Subject
title
Authorization for the City Manager to Execute a Settlement Agreement with Norair Engineering Corporation
end
Department
PW - Construction Management
City Attorney’s Office
Recommendation
Staff recommends the Mayor and Council authorize the City Manager to execute the attached settlement agreement with Norair Engineering Corporation.
Discussion
On July 22, 2021, the City entered into an agreement with Norair Engineering Corporation (“Norair”) in an amount not to exceed $8,037,400.00 to perform the work in IFB 01-21 for an electrical systems upgrade and building renovations to the Rockville Water Treatment Plant. The City declared the project substantially complete on February 10, 2025.
In November of 2024, Norair submitted a change order proposal reflecting a request for additional compensation, largely due to project delays. The City rejected Norair’s change order, and Norair and the City have been in settlement negotiations to resolve the dispute. Norair and City staff have reached concurrence on the attached settlement agreement, which includes release of $426,868.15 in retainage held by the City as well as a settlement amount of $673,131.85, for a total payment of $1,100,000.00.
Mayor and Council History
This is the first-time staff has brought this agenda item to the Mayor and Council.
Fiscal Impact
The overall settlement amount, including the $426,868.16 retainage, is $1,100,000. The release of retainage typically occurs in the normal course of business as projects reach completion. In anticipation of future payments related to this dispute, the city recognized and accrued expenses estimated at $326,991. The payment requiring additional appropriations from the Water Fund is approximately $346,141. The Water Fund has sufficient capacity to execute the entire settlement amount. Upon authorization of the settlement, Finance staff will coordinate the inclusion of the additional Water Fund appropriations in the next FY 2027 budget amendment to backfill any operating deficits.
Next Steps
After the Mayor and Council authorization, the City Manager will execute the attached settlement agreement in a form approved by the Acting City Attorney.