OVERVIEW: There are eight sections in this Staff Report.
1. Harrison Memorial Library
2. City Support Groups
3. Harrison Memorial Library Board of Trustees
4. Carmel Public Library Foundation
5. City Council Actions in 2024
6. Draft Agreement Proposed by Foundation Regarding Harrison Memorial Library Centennial Restoration Project
7. Analysis of Draft Agreement Proposed by the Foundation
8. Council Options
I. HARRISON MEMORIAL LIBRARY
Library service in Carmel-by-the-Sea began in 1906, when the Carmel Free Library Association began lending books from a little redwood building. For a fee of one dollar per year, people could borrow any one of 500 books from the Association’s “Reading Room” heated by a wood burning stove.
The Harrison Memorial Library building opened in 1928 and was built by local contractor M.J. Murphy with input from California architect Bernard Maybeck, and financed by a bequest from Ella Reid Harrison as a memorial to her husband, California Supreme Court Justice Ralph Chandler Harrison.
The library has had two additions: one in 1949, followed by another expansion in the 1970’s. In 1988, the Crocker Bank located on the corner of Mission Street and 6th Avenue, 3 blocks away from the Harrison Library was purchased by Mayor Clint Eastwood to serve as the Children’s Library and Local History repository.
The Library is a City Department and as such adheres to all City policies and procedures. The Library is governed by the Harrison Memorial Library Board of Trustees, appointed by the City Council, who approve the annual operating budget, approve and enforce library specific policies, have oversight of both Library facilities, and make recommendations to the City Council regarding the Library when needed.
The Library has three funding sources: (1) The City of Carmel-by-the-Sea which funds staff salaries and building maintenance for both library buildings; (2) The Friends of Harrison Memorial Library which formed in 1971 and raises funds to support operations; and (3) The Carmel Public Library Foundation which was established in 1990 and provides for the majority of the Library’s operating budget and additional special projects from time to time.
II. CITY SUPPORT GROUPS
October 3, 1989: City Council adopted Resolution 89-121 which adopted a Support Group Policy C89-47 (Attachment 1).
Policy C89-47: Adopted for the stated purpose of establishing a formal procedure for relationships with the City and its support groups (Attachment 2). This Policy includes the following provision in regard to implementation:
“Responsibility for Implementation of Policy:
The City Administrator is delegated as the City official responsible for the implementation of this policy.”
May 1, 1990: City Council adopted Resolution No. 90-49 designating the following City Support Groups:
a. Friends of Sunset Foundation
b. Friends of Harrison Memorial Library
c. Carmel Abalone Club
d. Friends of Carmel Forest
July 7, 1992: City Council adopted Resolution No. 92-64 designating Carmel Public Library Foundation as an official City Support Group.
April 3, 2007: The City Council adopted Resolution No. 2007-19 designating the following as City Support Groups:
a. Carmel Abalone Club
b. Friends of the Harrison Memorial Library
c. Carmel Public Library Foundation
d. Friends of Carmel Forest
e. Friends of Sunset Foundation
f. Lester Rowntree Native Plant Garden Committee
October 2, 2012: City Council adopted Resolution No. 2012-70 designating the Friends of Mission Trail Nature Preserve as a City Support Group.
September 7, 2021: City Council adopted Resolution No. 2021-046 designating Carmel Cares as a City Support Group.
III. HARRISON MEMORIAL LIBRARY BOARD OF TRUSTEES
On August 4, 1992, the City Council adopted Resolution 92-70 (Attachment 3) amending Policy C89-47 Support Groups to clarify the regulatory authority of the Library Board over the library facilities and equipment under its jurisdiction. Exhibit A attached to this Resolution includes underlined text regarding the authority of the Library Board.
On January 8, 2025, a Staff Report was presented to the Library Board of Trustees (Attachment 4) which included a discussion regarding the Library Board authority in general and with regard to the renovation project for the Harrison Memorial Library.
IV. CARMEL PUBLIC LIBRARY FOUNDATION
The Carmel Public Library Foundation (“Foundation”) was established in 1989 with the mission to keep the library open, relevant and thriving and to ensure free library service in perpetuity by providing funding for books, materials, programs, equipment and services.
In 1992, the City recognized the Carmel Public Library Foundation as an official City Support Group which are defined in Policy C89-47 (Attachment 2) as “associations of individuals who have voluntarily joined together in a unit whose sole or primary purpose is to provide assistance – monetary, social, cultural or otherwise – but not political – to the City or one of its departments.”
