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HomeMy WebLinkAbout24570RESOLUTION NO. 24570 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, FINDING THAT HAL HAYS CONSTRUCTION, INC., A CALIFORNIA CORPORATION, IS IN DEFAULT OF THAT CERTAIN CONSTRUCTION CONTRACT (AGREEMENT NO. 7038) RELATED TO THE POLICE DEPARTMENT REMODEL REBID, CITY PROJECT NO. 15- 05; AUTHORIZING ISSUANCE OF A NOTICE OF TERMINATION OF CONTRACTOR'S PERFORMANCE TO CONTRACTOR AND SURETY IN ACCORDANCE WITH SECTION 6-4 "DEFAULT BY THE CONTRACTOR" OF THE SPECIAL PROVISIONS; AND IN THE EVENT OF A SURETY DEFAULT, DECLARING A LOCAL EMERGENCY PURSUANT TO SECTION 20168 OF THE CALIFORNIA PUBLIC CONTRACT CODE, PALM SPRINGS MUNICIPAL CODE SECTION 7.04.040, AND CITY CHARTER SECTION 300; AND AUTHORIZING THE CITY MANAGER TO AWARD REPLACEMENT CONSTRUCTION CONTRACTS WITHOUT COMPETITIVE SOLICITATION FOR BIDS PURSUANT TO SECTION 22050 OF THE CALIFORNIA PUBLIC CONTRACT CODE, AS NECESSARY TO IMMEDIATELY AND EXPEDITIOUSLY COMPLETE WORK AT THE PALM SPRINGS POLICE STATION. THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The City Council finds and declares as follows: A. Following a competitive and open public bid process pursuant to Title 7 "Procurement and Contracting" of the Palm Springs Municipal Code ("PSMC") and Public Contracts Code ("PCC") § 20160 — 20175, on October 4, 2017, the City Council awarded a construction contract (Agreement No. 7038) (the "Agreement"), to Hal Hays Construction, Inc., a California corporation, ("HHCI"), in the amount of $3,381,830 for the Police Department Remodel Rebid, City Project No. 15-05, (the "Project"), to include Project 100 (Training Center), Project 200 (Lobby and Records Department), and Project 300 (Detective Bureau). B. On November 1, 2017, the City Council approved Change Order No. 1 in the amount of $837,090 for a total contract amount of $4,218,920 with HHCI to include Project 400 (Men's and Women's Locker Rooms) as a part of the Project. C. On December 18, 2017, HHCI commenced construction of the Project with a maximum allowable contract time of 240 calendar days, extending to August 14, 2018. D. Construction of the Project suffered delays caused by HHCI relate to HHCI's failure to adequately administer the Project and manage its construction, including, but Resolution No. 24570 Page 2 not limited to the following delays in : submitting insurance certificates and endorsements; obtaining live scan security clearances for all on -site workers; preparing and updating the construction schedule with sufficient detail; preparing submittals; correcting submittals; ordering long -lead time materials; submitting applications for payment, correcting applications for payment; preparing and signing change orders; securing performance of contractors, maintaining and updating red -lined as -built drawings. E. HHCI's failure to adequate monitor and administer the construction of its subcontractors resulted in poor quality of construction work, in particular in Project 400 (Men's and Women's Locker Rooms), requiring HHCI's request for and the City's approval of a substitute subcontractor pursuant to PCC § 4107(a)(7). F. On May 1, 2018, the City provided notice to HHCI and its Surety, Western Surety Company, ("Western"), advising HHCI and Western of the City's growing concerns of HHCI's failure to perform work on the Project in accordance with the Agreement, and within the allowable contract time. G. On July 10, 2018, the City, through its construction manager, Willdan Engineering, ("Willdan"), issued a Notice of Non -Compliance relating to HHCI's failure to perform and delays in completing work on the Project. H. On July 12, 2018, the City, through its construction manager, Willdan, issued a Notice of Delays indicating that HHCI had exceeded the allowable contract time to complete portions of work of the Project. I. On August 30, 2018, the City, through its construction manager, Willdan, issued a Notice of Default to HHCI and Western due to HHCI's failure to complete the entire work of the Project within the maximum allowable contract time. Included with the Notice of Default was a demand that HHCI commence correction within five (5) working days, and an estimation at that time of $475,100 in accrued liquidated damages. J. In September 2018, HHCI submitted a time impact analysis and request for time extension and recovery plan. Western acknowledged receipt of City's Notice of Default and requested documentation, which City promptly provided to Western. K. On October 1, 2018, the City provided a response denying HHCI's time impact analysis, and further identified HHCI's defaults in performing the contract. L. On October 11, 2018, City responded to HHCI's recovery plan, requested more detail for the full scope of the remaining work of the Project, which included removal and replacement of all existing tile within Project 400 (Men's and Women's Locker Rooms). Resolution No. 24570 Page 3 M. On November 17, 2018, HHCI provided a second recovery schedule showing the following completion dates: Project 100 (Training Center): December 11, 2018 Project 200 (Lobby and Records Department): January 23, 2019 Project 400 (Men's and Women's Locker Rooms): March 