SR-03-11-1980-6PCA RLK:SSS:dd
Council Meetini�, 03 -11 -80 Santa Monica, Califorr;.ia
STAFF REPORT
TO: Mayor and City Council
FROM: City Attorney
SUBJECT: Settlement of Claim against City of Santa Monica
by Keene Corporation, MBL, 79 -426
INTRODUCTION
WAR I I l9pf7
The above entitled claim arises out of a dispute between
Keene Corporation, Transit Systems Division, and the
Santa Monica Municipal Bus Lines relative tola contract
for the furnishing and installation of fareboxes and revenue
collection equipment. The staff report transmits a proposed
settlement by which the City will pay amounts due under
the contract, and Keene will furnish about $35,000 worth
of additional equipment and spare parts at no cost to the
City.
BACKGROUND.01 THE DISPUTE
On May 23, 1978, the City of Santa Monica entered into
a contract with Keene Corporation, Transit Systems Division,
for the furnishing and installation of 101 fareboxes,
126 farebox pedestals, a revenue collection unit and related
equipment, for the price of $499,277.00. Payment was to
be made as follows: 60 percent upon delivery, 20 percent
upon installation, and 20 percent upon acceptance.
Keene was required to complete delivery and installation of
the entire system within 180 days of award of the contract.
In addition there is a clause providing for liquidated
damages of five dollars per day per unit for any farebox
not installed by the end of the 180 day period.
MAR i9 €3(3
During the course of the system installation, several
problems and delays were encountered. Keene claimed that
they were delayed by the City. The City withheld payment,
claiming that Keene was not performing in good faith. In
turn, Keene ceased all work on the project.
On October 26, 1979, Keene Corporation filed a claim
against the City of Santa Monica. The claim alleged that the
City directly or indirectly caused all of the alleged delays,
and as a result that no liquidated damages should be assessed
under the terms of the contract. They demanded payment of
amounts due under the contract plus amounts for increased
labor costs and storage.
There have been several meetings and discussions between
City staff, UMTA personnel and representatives of Keene
Corporation since the filing of the above cited cI.aim. At
the most recent meeting on February 21, 1980, tentative
agreement was reached which would resolve all disputed issues
and would result in prompt completion of the contract. That
agreement was committed to writing and has received
UMTA concurrence. The agreement (Attachment 1) is submitted
for City Council approval at this time.
TERMS OF SETTLEMENT
Under the terms of the Mod'fication Agreement, the
City agrees to promptly pay the amounts due Keene under the
Contract. The City further agrees to extend the performance
period of the Contract to terminate sixty days from the date
of execution of the agreement.
d=
Under the terms of the Modification Agreement, Keene
agrees to promptly complete all work required under the
Contract and to submit a formal Notice of Completion. Keene
further agrees to furnish at no charge to the City, seven
additional fareboxes, p;.us a significant supply of spare
parts. Keene also agrees to pay all shipping expenses
required for warranty repairs at their factory.
Other terms and conditions of the contract, including
warranty, remain in full force and effect.
ALTERNATIVES
The alternatives to the proposed settlement would result
from taking no action and allowing the Keene Corporation claim
of October 26, 1979, to be litigated. If the decision
is in favor of Keene Corporation, it is possible that the
City would be liable for the total amount of the contract
plus additional charges for increased labor costs and storage.
If the decision is in favor of the City, liquidated
damages may be assessed against Keene Corporation. The
amount would be about $100,000. However, 80 percent of
that amount would be returned to UMTA and the remaining
20 percent which comes from TDA funds would be available
for use elsewhere.
Litigation will inevitably result in considerable delays
and costs. We are presently operating with two revenue
collection systems. This arrangement is inconvenient and
costly and should be terminated as soon as possible.
Execution of the agreement as recommended will result
-3-
in the earliest possible completion of the project. The
City also will receive the benefit of seven fareboxes
and a considerable amount of spare parts. It is estimated
that the total value of the items the City will receive
under the agreement will be approximately $35,000. This
compares favorably with the estimated $20,000 the City
might receive as liquidated damages. In view of the concerns
of UMTA as expressed b- their efforts for a speedy resolution
of the problem between the City and Keene Corporation,
the execution of the proposed agreement is appropriate.
RECOMMENDATION
It is recommended that the City Council act to authorize
the City Manager to enter into the attached modification
agreement: with Keene Corporation.
Prepared by: Richard L. Knickerbocker
Stephen S. Stark
Frank Barnes
Agenda Item 6 -p: The settlement of a case entitled Keene Corp, v.
the City of Santa Monica authorizing the City Manager to enter into a
modification agreement with Keene Corp., by award of Contract No, 3464(CCS)
was approved.
CITY COUNCIL MEETING - March 11, 1980