Resolution No. 83163
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RESOLUTION NO. 8316
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON TERMINATING CONTRACT NO. 565 FOR SEVILLE
AVENUE SEWER MAIN REPLACEMENT AWARDED TO CODY
ENGINEERING, INC. BY THE CITY PURSUANT TO
RESOLUTION NO. 8088
WHEREAS, on October 23, 2002, Contract No. 565 was awarded
by the City Council of the City of Vernon to Cody Engineering, Inc.
("Cody") for Seville Avenue Sewer Main Replacement (the "Project") in
accordance with Resolution No. 8088; and
WHEREAS, the Project was intended to upgrade the existing
(sewer main and manholes for the Malburg Generating Station Project
(the "Malburg Project"); and
WHEREAS, construction of the Project has been delayed
because of difficulty by the Contractor in meeting the insurance
requirements and because of delays in the construction schedule of the
Malburg Project; and
WHEREAS, Cody has requested that it be allowed to either
increase its bid by $91,376 or terminate its contract; and
WHEREAS, by letter dated November 13, 2003, Bruce V.
Malkenhorst, City Administrator/City Clerk, has recommended that the
City pay Cody for costs incurred for insurance and traffic plans of
$6,852.00 and that Contract No. 565 be terminated and re -bid when the
Malburg Project is ready to proceed.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
SECTION 1: The City Council of the City of Vernon hereby
finds and determines that the recitals contained hereinabove are true
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and correct.
SECTION 2: The City Council of the City of Vernon hereby
repeals Resolution No. 8088, the award of Contract No. 565 for Seville
Avenue Sewer Main Replacement to Cody Engineering, Inc. is hereby
rescinded and the City Clerk is hereby authorized to pay Cody
$6,852.00 for costs.
SECTION 3: The City Clerk of the City of Vernon shall
certify to the passage of this resolution, and thereupon and
thereafter the same shall be in full force and effect.
APPROVED AND ADOPTED this 19th day of November, 2003.
ATTEST:
BRUCE V. MALKENHORST, City Clerk
EONIS C. MAL URG, M yor
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STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do
hereby certify that the foregoing Resolution, being Resolution No.
8316, was duly adopted by the City Council of the City of Vernon at a
regular meeting of the City Council duly held on Wednesday,
November 19, 2003, and thereafter was duly signed by the Mayor of the
City of Vernon.
(SEAL)
BRUCE V. MALKENHORST, City Clerk
- 3 -
SUPPORTING
DOCUMENTS
CITY COUNCIL
LEONIS C. MALBURG
r
Mayor
THOMAS A. YBARRA
Mayor Pro -Tern
WM. 'BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator/City Clerk
FAX (323) 826-1438
City Council
City of Vernon
Honorable Members:
EDUARDO OLIVO
City Attorney
FAX: (562) 869-1883
V KEVIN WILSON
Wir Community Services & Water
FAX: (323) 826-1435
KENNETH J. DeDARIO
Director of Light & Power
FAX: (323) 826-1425
STEVEN E. PARKER
Fire Chief
FAX: (323) 826-1407
CITY HALL BRUCE W. OLSON
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058 Police Chief
TELEPHONE (323) 583-8811 FAX: (323) 826-1481
November 13, 2003
At this time it is necessary that Contract No. 565, Seville Avenue
Sewer, awarded to Cody Engineering, Inc., be terminated. The
contractor delayed the project for over a year due to schedule not
meeting the insurance requirements and due to the construction of the
Malburg Generating Station. He is now requesting an increase on the
contract due to increased costs over the last year. After review of
such request, staff has concluded that the increase cost is not
justifiable, contract should be terminated, and the project should be
re -bid.
This has been reviewed by the Acting City Attorney. It is hereby
recommended that the City pay the contractor $6,852.00 for cost
incurred and that the contract with Cody Engineering, Inc. be
terminated.
Very truly yours,
Bruce V. Malkenhorst
City Administrator/City Clerk
BVNi/gm
pF E'ER
6
m'VE6T two
COMMUNITY SERVICES & WATER DEPARTMENT
OFFICE MEMORANDUM
TO: Bruce Malkenhorst, City Administrator
FROM: Samuel Kevin Wilson, irector of Community Services & Water
DATE: November 12, 2003
SUBJECT: Seville Avenue Sewer, Contract No. 565 — Cody Engineering, Inc.
