Education

University of Iowa Children's Hospital disputes continue

Contractor accuses UI of bargaining in bad faith

The University of Iowa Stead Family Children’s Hospital is seen from Kinnick Stadium in Iowa City on Friday, Apr. 21, 2017. (Stephen Mally/The Gazette)
The University of Iowa Stead Family Children’s Hospital is seen from Kinnick Stadium in Iowa City on Friday, Apr. 21, 2017. (Stephen Mally/The Gazette)

IOWA CITY — Years of back and forth over work on the new University of Iowa Stead Family Children’s Hospital appeared near an end in March, with an arbitration award of millions for a contractor and a UI assertion the sides 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 14-floor hospital that started in 2011 with a $270.8 million budget and a 2015 end date, but swelled to a $360 million project that saw its first patients arrive in February 2017.

The rising costs come as the UI 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.

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 Iowa Supreme Court, which opted not to weigh in.

An arbitration panel in March sided with Modern Piping, awarding it nearly $21.5 million. Of that, about $4.6 million was for work the company said the UI owed it for helping build Hancher Auditorium.

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The university initially appealed the decision and asked a judge to reject it, arguing the panel wrongly considered the 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 UI days later asked for more time, noting a settlement agreement had been reached. On April 30, UI attorneys asked for another month extension because a settlement had not been executed. And then on Thursday the UI requested another three weeks as talks “that may resolve all matters” were underway.

Attorney Stone replied Friday saying — essentially — enough.

Stone said the UI faces only two options — court confirmation of the original award, or payment of a lesser $18.5 million amount with completion of the follow-up work.

“You can explain to the taxpayers why an additional $1.5 million will have been spent,” Stone wrote.

In the emails, UI attorney Pelzer spells out some of the terms that had been included in the pending settlement — which would require 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,” he wrote.

Board spokeswoman Josh Lehman said the board has nothing on its agenda related to a hospital budget revision.

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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.

Merit has four contracts worth more than $52.7 million in association with the project. Its original contract values came to $35 million, but grew with change orders.

l Comments: (319) 339-3158; vanessa.miller@thegazette.com

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