The city of Monticello and Siemens Industry Inc. have reached a settlement in a lawsuit related to a $10 million contract for the company to upgrade leaky water mains and replace thousands of aging water meters throughout the city.
Under the settlement, which was filed in federal court on Monday, the city will recoup $4.6 million of the $6.7 million it paid in advance to the company in 2014. Siemens will keep the $2.1 million difference in exchange for work already completed, including 4,500 installed water meters with upgraded software and wireless technology, and 261 new fire hydrants already delivered.
Monday's agreement puts the city back at square one for water structure improvements. The city has yet to open the bidding process for another company to finish the needed improvements.
"Our intent is to sit down with the engineering firm we have on retainer and to put together a proposal for us to move forward with the project," Mayor Zack Tucker said Monday, adding that he was pleased with the agreement.
The city council approved the agreement at a special meeting on Saturday.
"It removes a cloud of uncertainty that exists over the city. We'll have the option to move forward with the water projects," Tucker said during Saturday's meeting. "We are in the driver's seat."
Litigation over the Siemens contract began in January 2015 after city leaders asked the Illinois-based company to return millions of dollars when work was found to be noncompliant with contractual obligations.
For instance, the water meters were supposed to be manufactured by a city-approved company, yet Siemens had installed another brand of meters without the city's approval. The discrepancy was discovered as hundreds of water customers reported inaccurate water-usage measurements and billing errors. The company has since corrected more than 1,200 faulty installations.
Other issues included blueprints of water-main replacements that, according to the city's legal counsel, Cliff Gibson, only addressed a fraction of the oldest water lines in the city's core.
By April, Siemens had sued the city the same day Gibson and city officials sat down with company representatives to attempt to resolve issues.
The lawsuit, filed in U.S. District Court in Pine Bluff, accused the city of breach of contract after the city blocked the company from continuing work.
Gibson followed with a countersuit, claiming that the water meters the company had installed were a breach of contract, and that Siemens was not properly licensed by the state to do the work.
"After a lot of paper and ink and a full-blown hearing in federal court in Little Rock, Judge [D. Price] Marshall Jr. ruled that the contract was void -- it was in violation of Arkansas law" because the project was not opened to a competitive bidding process, Gibson said at the council meeting on Saturday.
"So, with the contract being illegal and void, we're entitled to our money back," Gibson added.
In addition to the $4.6 million returned to the city through the settlement, both parties agreed to a nondisparagement clause and a confidentiality agreement. The Arkansas Democrat-Gazette obtained the agreement from the city through the Arkansas Freedom of Information Act.
"Siemens acted in good faith with respect to the project and is pleased to have the matter resolved," said company spokesman Amanda Naiman. "As the parties' settlement is confidential, we are unable to comment further."
Metro on 08/16/2016