Construction contract problems at two high schools end up in legal tangle

Lake Oswego School District is settling one claim and filing another in an attempt to end a long-running dispute related to several breaches of contract during construction and improvements at both high schools.

The projects at Lake Oswego and Lakeridge high schools were both funded by the $85 million facility improvement bond in 2000, which also funded miscellaneous projects at all other schools, and wrapped up in 2005.

Late additions to the Lakeridge project combined with unanticipated facility issues and errors in architect drawings at both high schools caused cost overruns, forced projects at the elementary schools and junior highs to be curtailed or eliminated and churned up four claims - the final one the district plans to file this fall.

When all is said and done, 'I wouldn't be surprised if our damages are in excess of $2 million plus attorney fees,' said Financial Director Stuart Ketzler.

Three of the four claims have been directed at the district for a total of $4.8 million in demands, $837,500 of which has been settled through dispute resolution before reaching litigation.

The largest and current claim, filed by Robinson Construction Company is nearing the final negotiation stages.

The $3.1 million lawsuit was filed on June 1, 2007, in Multnomah County. After negotiations, the district has opted to settle out of court with Robinson for an undisclosed amount, which will affect a final demand from LSW Architects this fall.

LSW contracted with the district for projects at both high schools, and, according to Superintendent Bill Korach, is the responsible party in the district's current claim with Robinson.

The district stated its intention to take action against LSW for presumed deficient drawings as early as 2004.

'The architects did an outstanding job of envisioning and designing the actual changes that we wanted at Lakeridge and Lake Oswego,' said Korach. 'But, once the contractors bid drawings that weren't accurate, the problem was essentially so far along that there wasn't much we could do to correct it.'

For now, the district, as the middleman in the conflict, will settle with Robinson and then turn around and file suit against LSW this September seeking, to recover some of its losses.

In the current suit, Robinson says that LSW was required to issue drawings to the district. The district would then provide them to Robinson's subcontractor, Puget Sound Iron Works. Then designers could create drawings of steel detailing before starting the fabrication process.

Robinson alleges that the district instead provided 'deficient drawings' and ignored requests for information relating to those problems. According to the complaint, the district's negligence caused an 18-month delay and left the companies to pay additional expenses related to the drawings.

'Rather than have a three-way round robin legal battle, it's best for us to move forward and focus all of our attention on LSW,' said Korach. 'For us to be spending attorney fees in two directions just doesn't make sense.'

The suit against LSW would be the last of the loose strings attached to the high school projects. The current litigation is related to the LOHS construction, while the district has previously settled claims brought against them from contractors on the Lakeridge project, also related to perceived deficient drawings from LSW.

Though in the case of the Lakeridge projects, Korach said cost overruns and delays were not only the fault of the architects. Cost overruns were caused by a variety of factors including undiscovered structural issues and late additions to the project.

In a $370,000 claim with the HVAC (heating, ventilating and air conditioning) contractor, Total Mechanical, the district settled for $62,500 in 2005, according to Ketzler. LSW's insurance company paid $62,500, as well.

The electrical subcontractor, Rosendin Electric, claimed $1.3 million in damages, and the district settled for $212,500 in the summer of 2006.

'Those amounts that we paid out are part of the damages that we will be pursuing reimbursement for,' said Ketzler. 'LSW should be writing a check for everything. There's nothing that anyone can point to and say the district was the party (responsible for) why the drawings were not as complete and accurate as they needed to be. We weren't telling them not to respond to requests from Robinson Construction.'

The district is still preparing documents that will form the basis of the claim against LSW. Officials are using any leftover money from the bond projects to fund any work related to the claim.

The district will likely seek the limit of LSW's insurance policy in damages, said Ketzler.

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