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ST9302-CN 930614 NICHOLS, JACKSON, KIRK & DILLARD, L.L.P. ~WRENCE W. JACKSON Attorneys & Counselors at Law JOhN F. ROEHM Ill T,M K,RK 1800 Lincoln Plaza CHRISTINA A. M£LTON ROBERT L. DiL~nD III 500 North A~rd ROBERT E. HAGER p~ ~. s~, Dallas, ~s 75201 JOHN PIERCE GRIFFIN nOBERT 1. Dll~RD, JR. DAVID M. BERMAN (214)954-3333 H. LOUIS NICHOLS BRUCE A. STOCKAnD Facsimile (214) 954-3334 of COUNSEL June 14, 1993 (VIA FACSIMILE and REGULAR U.S. POSTAL SERVICE) Mr. Kenneth M. Griffin, P.E. City Engineer City of Coppell P.O. Box 478 Coppell, Texas 75019 Re: Professional Services Agreement/Rady & Associates, Inc. Dear Ken: Pursuant to your request, the undersigned reviewed the proposed Professional Services Agreement between the City of Coppell and Rady & Associates, Inc. for the Sandy Lake Road public works improvement project and provides the following comments and recommendations. We did not review the scope of services of the proposed contract as the same is beyond legal review. 1. Section I defines reimbursable engineering expenses and when read in conjunction with the other sections of the agreement, suggests that all of the engineering services which fall under the definition of "reimbursable engineering services" are compensated on the hourly rate, plus actual expenses times a factor of 1.15. Engineering services which fall under the definition of "fee engineering services" are subject to the lump sum fee. The fee engineering services subject to a lump sum for the study and report phase is described in paragraph 3.2.; for the preliminary design phase, in paragraph 3.3; for the final design phase, in paragraph 3.4; for the bidding or negotiation phase in accordance with paragraph 3.5; for the construction phase in accordance with paragraph 3.6. To the extent that those paragraphs do not describe all of the engineering services which the City expects to be provided pursuant to the lump sum fee basis, such services would be subject to the hourly rate compensation plus expenses times a factor of 1.15. AGG0426B Mr. Kenneth M. Griffin, P.E. June 14, 1993 Page 2 2. Section 3 of the agreement discusses the scope of engineering services, but does not make it dear whether the engineering services described in Section 3 are provided on a lump sum basis or subject to the hourly rate plus actual expense compensation, or a combination of both. If all of the engineering services are to be provided on a lump sum basis, then Section 3 should be entitled "Fee Engineering Services" and those services which are considered additional, i.e., not within the lump sum fee compensation, should be clearly described as such. 3. Paragraph 1.3.1 provides the consulting engineer services and design services are to be paid on an hourly basis according to the rates shown in Exhibit A. You advised, however, that the engineering services provided by the contract with the exception of the additional services, are to be provided on a lump sum basis. Paragraph 1.3.1 should be deleted or amended to conform to a contract on a lump sum basis. 4. Paragraph 1.3.2 authorizes the engineer to increase or decrease the hourly rates upon 30 days notice without the prior approval or consent of the City. If the contract is provided on a lump sum basis, this will permit the engineer to increase the hourly rates for the additional services without the consent or prior approval of the City. 5. Paragraph 1.3.3 provides in addition to the reimbursable expenses on an hourly basis in paragraph 1.3.1, the City will pay the engineer's actual expenses times a factor 1.15. If the proposed engineering services, with the exception of additional services, are to be provided on a lump sum basis, does that sum compensate the professional for actual expenses, or is the City obligated to pay actual expenses times a factor 1.15 in addition to the lump sum fee? If the engineering services are to be provided on a lump sum basis, then paragraph 1.3.3 should be deleted, or at least amended to provide that the reimbursement of expenses under the formula is only applicable to additional services. 6. Paragraph 1.3.4 obligates the City to pay the engineer on a monthly basis for services and expenses incurred for the prior month. Again, if the engineering services, with the exception of additional services, are to be provided on a lump sum basis, exclusive of actual expenses, paragraph 1.3.4 should be amended to delete the reference to expenses except to the extent it may apply to additional services. AGG0426B Mr. Kenneth M. Griffin, P.E. June 14, 1993 Page 3 7. Paragraph 2.1.1 states the professional is to provide engineering services for the project as defined as probable construction costs in excess of $500,000.00 on a lump sum basis according to the terms and conditions in Section 2. This paragraph does not state the lump sum amount nor is it referred to in an exhibit attached to the agreement. If a lump sum amount for the engineering services has been negotiated it should be recited in the agreement. Also, it should be clarified whether the lump sum amount is inclusive or exclusive of the professional's expenses. 