Penalties steep for missed deadlines
By Brian Johnson
Dolan Media Newswires
Minneapolis — Mortenson Construction will be compensated well for building the new Minnesota Vikings stadium, but the fee is smaller on a percentage basis than it made on other stadium projects in town. It also comes with some risk.
Mortenson, which was chosen by the Vikings and the Minnesota Sports Facilities Authority as the stadium’s construction manager Friday, will receive a fee of about $12.5 million, or 1.7 percent of the construction cost.
The fee could rise as high as $15 million if the Golden Valley-based contractor makes all its bonuses for things such as early completion, safety, and quality.
But there’s also a stick to go with the carrot. For example, the contract includes substantial penalties for not meeting the July 1, 2016, substantial completion target, including $5 million for every NFL game missed because of late completion.
“Our intention is to earn those bonuses and avoid the penalties,” John Wood, Mortenson senior vice president, said Friday after the authority approved the contract with Mortenson.
Mortenson initially proposed a fee of 1.95 percent. The final negotiated agreement of 1.7 percent is less percentage-wise than Mortenson made on both TCF Bank Stadium and Target Field, Wood said.
“Frankly, it reflects the marketplace today and it reflects what was a very rigorous competition for this project,” Wood said. “But we knew when we submitted our proposal that we were submitting a very aggressive fee. We really wanted this project and we knew what we were doing.”
Michele Kelm-Helgen, chairwoman of the authority, said the fee was “incredibly competitive,” and Lester Bagley, vice president of public affairs for the Vikings, said the fee compares “extremely well” to similar projects.
“It’s a fair contract, but it’s aggressive and we appreciate Mortenson’s willingness to partner with us on it,” Bagley said.
Mortenson beat out the team of Scottsdale, Ariz.-based Hunt Construction and Minneapolis-based Kraus-Anderson.
Both the Vikings and the authority said both finalists had strong proposals.
Among the things that tipped the scale to Mortenson were its local ties and strong national and local sports experience, which covers more than 100 sports venues, including TCF Bank Stadium and Target Field.
Mortenson, which is partnering with Thor Construction, also got high marks for its construction team, track record of completing projects on time and on budget, inclusion of disadvantaged workers and businesses on past projects, and its fee.
Al Gerhardt, Kraus-Anderson’s chief operating officer, said it’s always disappointing to lose out on a project.
“We pour our heart and soul into these kinds of competitions,” he said.
However, he said, winning and losing is part of the deal in the industry. Typically, general contractors win only 25 percent to 30 percent of what they go after and “we do better than the average,” he said.
“We want to congratulate Mortenson and wish them all the best in building the new [stadium],” he said. “We look forward to watching it take shape over the next couple of years in our backyard.”