Floyd County approves mediation proposal with law enforcement center and courthouse update architect

The Floyd County Board of Supervisors made a move Friday morning to settle litigation against the architect for the county Law Enforcement Center and courthouse update projects that have ended up costing much more and taking much longer than originally estimated.

The Board of Supervisors and Prochaska Associates, of Omaha, Nebraska, had filed claims against each other starting in July 2021, regarding the cost of Prochaska's services, cost overruns, change orders and other items. One of the main items in contention is about half a million dollars additional that Prochaska says the county owes it for its services.

Prochaska's architectural design fee, according to its contract with the county, is for 10% of the construction costs. Because the project ended up costing about $5 million more than originally estimated, Prochaska says it is owed an additional $500,000.

The county argues that the project is costing much more than originally estimated because of Prochaska's "professional negligence," including many change orders over the course of the project to fix what the county says were design errors.

The county asked that a jury not only decide the additional $500,000 does not need to be paid, but that Prochaska should be held responsible for some of the additional construction costs.

Prochaska filed counterclaims, including asking that the county be ordered to pay the additional $500,000 that the firm says it is owed.

The action was set for a jury trial to begin Jan. 17 in U.S. District Court in Cedar Rapids, but on Friday the Board of Supervisors approved a motion agreeing to a proposed settlement that had been mediated by a retired federal court judge over the past month.

The mediation agreement includes the county paying Prochaska $162,500 plus any insurance proceeds from Prochaska's liability insurer, estimated to be $50,000 but potentially more.

If agreed to and signed by both sides, the release would not prevent future action by the county for any claims regarding Prochaska's work that are discovered after the date of the mediation agreement, and Prochaska would still have the right to try to collect more than $8,700 in administrative costs.

As of Friday afternoon, Prochaska had not indicated to the county whether it would accept the mediation proposal.

The Board of Supervisors passed the mediation agreement motion at a special meeting Friday morning after about an hour discussion in closed session with their attorney in the matter, Roger Stone, a managing partner with Simmons Perrine Moyer Bergman PLC law firm in Cedar Rapids, by teleconference.

It was one of the last official acts by the three retiring board members, whose terms of office are officially over at the end of the day Jan. 1.

When asked if they felt some urgency to get the matter resolved before three new supervisors take office next week, Supervisor Linda Tjaden said that entered into their decision.

"We've been involved in this since day one," she said. "To put a new board of supervisors in it would have dragged out more, because you would have to get all the new board up to speed."

Originally filed by the county in Iowa district court almost a year and a half ago, the Board of Supervisors claimed that Prochaska breached its contract with the county because it failed to design a project that met the requirement of not exceeding the construction cost of $10,898,700.

"Further, there have been over 30 change orders to date due to items defendant omitted from the original plans and specifications for the project used for bidding the project," the county alleged. There have been additional change orders since the original suit was filed.

Because Prochaska is an out-of-state company, the architectural firm was successful in having the case transferred to U.S. District Court in the Northern District for Iowa.

The original construction cost estimate that Prochaska had provided in early 2018 and that was used to determine the amount of general obligation bonds that would have to be sold to finance the construction and other costs, was about $1.09 million.

When Prochaska had finished its actual design of the project, its estimated cost had climbed to $13.98 million. The company that the county hired as its construction manager, The Samuels Group, in 2019 estimated construction costs at $12.49 million, based on Prochaska's design.

Prochaska then reviewed the design to make changes to cut costs, including a much smaller atrium between the courthouse and the new Law Enforcement Center and other changes, but the cost was still more than the original budget and more than could be paid for with the $13.5 million bond revenue that Floyd County voters had overwhelmingly approved for the project.

The project was put out for bid in September 2019 with the changes that had been made by Prochaska, and the total bid price from the lowest bidders came back at $16.42 million, or $5.5 million more than the original cost estimate.

The county made some more changes to the project by either eliminating or delaying some items, Samuels Group made some value engineering changes with the contractors to reduce the price, and the county identified additional funding sources for the project in addition to the bond revenue, including using general fund revenue that would end up increasing county property taxes.

The final construction cost estimate was just over $16 million and the county proceeded to award the bids. Construction officially began with groundbreaking Nov. 13, 2019.

In August this year, Prochaska filed a motion for summary judgment in the lawsuit and counterclaims, asking U.S. District Court Judge C.J. Williams to order the county to pay the additional architectural fees and to dismiss the professional negligence claims against the company, arguing that the county had made a decision to proceed with the projects in spite of the known higher cost.

The county then filed its own motion for summary judgment, asking the court to declare that the county does not owe Prochaska the additional fees.

On Nov. 30, Williams filed an order denying the county's motion for summary judgment and denying part of Prochaska's motion for summary judgment but granting part of the motion.

County Auditor said the county had been requesting mediation since last summer, but Prochaska only agreed to mediation after the judge's ruling on the summary judgment motions was issued Nov. 30.

As part of his decision, Williams ruled that the "not to exceed" budget figure of $10,898,700 "was adjustable and not a guaranteed maximum price."

The county had argued that even though it had agreed to continue the projects at the higher price, Prochaska's fee should still be bound by the original cost estimate. Williams rejected that argument.

But Williams also noted that Prochaska had agreed that the county had never given written approval to proceed with the greater costs, as required in the contract.

"With this record, a reasonable jury could find that plaintiff never provided written approval to increase the construction budget figure past $10,898,700," Williams wrote. "And in fact, the record indicates that (the county) moved forward by obtaining additional funds, accepting bids subject to negotiations, and applying Change Orders, not by changing the budget by written approval."

Because of that, he wrote, "a reasonable jury could find that (Prochaska) breached its promise to (the county) to design a project that could be built for less than $10,898,700."

The total cost of the project with architectural fees and other costs such as the cost to purchase needed land, stands at more than $18 million. The project is still not complete.