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Contractors seek panel for Minn. shutdown claims

MnDOT in talks with builders to establish committee

By Brian Johnson
Dolan Media Newswires

Minneapolis — Nine months after the state government shutdown ended, highway contractors who suffered losses are frustrated by what they see as the slow pace of resolving claims.

Hoping to move the process along, some contractors and their representatives want to form an independent advisory panel to review some of the more complex claims and make nonbinding recommendations to the Minnesota Department of Transportation.

Tim Worke, director of the Associated General Contractors of Minnesota’s highway and transportation division, said in an email that the panel would “provide a level of separation from the emotion and other factors that seem to now be getting in the way of prompt resolution.”

MnDOT has been talking with the contracting community and “working with them on possibly doing something like that,” MnDOT spokesman Kevin Gutknecht said.

The 20-day shutdown last July affected 165 MnDOT projects, including those that were delayed or had work pushed into the next construction season. It resulted in contractor claims for everything from field office overhead to temporary traffic control.

So far, MnDOT has resolved 55 claims totaling $3.7 million, and those numbers should rise in the next couple of weeks, Gutknecht said.

“As the season progresses and more jobs conclude, we will find that we will get better numbers and get closer to settling this,” he said.

But Gutknecht cautioned that it would “take some time” to resolve all the issues because some claims cannot be settled until the project is finished.

The $3.7 million payout figure almost has doubled since early February. At the time, 29 claims totaling $2 million had been settled.

Other claims have been satisfied by giving the contractor more time to do the work.

Still, the one-year anniversary of the shutdown is approaching, and many claims remain unresolved, Worke said.

The situation is a financial hardship to contractors, and if the problem continues to simmer it’s “going to boil over” by summer, he said.

About 165 projects were affected by the state government shutdown, including 36 projects that had work moved to 2012 or beyond and 12 that will start in 2012 instead of 2011 as scheduled.

Among those 36 projects is an Interstate 35E resurfacing project between Interstate 694 and the Forest Lake split and a Highway 44 resurfacing job in Houston County.

Any one project can have multiple claims. Claims may be related to expenses incurred before, during and after construction, including site prep, traffic control, idle equipment, extended field overhead, erosion control, home office overhead and escalating material costs, according to MnDOT.

Dianne Holte, president/CEO of Ramsey-based Holte Contracting, has a pending claim of $48,000 for work related to a Highway 34 project near Park Rapids.

“For a small company, that is a lot of your operating budget, and not to be able to recoup those costs … that is kind of frustrating,” she said.

Holte was a subcontractor for Central Specialties on the Highway 34 job. Since MnDOT directly is negotiating with the prime contractors, subcontractors are relying on the prime to “go to bat for you,” Holte said.

Le Center-based O’Malley Construction is a certified disadvantaged business enterprise working primarily on state or state-aid highway projects, such as the Highway 610 design-build project.

Because of the shutdown, 45 percent of O’Malley’s 2011 bookings were shifted to the 2012 season.

Lori O’Malley, the company’s president, said it’s “very important” to form an independent advisory group.

“This is a unique situation for all of us, and I think it needs more of a collaborative effort,” she said.

Among the contractors’ concerns are lack of clarity about what is a legitimate claim and lack of transparency regarding MnDOT’s basis for approving or denying a claim, she said.

The process needs “full disclosure” of the decisions, the decision makers and the basis for the decisions “so there can be some consistency or at least an understanding on how to formulate claims,” she said.

Mike Leegard, MnDOT’s construction support/claims engineer, said MnDOT was looking at “any and all options” to expedite the process, including an independent panel.

But other issues have to be resolved first, such as the certification of subcontractor claims by the prime contractor, Leegard said. MnDOT’s contract is with the prime contractor, so the prime has to certify certain claims submitted by its subcontractors.

Asked about the time it’s taking, Leegard said many of the claims weren’t submitted until January or February. Sixty to 90 days isn’t an unreasonable amount of time to work through a claim, he said.

Still, Leegard said he sympathized with contractors who “want to get this behind them” and be reimbursed.

MnDOT is making “interim payments” on some claims that won’t be fully resolved until an audit is finished, paying 50 cents to 80 cents on the dollar and then paying the balance when the audit wraps up, he said.

“There is no sense sitting on 100 cents on the dollar,” he said.

Worke said he thought the department was doing its “level best to resolve the claims,” but at the same time it seemed MnDOT was “taking an approach that involves extreme detailed reviews” with consultants who would have “an owner’s bias.”

He was optimistic that the department gave the advisory panel “due consideration, as we think it has promise to break loose” some of the complex issues.

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