Official quits over vets’ home dispute

Friday, June 16, 2006 | 7:22 a.m.

CARSON CITY - A $10.3 million judgment against the state for fouling up construction of the Veterans Home in Boulder City has cost the head of the Nevada Public Works Board his job.

Dan O'Brien, manager of the board, resigned Thursday after meeting with Gov. Kenny Guinn, one day after a panel of arbitrators found that the board and its architects were responsible for the problems and delays in construction of the 188-bed home.

Steve George, a spokesman for Guinn, said the governor "was very unhappy after reading the report" of the arbitrators and "wondered how this situation escalated to that level."

George said after Guinn called O'Brien into his office to "get his side," O'Brien resigned, effective 5 p.m. today. George declined to say whether the governor asked O'Brien to step down.

Wednesday's judgment against Nevada represented a total victory for Addison Inc., the Las Vegas contractor fired midconstruction amid a bitter dispute over design flaws and cost overruns on the Veterans Home.

Kevin Senn, a San Francisco attorney who represented the state in the arbitration case, said Thursday he intends to "seek all available remedies." He declined to say, however, whether a binding arbitration decision could be appealed.

Thomas Kummer, a Las Vegas attorney representing Addison, said less than 1 percent of all court appeals from arbitration are overturned. Calling the decision a "complete vindication" of Addison, Kummer added that it also showed that the state acted "unreasonably and in bad faith."

Of the $10.3 million settlement, $4.6 million will go to attorneys for the contractor and subcontractors in fees and costs. Prior to his meeting with Guinn, O'Brien said the payment to Addison and subcontractors will have to be made by the 2007 Legislature.

In their decision, the arbitrators said that poor design caused construction delays and cost overruns, problems for which they blamed the state and its architect, Harry Campbell and Associates.

In May 1999, the public works board awarded Addison a $14.8 million contract to build the veterans facility. The state fired Addison in August 2001, a rare instance of the state terminating a contractor in midconstruction.

The state maintained that Addison was dismissed because it fell behind in construction and otherwise mismanaged the project. Another contractor was hired and the project was completed in mid-2002, about $1 million over budget and more than a year behind schedule.

The panel of arbitrators, however, decided that the state - not the company - was responsible for the various problems .

Accordingly, the arbitrators awarded Addison $3.4 million, Mojave Electric $1.5 million, JetStream Construction $1.8 million, Quality Mechanical Contractors Inc. $2.5 million and the National Fire Insurance Co. $551,459. It also ordered the state to pay $363,075 to cover the cost of arbitration, including six weeks of hearings, and another $70,950 for filing fees and expenses of the arbitration association.

The arbitrators concluded that the state began the project before the state Health Division and state Fire Marshal had approved it. In addition, the public works board knew of design deficiencies prior to the start of construction, but never took action, the decision stated.

After Addison brought the design flaws to the state's attention, public works officials "acted in an unreasonable manner" on a request by Addison and the subcontractors to stop construction to work out the architectural deficiencies, the panel said.

After being fired, Addison and the subcontractors sued.