Over time, the Foundation, in collaboration with the City and the Harrison Memorial Library Board of Trustees, has played a significant role in nurturing a thriving public library. This partnership has been crucial in meeting the diverse informational, educational, and cultural needs of Carmel’s residents.
Additionally, the Foundation has funded special projects such as the Gathering Place project which provided a free meeting space for the community for the first time in many years (Cost estimated at approximately $400,000) and Park Branch lobby renovation project (Cost estimated at approximately $40,000 with contributions from the Rotary Club).
V. CITY COUNCIL ACTIONS IN 2024
January 8, 2024: City staff presented to the City Council a Staff Report (Attachment 5) with a proposed Resolution reaffirming the City’s public-private partnership with the Carmel Public Library Foundation. The Council adopted Resolution 24-02 at that meeting (Attachment 6).
July 8, 2024: There was a City Council Staff Report submitted for Agenda item No. 11 to receive and review the Request for Proposal for Architectural Services for the Harrison-Memorial Library (Attachment 7). The Minutes from the July 8, 2024 Council meeting for this Item read as follows:
Item 11 - Receive and review the Request for Proposals for Architectural Services for the Harrison Memorial Library provide staff with direction.
Library and Community Activities Director Ashlee Wright presented the item to Council and answered questions. She summarized the background of the Library Master Plan, community engagement workshops, and the request for proposals (RFP) development. She also spoke about the project scope and timeline and requested any input from Council on the RFP before moving forward with issuance.
Public Comment:
John Krisher
Alexandra Fallon
Councilmember Baron requested clarity on the city's financial obligations once the RFP is issued. He also suggested an agreement between the city and the Carmel Public Library Foundation (CPLF) to outline funding and contingency obligations. Additionally, he said he would like to see the list of people on the RFP evaluation committee that includes city staff and local architects. Councilmember Ferlito agreed, stating that addressing these questions before starting the project would help avoid confusion. Mayor Potter acknowledged the need to protect the city's interests and ensure good project management but expressed concerns about potential project delays.
Motion by Mayor Potter to have Library Director Wright return in August with a list of the Library Master Plan RFP evaluators, amend the RFP specifically in the criteria section calling out the necessity of a library consultant for the project, and an agreement between the City and CPLF outlining the project funding obligations for Council approval, seconded by Mayor Pro Tem Richards, and approved 5-0-0-0 by the following roll call vote:
AYES: Councilmembers Baron, Dramov, Ferlito, Richards, and Mayor Potter
NOES: None
ABSENT: None
ABSTAIN: None
August 6, 2024: There was a City Council Staff Report (Attachment 8) submitted for Agenda Item No. 5 to Review the Request for Proposals (RFP) for Architect Services for the renovation of the: Harrison Memorial Library and the list for the Architect Selection Committee. The Minutes from the August 6, 2024 Council meeting for this Item read as follows:
Item 5 - Review the Request for Proposals (RFP) for Architect Services for the renovation of the Harrison Memorial Library and the list for the Architect Selection Committee
Library and Community Activities Director Ashlee Wright presented the item to Council and answered questions from Council. She outlined the project timeline to date, the goal of the RFP, and summarized the role of the Harrison Memorial Library Board of Trustees Carmel Public Library Foundation (CPLF), and the Friends of the Harrison Memorial Library. She requested direction from Council on releasing the RFP, as well as provide direction on the architect selection committee members. CPLF Executive Director Alexandra Fallon answered questions from Council in regard to the list of members on the architect selection committee. She announced that the CPFL has a donor willing to make a $5 million lead gift that has a matching donation requirement by June 2025.
Mayor Pro Tem Richards made a motion to approve and release the RFP for Architect Services for the renovation of the Harrison Memorial Library and approve the list of 19 people on the Architect Selection Committee, seconded by Mayor Potter.
Council discussion resumed. Councilmember Baron asked about the status of the agreement between the City and with CPLF to secure funding for the Library Master Plan project, and expressed concerns that the agreement has not been entered into. Ms. Fallon said that the CPLF is committed to providing the initial $250,000 towards the architectural services agreement for the Library Master Plan.
Mayor Pro Tem Richards amended his motion to add that the city acknowledges that the CPLF has committed to funding $250,000 towards the architectural services agreement, in addition to approving and releasing the RFP, and approving the list of 19 people on the architectural selection committee. Amended motion seconded by Councilmember Baron.
