changes, materials cost escalation in excess of 2.5% annually and a project delivery change from design-bid-build to construction manager-at-risk.

“I want to...move forward with a new design team as soon as possible.” — Ben DeCosta, Hartsfield Manager

Aviation General Manager Ben DeCosta claims the design team promised that all scope changes could be made within the established budget and that hiring a CM-at-risk did not increase delivery costs. He says TDT is responsible for value-engineering to reduce the impact of materials cost escalation and that the design team kept him in the dark about budget overruns. DeCosta says it was the new CM-at-risk that reported that the team’s design would push the project $200 million over budget. The CM is a venture of Atlanta contractors Holder Construction and C.D. Moody; Manhattan Construction, Tulsa; and Hunt Construction Group, Scottsdale, Ariz.

TDT Chairman Jerry Voith, a Leo A Daly vice president and managing principal-in-charge in Atlanta, says the team repeatedly requested budget adjustments corresponding to scope changes. The 60% design submission explicitly states an estimated figure that was $60 million over the unadjusted budget, he adds. The airport also breached the contract by "unilaterally" hiring the CM on a non-competitive basis after the 60% design phase, says Voith.

"The contract clearly contemplates that documents will be used when the construction project is competitively bid to select the construction contractor," says Ingraham. "A different process was utilized by the city in selecting the CM-at-risk. As a result, the city clearly failed to follow contract requirements with TDT."

City attorney Henner says the airport did not breach the contract because the CM will still seek the lowest bids for all work. DeCosta says any scope change that created overruns should not have been added to the design without his written approval. TDT says the additions were made in good faith based on requests by Delta Airlines, federal agencies and other stakeholders, and were approved by DeCosta or his lieutenants.

DeCosta credits TDT for producing a "beautiful" building, but says it was terminated because he has no confidence in the team’s ability to deliver a cost recovery plan. DeCosta says the team was given four extensions beyond the original deadline to fix design problems and provide 100% stamped documents to stay within budget, but it could not. Stamped drawings the team did provide were "substandard," DeCosta says.

“Ben DeCosta personally deceived me. I can’t tell you how mad that makes me.” — Jerry Voith, Terminal Design Team Chairman and Vice President, Leo A Daly

Voith admits the gaffe, blaming a flawed CAD file for causing drainpipes to "flow uphill," among other design flaws. But the team worked hard to fix the design document, which Voith says accounted for just 1.5% of total design document pages.

TDT alleges that airport officials violated an agreed two-week "cooling off" period by announcing the team’s termination at a press conference the same day it notified the designers by letter. "Ben DeCosta personally deceived me," says Voith. "I can’t tell you how mad that makes me." DeCosta accuses Voith of making "untrue" statements.

If proven to be in default, the design team would owe the city damages that "exceed the value of [its] contract by a significant multiplier," DeCosta wrote in a letter to TDT. The airport will lose its $34-million investment in the terminal design if it cannot find a firm capable of modifying it for delivery within the $688-million budget. "I want to get the documents and move forward with a new design as soon as possible," says DeCosta.

But the project still faces extra costs for legal and redesign fees and potential delays. Some TDT sources suggest that DeCosta may be risking such costs in order to intentionally delay the project, as Delta’s financial health deteriorates. "Delta will probably file for bankruptcy sometime over the next month," predicts Philip Baggaley, senior airline credit analyst for Standard & Poor’s. The airline likely will reduce its fleet and overall workload, especially domestic flights, to cut costs. DeCosta acknowledges Delta’s financial woes, but says "I’m not too worried about this project being a year late."

Atlanta City councilman C.T. Martin, a member of the transportation board, questions the wisdom of terminating TDT. He expects DeCosta to resolve the dispute and reconcile with the team unless "he can show me, factually, that these people deserve no confidence. I don’t want to pay for a change order."

While airport officials talk of replacing the design team, they offer no timetables. Even so, some airport designers say they’re not anxious to get involved with the project in its current state. Says one, "there’s too much blood on the floor."

Related Links:

Overbudget Airport Terminal Is Costly to Design Team , August 16, 2005