The County Board will be holding an extra meeting tomorrow prior to the full board meeting. The meeting is to discuss litigation, and I believe it might be regarding the Otto Baum arbitration hearing that Julia Rietz told me is to happen this month. While it’s possible the meeting will be to receive the arbitrator’s decision, it’s probably more likely that the Board will be meeting to consider one final settlement offer. Regardless, here are some points for everyone to consider as this issue heads to a conclusion.
Otto Baum was the general trades contractor for the nursing home (not the general contractor). PKD, who has already settled with the County for $113,000 for their part in both the mold and the HVAC problems, was the project manager. The costs associated with the mold problem are about $2 million, with additional on going expenses for testing as well as delays in the opening of the facility. Early on in this fiasco, it was believed that Otto Baum would have written us a check for at least $800,000 and possibly $1.3 million just to be rid of the situation. Now with our legal fees since that time, anything less than a million dollar settlement means that the County lost out by hiring the outside attorneys.
The case against Otto Baum rests primarily on the fact that they ordered the trusses from Bear Creek and that at least some number of those trusses showed up with mold on them. Those trusses were then installed in the building. The County also believes that Otto Baum didn’t take proper care in the storage of the trusses on site and I believe that the County feels that Otto Baum had responsibility for wrapping the building.
Otto Baum’s case against PKD (not part of this arbitration) is that they had responsibility for the site conditions, that they made the decision to put heaters in the building, and that they contributed to the problems by creating a greenhouse effect by wrapping a building that had snow in it and turning on those heaters. In looking at the contracts, it is unclear to me who had responsibility for these issues. Of course, since we’ve already settled with PKD, any responsibility that the arbitrator might assign to them will not accrue to the benefit of the county.
Otto Baum’s case against the County is unfortunately pretty damning. First, although originally denied by Inman, Beckett and Weibel, there is a memo that says that the County agreed to put up the moldy wood in the nursing home. This was done without any written agreement as to how the problem would be resolved financially. It’s presumed that this was done in an attempt to keep the project on track. Otto Baum had no contractual obligation to finish the project in a certain time frame. For them, the cheapest and easiest solution would have been to reject the moldy wood and wait for better product. They will argue that the County chose a more expensive way of dealing with it and that they shouldn’t have to pay for that.
Otto Baum also can point to the original environmental engineer brought into this case who said that no wood should be installed in the facility until it was tested for moisture content and fell below 15%, the industry standard. No tests for moisture content were ever done and Inman has not been able to provide any documentation of passing on that recommendation to Otto Baum. The minutes of the weekly progress meetings have no mention of this.
I’m guessing that we’ll see the County settle for a disappointing amount. The reason is simple. Our case is not strong, and the powers that be have never really wanted to let anyone in on the truth. A settlement would allow both parties to merely put a number on a piece of paper, and the people responsible can continue to claim they did nothing wrong. If it goes to an arbitrator, his decision, including anything embarrassing within it for the County, will become part of the public record.
Any proceeds from the settlement will be used to pay off the bonds that were sold to pay for the various problems that led to the $4 million cost overrun. The only benefit to the general corp fund balance is about $150,000 from a previous fiscal year bond payment as well as a few years reprieve for bond payments.