Motion by Mayor Pro Tem Richards to approve and release the RFP for Architect Services for the renovation of the Harrison Memorial Library; approve the list of 19 people on the Architect Selection Committee; that the CPLF will enter into an agreement with the City to secure funding for the project once the architect is selected; and acknowledge that the CPLF has committed to funding $250,000 towards the initial architectural services agreement, seconded by councilmember Baron, and approved 5-0-0-0 by the following roll call vote:
AYES: Councilmember Baron, Dramov, Ferlito, Richards, and Mayor Potter
NOES: None
ABSENT: None
ABSTAIN: None
August 8, 2024: Request for Proposals for Architectural Services For The Harrison Memorial Library Renovation Project (RFP) was issued by the City. A copy of the RFP is Attachment 9.
The City received six Proposals in response to the RFP. The City has not entered into a contract with any of the Proposers who responded to the RFP pending the City and Foundation entering into an Agreement as directed by the City Council on July 8, 2024.
VI. DRAFT AGREEMENT PROPOSED BY FOUNDATION REGARDING HARRISON MEMORIAL LIBRARY CENTENNIAL RESTORATION PROJECT
Since the City Council meeting of August 6, 2024, as directed by the City Council, the City has had discussions with the Foundation regarding a draft Agreement to present to the City Council for review and consideration of the process to be followed for what is referred to as the Centennial Restoration of the Harrison Library Project (“Project”).
It is staff’s understanding that the Foundation has estimated the Project costs including Architect Services and Construction Costs will be in the range of $15 million to $20 million. However, the City has not entered into a contract with the Architect or the Construction Contractor so the Project costs are not known at this time. As noted, the Architect will be asked to prepare an Engineer’s estimate which will help inform the Construction Costs, but the bids the City receives for the Construction work could be less, or more, than the Engineer’s estimate.
The latest draft Agreement is proposed by the Foundation and is dated for reference purposes as January 24, 2025 (“Draft Agreement”) and is Attachment 10. Here is a summary of the ten Sections of the Draft Agreement.
Section 1: Recitals
The Draft Agreement includes Recitals A to J which are incorporated by reference in Section 1.
Section 2: Project Executive Committee
Section 2 would create a Project Executive Committee (“Committee”) which would be comprised of Mayor Dale Byrne, Assistant Administrator Brandon Swanson, Foundation representatives Chair Marci Meaux and Alexndra Fallon. These four Committee members would select a fifth member, with the intent of this member being impartial.
The Committee is proposed to provide final decisions regarding issues relating to the Project. Those final decisions by the Committee would be communicated by the Foundation Representative (Section 5) and the City Project Manager (Section 10.1) to the City Administrator and the Foundation Executive Director for implementation.
The Committee would have the authority to create such sub-committees as it deems necessary to assist the Committee in connection with its decisions.
Section 3: City Resolution No. 2024-002
Section 3 references Resolution No. 2024-002 reaffirming the City’s public-private partnership with the Carmel Public Library Foundation which is mentioned above and is Attachment 6 to this Staff Report.
Section 4: Architect Services
As noted, the City issued an RFP for Architect Services (Attachment 8 to this Staff Report) and received proposals in response to that RFP. The City has not yet entered into a Design Professional Contract (DPC) with an Architect for this Project. Section 4 provides that the DPC would be subject to approval by the Foundation and City Council.
Section 4 provides that the DPC would be divided into three Phases with a goal of completion of the Project by December 31, 2028 subject to extensions approved by the Parties:
1. Phase One: Preparation of a Historic Structures Report and Schematics/Conceptual Design subject to the Committee making a final decisions
2. Phase Two: Design Development, Engineering and Construction Drawings/Documents and specifications subject to the Committee making a final decisions
3. Phase Three: Services for support and consultation during construction subject to the Committee making a final decisions
Section 4.8 has several provisions regarding payment of the Design Professional Invoices including the following:
Section 4.8.1: The Foundation has raised all or most of the funds for Phase One.
Section 4.8.2: For Phase Two, there is a provision that the City must obtain a written acknowledgement that the Foundation has raised sufficient funds to pay for Phase Two before commencement of Phase Two and then the Foundation would pay the Architect based on invoices approved by the City Project Manager and Foundation Representative. Although not stated here, the Committee would, based on Section 2, make the final decisions regarding payment of the Architect invoices for Phase Two.