8. Paragraph 2.1.2 states the engineer will provide the fee engineering services for the study and report phase, preliminary design phase, final design phase, bidding or negotiation phase, and construction phase in accordance with the scope of services specified in paragraph 3.6 and as supplemented by Exhibit B. Our copy of the proposed agreement does not have Exhibit B and, therefore, we cannot comment on whether the scope of services is in fact supplemented by Exhibit B. 9. Paragraph 2.2.1 states the professional will be compensated in a lump sum basis for the fee engineering services negotiated at the initiation of the project prior to the preliminary design phase. If an agreement cannot be reached, then the fee engineering services are performed on a reimbursable basis according to paragraph 2.2.2, i.e., hourly rates plus actual expenses times a factor of 1.15. If the fee engineering services are to be provided on a lump sum basis, then the City should complete its negotiation and recite the lump sum amount in the agreement and amend paragraph 2.2.1. The City should not execute this agreement if it intends to have the services provided on a lump sum basis, leaving that amount to be negotiated after execution of the contract. The professional could withhold agreement thereby causing the services to be provided on an hourly basis, plus actual expenses. 10. Paragraph 2.2.2 states the City will pay the professional for additional services in Section 4 of the agreement and outside the scope of the fee engineering services in Section 3, based on the hourly rates shown on Exhibit A plus actual expenses times a factor of 1.15; and shall also be required to pay for the services and expenses of any professional associates and consultants which the contracting engineer requires. The City should ensure that the contract adequately describes the services which are included in the fee engineering services so that there is no dispute as to which engineering services are considered within the lump sum amount or subject to the hourly Mr. Kenneth M. Griffin, P.E. June 14, 1993 Page 4 rates and expense factor as additional services. 11. Paragraph 2.2.3 provides a definition of "construction costs' for the basis of payment for the professional. This paragraph may not be necessary since the services are to be provided on a lump sum basis and the parties could agree on a payment schedule as set forth in paragraph 2.2.2. 12. Paragraph 2.3.1 states the engineer will submit monthly statements for fee engineering services based upon the estimate of the proportion of the total services for the project actually completed at the time of billing and obligates the City to make prompt payment thereof. If the engineering services are to be provided on a lump sum basis, then paragraph 2.3.1 could be deleted if the parties agree on a percentage of payment at certain phases of the project as set forth in paragraph 2.3.2. 13. Paragraph 2.3.2 requires the City to bring compensation pay to the engineer to certain percentages at the conclusion of each phase of the fee engineering services. This paragraph is satisfactory. 14. Paragraph 2.3.4 requires the City to pay the engineer in the event of termination upon completion of any phase of the fee engineering services, the progress payments due for services rendered through such phase in accordance with paragraph 2.3.2. Essentially, the City would be required to compensate the engineer upon termination in accordance with the percentages applicable through the conclusion of the respective phase of the contract. In the event of termination during an uncompleted phase, paragraph 2.3.4 requires the City to compensate the engineer on an hourly basis, plus actual expenses times the factor of 1.15, plus the charges for independent professional associates and consultants employed by the engineer, plus termination expenses defined as additional expenses directly attributable to termination which shall include contract damages provided by law. Paragraph 2.3.4 should be amended to provide "in the event of such termination of engineer during any uncompleted phase, the engineer will be paid for the services rendered up until termination in accordance with the payment for reimbursable services and expenses specified in Section 1.3 provided such amount does not exceed the required percentage through completion of the respective phase as set forth in paragraph 2.3.2." In any event, the City should not agree to pay termination expenses. Mr. Kenneth M. Griffin, P.E. June 14, 1993 Page 5 15. Paragraph 2.4.7 provides that in the event the project is delayed or suspended more than three months beyond the engineer's control, the City shall pay the professional as provided in paragraph 2.3.4, i.e., the progress payment through completion of that phase if applicable, or in the event the suspension occurs during an uncompleted phase, at hourly rates plus expenses plus termination expenses. Paragraph 2.4.7 should be amended to be consistent with the changes in paragraph 2.3.4. 16. Paragraph 3.1.2 states that for reimbursable engineering design services in which the probable construction cost is less than $500,000.00, the City will be compensated for only those services requested by the City in the study and report phase, and the preliminary design phase. This provision is confusing but essentially states that for any engineering services which are reimbursable (i.e., not included in the lump sum), in which the construction cost is less than $500,000.00, the City is obligated to pay the professional on an hourly basis plus the actual expenses times the factor of 1.15, if requested by the City during the study and report phase and the preliminary design phase. The City should carefully review paragraph 3.1.2 to determine the intent and effect of this paragraph. 