LARNED — The Larned City Council refused to grant a materials price increase request on the community’s Community Development Block Grant waterline project at its regular meeting Monday.

Crews from Cobalt Construction had been involved in exploratory work on early phases of the multi-year, multi-phase project, totalling $4.5 million, last summer, when work was put on hold at the request of contractors due to difficulty securing project materials. In a meeting to approve the stop work order, council members were told that the contractors’ supplier, Ferguson Waterworks of Hutchinson, had told them they could not commit to a delivery date after pushing back their timeline several times.

Last month, Keithen Meyer, a representative from Schwab-Eaton, the engineering firm assisting with the project, notified the council that True Solutions, the general contractor in charge of the project, and Cobalt would be asking for an additional $49,107.23 as a change order to the original bid. The agenda item was tabled until Monday’s meeting.

Monday evening, Meyer, along with John Elam of True Solutions and Clayton Gregg of Cobalt, appeared before the council via Zoom to repeat their request.

“True Solutions is requesting a materials price adjustment a little over $49,000 due to materials price increases that they have incurred,” Meyer said. “They do not have what I would consider ideal documentation, but according to the documentation that we have gone through, we at Schwab-Eaton feel that it is appropriate and it is a real cost.”

Elam explained that Ferguson, their supplier, had delivered materials at a cost substantially higher than originally quoted.

“We’ve had material costs that were higher that were out of our control,” Elam said. “We received a force majeure letter from our supplier and other vendors are going to be even more expensive than what we’ve experienced with the vendor we originally selected.“

“The costs are really out of our control; they are COVID-related, really international supply chain related. The materials market is just, it’s the ‘Wild West.’”

Councilman Jason Murray took up the council’s position that all parties should honor the terms of the original bid, especially in light of the federal funds and their parameters involved.

“One of my concerns, John, is that I’ve been in bid projects before, and especially when you’re up against competition, sealed-bid scenarios, and the thing that concerns me is that we did not take other people’s bids that may have looked at the future,” Councilman Murray said. “The supply chain has been a problem for multiple months, going over a year now. My main concern is that if you are asking for this now, how many more supplies have you not secured that we know the prices have gone up since your bid and if you didn’t look ahead, knowing that it was going to be a long-term project, knowing that prices very rarely go down, how many other requests are you going to make that we basically bail you out on?”

“I can’t speculate about the future, because I don’t know the future,” Elam responded. “I know this is the first time we’ve ever had anything like this happen. Saying that we can’t get things this week or the week after, that’s not an uncommon thing, but this is outside of anything I’ve ever seen.” 

Mayor William Nusser then weighed in, noting that the situation wasn’t simply a matter of two businesses doing business.

“What to me is tricky about this is that with the CDBG project, we were required to take the low bid because of the federal deal and there was a significant difference in the bids. We’re a steward of the taxpayers. We are both in a tough spot here, we’re trying to make the right choice, not just for you, but also as representation of the taxpayers themselves.” 

Nine bids were received for the first phase of the project. True Solutions’ bid, accepted as required by block grant parameters, stood out as low bid by as much as $200,000 from the other eight bids and $681,095 or 43%, of the high bid of $1.58 million.

Council members wanted to know whether all materials had been ordered, and if so, what had been received on site.

The contractors assured the council that all materials in the bid contract had been ordered and a “majority” were on site.

The council was also worried because the project was near the CDBG match cap of $600,000 and the city might not be reimbursed for additional increases.

Council member Sharon McGinness offered to share the increased expense with the contractors.

“I would make a motion that, given the circumstances, I think they made their bid in good conscience and good faith,” McGinness said. “This is a unique situation, it has been for several months since COVID started. I would move that we approve this for 50% of the $49,000 and just split the difference.”

The motion died for lack of second.

Council member Gary Rainbolt then moved to accept the full change order.

“Due to the circumstances that they are in, I make a motion that we give them the whole 49,” Rainbolt said. “I don’t like it, but as I say, this is an odd situation.”

Councilman George Elmore seconded.

Other council members noted that prices were rising everywhere and that preparing for them was the cost of doing business.

“This isn’t just a plumbing problem,” noted Councilman Kim Barnes. “It’s not unique to this project. To me, it a part of doing business. When fuel goes up overnight, I don’t go back and ask my supplier to reimburse me. Businesses are having to absorb what is going on.” 

Council member Murray agreed.

“This was part of my job for multiple years. Nobody can operate a business less than a 20 percent margin. You just told me that you used that margin to accommodate for any price increases. You need to either increase your margins, or get better purchasing and contract arrangements. 

“This is all part of business,” he said. “You can’t come in with a 20 percent margin on a contract and then expect that to stay steady the entire time if you are in a low-bid situation. This came back and bit you in the butt because you are the low bid. It’s part of the risk that you run operating a business.

“I don’t think that the City of Larned should take on every single person’s business risk. We can’t take on another $50,000, because we can’t just raise taxes tomorrow.”

Mayor Nusser then called for a vote on Rainbolt’s motion. The motion failed, with council members Barnes, McGinness, Murray, Josh Riedel, Terry Clark and Carroll Bennett opposed.