Section 4.8.3: The Architect will provide an Engineer’s Estimate for the cost of the construction of the Project.
Section 4.8.4: The Architect will be requested to provide, if reasonably feasible, a description of Phases for the construction of the Project which must be discreet work meaning that if the work on a Phase is completed that the Library will be fully functional even if later Phases are not constructed due to lack of funding by the Foundation. If Phases are provided, then the Architect be asked to provide an Engineer’s Estimate for the cost of each Construction Phase.
Section 4.8.5: In order to proceed to Phase Three, the City must obtain a written acknowledgement that the Foundation has raised sufficient funds to pay for the Phase Three services and, if so, then the Foundation would pay the invoices as approved by the City Project Manager and Foundation Representative. Although not stated here, the Committee would, based on Section 2, make the final decisions regarding payment of the Architect invoices for Phase Three.
Section 4.8.6 confirms that all fundraising shall be done on a best-efforts basis and that at the time of entering into the proposed Agreement, the only funding formally available is for Phase One of the Architect Services.
Section 4.8.7 states that the Foundation agrees not to unreasonably withhold payments on the invoices of the Architect.
Section 5: Foundation Representative
The Foundation will select and pay for a Foundation Representative who will work and consult with the City, Architect, City Project Manager, the Engineer, Contactor, Committee and any sub-committees and others.
The Foundation Representative is responsible for reviewing and approving all Construction Costs and request for payment and compliance by the Contractor with Construction Agreement and will carry out any final decisions of the Committee which includes the authority to approve, and presumably disapprove, invoices from the Architect and Construction Contractor.
Section 6: Construction Costs
Section 6.1: Construction Costs include the costs as defined in the Construction Agreement.
Section 6.2: The Notice Inviting Bids is subject to approval by the City and Foundation.
Section 6.3: Before the City issues the Notice Inviting Bids, the City must obtain from the Foundation an acknowledgement that the Foundaton has raised sufficient funds for the Construction Costs based on the Engineer’s Estimate.
Section 6.4: If the Architect has prepared Construction Phases, then the City must obtain an acknowledgment from the Foundation that the Foundaton has raised sufficient funds for the Construction Costs for each Phase based on the Engineer’s Estimate in order for a Phase to commence.
Section 6.5: Upon receipt of the Foundation’s acknowledgement in Section 6.2 (may be intended to be 6.3), the City shall issue the Notice Inviting Bids.
Section 6.6: After receipt of bids, City and Foundation Representative will review the bids and decide whether to award a contract to the lowest responsible bidder. Although not stated here, the Committee would, based on Section 2, make the final decisions regarding awarding a contract.
Section 6.7: Invoices from the Construction Contractor are subject to approval by the Foundation and if there is an objection to payment of an invoice, then the objection is resolved by the Committee. Invoices, if approved, are paid by the Foundation to the Contactor.
Section 6.8: Foundation will pay the Contractor’s invoice if no objections.
Section 6.9: The Foundation will execute a “guarantee of payment” for approved invoices.
Section 6.10: Foundation to provide a monthly accounting of Project expenditures to the Committee and City Project Manager.
Section 7. Termination of Agreement
Section 7.1: Termination by the City. City may terminate the Agreement if Foundation breaches the Agreement with 30 days for Foundation to cure the breach. There is no right of the City to terminate the Agreement without cause. Section 7.1.4 provides that if there is a termination of the Agreement that the City agrees to refund any Deposits made by the Foundation that are not due. However, the Agreement as written does not require the Foundation to make any deposits with the City.
Section 7.2: Termination by Foundation. Foundation may terminate the Agreement if City breaches the Agreement only until the City award a contract to the Contractor with 30 days for the City to cure the breach. There is no right of the Foundation to terminate the Agreement without cause. After the City awards a contract to the Contractor, the Foundation may terminate the Agreement after each Phase of Construction is completed if there are Construction Phases.
Section 8: Indemnity
Section 8.1: The City indemnifies the Foundation for any conduct of the City which is in breach of the Agreement and the City also indemnifies the Foundation for any “third-party Claims” which could include claims by the Architect and/or the Construction Contractor for non-payment of invoices.
Section 8.2: The Foundation indemnifies the City for claims arising from conduct of the Foundation which is in breach of the Agreement.