17. Paragraph 3.6.8 requires the engineer to act as an interpreter of the requirements of the contract documents and judge the acceptability of the work and make decisions over claims of the owner and the contractor. This provision also requires the City to indemnify the engineer from any damages arising from its interpretation of the contract documents in a dispute between the City and the contractor. In essence, the engineer will be the judge and jury over contract disputes, but the City will protect the engineer from any claims from the contractor ariSing from such interpretation. ~8. Section 4 of the agreement describes the additional services of the engineer and in paragraph 4.1 provides that the services described in Section 4 are not included as part of the fee engineering services and will be subject to the hourly rate and actual expense compensation. The City should review Section 4 carefully to determine if there are any services described therein which the City intended to be included within the lump sum fee services. ~ Paragraph 4.1.2 states that services to make measured drawings of or to investigate existing conditions or facilities, or other information furnished by owner, is an AGG0426B Mr. Kenneth M. Griffin, P.E. June 14, 1993 Page 6 additional service. This provision to a layman seems overly broad and vague and the phrase "investigate existing conditions or facilities, or other information furnished by owner" could conceivably include fee services. The City should carefully review this paragraph to determine the intent and effect. 20. Paragraph 4.1.3 states that significant changes in the scope, extent or character of the project or design, including changes in the City's schedule, character of construction or method of financing, and studies, design documents or contract documents, will be considered additional services. For example, if the City requires a change order and asks the engineer to review the change order, the professional will be entitled to additional services compensation. The City should carefully review paragraph 4.1.3 to determine the intent and the effect. ~1. Paragraph 4.1.7 provides that the services of independent professional services or consultants other than the fee engineering services are considered additional services subject to the hourly and actual expense compensation. The City should carefully review the entire agreement to ensure that the fee engineering services do not authorize the professional to engage independent professional associates and consultants. In that event, the City could be responsible for compensating the independent professional associates' consultants' retained by the professional as additional services. 22. Paragraph. 4.2 governs "required" additional services and permits the engineer to provide such services without the prior approval of the City. These services are not part of the fee engineering services and, therefore, are subject to the hourly and actual expenses compensation package. The City should carefully review paragraphs 4.2 - 4.2.8 to determine whether the engineer should be authorized to provide those services without prior approval of the City. For example, paragraph 4.2.3 indicates that services in connection with change orders do not require prior approval of the City and are considered additional services not within the lump sum compensation. 23. Paragraph 7.2 concerns the reuse of documents and requires the City to obtain written verification or adaptation by the engineer for the City's reuse of the subject document and requires the City to indemnify and hold the engineer harmless from any claims or damages arising out of such use. If the City reuses any documents under Mr. Kenneth M. Gr'~n, P.E. June 14, 1993 Page 7 those conditions the professional is entitled to additional compensation at rates to be agreed upon by the parties. 24. Under paragraph 7.3.3, the City can require the engineer to provide additional liability insurance coverage over $1,000,000.00 at the City's cost. In the absence of such, the City agrees to limit the engineer's liability for any damages, including breach of contract, to $1,0(X),000.00. The City should consider possible claims and determine whether to require additional insurance, and if such insurance should be at the City's cost. 25. Paragraph 7.4.1 requires the City to immediately relieve the engineer of any obligations to continue to perform services under this agreement and to indemnify the engineer from any claims or damages in the event hazardous waste elements or asbestos are discovered at the project site. 26. Paragraph 7.4.2 states that the scope of engineering services does not include engineering design services and the professional will only perform such services upon the owner's agreement to reimburse the professional for all costs incurred in that regard. 27. Paragraph 7.7 relates to the controlling law and, although the proposed agreement is governed by the laws of the State of Texas, it should be amended to provide that venue for any action shall be in Dallas County, Texas. 28. Section 8 of the agreement governs special provisions, exhibits and schedules. Exhibit B, Scope of Services for Sandy Lake Road, was not attached to our copy of the agreement. Paragraph 8.8.1 refers to Exhibit A, Hourly Rates for Reimbursable Consulting Engineer Services and Engineering Design Services. If the contract is on a lump sum basis with the exception of additional engineering services, Exhibit A and paragraph 8.1.1 should be amended to reflect the hourly rates are for additional consulting engineer design services and additional engineering design services. AGG0426B Mr. Kenneth M. Griffin, P.E. June 14, 1993 Page 8 Thank you for your attention to this matter. If you have any questions in this regard, please do not hesitate to contact me. Very truly yours, NICHOLS, JACKSON, KIRK & DILLARD PGS/mdm ~26B