The contractor for the Seville Avenue Sewer, Contact No. 565, has submitted a request to
change the terms of the contract awarded to him. The contract was awarded Cody Engineering, Inc.
by the City of Vernon on October 12, 2002 but the project construction was delayed by the contractor
in meeting the requirements for insurance and then due to the construction schedule of the Malburg
Generating Station. The delay is now over a year and the contractor requests a significant increase in
the contract due to the increased costs over the last year or release from the contract. The proposed
increase in costs is not justifiable and the contract should be terminated and the project bid again.
However, the contractor has incurred costs for insurance and traffic plans required by the Malburg
Generating Station Chief Building Official. The costs are $6,852.00 and I recommend we pay these
costs as a settlement of all claims and terminate the contract. The Acting City Attorney's Office has
reviewed the file and also recommends this course of action. If you concur, the Acting City Attorney
will draw the necessary documents to effect this termination and rebid the project.
SKW/sn
Enclosure
C: Eric Fresch
Eduardo Olivo
NOV-11-2003 TUE 01:33 PM OLIVO & PLASCENCIA FAX NO. 1 P. 02/06
C O Y COUNC IL
LFONI5 C. M AI -BURG,
M.,yor
TITOMAS A. YIIATtI1A
Mayor Pro ••7em
WM, "BILL" DAVIS
(:mini ilmnrl
IL "LARkY" GONZALES
Camurilmin
W. MICI 1AFT, MCC'ORMICK
Co.tildM1,11
UU(Ti V. NiAEKFNI IORST CITY HALL
City Atlutin6r lratnr/City Clerk 4305 SAN-fA FE AVENUE, VJ,RNC)N, CALIFORNIA 90058
FAX, (323) 826-11M IT- LEPHONh (3')3) Sf? ,8811
November 11, 2003
Via Facsimile & U. s. Mail
1;T)TJARDO OLIVO
City Attorney
FAX: (562) 669-188:1
KE•,VIN WITSON
17irectnr of Community Se►vicvs lZ Water
I'AX: (323) 8264435
KENNETH J. DcUARIO
Director of Utilities
1 'AX: (323) 826.1425
S'11-'V1;N E. PARKER
rlre Chief
FAX: (323) 826-1407
BRUCE W. OLSON
rt)lice corer
FAX: (323) 826-1481
Kevin Wilson CONFIDENTIAL
Woody Na,tsuhara ATTORNEY -CLIENT COIvJWMICATZON
COMMONITY SERVICLS & WA HR
4305 Santa Po Avenue
Vernon, California 90058
Re: Contract No. 565 with Cody Engineering, Inc.,
for the Seville Avenue Sewer Main Replacement
C3enL-lemen:
You have-xequestod advice regarding the potential
tex,mination of Contract No. 565 (the "Contract") between. the
City of Vernon and Cody Engineering, Inc. ("Cody"). You
have asked the following questions: (1) is the City
required to approve a request by Cody to increase its
original bid price; (2) may the City terminate the Contract
because it is not able to proceed with the project at this
time,, (3) if the City desires to terminate the Contract,
what procedure must be followed; (4) if the City terminates
the Contract, will it be required to reimburse Cody for the
costs incurred by Cody; and (5) may the City pay such costs
through the "change order" procedure.
NOV-11-2003 TUE 01:33 PM OLIVO & PLASCENCIA FAX NO. 1
P. 03/06
Kovin Wilson
Woody Na tsuhaz a
November 11, 2003
Page 2
FACTS
The City sent out Notice Inviting Rids for the
furnishing of all equipment, materials and supplies
necessary fob the Seville Avenue Sewer Main Replacement (the
"Project") . The Project was intended to upgrade the
existing sewer main and manholes for the MGS Project. The
City received several bids and, on October 23, 2002, awarded
the Contract to Cody. Cody was required to obtain a labor
and materials bond, as well as a performance bond, upon the
execution of the Contract and prior to beginning the work.
The bond: were obtained and the contract was executed and
delivered to Cody on or about April 15, 2003.
According to the documents I reviewed, a start
date was originally projected for January of 2003. However,
the Contract was not executed until April. 15, 2003, and the
pre -construction meeting was not scheduled until April 30,
2003. On May 1, 2003, the City advised Cody that it needed
a daily construction schedule, a traffic control plan and
other itomo. By letter dated May 13, 2003, Cody confirmed
that the :Mart date had been changed "once again" to June 9,
2003. At that time, Cody advised that " [tl his
uncertainty/confirmation of a start date makes it very
difficult. for Cody Engineering to schedule our projects."
Pursuant to a memo dated June 3, 2003, Cody recplested that
the City authorize a progress billing for mobilization and
advised the City that Cody had paid for the bonds, traffic
plans and shoring- plans. On June 5, 2003, Cody submitted an
invoice for .$6,852.00 for the cost of the bonds and the
traffic and shoring plans.