Section 9: Dispute Resolution
Disputes which arise relating to a Termination of the Agreement (as provided in Section 7) are to be submitted mediation with the costs shared equally by the parties.
If the dispute is not resolved by mediation, then either party can request arbitration. Although not stated in the Agreement, the costs for the arbitrator would presumably be shared equally by the parties.
Section 10. General Provisions
Section 10.1 provides that the City shall, with the approval of the Foundation, designate a City Project Manager a qualified independent contractor to represent the City and the Foundation agrees to reimburse the City for the costs of the City Project Manager.
Section 10.2 provides that the City will provide the Foundation with electronic copies of records regarding the Project.
Section 10.3 to 10.10.9 are standard contract provisions.
Section 10.10 provides that public communications must be approved by the parties in advance.
Section 10.11 provides that Project Costs includes the cost for an alternative Library location during construction if required and subject to approval by the Committee.
VII. ANALYSIS OF DRAFT AGREEMENT PROPOSED BY THE FOUNDATION
A. Contract Issues – Risk of Potential Litigation
The Harrison Memorial Library Centennial Restoration would be a City Project. The City would be entering into the contract with the Architect and, as such, the City would be legally responsible for payment of the services of the Architect. The City would be entering into the contract with the Construction Contractor and, as such, the City would be legally responsible for payment of the work by the Construction Contractor.
Contracts impose legal obligations upon the parties to the contract. One of the primary obligations of a contract is for the party or parties who are required to perform services under the contract do so in a manner consistent with the terms of the contract. Here, that would include the contract between the City and the Architect and the contract between the City and the Construction Contractor. If the party performs the services required by the contract, then the other party to the contract (i.e. the City) has the obligation to make payment to that party.
1. Contract with Architect
Contracts with Architects can result in disputes on a number of issues including whether the Architect, when performing the services, has complied with the terms of the contact and is entitled to payment for an invoice or invoices. In the event of a dispute, the Architect has the right to file a legal action against the other party to the contract (here, the City) including arbitration or a lawsuit filed in court depending upon the terms of the contract with the Architect.
2. Contract with Construction Contactor
Contacts with a Construction Contractor can result in disputes on a number of issues including, but not limited to, whether the Contractor has complied with the terms of the contract, whether the Contractor is entitled to additional compensation based on what the contractor claims is “extra work” (i.e. work that is outside the scope of the contract work), whether the City (or Foundation) has caused delays to the contractor in completing the work, disputes with sub-contractors and/or suppliers which can lead to the filing to claims and multiple other possible issues. In the event of a dispute, the Contractor has the right to file a legal action against the other party to the contract (here, the City) including arbitration or a lawsuit filed in court depending upon the terms of the contract with the Contractor.
Also, as mentioned, Section 6.9 of the Draft Agreement states that the Foundation will execute a “guarantee of payment” for approved invoices. However, this “guarantee” is limited to approved invoices, it does not address the issue of what will happen if the Foundation and/or the Committee does not approve an invoice.
3. Contract with Foundation
This Draft Agreement with the Foundation also could result in disputes between the parties on a number of issues including whether an invoice or invoices from the Architect should be paid, whether an invoice or invoices from the Construction Contractor should be paid, whether the City is in breach of one or more terms of the Draft Agreement, whether the Foundation is in breach of one or more terms of the Draft Agreement and multiple other possible issues.
4. Evaluation of Risk of Litigation
It is difficult to quantify the extent of the risk of litigation because there are a number of unpredictable factors to consider in evaluating the risk. As noted, there are three contracts (Architect, Construction Contract and Foundation) which could, in the event of a dispute, result on litigation.
Anytime the City is involved in a public works project, there is always a risk of litigation with the architect and/or the construction contractor. The difference with this Project is that, based on the terms of the Draft Agreement proposed by the Foundation in Section 2, the City is not making the “final decisions” (which is proposed to be done by the Committee) and the City is not in control of the payment to the Architect or the Contractor (which is proposed to be done by the Foundation).
All parties to these three contracts will certainly enter into the contracts with the hope and expectation that the Project will go as planned and without disputes during the Project. However, disputes can arise on public works projects, as with all contracts, and if and when the dispute arises, then question becomes how to address the dispute or disputes. This analysis requires a consideration of the issues involved with the Draft Agreement proposed by the Foundation for this Project addressed below.
