In seeking over $50 million in damages from the original engineering and construction management team on the St. Louis light rail system extension, the systems chief executive officer, Larry Salci, says his lawyers intend to show more than design errors. He says they intend to show that the teamwhich includes Parsons Brinckerhoff and Jacobs Engineeringalso committed fraud.
|Metro project is a year late and $150 million above early estimates.|
I want a jury verdict, says Salci.
The agency, the Bistate Development Agency, whose transportation system is called Metro, terminated the team and then in late 2004 sued in state court in St. Louis County for damages based on negligence, breach of contract, tortious interference and several counts of fraud.
Not scheduled for trial until Jan. 2007, the battle between Metro and the former design and construction management team called the Cross County Collaborative, will drag on far past the extensions scheduled opening in September or October. In addition to New York-based Parsons Brinckerhoff and Jacobs Engineering, Pasadena, Calif., the CCC includes STV Inc., New York City; and Kwame Building Group, St. Louis. The team has countersued and its lawsuit includes charges of wrongful termination, breach of contract and unfair competition based on Metros hiring of CCCs former employees.
In answer to written questions, CCC says Metros fraud claims are baseless.
Both sides say that alignment changes added to the costs. CCC adds that there were numerous changes and that running segments of the alignment underground, and elevating other segments above grade, accounted for some of the more costly changes.
With completion over a year late and the cost of the eight-mile extension now tabbed at $550 million, or about $150 million over the early project estimates, the court battle may overshadow the work of the prime contractors. St. Louis-based Tarlton Corp.s original $47 million contract jumped to $74 million. McCarthy Building Cos. Inc., also headquartered in St. Louis, reported that its original $74.8-million contract increased to $98.8. Fred Weber Inc., St. Louis, had two contracts that jumped from a combined total of $64.9 million to $112.2 million. Only the signal system prime contractor, White Plains, N.Y.-based L.K. Comstock & Co., stayed close to its original cost; the contract grew from $78.6 million to $83.7 million,.
Salci needs to prove fraud, he says, because CCC's liability is capped at $8 million. Salci says the limit is because of professional errors and omissions insurance, but CCC says the limit is contractual.
To get more in damages Metro says it can prove that CCC committed fraud by representing in Dec. 2002 that its work, which included securing easements, buying out property owners along the route and providing drawings that showed or relocated all the utilities, was done and ready for bidding. They said it was finished in Dec. 2002, and we went to bid in January 2003 and by spring and summer contractors started bringing back all kinds of omissions, material tables, wrong specs, claims Salci. With the trouble the project completion, which had been set at spring 2005, slipped to spring 2006 at the time.
Metro, whose outside counsel is Gary Snodgrass, has finished much of its pretrial depositions and CCC says it has until October to finish its pretrial discovery. Some of CCC's efforts have involved shaping perceptions of Metro and CCC by local elected officials that may have been affected by Metros charges.
For example, CCCs outside attorney, Richard R. Hardcastle III, in 2004 hired John Bardgett & Associates, to gather information concerning public officials' perceptions of CCC and its performance on the Metro Link Project, as well as the decision-making process within Metro, according to a letter obtained by ENR. In the letter Hardcastle excludes any lobbying by Bardgett.
According to Metro's lawsuit, CCC has been "spinning" stories to the local media, planting story ideas. "They've engaged in character assassination," claims Salci.
In Metro's original complaint against CCC, Metro alleges that CCC has "engaged various agents, spokespersons, lobbyists, straw men and representatives" for "malicious purposes" that include making comments that besmirch and damage the reputation of Metro and its executives to the St. Louis Post-Dispatch, the Riverfront Times, Missouri State auditor Claire McCaskill, Gov. Matt blunt and Metro commissioners. The stories contained statements from people saying Salci was a liar and that Metro had grossly mismanaged the project.
CCC, in response to questions about the charge, notes that Judge Carolyn Whittington has dismissed Metros claims of tortious interference and prima-facie tort for failure to state claims. The fraud claims, the high-profile media and political assaults upon CCCare extraordinary and foreign in the experience of the CCC firms. Metros tactics go well beyond the normal course of fair and civil dealing in settling disputes.
While the CCC firms generally refrain from campaigning in any way against former clients, CCC claims, Metros allegations and tactics required the firms to defend themselves outside the judicial arena.
CCC's case may have received a boost recently when Hardcastle met with Willie Noble, a former Metro construction executive, who told Hardcastle that Metro officials knew the design drawings used to obtain bids were incomplete, according to a written account of the meeting obtained by ENR. Salci has always said that CCC represented the designs it had given to Metro for bidding as complete.
In Hardcastle's account and in a story in the St. Louis Post-Dispatch partly based on a leaked copy of the account, Noble says the opposite was true. He also said Metro allowed CCC to "bill ahead" on some tasks, essentially collecting payment for extra hours but representing that more work had been done than was actually completed.
Metro says CCC overbilled as part of its fraud.
"Mr. Noble stated that no one on the technical team thought that the design was 100% complete at this time, and everyone realized that there was a substantial amount of work remaining," Hardcastle states.
How did the Post-Dispatch get Hardcastles memo? CCC doesnt know and says neither Hardcastle nor CCC gave the memo to the newspaper.
Salci has been an auto industry and transit car industry executive for many years, including a stint spent trying to save Morrison-Knudsen's transit car unit after it had run into heavy losses on some of its contracts. He says he joined Metro in 2002 after a temporary retirement and after the design work had begun and found that the agency had taken on too much of the construction risk in its dealings with CCC on the extension project. The linking of the design and construction management in a single company was a mistake by his predecessors, because in the CM role CCC defended its design, Salci says.
CCCs top project staff changed several times, claims Salci, and CCC repeatedly failed to finish its work. At one point, claims Salci, Metro agreed to pay CCC more money, but still the troublesome real estate takings and easements and design issues dragged on.
Since terminating CCC Metro essentially has managed the design and construction management itself, paying extra costs to its prime contractors and heading toward a completion date. One charge from CCCs counterclaim is business interference based on Metros hiring CCC employees after terminating the companies, but as usual both sides disagree: Salci says Metro hired about a half dozen clerical and staff engineers; CCC claims Metro hired a total of 13 people away from CCC firms and attempted to hire many more.