IOWA CITY — Years of back and forth with a contractor over work on the new University of Iowa Steady Family Children’s Hospital appeared near an end in March, with a $21.5 million arbitration award for the contractor and a UI assertion they had “reached an agreement in principle.”
But the dispute rages on, with UI attorneys asking for a third court extension and the contractor — Modern Piping Inc. of Cedar Rapids — accusing the university, again, of negotiating in “bad faith.”
“I am writing to communicate that you have engaged in bad faith in these settlement negotiations,” Modern Piping attorney Jeff Stone wrote to UI Deputy General Counsel Gay Pelzer in a May 15 email made public through the courts. “Specifically, you now are unwilling to honor language you previously proposed, and you have attempted to reopen closed terms.”
At stake is the ballooning cost of the biggest project in Board of Regents history — a more than 563,000-square-foot, 14-floor hospital that started in 2011 with a $270.8 million budget and a 2015 end date and swelled to $360 million, with its first patients moved in February 2017.
The rising costs come as the University of Iowa struggles to cut millions following recent state de-appropriations amounting to nearly $21 million in the last and current budget years. The campus has halted new construction, instituted a pay freeze, and backed tuition increases for the fall.
Its disagreement with Modern Piping started years ago over work and timing, catapulting the case into the courts — where decisions against the university prompted an appeal to the Supreme Court, which opted not to weigh in. An arbitration panel in March sided with Modern Piping and ordered the university pay $21.5 million.
The university initially appealed the decision and asked a judge to reject it, arguing the panel wrongly considered its Modern Piping disputes on both the Children’s Hospital and new Hancher Auditorium together.
Modern Piping countered by asking a court to confirm the award and expedite payment, with no extensions granted. But the university days later asked for more time to meet court deadlines — noting a settlement agreement had been reached.
On April 30, UI attorneys asked for another month extension because a settlement had been reached but not executed. And — just ahead of its revised deadline — the university on Thursday requested another three weeks, “because the parties are actively involved in settlement negotiations that may resolve all matters.”
Modern Piping attorney Stone promptly replied Friday, saying — essentially — enough.
UI resistance to the award is “past due,” according to Stone. “Modern Piping’s motion to confirm should be immediately granted as there are no grounds on which to vacate the arbitration award.”
Stone supported his accusations the university has reverted to bad-faith bargaining by attaching the May 15 email in which he accuses the university of now being “unwilling to honor language you previously proposed.”
“You have attempted to reopen closed terms,” he said.
He noted Modern Piping and the university had established an enforceable settlement agreement and without prompt execution, Modern Piping would ask a judge to intervene — a threat he made good on Friday.i
Stone noted the university was facing two options — court confrmation of the original award without several follow-up measures Modern Piping had agreed to in a settlement with the university; or UI payment of a lesser $18.5 million amount and completion the requested follow-up work.
“You can explain to the taxpayers why an additional $1.5 million will have been spent,” Stone wrote to the UI attorney. “You have exhibited bad faith in these negotiations by not honoring the language offered by the University of Iowa on April 16 and May 1 and by attempting to reopen negotiations … I have no expectation your conduct in future negotiations will differ from your past conduct.”
In the emails, UI attorney Pelzer spells out some of the terms that had been included in the pending settlement — which would require Board of Regents approval.
“The settlement agreement will not be signed by the executive director of the Board of Regents until after the June board meeting formalizes approval of the UIHC Children’s Hospital revised budget,” which would account for the $20 million bump — bringing it to more than $380 million.
The Board of Regents agenda for this week does not include any mention of a revised Children’s Hospital budget. The plan had been to wire the first payment to Modern Piping before June 7 and a second and final payment no later than July 12, according to the emails, but board spokeswoman Josh Lehman told The Gazette the board has nothing on its agenda related to a hospital budget revision.
In addition to the university’s contract with Modern Piping, it still has 15 open contracts of the more than 25 on its Children’s Hospital project — including ones with Merit Construction Company, which also is in arbitration over work and payment with the university.
Merit has four contracts worth more than $52.7 million in association with the project. Its original contract values totaled $35 million but grew with rampant change orders.
l Comments: (319) 339-3158; vanessa.miller@thegazette.com