5.7 EMRUSR 08-13-2024Ji
Elk River amft .
Municipal Utilities UTILITIES COMMISSION MEETING
TO:
FROM:
ERMU Commission
Mark Hanson —General Manager
MEETING DATE:
AGENDA ITEM NUMBER:
August 13, 2024
5.7
SUBJECT:
Field Services Building Project Closeout
ACTION REQUESTED:
Provide Direction on Desired Outcomes
BACKGROUND:
Our $12.3 million Field Services Building construction contract is nearing final closeout. Only a
few punch list items remain (estimated at roughly $5000 in total value). As such, ERMU staff
and legal counsel have started initial project closeout conversations with the contractor, RJM
Construction LLC.
Currently, ERMU is retaining $250,000 from RJM's final invoice. There are several issues that
factor into the retainage amount: the variability in the concrete floor thickness and rebar
placement (—$120,000), the default of the steel contractor (—$37,000), and the failure of RJM to
submit complete closeout documentation (—$123,000). Additional details are provided below:
• Concrete Floor (Ultra Concrete, Inc.): Staff estimated the floor scans show eight areas
with rebar significantly outside of the specified tolerances. Future potential repairs are
estimated at $15,000 each for a total of $120,000. A specialist has been retained to
review the concrete floor and estimate future costs. An expert will help remove the
uncertainty, be an accepted basis to contest RJM's position, and allow ERMU to move
forward with a legal claim if an agreement cannot be reached.
Steel Contractor (Thornberg Erecting and Steel Services, Inc.): RJM obtained a judgment
against Thornberg in the amount of $492,021.96. Unfortunately, Thornberg has since
gone out of business and only $37,138 has been recovered to date. Staff's position is the
$37,138 should go to ERMU and an additional settlement term should be RJM's
assignment to ERMU of all its rights to future recoveries associated with the judgment.
RJM has stated their legal costs far exceed the $37,138 recovered. Their plan is to keep
any recovered amounts to offset their legal costs until they have recovered their costs.
• 1% Administrative Retainage: No state agency or local unit of government can make
final payment to a contractor (or subcontractors) until the Minnesota Department of
Revenue has certified that they fulfilled their Minnesota withholding tax requirements.
RJM has a few missing Lien Waivers and IC-134 forms that are needed. MN Statute
337.10 allows us to withhold up to one percent ($123,238) of the contract value until all
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forms have been submitted. ERMU's possible exposure due to fines on unfiled IC-134s
would justify most, if not all, of the full withholding. RJM has stated the retainage should
be based solely on the non -compliant subcontractors: Sambatek = $682, Windsor =
$1,359, Ultra = $34,788, Wolf River = $31,262 (or $68,091 in total). RJM has not
provided a position on what, if any, of the total amount would be offered to ERMU as
part of a closeout agreement.
DISCUSSION:
It is highly unlikely RJM will agree to close out the project with ERMU keeping the entire
$250,000 currently retained. Rather, each issue will be debated on its own merits resulting in a
mutually agreed upon total amount.
To ensure a potential agreement aligns with commission expectations, staff requests
commission direction if a specific outcome is desired on any of the above issues. Absent specific
direction, staff will work with ERMU's legal counsel to pursue the most advantageous outcome
overall. Once a potential agreement is reached, staff will bring it to a future commission
meeting for approval.
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