B. Potential Issues with Draft Agreement
1. Project Executive Committee - Section 2
The provisions of Section 2 are summarized above. This Committee is proposed to have final decision making authority regarding the Project including the payment, or non-payment, of invoices from the Architect and the Construction Contractor. If the Committee decides not to pay an invoice or invoices from the Architect and/or the Construction Contractor, or makes some other “final decision” that give rise to a dispute, then there is a risk of a legal action being filed against the City which is the other party to those contracts.
The creation of this Commission also gives rise to an issue regarding an improper delegation of authority by the City to the Committee. The City only has two representatives on the Committee out of five members. This structure delegates the authority to make final decisions to three non-City members of the Committee who would be a majority of the Committee. Under the law, a city may delegate the performance of administrative functions to a private entity provided that the city retains ultimate control over administration so that it may safeguard the public interest. International Longshoremen’s and Warehousemen’s Union v. Los Angeles Export Terminal, Inc. (1999) 69 Cal. App. 4th 287, 297-298. Here, the Committee is proposed to have final decision-making authority so the City will not have ultimate control over the administration of the Project.
Also, as noted, City Policy C89-47 (Attachment 2) which established City Support Groups, including the Foundation, delegated to the City Administrator the responsibility for the implementation of the Policy.
2. Architect Services – Section 4
The primary issues regarding the Architect Services is Section 4.8 which has the payment process for the invoices from the Architect. The invoices are subject to approval by the Foundation and the Committee. These provisions create two issues which have been addressed above, namely the risk of litigation if disputes arise with the Architect and the delegation of authority to the Committee to make “final decisions” including payment, or non-payment, of Architect invoices.
Another issue is that under the contract between the City and the Architect, the City would have the right to terminate the contract with or without cause. In light of Section 2 of the Draft Agreement with the Foundation, there is an issue as to whether the City could terminate the contract with the Architect without approval of the Committee which has final decision making authority regarding the Project.
3. Construction Costs - Section 6
The same considerations apply here as for the Architect, namely the risk of litigation if disputes arise with the Contractor and the delegation of authority to the Committee to make “final decisions” including payment, or non-payment, of Contractor invoices.
As with the Architect, there would be the same issue under the contract between the City and the Contractor on whether the City would have the right to terminate the contract with the Contractor with or without cause. In light of Section 2 of the Draft Agreement with the Foundation, there is an issue as to whether the City could terminate the contract with the Architect without approval of the Committee which has final decision making authority regarding the Project.
4. Indemnity – Section 8
“8.1 City shall indemnify, defend and hold harmless the Foundation and Foundation’s employees, officers, directors, representatives, members, and agents (collectively the “Foundation’s Affiliates”) from any costs, expenses, damages, judgments, actions, attorneys’ fees, liabilities, claims, court costs, expert witness costs, appellate costs, or losses (collectively, the “Claims”) with respect to, or arising from any conduct of the City which is in breach of this Agreement. City shall further indemnify, defend and hold harmless the Foundation and Foundation’s Affiliates from any Claims with respect to, or arising in connection with any third-party Claims relating to the Project.”
The effect of the last sentence in Section 8.1 (underlined) is that if the Architect and/or Contractor files a legal action against the City, even if due to the “final decisions” of the Committee (such as non-payment of an invoice or other decisions), then the City would have to indemnify the Foundation in that litigation.
C. Potential Minimization of Risks
1. Project Executive Committee - Section 2
Section 2 of the Agreement can be modified to provide that the Committee makes recommendations to the City on Project issues, but the final decision making authority, including the payment of invoices, rests with the City.
This modification would resolve the issue of delegation of final authority by the City to the Committee which is not permitted under the law. However, given that the Foundation is raising most, if not all, of the funds for this project, and desire to play a decision making role in the process, their preferred structure and authority for the Project Executive Committee is as-drafted.
2. Architect -- Section 4
a. Phases: The Draft Agreement includes three phases: (1) Historic Structures Report and Schematics/Conceptual Design; (2) Design Development, Engineering and Construction Drawings/Documents and specifications and (3) support and consultation during construction. Each Phase will only commence if the Foundation acknowledges that it has raised sufficient funds for that Phase. It is likely that the great majority of the expense for the Architect will be for Phase Two.
b. Termination of Contract: If a dispute arises with the Architect which cannot be resolved and creates a situation where further services by the Architect is not workable, then City can terminate the contract. However, in order to make sure that the City has the authority to terminate the contract, Section 2 of the Draft Agreement would need to be modified as described above to give the Committee the authority to make recommendations, but not make final decisions.
c. Deposit process. The Draft Agreement could be modified to include a provision that the Foundation would make a deposit with the City for the estimated cost of each of the three Phases of the Architect Services and then the City would pay the invoices of the Architect from those deposits.
