Friday, May 18, 2012

District and McKinstry sue each other

Stakes approach $26 million in dispute with energy contractor

Express Staff Writer

Burks Excavation, shown here at Hailey Elementary School last summer, was one of numerous local contractors put to work thorough a Blaine County School District multi-million-dollar contract with the McKinstry engineering firm. Express file photo

A three-year relationship between the Blaine County School District and the Seattle-based McKinstry engineering firm has gone sour as both parties filed lawsuits against each other on Tuesday in a legal battle with stakes approaching $26 million.

Both complaints were filed in Blaine County 5th District Court. The dispute involves a $15.1 million contract that the parties entered into in 2010 for geothermal resource development, heating, ventilating and air conditioning retrofits and other improvements at eight district schools or facilities.

McKinstry argues in its complaint that the contract amount was not fixed and that the School District still owes it almost $7 million.

The School District, meanwhile, accuses McKinstry of fraud, misrepresentation, negligence, breach of contract, violation of Idaho law and "poor quality" work. The district is seeking unspecified monetary damages, but alleges that damages are "approximately equal to the total amount of payments made to date by the district to McKinstry."

According to the McKinstry complaint, the company has been paid $18,930,703. The company alleges that work performed to date is worth $25.8 million.

The district board of trustees unanimously approved filing the lawsuit following a closed executive session Monday.

On Wednesday, the district issued a press release characterizing the dispute as a contract "discrepancy."


The press release was the first public mention of a problem with the McKinstry contract, even though McKinstry's complaint indicates that problems arose as early as seven months ago. The complaint states that in October 2011, the district stopped making payments directly to McKinstry and instead issued joint checks payable to McKinstry and various local subcontractors for work they had done under the McKinstry contract.

Concerns about getting paid arose among local subcontractors in mid-December when about 20 of them met with district Superintendent Lonnie Barber and district Business Manager Mike Chatterton regarding the issue.

At the time, Barber and Chatterton characterized the issue as "just rumor" and assured the subcontractors and the Idaho Mountain Express that there were no problems with the McKinstry work.

The district became involved with McKinstry in 2009 when the company was hired to prepare energy conservation preliminary plans for a 10-year $59.8 million plant facilities levy that was approved by voters later that year.

In April 2010, the district entered into a $15.1 million contract with McKinstry for engineering services and contract management for extensive energy conservation work at eight school district facilities, including Bellevue and Hailey elementary schools, Wood River High School, the Community Campus, the District Support Services facility at the Community Campus and at the Carey School elementary, high school and gymnasium buildings.

The bulk of the funding was from the plant facilities levy. However, another $5 million came from an energy conservation grant awarded to the district by the U.S. Department of Energy.

Both parties are demanding trial by jury. The school district is represented by Boise attorneys Robert L. Bilow and Richard H. Greener, while McKinstry is represented by the Seattle law firm of Ahlers & Cressman and the Boise law firm of Banducci Woodard Schwartzman.

McKinstry is officially named in the court documents as "McKinstry Essention, Inc."

Terry Smith:

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