Vikings stadium authority to pay $16.25M toward disputed costs

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By Brian Johnson
Dolan Media Newswires

A new agreement that settles disputed costs of the Vikings stadium has the team overseeing construction breathing a little easier — and provides extra incentives for all involved to keep costs under control as the $1.1 billion project heads into the home stretch.

After months of talks and an appearance before a mediator last fall, the Minnesota Sports Facilities Authority agreed Friday to pay $16.25 million toward up to $29 million in existing and estimated future disputed costs related to construction of the 1.75-million-square-foot stadium in downtown Minneapolis.

The total settlement is “substantially higher” than the $16.25 million because it also includes a contribution from the design team led by Dallas-based HKS, said John Wood, senior vice president of Golden Valley-based Mortenson Construction, which is building the stadium. Wood said he wasn’t at liberty to disclose the dollar figure from HKS.

Under the deal with the MSFA, the $16.25 million will go into an escrow account until substantial completion in late July, and Mortenson will assume the financial risk for potential “future cost issues” between now and then.

After the project is completed, Mortenson has the option to accept the amount of money in the escrow account to settle all claims — or go to arbitration if the claims are “significantly higher than we all anticipate today,” said Michele Kelm-Helgen, chair of the MSFA.

“Nobody is expecting that; nobody is planning on it,” she said in an interview.

The deal was designed to cover future as well as current obligations to “create certainty on costs as we complete this project,” Kelm-Helgen said before the meeting.

Wood said the settlement provides “a great incentive” for everyone involved “to contain any future growth in the cost of construction to the greatest extent possible, and give this settlement the best possible chance of sticking when we get to the substantial completion.”

The deal stems from a disagreement last year between the MSFA, Mortenson and HKS over $15 million in disputed project costs, such as installation of a third electrical feeder.

That number has risen to $16.8 million since last fall. The deal also anticipates future claims of $9 million to $12 million between now and the project’s July 15 completion, for a projected total of $26 million to $29 million.

Overall, Wood said he’s satisfied with the agreement and glad that it’s settled.

“It has been a big distraction. It has involved a lot of time and expense, and it has been sort of a dark cloud hanging over the project,” Wood said. “Hopefully we can clear that and get back to focusing on getting the project finished happily for everybody.”

Wood said after Friday’s MSFA board meeting that the dispute took as long as it did to settle because it “literally involved hundreds” of issues. “There were a lot of people involved in the mediation process, and it took the time that it took to get it right for all parties,” he said.

Of the initial $15 million in disputed costs, about $14 million was owed to subcontractors. Wood said those subcontractors have since been paid, except for a total of about $3.9 million owed to mechanical contractor Harris Mechanical of St. Paul and electrical contractor Build 23, a joint venture of Gephart Electric and Parsons Electric.

“There are new issues that, on a project like this, come up every week,” Wood said. “But as far as this sort of backlog, everybody else has been taken care of.”

Harris senior vice president Darrel Bugel declined to comment on the settlement, except to say the situation was managed well and “didn’t adversely affect our progress on site.”

In another move, the Vikings agreed to contribute $5.4 million to help pay for the settlement and new project costs, such as cabling for local and national broadcasters and additional security.

No additional public money is going into the project beyond the existing $498 million, Kelm-Helgen said. But the existing budget includes $4.5 million in “unallocated funds” to help close out the project, and that money will be shifted to the MSFA’s contingency, she said.

The deal will leave the MSFA with $13.5 million remaining in its contingency account, which should be enough to absorb any unforeseen expenses over the project’s remaining five months, Kelm-Helgen said.

A contingency release schedule anticipated that $12 million would be left in the account at this point in construction. The project started with $37.5 million in the owner’s contingency.

Mortenson started with $22 million in a separate contingency, which has since been tapped, Wood said.

Vikings spokesman Lester Bagley said the team has now contributed an additional $115 million beyond its initial $477 million commitment.

“Those investments will benefit … everyone who enters the building, so we are proud of that,” Bagley said Friday.

U.S. Bank Stadium is 90 percent finished and on schedule for substantial completion on July 29.