Government

Iowa Court of Appeals sides with Modern Piping in UI Children's Hospital dispute

Panel affirms $21.5 million award

Fans at Kinnick Stadium wave Oct, 7, 2017, to young patients in the UI Stead Family Children’s Hospital between the first and second quarters of the Iowa game against Illinois. (Liz Martin/The Gazette)
Fans at Kinnick Stadium wave Oct, 7, 2017, to young patients in the UI Stead Family Children’s Hospital between the first and second quarters of the Iowa game against Illinois. (Liz Martin/The Gazette)

IOWA CITY — Years after a local contractor sued the University of Iowa to be paid for millions of dollars of work on the UI Stead Family Children’s Hospital, appellate judges ruled Wednesday — again — in favor of the contractor.

The cost of the acclaimed 14-story hospital already has ballooned from recurring construction change orders, and still faces millions more in disputed bills.

“We find no error in the district court’s determination,” according to the Iowa Court of Appeals, which was asked to weigh in on whether a Johnson County District Court judge was right to confirm a $21.5 million award in favor of Cedar Rapids-based contractor Modern Piping Inc.

The American Arbitration Association granted that award to Modern Piping after considering its disputes with the UI over work on two of the campus’s signature buildings — the Children’s Hospital and Hancher Auditorium.

The association agreed to consider the complaints together due to similarities in the two contracts, but UI officials contended that never should have happened.

A district court judge last August, however, confirmed the $21.5 million award, of which the university still owes about $17 million. The UI appealed, arguing to nullify results of the arbitration because it never consented to the process.

The UI appeal — the most recent of many in the yearslong case — launched a bitter public dispute that included Modern Piping asking the Johnson County Sheriff’s Office to garnish UI bank accounts and suggesting the UI sell its Jackson Pollock “Mural” — the most famous painting in the UI Museum of Art — if it couldn’t find the cash.

ARTICLE CONTINUES BELOW ADVERTISEMENT

UI President Bruce Harreld later shot back during a Board of Regents meeting that “the notion that we’re not good for the money is ludicrous.” He said the dispute “represents change order requests and labor inefficiencies that the university does not accept as valid.”

“The university is acting within its rights on these matters and will pursue its rights of appeal and await the decision of the appellate court,” he said then.

While the UI waited, interest on the award was accruing by $2,321.83 a day. As of Wednesday, accrued interest was nearing $1 million — bringing the total still due to $17.9 million.

That doesn’t include costs the state incurred on expert witnesses and analysts throughout the case — a figure The Gazette has requested but not yet received from the UI or the Iowa Attorney General’s Office.

The university didn’t respond Wednesday to a request for comment on the court ruling.

Modern Piping Chief Executive Officer Ken Brown said his company is pleased with the ruling, which aligns with its past wins on “every issue before the arbitration panel and Iowa courts.”

Modern Piping, he said, “looks forward to the University of Iowa honoring Bruce Harreld’s promise to pay the nearly $18 million that has been due since 2017.”

Regents spokesman Josh Lehman said Wednesday the board doesn’t have any additional comment. Board members, including President Mike Richards, previously supported UI’s decision to fight the Modern Piping award.

While Wednesday’s ruling signals the UI has exhausted legal options, the dispute appears destined to continue.

ARTICLE CONTINUES BELOW ADVERTISEMENT

Thank you for signing up for our e-newsletter!

You should start receiving the e-newsletters within a couple days.

Modern Piping has filed a counterclaim seeking damages for the university’s delays in paying. Modern Piping has requested a jury trial on those allegations.

Although contractors have said they stand by their work on the hospital and support its mission, their concerns lie with the university’s management and oversight of the project, as detailed last summer in a Gazette investigation.

The newspaper revealed the largest capital project in regents’ history ran rampant with thousands of design changes, mismanagement, delays and cost overruns that ballooned its budget from $270.8 million in 2011 to $360.2 million in 2015, when the project was slated to be completed.

But the university delayed its planned opening to December 2016, spending millions on temporary facades and expedited materials to host grand opening events. The hospital’s construction exceeded even that extended schedule, and the UI pushed back the opening again — welcoming patients in parts of the new Children’s Hospital in February 2017.

In December, the UI reported its current cost commitments for the hospital at more than $366 million — with the expectation it would shave off $13.1 million from its contractor expenses. That’s the amount it was seeking from another contractor dispute on the project.

But that contractor — Merit Construction, also of Cedar Rapids — similarly won against the UI in arbitration in February, adding another $9.7 million to the growing Children’s Hospital cost.

Merit attorneys promptly asked a judge to confirm that award, and the university had until Wednesday to file a response. The UI had not done so as of 5 p.m., according to the court system’s online database. That award also is accruing interest.

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

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.