The start date for. the Contract was continued on
sevora.l other occasions to July 14, 2003, August 4, 2003 and
September 8, 2003. Cody complained about its inability to
schedule other jobs and about its increased insurance costs.
Cody also complained that the uncertainties regarding the
start d Ue was causing it an undue financial impact.
On October 9, 2003, Cody advised the City that it
needed to adjust its bid price from $243,440 to $334,816.
Cody asked the City to accept its increased bid and commit
to a start date of no latex than January 5, 2004.
NOV-11-2003 TUE 01:33 PM OLIVO & PLASCENCIA
FAX NO. 1
P. 04/06
r
Itavin Wi l son
Woody Natauhara
.November 11, 2003
Page 3
A1tea:-natively, Cody requested that its (1) be released from
t:ho Contract and that the City reimburse Cody $6,852.00, the
cost of the bonds bids and traffic and shoring plans, or (2)
the City pay Cody 10% of the Contract amount, $24,344, which
would have been the amount, Cody would have forfeited if it
could not proceed with the Contract.
You have advised that tho City is stall not able
to commi.t: to a start dare. Further, you believe that the
City can obtain a lower bid than Cody's revised bid.
Theref_orE!, you have advised that the Community Services
Department recommends that the Contract be terminated and
that the Project be re -bid when the MGS Project is ready to
proceed.
provides
,ANALYSIS
Section 44 of Contract No. 565 ("Termination")
"(b) Optional Termination of Contract by City
(Contractor. Not at Fault)
City may terminate the Contract upon ten (10)
days written notice to the Contractor, if it
is found that reasons beyond the control of
either the City or the Contractor make it
impossible or against the City's interests to
complete the work. in such a case, the
Contractor shall have no claims against the
City except (1) for the value of work
performed up to the date the Contract is
terminated, and (2) for the cost of materials
and equipment on hand, in transit, or on
definite oommitmont, as of, the date the
Contract is terminated, provided that such
materials and equipment would be needed in the
work and meet the requirements of the
opecif icat ions . The value of work performed
and the cost of materials and equipment, as
mentioned above, shall be determined by the
City in accordance with the procedure
NOV-11-2003 TUE 01:34 PM OLIVO & PLASCENCIA FAX NO. 1 P. 05/06
Kevin Wilson
Woody Watsuhara
Novoanher 11, 2003
Pago 4
.prescribed for making of a final estimate and
payment as described in Section 3."
If Cody were forced to file a breach of contract:
lawsuit, they would generally be entitled to delay damages.
Cody would probably not be entitled to the increased bid
Price.. However, some adjustment in the price due to
increasod costs caused by the delay, would be recoverable.
Cody would also be Entitled to costs for office overhead,
lost profits and other matters that they would attribute to
the delay. Rather than continue to delay the stars: date, I
agree that the City ahou.ld terminate the Contract,
Pursuant: to Section 44, the City may provide ten
days written notice of its intent to terminate, If it does
so, the City is obligatod to pay the "value of the work
performod and the cost of material and equipment'. Cody
would not he entitled to a termination payment of 10% of the
Contract price. The cost of the bonds are not, technically,
`°materialoll or "equipment." Nevertheless, a. court would
probably interpret this provision to require the
reimbursement of reasonable costs, including the cost of the
bonds. Considering the damages that could be alleged in a
broach of contract action., X recommend that the City accept
Cody's "settlement" proposal of $6,852.00.3
The following steps need to be taken to address
this CT at Ler:
1. The termination of the Contract should be put
on the agenda for City Council consideration.
Kevin should request that the matter be
placed on the agenda.
2. A closed session item will also be needed to
discuss the potential for litigation. Z will
advise the Acting City Attorney of that item
and request that it be placed on the agenda.
x It appears that Cody has provided sufficient proof that these
coots were incurred in connection with the Contract.
NOV-11-2003 TUE 01:34 PM OLIVO & PLASCENCIA FAX NO. 1 P. 06/06
1Cev-.113 W11,1.'0n
Woody Natsubara
N'ovembe.r. 1.1, 2003
t Page 5
3. if the City Council approves the termination
and the payment of the funds, the 10-day
notice should be sent to Cody immediately.
The notice should also indicate that the City
Council has agreed to accept Cody's October
9, 2003, "proposal" that payment, of $6,852.00
be accepted as full and final paymerit of all
costs allegedly owed to Cody.
P11ease call cite if. you have any questions.
