Report to Carson Reclamation Authority
Tuesday, September 04, 2018
Consent
SUBJECT:
Title
CONSIDER AMENDMENT NO. 3 TO ENVIRONMENTAL REMEDIATION AND DEVELOPMENT MANAGEMENT AGREEMENT TO ADJUST THE MONTHLY FEE STRUCTURE
Body
I. SUMMARY
This matter has been carried over from the August 7, 2018 Carson Reclamation Authority agenda due to no quorum on August 7, 2018.
This action amends the Environmental Remediation and Development Management Agreement (“Agreement”) with RE|Solutions, LLC (“RES”) to adjust the Minimum Monthly Fee structure to extend it for up to four months in order to preserve staff levels during an unanticipated delay in the commencement of the grading and construction work of the project where the Services Fees, which is the primary source of funding in the contract, will be adequate to cover the contractor’s management costs in undertaking this project. Staff and RES are undertaking a review of the entire contract and will return to the Board at a future meeting with an Amended and Restated Agreement fixing a number of inconsistent and ineffective provisions. This action is focused on the specific issue of the minimum monthly fee.
II. RECOMMENDATION
Recommendation
1. APPROVE Amendment No. 3 to the Environmental Remediation and Development Management Agreement with RE|Solutions, LLC; and
2. AUTHORIZE the Chairman to execute all documents related to this Amendment.
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III. ALTERNATIVES
Take another action the Board deems appropriate.
IV. BACKGROUND
CRA and RES entered into an Environmental Remediation and Development Management Agreement dated July 26, 2017 (“Original Agreement”) under which RES agreed to provide environmental and development management services related to Cal Compact Landfill project. The First Amendment was approved January 10, 2018 to change the RES Master Account used for making payments to RES, and on May 8, 2018 the Second Amendment was approved to amend Section 5.04 (i)(iii) (Insurance Management) and Section 5.12 related to the liability specifically arising from Pile Design, and other insurance requirements.
Because the primary form of RES’ compensation is the “Services Fee” described in Section 4.06, calculated as a markup of 5% on subcontracted work, the minimum staffing required of RES to undertake all of the pre-development work pursuant to the Agreement is far in excess of the monthly Service Fees, which resulted in a negotiated Minimum Monthly Fee described in Section 4.05. Contractually, the Minimum Monthly Fee was originally intended to be for no more than twelve months, during which the substantial construction work (grading, waste consolidation, infrastructure and pile installation) would have begun, generating sufficient Services Fees to eliminate the need to continue the Minimum Monthly Fee, though the parties expected heavy construction to start in February, 2018, a significantly shorter period than twelve months.
As illustration, the development schedule in place at the time of the Original Agreement had the Cell 2 project (the Fashion Outlets of Los Angeles) and the District at South Bay Specific Plan approved by the Planning Commission in November 2017 and City Council in December 2018. Therefore, construction, including grading and waste consolidation, would have commenced in February, 2018 and pile fabrication would have commenced in March 2018. Because of delays outside the control of RES, construction work will not start until at least September, 2018, the 14th or 15th month of the contract.
This amendment provides that the Minimum Monthly Payment paid to RES will be paid up to 16 months from the commencement of the contract. During the next few months, staff and RES will negotiate an Amended and Restated Agreement which will address the Minimum Fee issue as well as a number of other inconsistent and ineffective provisions contained in the agreement. Since all of the CRA’s work (both the O&M work, the installation of the remedial systems as well as the development-related subsurface work - slab and piles) is performed under this contract it is important to have as much clarity in the Agreement as possible.
V. FISCAL IMPACT
The difference between the Minimum Monthly Fee and the currently-calculated Services Fees today is approximately $50,000 per month.
VI. EXHIBITS
1. Amendment No. 3 to the Environmental Remediation and Development Management Agreement (pgs. 4-9)
Prepared by: John S. Raymond, Executive Director