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Press Release: Architects sue OSU and Trustees over wrongful termination of their contract


University agrees there is no cause but doesn’t tell Karlsberger
why it withheld payment or refuses to reinstate its contract

Architects claim that OSU’s mismanagement, secret meetings,
violation of State of Ohio Sunshine Law, and restrictive new
bidding criteria are contrary to the public interest

Columbus, Ohio, Nov. 27, 2009 – Columbus, Ohio-based Karlsberger <http://www.karlsberger.com/>  Architecture, Inc. filed on November 13th an eight-count lawsuit <http://www.cco.state.oh.us/scripts/ccoc.wsc/ws_civilcasesearch_2007.r?mode=5&CaseNo=200908896> in the Ohio Court of Claims against The Ohio State University [OSU], including its Board of Trustees.  The lawsuit stems from OSU’s bad-faith termination of Karlsberger’s $32-million contract to provide Associate Architect/Architect of Record services for the planned 1-million-sq.ft., $1-billion expan­sion of OSU’s Medical Center to create a cancer and critical care facility on the OSU campus. 

OSU admits that Karlsberger performed as expected, and that the contract termination was “without cause.”  Karlsberger’s inclusion of the OSU Board of Trustees in the law suit is exceptional, reflecting its claim that the trustees have failed in their oversight and management of the process.  

The architecture firm also claims that OSU has withheld payment of outstanding requisi tions for work performed to date under its contract, and wrongfully terminated that con tract.  [Subsequent to filing the litigation, OSU made a partial payment on Karlsberger’s requisitions.] According to Karlsberger attorney James E. Frankel, “Karlsberger is ready, able, and qualified to complete the contract and has tried diligently to resolve this dispute without resorting to litigation.” 

A major Ohio-based architecture firm with offices throughout the US, Karlsberger has been in continuous operation since 1928 [www.karlsberger.com <http://www.karlsberger.com/> ]. Since the 1940s, it has been considered a leader in the planning and design of healthcare-related projects.  In the annual ranking of the top 40 architecture firms that specialize in healthcare by Crain’s Modern Healthcare [03/16/09 issue], Karlsberger placed sixth largest firm in construc tion dollar volume, seventh largest in hospital square footage, and highest-ranked firm headquartered in the State of Ohio.  Mitchel Levitt is CEO of Karlsberger Companies. 

The lawsuit seeks damages for OSU’s multiple breaches of contract, bad faith conduct, violation of the Ohio Sunshine Law <http://codes.ohio.gov/orc/121.22> , and unlawful practices regarding the competitive bidding process associated with the Medical Center expansion.  It asks the Court to “set aside the termination without cause as null and void,” to pay the outstanding fees and related charges as well as damages, and to reinstate the contract. 

In September 2008, Karlsberger was awarded the OSU contract to be the Associate Architect and Architect of Record as a result of a public bidding process.  Its role had been to monitor the work and progress of the design architect and to verify the construc tability of its schematic design.  Then Karlsberger was to take over and complete the de sign, prepare the drawings and specifications from which the project would be built, co ordinate with the construction manager, and remain actively involved in the cancer center and critical care tower through and even after construction – that is, through March of 2014.  The total cost of the construction is estimated at nearly $405 million.

OSU selected HOK – an out-of-state firm, and seventh-ranked architects on the same Modern Healthcare list – to serve as the design architect for this Medical Center project, working out of offices in Chicago and New York to create the project’s master plan and schematic design.  Karlsberger was to dovetail its architect-of-record role with HOK during the schematic design process, after which Karlsberger would complete the project. As of this point, HOK has produced three different versions of the project that OSU has either changed or rejected for design, sustainability, or budget issues.  Notwithstanding this performance, OSU has agreed to pay HOK $13.9 million, and HOK is currently pro ceeding with the fourth round of schematic design documents for another $1.7 million in fees, bringing the total expense to $15.6 million.   

Karlsberger alleges that OSU has acted not just in bad faith, but also contrary to public policy and public interest.  “It has avoided its contractual obligations by terminating the public contract.  And, by re-bidding the publicly-funded project only one day after Karlsberger was notified of the termination, it has further violated Ohio’s Sunshine Law,” a Karlsberger spokesperson points out.

The lawsuit also contends that the termination decision was made in secret meetings by undisclosed persons, in “an arbitrary and capricious manner.”  Further, the November 5th notice of re-bidding for the Karlsberger contract work contains a qualification criterion “to the favor of one specific party.”  

Karlsberger’s spokesperson further comments that: “These criteria – like much of this situation, contrary to the public interest – virtually guarantees that the same design firm that produced three costly and unacceptable sets of schematic design drawings, would be the ‘most qualified’ bidder.  The complaint says that this is a smoke screen, not public bidding, that violates Ohio law requiring open and competitive bidding of public contract.”

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