Sincerely,
Eduardo Olivo
Lcgal Counsel
Cc: City Administrator
Acting City Attorney
CodV Engineeringg Inc.
License Nbr 783530 "A"
PO Box 341
Norwalk, CA 90651
Ph: 562/868-2252 Fx: 562/868-2552
e-mail: codyengdnc@earthlink.net
October 9, 2003
Sent via Facsimile
City of Vernon
Mr. Samuel K. Wilson
4305 S. Santa Fe Avenue
Vernon, CA 90058
RE: Seville Avenue Sewer Main Replacement — Contract #565
Dear Mr. Wilson:
This morning I received a call from Mr. Sherwood "Woody" Natsuhara, City of Vernon's P.E., regarding the start
date of the above referenced project. This is a project that was bid, and awarded, approximately a year ago and has
had numerous changes in the start date.
On August 25, 2003, we sent a letter to Woody explaining that, due to the increases in wages, workman's
compensation as well as all other insurances and supplies to name a few items, the delays would require an
adjustment to our prices. We anticipated a start date around the month of October. This morning we were informed
that the "new" projected start date is around January / February 2004. As a contractor, and in order to insure
ongoing projects be properly serviced, we must schedule our bidding and work schedule at least 60 days in advance.
As per the instructions to bidders, Cody Engineering was compelled to furnish, within 7 days, the bonds and other
submittals or risk the loss of our bid guarantee of $24,344.00. The cost of the bonds, traffic plans and shoring plans
were in excess of $6,800. and were paid the several months ago. In conversations with Mr. Pin Chan the first part of
June 2003, he instructed us to invoice the City of Vernon and he would arrange for payment. To date, we have not
received the funds.
These delays and uncertainties have created an undue financial impact on our company. We have not been able to
commit to other work due to the constant uncertainty of this yearlong situation.
Cody Engineering Inc. has calculated the increased costs for this project since the original bid opening. A copy is
enclosed for your review. We anticipate a start date no later than January 56' 2004. Cody Engineering Inc. requests
that the adjusted costs be acknowledged and accepted in writing within 10 calendar days from the receipt of this
letter.
In the event that the City of Vernon chooses not to accept the increased costs, we request that we be released from
the contract. In addition, Cody Engineering would accept a 101% payment of $24,344. from the City of Vernon,
similar to the assessment that would be imposed had we failed to perform, or prompt payment of our invoice #119
originally submitted June 5, 2003 in the amount of $6,852.
City of Vernon
Page 2
October 9, 2003
As suggested in our prior correspondence (copy attached), we feel it would benefit all parties concerned to settle this
matter promptly or, the City of Vernon pay Cody the damages stated, cancel the contract and put it out for rebid
when the City is ready to move forward on this project.
We await your comments.
Respectfully submitted,
CODY ENGINEERING, INC.
Bob Kratz
President
Cc: Mr. Sherwood Natsuhara
R.S. Bonding and Insurance Agencies
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License CodV Engineering, Inc.
PO Box 341
Norwalk, CA 90651
Ph: 562/868-2252 Fx: 562/868-2552
e-mail: codyengrinc@earthlink.net
August 25, 2003
Sent via Facsimile
City of Vernon
Mr. Woody Natsuhara
4305 S. Santa Fe Avenue
Vernon, CA 90058
RE: Seville Avenue Sewer Main Replacement — Contract #565
Dear Mr. Natsuhara:
Cody Engineering was the low bidder on the above referenced project. The bid date was October 1, 2002 with an
anticipated start date of January 3, 2003. There have been no less than 5 changes in the start date. We are now at
the end of August and have September 8 as the target to begin the project.
Since the original bid date, all of our insurances from General Liability to Workers Comp have seen an increase of
no less than 25 percent, in addition to the increase in the prevailing wage. Furthermorg, most supplier quotes are
valid for 30 to 45 days from the quote date. As it stands today, the boring company we listed is declining the project
for the reasons previously mentioned, they can't afford to complete the project as shown on their quote dated
October 1, 2002.
In the past 10 months since the original bid opening, we have had a change order proposal request from Mr. Pin
Chan for Concrete Blankets and most recently (last week) were told our crew would have to watch a 45-minute
safety video prior to Cody Engineering starting the project. These items were not on the original bid.
Therefore, due to the lengthy delays and other bid modifications, we feel we are entitled to adjust our bid to absorb
the various increases in cost. Another suggestion would be to release us from the project and send it out for rebid
when the City is ready to move forward.
We await your comments.
Respectfully submitted,
CODY ENGINEERING, INC.
Bob Kratz
President
Cc: Mr. Pin Chan