Iowa agrees to pay $7M more to general contractor to resolve dispute over delayed new prison

IndustriesAssociated Press

Iowa's executive branch agreed Monday to pay another $7 million to a key contractor that worked on the state's new prison, avoiding litigation in one dispute arising from the long-delayed project.

The State Appeals Board approved the settlement with Walsh Construction, which was selected in 2010 as general contractor for the new 800-bed Iowa State Penitentiary in Fort Madison. The payment brings to more than $130 million the cost of the state's contract with Chicago-based Walsh, but it means both sides will avoid legal claims that could have lasted years.

Continue Reading Below

The maximum-security prison for male offenders, which will replace a penitentiary down the road that dates to 1839, remains empty more than a year after it was scheduled to open. Workers have been trying to bring housing units into compliance with the fire code after discovering faulty smoke evacuation systems last year, and the prison is expected to open within months. The opening had been delayed earlier by flaws in a geothermal heating and cooling system that have since been replaced. Design flaws in both systems have been blamed on a now-bankrupt Dubuque architectural firm, Durrant Group, Inc.

The project's costs have soared. Walsh's initial contract was for $116.9 million, then rose to $123.4 million during the project. In December 2013, the company asked the state for an additional $18.1 million, saying it encountered delays for which it wasn't responsible and had to perform additional work that wasn't anticipated. State officials disputed the claim, contending that some work should have been included in the original contract and that Walsh didn't give them a chance to mitigate costs.

Both sides negotiated the settlement with the help of an outside mediator last month. The $6.95 million payment covers a number of items, including changes to the size of cells, structural steel design conflicts, and time for installing pumps and pipes that had to be replaced.

The agreement also calls for the state to pay Walsh $6.1 million in funds that were retained as required by the contract until the end of the project. The two sides agreed to "waive any and all claims against one another" arising out of the project, with a few exceptions. The state is currently unaware of any "latent defects" in Walsh's work, but reserves the right to assert legal claims for any that became known later, the agreement states.

As of April 10, Walsh was allowed to terminate its insurance coverage on the project and the state immediately took over legal responsibility for the property. Walsh official Kevin Swain, who signed the agreement, didn't immediately return a message seeking comment.

The deal doesn't rule out potential litigation against other companies involved on the project, though none has been filed to date. The Iowa Department of Corrections has told lawmakers that another company, Taylor Ohde Kitchell, was in charge of overseeing the project as construction manager and that other firms were responsible for architectural and design work.