29, 2019 N. In December 2018 the City accepted and processed HHCI's application for payment number 17228-09R3 with the sole intent of directly paying subcontractors working for HHCI on the Project. At considerable administrative expense, by January 18, 2019, the City had processed nineteen (19) separate payments to HHCI's various subcontractors which were collectively paid a total of $874,091.03, with these direct subcontractor payments intended by the City to incentivize HHCI's subcontractors to continue performing for HHCI to complete the Project. O. Despite the City's best efforts to incentivize subcontractor performance under contract with HHCI, pursuant to California Civil Code § 9358, as of February 14, 2019, there are (4) active stop payment notice claims, in the aggregate amount of $80,329.67, reducing the amounts the City may otherwise pay to subcontractors. P. On January 31, 2019, the City issued HHCI and Western a Notice of Intent to Terminate HHCI for Default, (the "Notice"), noting that as of that date HHCI had failed to complete Project 100 (Training Center) and Project 200 (Lobby and Records Department), commence reconstruction on Project 400 (Men's and Women's Locker Rooms), or accepted Project 300 (Detective Bureau). Included with the Notice was an estimation at that time of $900,000 in accrued liquidated damages, and a requirement for Western to cure HHCI's default within five (5) working days (February 8, 2019), by arranging for completion of HHCI's work in accordance with the Agreement. O. On February 8, 2019, Western failed to cure HHCI's default. R. In conducting due diligence to consider whether HHCI has the ability to perform and complete the Project, the City learned of HHCI's failure to complete the Humboldt County Juvenile Hall in Eureka, California, as evidenced in the following two news articles: (1): "Juvenile hall construction project delayed indefinitely," Times Standard, November 13, 2018, where it was reported: A major construction project for a new Humboldt County juvenile hall in Eureka was expected to be complete in April, but six months later, the project appears to be dead in the water. The county recently began "serious discussions" with the project's contractors on the new building's status, county Public Works Director Tom Mattson said Tuesday. But the contracted company, Hal Hays Construction, Inc., notified subcontractors Resolution No. 24570 Page 4 on Tuesday that all construction work is "terminated" until further notice, according to a document obtained by the Times -Standard. (2): "Juvenile hall construction has 60 days to show progress, county says," Times Standard, December 19, 2018, where it was reported: The construction company behind a major juvenile hall project, which is far behind its projected completion date, must keep to a 60-day schedule in order to show meaningful promise that the facility will be completed in a timely manner, a Humboldt County official said. Hal Hays Construction, Inc., the contracted company, put the brakes on the 19,000-square-feet construction last month after missing scheduled completion dates in April and October. The unfinished facility sits adjacent to the previous building on Harrison Avenue, near the Eureka Dog Park. "(Hal Hays) has to live up to the terms of the agreement," said Public Works Director Tom Mattson, "and complete everything they say they're going to complete." S. HHCI's continuing delays in completing the Project are causing serious disruption to the function of one of the City's most important and essential public buildings, affecting the internal safety and security of Palm Springs Police Department's daily operations, interfering with the ability of the Palm Springs Police Department to provide optimal public safety services, and resulting in costly delays to the Project. T. The Agreement has not been terminated for the convenience of the City, or for any other reason, and there still exists a contractual relationship between the City and HHCI for completion of the Project; only HHCI's performance of the Contract is terminated for default. U. The Agreement has not been abandoned by either party, but HHCI has failed to complete the Project in conformance with the Agreement, despite repeated requests by the City for HHCI to cure its default. V. The City has worked diligently and patiently with HHCI to resolve its deficiencies on the Project, but as of the date of this Resolution, HHCI's performance has not improved, a full crew of workers have are not been present on the site for months, and there are incomplete defective conditions on the Project that pose a clear and imminent danger (e.g. incomplete bullet-proof glass installation). These deficiencies, including but not limited to HHCI's failure to complete the Lobby and Records Department, Detective Bureau, Training Center, and Men's and Women's Lock Rooms, require immediate City action to prevent the loss or impairment of life, health, and property. W. On February 20, 2019, the City Council considered the facts relating to HHCI's performance and its failure to complete construction of the Project in accordance with the Special Provisions issued for the Project and incorporated