Council nixes fee reduction for MLK Transit Center Project
COMPTON—The Compton City Council rejected reducing the retention fee (money withheld from payments on a contract during construction) from 10 percent to 5 percent for the Martin Luther King Jr. Transit Project on Tuesday, Nov. 15.
The resolution failed by a three-to-two vote. Councilpersons Yvonne Arceneaux, Lillie Dobson and Mayor Eric J. Perrodin voted no, while Councilpersons Janna Zurita and Willie Jones voted yes.
The agreement, adopted by the Council on May 26, 2009, awarded Mepco Services the MLK project, and the group agreed to a 10-percent retention fee. The state minimum requirement is 5 percent.
The resolution proposed releasing $533,000 to the contractor. The retention fee usually goes to the developer approximately one month after a project is completed.
“ The city withholds 10 percent,” Construction Manager Van Wilson said. “ The general contractor withholds an equal amount to the subcontractors. Releasing 5 percent is a show of faith by the city.”
More than 25 subcontractors worked on the MLK project.
“ There is something in law called assumption of risk,” Mayor Eric J. Perrodin said. “Once the project is finished, we have to give a certificate of completion to the county. The mechanical lien law says that subcontractors have 21 days after we send the completion notice to the county to file any liens they have against the property. We set a 10-percent policy because for years contractors used and abused us. If we change this, we lose all our leverage.”
The Hartford Insurance Group is aware of the city’s concerns about releasing part of the retention fee with unresolved and disputed claim issues. Change orders for the project total $1.9 million approved and $4.3 million under dispute.
“There is no such thing as a slam dunk in court,” Perrodin said. “Cases I thought I would never win sometimes work out in my favor, while others I feel positive about come back with a not guilty verdict.”
Hartford is willing to indemnify the city for liquidated damages owed by Mepco, subject to a cap of the retention fund.
“Why should the city assume the risk that the insurance company takes?” Perrodin said. “ They are asking us to assume the risk, and they will cover us for up to $533,000, while we have $4.3 million in disputed change orders.”
City Attorney Craig Cornwell said Hartford Insurance provided financial assistance to the contractor in April 2010, two months before the original completion date.
“I am not trying to disparage the contractor in any way, but I assume they ran short of money,” he said. “To date, Hartford has provided $3 million of support for the contractor. There are still two $10-million bonds insuring the project, and the $533,000 retention fund. If we need the money that is released, the insurance company will cover it.”
Wilson addressed the remaining construction issues for the project, requested by Dobson at the Nov. 8 council meeting.
“ The north wall on the outside of the building has zinc metal panels to complete,” he said. “ The south section is lacking glass panels for the security office, scheduled for installation on Wednesday, Nov. 16. The traffic management operations center is also incomplete.”
He said anyone who wants to look at the project is welcome to come down.
Wilson said a report detailing the delays to the MLK project is being prepared for the Council.
Everybody in attendance agreed that the project needs to be completed, and the finish line reportedly is in less than 30 days.
“ The project has a completion date of Dec. 15, and I feel comfortable with that date,” Wilson said.