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Saturday, February 12, 2005 - Page updated at 12:00 a.m.

Bellevue, City Hall contractor disagree about who should pay for cost overrun

Seattle Times Eastside bureau


A worker levels fresh concrete yesterday at Bellevue's new City Hall project site. The $71 million downtown construction project is $11.3 million over budget and a month behind schedule.

For now, Bellevue city leaders and the company they hired to build a City Hall agree on one thing: The downtown project is $11.3 million over budget, a shortfall announced yesterday that has the city scrambling to keep construction on track.

What the city and its general contractor, Lease Crutcher Lewis, can't seem to agree on is who's going to pay for it. The shortfall emerged after subcontractor bids were way over the previously agreed construction cost, $71 million, and it could land the city and Lease Crutcher Lewis in court if scheduled mediation does not work.

"We felt we had a guaranteed price in June," said City Manager Steve Sarkozy. "We were hopeful that the initial bids were not indicative of a problem, but as they all came in, it got progressively worse."

Construction on the building — a retrofit of an existing seven-story structure on 110th Avenue Northeast — is continuing while the city and general contractor attempt to cut costs and figure out who ultimately will cover the overage. Because Seattle-based Lease Crutcher Lewis has legally agreed to a maximum price of about $71 million, including sales tax, the company can be held responsible.

Sarkozy said the problems have so far put the project about 30 days behind schedule, with a late-December opening projected.

He said the city plans to use a project contingency fund to cover $1.9 million of the shortfall in the meantime, so that construction can continue. Lewis agreed to pay $2.5 million for now, to keep the project moving, leaving the city with the rest of the bill if it can't find enough ways to save money on the project.

The city will not raise taxes to fill the gap, Sarkozy said.

During mediation, which will begin in October, the city and company will try to come to a final agreement about who is at fault and who ultimately should pay.

"If mediation is unsuccessful, we have other options beyond that — litigation," Sarkozy said.

Though the parties disagree on who should pay, they do seem to agree on where to put some of the blame.

After demolition and excavation, the project was split into 17 construction tasks, called packages. Of those, 14 were put out to bid in December. Two of those 14 only got a single bidder, according to the city.

"In our experience, that's somewhat unusual," said Lease Crutcher Lewis President Bill Lewis, whose company also is working on projects at Garfield High School in Seattle and Bothell High. It also built Bellevue's current City Hall on Main Street.

In several other cases, packages got only two or three bids, and that lack of competition possibly drove up costs, said Matt Terry, the city's planning and community development director.

The city and the company also cite market factors, such as an increase in construction projects in Bellevue over the past nine months, and a price increase in construction materials, particularly steel.

Sarkozy and Lewis also agree there could have been problems interpreting details of the project's design, as well as possible inaccuracies or deficiencies in the design drawings, done by another company.

City officials said they expect to find as much as $3 million in savings within the next few weeks by redesigning or possibly getting rid of some components of the City Hall design. City Council members will decide Monday whether to approve the interim agreement between Bellevue and Lease Crutcher Lewis to keep the construction going until mediation.

The city bought the building, at 450 110th Ave. N.E., from Qwest Communications for $29 million in late 2002. The current plans aim to cloak the building's concrete exterior in a combination of metal and terra cotta.

When finished, the campus will include a 400-stall parking garage and a large open space for public gatherings.

Natalie Singer: 206-464-2704 or

Copyright © 2005 The Seattle Times Company


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