St. Margaret’s – A Harsh Contract


St. Margaret’s demanded that we accept one of the lowest fees and some of the harshest contract provisions I have ever faced.  Again I wanted to back out, but Bill and Renis counseled continued involvement.  I considered the fee offered to be 25-percent below standard, and it was made even worse because of the massive remodeling to be involved, the inherent inefficiency of joint venture work, and the duplication and frustration that was to come along with the Construction Management concept.  Besides the low fee, the hospital insisted on other harsh terms which were totally unacceptable.

Construction SignAlmost a year after our selection, we were still haggling over contract terms.  In March of 1977, I wrote Charles Denton, the Associate Administrator, “In 20 years of practice we have not been asked to accept such a detrimental contract as you are trying to impose on us.”  Klein proceeded with the schematic work while contract terms were still in debate.  I visited hospitals in other states without a contract.  But when it became time to begin the preliminary phase, PH&J refused to proceed.  Everyone had hired a lawyer before the requisite compromises were reached in July of 1977, and all of us were equally miserable over the result.

As noted, the struggle with St. Margaret’s over contract terms reached such epic proportions that we had to hire an attorney to defend against the hospital attorney.  Up until that time, the only positive experience we had with our own lawyers was with our tax attorney, Alan Rothhfeder.  By 1977, Alan’s firm had moved downtown into the old Pizitz Department Store building on Court Square, and had combined forces with another law firm.  The new outfit was called Ball, Ball, Duke and Mathews, and I found there a likable but green young attorney named Charles Paterson.  Charles and I hit it off immediately and I vowed then and there to train him in the wiles of construction law.  It was he that I chose to represent us in our contract negotiations with St. Margaret’s, and except for a brief detour on his part, he has remained our legal counsel of choice over the 20 years from that day to this.

When the contract terms were almost worked out, one last stumble-block cropped up.   While the owner-architect agreement was being drafted, it came out that some of the principals of The Klein Partnership, Inc., were not registered in Alabama and thus their corporate name could not be used here.  Falick said he did have Alabama registration, and that legally the joint venture would be Falick/PH&J.  “No way!” I declared.  “We must have equal legal exposure.  You serve up one name and PH&J will serve up one.  The joint venture can be Falick/Humphries.”

“No way!” declared the hospital and its legal brain trust.  After much bitter debate, in which Sister Susan viewed me as an obstructionist, the official name on our contract with Saint Margaret’s became Jim Falick / Irving Klein / Charles Humphries / John McDonald.  That’s what appeared on the huge job signs which ultimately fronted the construction.

Johnny McDonald was a new principal in our firm, having bought in around 1971.  In 1977 we were rearranging his responsibilities to include hospital work, so his was the logical name to join mine on the contract.  Both he and I extracted an elaborate hold-harmless agreement from our corporation and from Bill and Renis to cover us on the deal.

 

Disdain and Distrust

As you can see, PH&J was being boxed into a very dangerous and unsavory situation, in which we grew more and more concerned over the integrity and fairness of all the other parties.  I found myself involved not only with a client I had suddenly grown to dislike, but also with a partner firm that I distrusted.  That was to say nothing about a construction manager who disdained architects and who operated a system for which I had no respect.

My worry over the high flying Klein crowd ultimately proved to be well founded, as was evidenced by two episodes which took place long after all the contract fuss took place.

The first one occurred as our joint work on the construction documents was nearing its end.  Part of the Klein Partnership’s half of the architectural work was the working drawings (blueprints) for the huge new wing they designed for St. Margaret’s.  Because PH&J was to do all the construction inspection, we were quite concerned that the Klein documents be complete and correct.

I repeatedly sent notices to Houston pointing out discrepancies and omissions in the Klein work.  As the bid time neared, I demanded to know why they would not make the necessary corrections–or even check their own work.  Their project manager finally admitted that Klein had run out of budget money for the job and would authorize no further work on it.  It was my turn to be aghast–an architect cannot stop his work because the job account tips into the red. As I had predicted, Klein had spent all its money on sending photographers, model builders, writers, etc., to Montgomery to document their design procedures for future solicitations.  It was all for show.

The second episode which justified my apprehension over Falick and Company took place some four years after we cut the 50/50 deal in Houston.  The extremely low fee and other factors caused the job to be a real money loser for Bill, Renis, and me.  The project was a major contributor to the financial hardship that our firm suffered in the late 70’s and early 80’s.  As I mentioned earlier, losing money on a job this big was difficult to overcome.

About the time the construction was complete and St. Margaret’s had occupied its new spaces, Jim Falick and two of his associates flew into Montgomery.  They had no other purpose than to accost yours truly, and requested a meeting at the PH&J office.  Jim said, “I know we agreed to split the fee half-and-half, and I know that PH&J lost money, but not nearly as much as the Klein Partnership lost.”  With that preface, he demanded that we re-cut our arrangement 60/40 in his favor.  I was astounded at such gall and laughed him out of my office.  As far as I was concerned, Falick had brought the pain on himself and PH&J was not about to share his misery on top of our own.

 

-Charles Humphries (“Peril and Intrigue Within Architecture”)

This is one of many St. Margaret stories. The rest can be found here.

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