into the Resolution No. 24570 Page 5 Agreement. Accordingly, the City Council finds HHCI is in default of the terms and conditions of the Agreement on the following grounds: 1. HHCI is unable to pay debts (to its subcontractors and suppliers) as they become due and appears to be financially unable to complete the Work; 2. HHCI has essentially abandoned the work by failing to provide the full complement of required workers by both HHCI or its subcontractors at the site as required to diligently prosecute completion of the Work; 3. HHCI disregards and violates provisions of the Contract Documents and City instructions, as detailed in Project correspondence; and 4. HHCI has failed to prosecute the Work according to the approved schedule/Contract Time without excusable delays in conformance with Section 6-6 of the Special Provisions of the Contract. X. Section 6-4 "Default By The Contractor," of the Special Provisions, and Section 6- 4.4 of the 2015 Edition of the "Greenbook" Standard Specifications for Public Works Construction, which are incorporated into the Agreement by reference, impose certain responsibilities upon Western upon receipt of the City's written Notice of Termination for Default. As required by Section 6-4 of the Special Provisions, the Surety is obligated to: ...immediately takeover and assume the control of and perform the Work as the successor to the Contractor. The Surety shall assume all rights, obligations, and liabilities, including liquidated damages that have accrued under the Contract. The Surety shall maintain the Site and all of its safety controls. If the Surety fails to maintain the Site, the City may correct unsafe conditions and charge the Surety for all costs incurred. When the Surety assumes any part of the Work, it shall take the Contractor's place in all respects for that part, and will be paid by the City for Work performed by it in accordance with the Contract. When the Surety assumes the entire Contract, all money due the Contractor at the time of its default shall be payable to the Surety as the Work progresses, subject to the terms of the Contract. Within 15 Working Days of the notice of Termination for Default, the Surety shall provide a written plan detailing the course of action it intends to take to remedy the default. The City will review and notify the Surety if the plan is satisfactory. If the Surety fails to submit the plan or to maintain progress on the plan once it's been approved by the City, the City may exclude the Surety from the premises. The City may then take possession of all material and equipment and complete the Work by the City forces, by letting the unfinished Work to another Contractor, or by a combination of such methods. In any event, the cost of completing the Work shall be charged against the Contractor and its Surety and may be deducted from any money due or becoming due from the City. If the amounts due under the Contract are insufficient for Resolution No. 24570 Page 6 completion, the Contractor or Surety shall pay to the City within 30 days after the City submits an invoice for all costs in excess of the remaining Contract Price. Y. The City Council has significant concern with continued delays in completing the Project work, and with the HHCI default. The Council views the default as detrimental to the internal operations of the Palm Springs Police Department and the function of the Department in the community. To the extent Western fails to submit its required written plan to remedy HHCI's default, or its written plan is not acceptable to the City, or Western does not maintain progress on its written plan once approved by the City (in any of these events a "Western Failure"), the City will be required to pursue alternative remedies in completing the Project. Z. Pursuant to PCC § 20168, the City Council may, upon a four -fifths vote, declare that public interest and necessity demand the immediate expenditure of public money to safeguard life, health, or property because of an emergency. AA. In accordance with PCC §§ 20168 and 22050, the City Council may repair or replace a public facility, take any directly related and immediate action required by that emergency, and procure the necessary equipment, services, and supplies for those purposes, without giving notice for bids to let contracts. BB. Due to HHCI's default and extended and continued delay of completing the Project, the condition of the Palm Springs Police Department is causing serious disruption to its daily safe operations, and interfering with the Department's service to the community; accordingly, the City Council finds that there is an imminent threat to public health and safety that requires immediate action. CC. The Council finds upon substantial evidence as stated herein and during the City Council consideration of this Resolution at a public meeting, including the staff report and all evidence submitted, whether verbally or in writing, that given the HHCI default, in the event of a Western Failure, (i) repair and replacements will be necessary to permit the continued conduct of Palm Springs Police Department operations, and (h) there will exist a threat to the public health, welfare and safety, and an