Bill for delayed work debate comes to a head

Grafton Board of Public Works members  disagreed on how to resolove a headworks facility construction billing dispute with contractor C.D. Smith for $214,500 in liquidated damage fees regarding the project’s delayed completion.

An agreement between the Village of Grafton and C.D. Smith states the company would pay the village $1,000 a day after the June 14, 2021, substantial completion deadline and $500 a day after the Aug. 14, 2021, total completion deadline. The Headworks’ construction wasn’t substantially completed until Aug. 16, 2021, and total completion wasn’t until June 13, 2022, — 303 days after the proposed deadline — resulting in C.D. Smith receiving a $214,500 bill.

C.D. Smith contends it doesn’t have to pay the full amount because the agreement states the fee is not a penalty, which the company claims implies it is only responsible for damages accrued during that time period. As a result, the company wants to waive the $214,500 fee and pay about $60,000 toward engineering overage costs instead. C.D. Smith said it is already losing money on the project and would like to limit the project’s financial burden.

C.D. Smith Vice President Dane Bernau said staffing limitations and the pandemic caused the delay.

“Covid-19 has been a challenge. It’s caused all industries to lose money for one reason or another and to work through difficulty,” Bernau said at the Aug. 8 Board of Public Works meeting. “It is the workforce shortage and then material challenges. Basically, for every day we’re on site, it costs more money for us to operate the job so we make the point that we did not leave the job site. We continued to work to the best of our ability with the resources that were available.”

Bernau said C.D. Smith agrees to pay for damages related to staffing but believes the $1,000 a day reads more as a penalty versus covering “real costs” accumulated during the time. Bernau said C.D. Smith shouldn’t pay more than those “real costs.”

“I’m not sure if there are calibrated costs of what happened regarding when we were supposed to be completed,” Bernau said. “No doubt, there was staff time, which is why we totally agree to pay that. But as far as other items, other additional expenses, the blanket $1,000 seems like a penalty.”

Board of Public Works members were split as they pondered whether they should accept the compromise C.D. Smith proposed or follow a staff suggestion to deny the request.

Trustee Dan Delorit was against compromising, saying a contract is a contract and it should be upheld as such.

“I’m sorry that we have Covid,” Delorit said. “I’m sorry that there are supply issues, that’s business. We all are feeling that (but this is a) business arrangement.”

“It seems excessive to me but they agreed in the contract,” member Les Blum said. “Part of the problem I have is they agreed to it.”

Not everyone felt that way. Public Works board members Lisa Harbeck, Patrick Murray and Chairman Tom Krueger thought a compromise was necessary and agreed with Bernau that the village shouldn’t charge C.D. Smith more than the actual damages caused.

The motion to accept the compromise passed 3-2 and will go before the Village Board. Blum was quick to comment after the motion to compromise was confirmed.

“As a citizen of the community, I think it’s a mistake what we did,” Blum said. “You take this to an attorney, (the agreement) says $1,000. We agreed to it.”

Krueger responded to Blum saying the village would have to prove its total loss — that the village couldn’t walk away with more money than it was forced to swallow from the delays.

If the Village Board rejects the compromise, the dispute will likely go to legal mitigation, according to village and C.D. Smith staff members.

“If we were to go the legal route, we think we have a good case that these (fees) are being used as penalties,” Bernau said. “We really don’t think it’s fair. Now, if you had true expenses, like a generator (having to power the facility) and somebody had to pay to run that facility temporarily. We couldn’t dispute that.”

The village has yet to determine its liquidated damages and would have to go through staff time sheets. After legal action was brought up, Director of Public Works Amber Thomas suggested accepting C.D. Smith’s compromise despite the staff report’s suggestion to deny it.

“If we try to pull (staff) time together, we’re probably going to get that ($60,000),” Thomas said. “So we could maybe just save ourselves some time and try to compromise.”