Friday, August 10, 2012

McKinstry: Hiring local escalated costs

School energy contractor alleges increases as high as $1.68 million

Express Staff Writer

Seattle-based McKinstry Essention, the Blaine County School District's energy savings performance contractor, is claiming that the district requirement of hiring only local subcontractors escalated costs by at least $1.68 million.

In a statement issued Thursday, the district characterized McKinstry's claim as "disingenuous and misleading."

The McKinstry claim has been made without explanation in company court filings against the district but is explained in detail in a proposed change order filed with the district on April 18. The change order, which was not approved by the district, was filed well after most work was already finished.

In the document, McKinstry claims that the use of only five local subcontractors—Western States Geothermal, Evans Plumbing, Thornton Heating & Sheetmetal, Sawtooth Plumbing & Heating and Mattson Fire Sprinkler—raised the cost of the work by $1,689,416. McKinstry explained in the document that it was reserving the right to file additional change orders claiming increased costs for 22 other local companies hired for subcontract work.

The McKinstry claim partially explains why the company alleges that it performed work worth $25.8 million, more than $7 million above the $18.6 million that the school district claims it authorized under the contract. The difference between the two numbers is at the heart of litigation between the parties that was started in May and is now pending in Blaine County 5th District Court.

The school district and McKinstry entered into a contract in 2010 for energy savings work and building improvements at eight district schools and facilities.

The change order, in which McKinstry was seeking reimbursement from the district, was obtained by the Idaho Mountain Express through an Idaho Public Records Law request filed on July 18. The Express is seeking information on at least 29 other proposed change orders that McKinstry filed with the district, beginning as early as October 2011. According to the school district, none of the McKinstry change orders were approved.

According to the document, the highest cost escalation came through subcontracting to Western States Geothermal in Ketchum. McKinstry claims that the total price of $2,409,466 paid to Western States was $829,806 higher than if McKinstry had been allowed to contract with a company outside Blaine County.

McKinstry claims that contracting with Thornton Heating and Sheetmetal in Ketchum raised costs by $288,744 on a total subcontract price of $1,584,905. Contracting to Sawtooth Plumbing and Heating in Hailey allegedly escalated costs by $206,652 in a total subcontract price of $1,799,950.

McKinstry further claims that a subcontract price of $1,425,973 to Evans Plumbing, located south of Ketchum, escalated costs $127,944 compared to rates that would have been charged by an out-of-county company. The total Mattson Fire Sprinkler contract price was $702,250. McKinstry claims that contracting to the Ketchum company rather than elsewhere raised costs by $89,497.

The proposed change order also includes an 8 percent profit premium payable to McKinstry as construction manager.

The school district strongly refuted the McKinstry claims in a written statement issued to the Express by district Communications Director Heather Crocker.

"McKinstry's charge for $1.68 million is disingenuous and misleading," Crocker stated. "BCSD signed an energy-savings performance contract with McKinstry because we needed to replace outdated systems in buildings as old as 40 years."

Crocker further explained that a preference for hiring local subcontractors was allowable by Idaho law and under contract so long as it did not "adversely impact the project, quality, scope and budget."

"Yet at the conclusion of the project, McKinstry has submitted a $1.68 million charge for the use of local subcontractors," Crocker stated. "McKinstry never objected to our preference for local subcontractors, and instead, lauded the district for its local subcontractor focus. Now McKinstry claims to be owed a premium for using local subcontractors.

"In view of [the law], contract and prior McKinstry statements, why is McKinstry now trying to charge a premium for local subcontractors if its leadership really cared for this community and professes to represent integrity and excellence? The contrast is inescapable," Crocker stated.

Terry Smith:

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