Education

UI's Bruce Harreld pushes back against Children's Hospital claims

Regent agrees with UI appeal of award to contractor worth millions

University of Iowa President Bruce Harreld (The Gazette)
University of Iowa President Bruce Harreld (The Gazette)
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IOWA CITY — The University of Iowa has and is paying contractors it hired to build a 14-story Stead Family Children’s Hospital, UI President Bruce Harreld told the state Board of Regents on Wednesday in response to questions about disputes with two companies that say they’re still owed millions more.

“But we’re not paying what we don’t think we owe them,” Harreld said.

And that includes about $17 million of a $21.5 million award an arbitration panel has granted Modern Piping of Cedar Rapids, he said.

A district court judge recently confirmed that award and ordered the UI to pay up — after first scolding it for delays. The judge also dismissed a UI countersuit seeking to vacate the arbitration award, but the university filed a notice to appeal both decisions — sending the fight again back to court, which is “exactly” where the case needs to be, said Harreld and Regent Larry McKibben.

“You are doing exactly the right thing,” McKibben told Harreld during a regents meeting held on the UI campus after the president — for the first time in public — updated the board on the UI’s position in the construction of the hospital, which had gained the attention of several state lawmakers who say they intend to investigate.

“The reasons we have a Supreme Court in the state of Iowa is for exactly the reason of what we are digging into now,” McKibben said.

The UI is risking having to pay $2,321.81 a day in interest charges if the justices do not agree with it. Neither Harreld nor the regents discussed the interest or legal costs in fighting the contractors. Besides Modern Piping, Merit Construction, also of Cedar Rapids, asserts it is owed $13 million more for hospital work.

Harreld stressed his institution would be good for the Modern Piping payout if it loses. “The notion that we’re not good for the money is ludicrous,” he said.

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Referencing a suggestion from a contractor’s attorney that the UI tap its famed Jackson Pollock “Mural” painting if it can’t come up with the money, Harreld argued the appeal fulfills his obligation of “protecting state assets.”

“The notion that someone would reach in here and put any sort of lien on the Mural which, by the way, is in the east wing of the United States Smithsonian museum of art right now, is a publicity stunt,” he said.

Harreld argued the UI has legitimate claims against Modern Piping, notably that the university never agreed to arbitrate the Children’s Hospital dispute along with another one involving its new Hancher Auditorium construction.

A district court judge in February 2016 ordered the two arbitrated together, and the university appealed that to the Iowa Supreme Court — which declined to hear it.

Following the arbitration panel’s award in February, the UI appealed — citing the same complaint. A separate district court judge told UI attorneys this summer that issue already had been decided.

But Harreld on Wednesday hammered that point as did McKibben, who noted, “Judges can make mistakes.”

He also said the UI was close to reaching a settlement with Modern Piping, but he would not approve it.

“Given that we’re dealing with a Children’s Hospital where any incident would be catastrophic … I could not take that risk,” he said. “Meanwhile, in Hancher, we’ve already had several hundred thousands of leaks and repair work. So I chose not to settle and said the path to resolve this is not in frankly this board, it’s not in the papers, it’s not in the press, it’s a matter for the court to adjudicate.”

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Harreld said the UI has paid Modern Piping, as a contractor on both the Hancher and Children’s Hospital projects, more than $57 million — most of what the company says it’s owed.

“The last $17 million we’re looking at very carefully,” he said. “And we have a legitimate dispute with them. We don’t think they have legitimate proof for that.”

Harreld acknowledged the UI wasn’t perfect in its methods and management over the Children’s Hospital construction — which an investigation by The Gazette found was plagued by thousands of mid- and late-design change orders, miscommunication, cost overruns and delays.

But he refuted the notion that the troubles grew from an initial, more rectangular design for the hospital and a more modest $270 million budget that preceded contractor bidding. Instead, he pointed to the endeavor’s complexity.

“This is by far and away the largest and most complex project we’ve had ever before as a regent system,” he said. “Because of its size and complexity, we decided that rather than put it out as one project with one firm that would require and force out the ability for local contractors to participate — we broke it into a number of packages.”

It then hired a firm to oversee those 24 contractors, “and then we asked them to not be at risk.” Those factors prompted numerous recommendations from a critical audit of the project in March 2015, to which Harreld said the UI responded.

Harreld did not address a report in The Gazette about UI efforts to paint the hospital budget in a more favorable light for regents. And he didn’t discuss reports the UI spent millions on overtime and rushing temporary fixtures for an open house in November 2016 — knowing that odds of opening the hospital that year as planned were slim.

New documents obtained by The Gazette show that when it came time to open the hospital, the UI picked the date a report said posed the highest risk of being able to pull off.

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Opening day options mapped out for a Jan. 5, 2017, meeting of key players in the project showed that opening the hospital’s lower floors on March 25, 2017, would be a low risk for having all the key work and training completed. But the UI picked the earliest option of Feb. 25, 2017 — a “very high risk path” to having the building work and training complete.

Still, said Regent Nancy Dunkel, “At the end of the day, we have a wonderful Children’s Hospital that is saving lives every day.”

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