emergency. DD. In compliance with Section 7.04.040 "Emergencies: Procedures" of the Palm Springs Municipal Code ("PSMC"), to protect public health, welfare and safety, and to permit the continued safe operation of the Palm Springs Police Department, the City Council hereby authorizes the City Manager, upon a Western Failure, to complete the work relating to the Project by letting the unfinished work to another Contractor, or multiple Contractors, in the most expeditious manner possible. EE. In the event of a Western Failure and City Manager completion of Project work pursuant to paragraph DD above, the City Manager shall make a written report to Resolution No. 24570 Page 7 the City Council of the circumstances of all emergency purchases and expenditures in excess of twenty-five thousand dollars ($25,000) for supplies, services, construction and/or construction services at the first regularly scheduled meeting after the emergency procurement is made, i.e., once all Project work is complete. FF. Competitive bidding for the defaulted work on the Project would cause unnecessary and further delays. GG. It would work an incongruity and not produce any advantage to the City to competitively bid the completion and repair work due to the immediate need of completing the Project and providing a safe and adequate facility for operations of the Palm Springs Police Department. HH. Shore v. Central Contra Costa Sanitary District (1962) 208 Cal.App. 2d 465 and Garvey School District v. Paul (1920) 50 Cal.App. 75 are legal authorities that hold contract for takeover work may be exempted from competitive bidding upon contractor default. II. Meakin v. Steveland (1977) 68 Cal.App.3d 490 and Los Angeles Dredging v. Long Beach (1930) 210 Cal. 348 are legal authorities that hold that statutes requiring competitive bidding do not apply when competitive bidding would work an incongruity or not produce any advantage. SECTION 2. The City Council hereby terminates HHCI's performance of the Agreement for default of HHCI, pursuant to Section 6-4 of the Special Provisions issued for the Project. SECTION 3. The City Council hereby orders Western to immediately takeover and assume the control of and perform work on the Project as the successor to HHCI, and to perform all of its obligations as identified in Section 6-4 of the Special Provisions issued for the Project, including submittal of a written plan to remedy HHCI's default. SECTION 4. In the case of a Western Failure, i.e., in the absence of Western's required performance pursuant to the Agreement, in accordance with Performance Bond No. 30022329 issued for the Project, and as required by Section 6-4 of the Special Provisions issued for the Project, the City Council hereby finds and orders that A. an emergency as described hereinabove in Section 1, Paragraph CC, will exist, and that timely and immediate completion of the Project is necessary to provide a safe and adequate facility for the public and employees of the Palm Springs Police Department, and to avoid unnecessary health and safety risks, Resolution No. 24570 Page 8 B. the award of a contract, or of multiple contracts, to correct defective Project work, or complete remaining work related to the Project through the competitive bid process would cause unnecessary and prejudicial delay to completion of the Project, which is already in serious jeopardy due to delays caused by HHCI, and C. The City Manager shall take all steps necessary to protect public health, safety and welfare including, without limitation, to execute any and all agreements with qualified contractors and to execute any necessary documents to correct defective Project work, complete remaining Project work, or to otherwise carry out the intent of this Resolution, pursuant to relevant case law as cited in Section 1, and in accordance with PCC § 22050 and PSMC Section 7.04.040, and to incur and report such other expenditures reasonably deemed necessary by the City Manager as related to the Project. SECTION 5. If any part of this Resolution or its application is deemed invalid by a court of competent jurisdiction, the City Council intends that such invalidity will not affect the effectiveness of the remaining provisions or applications and, to this end, the provisions of this Resolution are severable. SECTION 6. This Resolution will become effective immediately upon adoption and remain effective unless superseded by a subsequent resolution. ADOPTED THIS 20TH DAY OF FEBRUARY, 2019. David H. Ready, Esq., D. City Manager ATTEST: A h y J. Meji , City Clerk Resolution No. 24570 Page 9 CERTIFICATION STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE) SS. CITY OF PALM SPRINGS) I, Anthony J. Mejia, MMC, City Clerk of the City of Palm Springs, hereby certify that Resolution No. 24570 is a full, true and correct copy, and was duly adopted at a regular meeting of the City Council of the City of Palm Springs on the 20th day of February, 2019, by the following vote: AYES: Councilmembers Holstege, Middleton, Mayor Pro Tem Kors, and Mayor Moon NOES: None ABSENT: Councilmember Roberts ABSTAIN: None IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Palm Springs, California, this tiles day of , -20*&-u 1.