City, Builder Resolve Lengthy Squabble Over Civic Center Costs

There were no hurrahs, smiles or slaps on the back last week, only a sense of relief at City Hall in Beverly Hills after an agreement was reached to end an expensive 2 1/2-year legal fight over the cost of building the city’s $120-million Civic Center.

City officials and the principal contractor, J.A. Jones Construction Co. of North Carolina, announced an $11.2-million settlement on Tuesday that resolves nearly all aspects of the dispute between the city, the construction company and subcontractors.

The settlement, which brings the total cost of the final phase of the Civic Center to $73 million, was the result of court-ordered mediation. Not included are more than $3 million in legal fees that the city incurred during the protracted battle.

Lawyers for Jones had contended that the city was responsible for $75.5 million to build the library, police station and outdoor courtyards that made up the final phase of the project.

With Jones seeking interest payments and legal fees, the city’s potential liability could have been much higher had the case gone to court, City Manager Mark Scott said.

“Our exposure was greater than $75.5 million,” Scott said.

The city had argued in January, 1990, that Jones should be held to the original cost of $43 million plus $10 million in change orders that resulted from design problems, asbestos removal and other delays. By April of this year, the city and contractor had reached agreement on a total of $62 million.

Still in dispute is the final cost of the poured-in-place concrete work, Scott said. Under the settlement, the city’s maximum liability for that is $2 million, which the city is holding in its reserve fund until the matter is resolved, whether by trial or negotiation.

“We’re really happy to have it behind us,” said Councilman Maxwell Salter of the lengthy wrangle. “The only ones who did any good by it were the lawyers. All of this has consumed an incredible amount of City Council and staff time.”

Councilman Allan L. Alexander said although he was not on the council when the project began, “the project was started with good intentions.”

The facility, especially the police headquarters, needed upgrading, but what started as a relatively modest renovation and expansion “led to an almost completely new civic center,” Alexander said.

“The scope was grander than necessary,” he said.

The design of the facility also created problems. “It is very exciting architecture,” he said, but the design “led to a complex structure which resulted in costs that clearly could have been avoided if the design had been simpler and more functional.”

At the height of the dispute in 1990, Jones Construction stopped work on the project for more than a month, claiming the city owed more than $10 million. Work resumed after the city agreed to a partial payment, and both sides agreed to delay a final resolution of who was responsible for what until after the job was finished.

“To understand what was properly owed was a very complex process,” Alexander said last week.

The city brought in experts familiar with construction and construction accounting to analyze what was owed based on the contract and what was agreed on.

“I was not prepared to authorize payment or a settlement without a thorough understanding of what was owed” as determined by the analysis, Alexander said.

With the contractor asking for interest fees and the cost of legal fees if it went to court, much more than $75.5 million was at stake during negotiations, he said.

“We were pleased that we were able to settle without going to court” over the major issues. “It was costly, but we had the city’s interest to protect,” he said.

Speaking during the council meeting on Tuesday, the day the agreement was announced, Alexander noted there was “plenty of blame to be placed on everybody” in the dispute.

In retrospect, Alexander and former Councilman Bernard Hecht said they believed the Civic Center should have been submitted to a vote by the community.

“I think we have a world-class facility,” Hecht said. “We do have another touch of excellence in Beverly Hills.”

But the city showed poor business judgment in not monitoring the project better to keep costs in line and by hiring a contractor with no track record in California, Hecht said.

Representatives of Jones Construction did not respond to telephone calls seeking comment on the case.

BACKGROUND

First proposed to the City Council in 1982, the Beverly Hills Civic Center was originally expected to cost about $30 million plus architectural fees. A firehouse and parking structure were built without problems, but the final phase proved otherwise, ballooning from an original bid of $43 million for construction of the police headquarters, library and outdoor courtyards to $75.5 million, according to the general contractor. Asbestos in the library, ground water under the police station and many architectural changes were blamed for the spiraling costs. Together with the first phase and a separate renovation of City Hall, the bottom line cost is about $120 million, city officials say.