Taxpayers, contractor learn costly lessons in justice center settlement

Paul Faulkner learned a lesson.

So did Randy Walker.

Meanwhile, at least one Clark County commissioner is waiting for staff to explain lessons learned to avoid repeating mistakes of previous commissioners and managers.

Even if her colleagues didn't raise concerns, Commissioner Chris Giunchigliani doesn't want to repeat those errors recently resolved by paying almost $60 million to AF Construction and its bonding company.

Faulkner, owner of AF Construction, which built the Regional Justice Center and the county jail expansion, learned it was a mistake to get involved in litigation with the county.

"They're dealing with taxpayers' money; they don't care what they spend to beat you," he said.

Walker, the county's aviation director who in 2002 was asked to take over managing construction of the justice center and the jail expansion, laughed at the question.

"The next time someone comes and asks me to do this kind of assignment, tell them: Hell no. That's what I learned," Walker said.

When the county commissioners authorized the settlement for the justice center at a recent meeting, the emphasis was not on the $51.2 million paid to settle the justice center cases, or the end of the jail expansion case (a separate $8.4 million settlement), or the $32.8 million in legal fees.

In public, the commissioners patted themselves on the back for their decision to challenge the methodology of how the interest was calculated on the Regional Justice Center settlement, reducing the award by $1.5 million to $51.2 million instead of $53 million. In addition, the lawyers had negotiated an agreement to waive the $10,000-a-day post-judgment settlement, so the negotiations saved a respectable $2.1 million.

However, Giunchigliani had to be corrected when she thought the $1.5 million would be money returned to the county and started suggesting ways to spend it.

"It's not money that we got back; it's money we don't have to pay," County Manager Virginia Valentine explained.

As for any thorough public discussion of lessons learned from the fiasco, the usually chatty commissioners were silent, even though none of them was on the commission when this mess began.

Giunchigliani suggested staff review the arbitration decision and look for areas "where judgment was maybe not appropriate. We didn't have the proper oversight, whatever. So we learn from that and don't get into this kind of a problem again."

"Duly noted," said Commission Chairman Rory Reid.

That was the entire public discussion about lessons learned, although both Reid and Giunchigliani told me they read the entire decision.

Three arbitrators heard 10 weeks of testimony before issuing their opinion that the county was more culpable than AF Construction in the justice center disputes.

The county disagrees with their findings, but in point after point, the arbitrators ruled in favor of AF Construction, which argued that faulty designs, poor county management and frequent change orders by the county were to blame for the justice center coming in over budget and late.

The arbitrators chided the 1996 Board of County Commissioners for asking voters to approve a $120 million bond for four projects, when that figure wasn't remotely close to the real costs to expand the jail, build the justice center and enlarge two juvenile facilities.

One lousy decision after another led to serious consequences, the arbitrators said. To cut costs, the county reduced the space between each floor by two feet, making it harder to install mechanical and electrical work. It was one of seven major design flaws, including the foolish decision to save money by not testing for caliche.

The arbitrators said the county, at Walker's insistence, took a strict compliance position with AF Construction without considering the economic waste. And the county issued, "with questionable good faith," numerous meritless or overpriced nonconforming notices to the builder.

The county stopped paying Faulkner in April 2003, yet he kept working on the project. Many wonder why he didn't walk away.

"I've never quit anything in my life," Faulkner said.

Don't assume the settlements made him whole. Most of the money went to the bonding company. Faulkner said he's still out of pocket more than $20 million.

Faulkner was the one bloodied the most in this just-ended legal fracas. Taxpayers didn't fare well either.

But lawyers representing the county did fine. The county has paid $32.8 million in legal fees for cases settled in Paul Faulkner's favor. Sounds like they're the real winners here.

Jane Ann Morrison's column appears Monday, Thursday and Saturday. E-mail her at Jane@reviewjournal.com or call (702) 383-0275. She also blogs at lvrj.com/blogs/morrison.