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Arbitration panel upholds decision to terminate contractor

by Karen A. Grava - January 30, 2006

The University has received an interim arbitration decision that finds the University appropriately terminated HRH/Atlas Construction Inc. for its failure to fulfill its obligations as the general contractor for the construction of the Biology/Physics Building.

By this interim decision, the arbitration panel wholly rejected the $45 million “wrongful termination” claim filed by HRH/Atlas against UConn in September 2001.

“Terminating HRH/Atlas was an important decision for the University to make, but that is never an easy decision, given the implications,” said Linda Flaherty-Goldsmith, chief operating officer. “This decision demonstrates that the University managed this process in the manner outlined by the contract, and soundly documented its decision-making process.”

UConn has also recently resolved other issues that have resulted in significant cost avoidance. Fire and building code problems with Husky Village were resolved during the summer of 2005 by the contractor, Capstone Building Corp., which installed fire walls and insulation and worked to resolve other issues at it own expense.

Fire and building code issues at Charter Oak Apartments have recently been or are being remedied by the builder of that complex, JPI Construction.

The seven-story, 147,000-square-foot Biology/Physics Building, located on North Eagleville Road, was part of the first phase of the UConn 2000 program, which began in 1995. The building was scheduled to be completed by August 1999, but in February 2000, UConn terminated its contract with HRH/Atlas. Costs for completion of the building were covered by a surety bond assuring that the work would be completed. Construction of the 110-foot-tall building was completed by Turner Construction Co., and it opened in January 2003.

The arbitrators also found that HRH/Atlas had lost several of its vital subcontractors including, in particular, the electrical and concrete subcontractors, and had no plans as to how those parties would be replaced nor when the work would be completed.

The arbitrators also found that the University did not breach its contract by terminating HRH/Atlas and correctly interpreted and enforced the contract with regard to payment, changes, time extensions, and extra work.

The University used a process outlined in its construction contracts to terminate HRH/Atlas. Although the bonding company paid UConn to complete the construction of the building, HRH/Atlas claimed it had been wrongfully terminated and, pursuant to the contract and Connecticut statutes, took its claim to arbitration. The University, represented by Gordon, Muir and Foley LLP, has aggressively defended against this claim.

“The termination decision also needs to be considered in the context of the performance by HRH/ Atlas throughout the duration of the contract,” the arbitration panel said.

“A history of mismanagement, problems with subcontractors … a record of significant non-conforming work are but some of the other circumstances which weigh on the question of whether HRH/Atlas would have ever finished the building with reasonable conformance with what was required by the contract.”

The arbitrators noted that the delay in construction of the Biology/Physics Building also was a problem because it was a “lead project in a planned sequence of other construction.” Completion of the Biology Physics Building was necessary so that other work in the science quad – such as the demolition of the Biology Annex – could be completed.

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