3. Contractor – Section 6
a. Phases: As noted, Section 4.8.4 provides that the Architect will be requested to provide, if reasonably feasible, a description of Phases for the construction of the Project which must be discreet work meaning that if the work on a Phase is completed that the Library will be fully functional even if later Phases are not constructed due to lack of funding by the Foundation. If Phases are provided, then the Architect be asked to provide an Engineer’s Estimate for the cost of each Construction Phase. If there are Phases for the Construction work, then this could reduce the exposure risk as each Phase would only commence upon the City and Foundation agreeing to authorize the Contractor to proceed.
b. Termination of Contract: If a dispute arises with the Contractor which cannot be resolved and creates a situation where further services by the Contractor is not workable, then City can terminate the contract. However, in order to make sure that the City has the authority to terminate the contract, Section 2 of the Draft Agreement would need to be modified as described above to give the Committee the authority to make recommendations, but not make final decisions.
c. Deposit Process: The Draft Agreement could be modified to include a provision that the Foundation would make a deposit with the City for the estimated cost of the Construction work and then the City would pay the invoices of the Contractor from those deposits. If the Construction work is performed in Phases, then the amount of the deposit would be for the Engineer’s estimate for the cost of each phase as the work progresses through the phases. If there are Phases, then the contract with the Contractor would have to include provisions confirming that the Contractor agrees to perform the work in Phases if and when those Phases are approved to proceed.
4. Indemnification -- Section 8
The risk to the City would be further reduced if the last sentence in Section 8.1 about the City indemnifying the Foundation for third party claims is removed. However, if the changes are made to the Agreement as described above, including use of phasing and deposits, then the Foundation may be less at risk of third party claims since the City would have the final decision making authority, including responsibility for payment of invoices, and the City may wish to consider allowing the last sentence to remain in Section 8.1.
5. Claims for Additional Compensation by Architect and/or Contractor
There can be claims by parties contracting with the City on a public works projects, including Architects and Contractors, that work they are being asked to perform by the City (or the Foundation) is beyond the scope of work in the contract and that additional compensation is due.
Another type of claim with public works projects arises from delays in performance which the contracting party may contend is due to the conduct of the City and/or, in this case, the Foundation.
As noted, the Draft Agreement does have language regarding indemnification for claims due to the breach of the Agreement by the City or the Foundation. However, claims for out of scope work or for damages due to delays or other claims, may not be the result of the breach of the Agreement between the City or the Foundation, but could still give rise to a need for additional payments to be made to the Architect or Contractor.
The Draft Agreement would need to include language addressing how these claims for additional compensation are to be addressed. One solution which is common with public works project is to include a contingency amount above contract amount (often 15%) for such unexpected costs. However, it is possible that the additional compensation might exceed to the contingency amount which raises the issue of who is responsible for payment of that additional compensation which should be considered in contract drafting.
6. Payment Bond – Also known as a Labor and Material Bond
The City requires that a Contractor post a Payment Bond with the City to guarantee payment to the sub-contractors and suppliers of the Contractor.
7. Performance Bond
The City will require the Contractor to post a Performance Bond so that if the Contractor does not complete the work in a satisfactory manner and refuses to correct the work, then the City can make a demand upon the Surety which issues the Payment Bond to complete the work.
VIII. COUNCIL OPTIONS
The City has discussed with the Foundation the issues with the Draft Agreement proposed by the Foundation (Attachment 10) and suggested potential revisions to the Draft Agreement to address these issues. There are a number of Options available to the City Council on how to proceed including the following:
1. Motion to direct the City Administrator to continue negotiations with the Foundation with modifications to reduce the risks to the City as described in Section VII C of this Staff Report. This direction could include specifics on which sections should be modified to address certain potential risks.
2. Motion to direct the City Administrator to work with City staff to present the Draft Agreement Version January 24, 2024 (Attachment 10) as currently written to the Library Board of Trustees for review and recommendation to the City Council.
3. Other action as the City Council may deem appropriate.