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School district hires legal counsel

One sentence could stop the Cloquet School District from putting the design and oversight of its $47 million middle school out for bid.

When Cloquet Schools Superintendent Ken Scarbrough signed the contract with Kraus-Anderson Construction Company two years ago to assess school district facilities and the possibilities of a referendum vote, the stated fee for that work was $16,000.

However, at the end of the fourth paragraph — in what was only a seven-paragraph letter — there is the sentence:

“The Owner [in this case, the Cloquet School District] agrees, after a successful referendum, to continue to use the services of Kraus-Anderson and ARY [Architects Rego + Youngquist (ARY)] in a newly developed contract.”

In a meeting to verify the votes a week after the referendum passed successfully, Scarbrough told Cloquet School Board members that, in reading the contract, he thought the district may have already agreed to use both firms for the rest of the project, contrary to a statement he made the night of the vote when he said it would be up to the Board to decide whether or not to solicit RFPs (Request for Proposals) for architectural/engineering and construction management services.

Since then, Scarbrough told the Pine Journal Thursday, the district has hired an attorney who specializes in contracts, Jay Squires of the Twin Cities firm Rupp, Anderson, Squires and Waldspurger, PA. (The district did not have an attorney look at the initial contract.)

“We are consulting with an attorney just to take a look at all our obligations and options,” Scarbrough said. “We’re very happy with the work that we’ve had from Kraus-Anderson and Paul Youngquist (of ARY). We understand that some people are concerned about the process and we want to make sure that the board has carefully examined all its options and obligations before we move on.”

Kraus-Anderson Vice President H. John Huenink said his company and ARY feel they won both the contract for the preliminary services (at $16,000) and the actual construction management contract (for which they could be paid close to $3 million or more total) in March 2013.

“In our eyes, it’s still an agreement,” Huenink said, adding that they used a short letter contract because there was no guarantee the referendum would pass. “But even if it’s an AIA (American Institute of Architects) contract, any contract can be broken with written notice. It doesn’t matter if it’s the person who delivers your milk, … or a construction manager. There are always provisions that can be broken.”

Hermantown School District passed a building referendum — after a referendum failed in 2009 — for a new elementary and secondary school in November 2013.

Superintendent Brad Johnson said their contract with Johnson Controls was for the phase one and two of the planning up to the referendum.

According to another source close to the Hermantown project, Hermantown actually negotiated a similar clause (similar to the one in the Cloquet letter) out of its contract with Johnson Controls.

Johnson explained that the district realized during the research leading up the passage of the referendum that voters wanted to do an RFP if the referendum passed. When it passed, Hermantown did an RFP for both construction manager and project architect/engineer, forming a committee for the process of reviewing proposals and making a recommendation back to the School Board. The school district ultimately selected the same architect/engineering firm and construction management firm that had worked under Johnson Controls leading up to the referendum.

In the process, Hermantown was also able to negotiate a lower price for those services, which can run into millions of dollars.

Ultimately, Hermantown School Board member Greg Carlson said that bidding for the architect/engineer and construction manager to oversee the project is important for a number of reasons.

“It’s not just about getting the right price,” said Carlson, who also deals with construction contracts in his regular job. “It’s about means and methods, strength of their project team, approaches, company philosophy, references, past projects. There’s a whole host of things that are involved beyond the price.”

While cost is a key consideration, getting the right company for the job is the most important thing, he added.

The Cloquet School District has had some discussions with Kraus-Anderson and ARY since the referendum passed, but has not signed a new contract with either firm.

“At this point, before we sign anything to continue, I want to make sure we are proceeding in a way the Board feels comfortable and so the Board knows they’ve got legal advice with what they’re doing,” Scarbrough said.

The Cloquet School Board and district officials are meeting with the attorney at 3 p.m. Friday, March 6, in the Board Room on the second floor of the Garfield School. The meeting is open to the public although there may not be any public comment period.