LAS VEGAS—MGM Mirage likely will not seek legal action against the participating parties involved with structural issues that delayed and significantly altered the design on the Harmon Hotel, according to the company’s chairman and CEO, Jim Murren.
The Harmon, one of six major components of the just-opened CityCenter, originally was designed as a 49-story mixed-use condo/hotel. But when the structural engineer deemed the project compromised after discovering 15 floors worth of improperly placed reinforcing bar, construction was stopped at 28 floors. MGM Mirage, co-owner and CityCenter project manager, later cancelled the residential condominium component altogether.
“It is our hope to be able to resolve any issues related to construction at the Harmon Hotel in the course of finalizing the building process at CityCenter,” Murren told HotelNewsNow.com via e-mail. “At this time, we hope no legal action will be needed to resolve the matter between the parties.”
Jim Murren (pictured here during the CityCenter grand opening press conference) said MGM Mirage likely will not seek legal action against parties involved with construction delays at the Harmon Hotel.)
While not a definitive statement of intentions, Murren’s comment softens expectations for a potential lawsuit that some within the industry speculated might help MGM recoup lost revenues tied to the Harmon’s condominium component.
Those same comments, however, fail to provide clarity for a lengthy battle over liability that first began in July 2008.
The blame game
Construction errors on the Harmon were first noticed 15 July 2008 by project engineer Halcrow Yolles, according to a complaint filed by Ron Lynn, director of the Clark County Development Services Department, as reported in the Las Vegas Review-Journal.
The project’s subcontractor, Pacific Coast Steel, had incorrectly laid reinforcing bar, commonly known as rebar, for the link beams and floor jambs from floors six to 20, which were not in accordance with the original design, according to signed court documents from the Nevada State Contractors Board.
In April of this year, the subcontractor agreed to pay a US$10,000 fine for “workmanship not commensurate with the standards of the trade in general,” as well as US$4,105 in administrative fees to cover the cost of the investigation, according to the documents.
Throughout the investigation and settlement process Pacific Coast Steel never admitted guilt, citing only a “desire to resolve the issues”
under investigation by the Nevada Contractors Board.
The board determined that Pacific Coast Steel remained qualified to conduct business in Nevada.
While the subcontractor might have physically laid the rebar, other parties were quickly brought into the fray as well.
Most notable were the third-party consultants, Converse Consultants, hired by MGM Mirage to oversee construction of the complex CityCenter project.
In an administrative hearing conducted by Clark County, it was concluded that two inspectors, Joseph Laurente and Scott Edberg, who were hired by Monrovia, California-based Converse Consultants, falsified 62 daily inspection reports that said they had observed and approved rebar work on the Harmon, according to court documents. As a result, the compromised structural work continued for 15 floors.
Pacific Coast Steel and Converse Consultants did not respond to multiple requests for interviews for this article.
Perini Building Company, the general contractor for all of CityCenter, also received flack for not properly overseeing the work done by Pacific Coast Steel.
Initially, Perini management was quick to redirect blame. When the Nevada Contractors Board ruled against Pacific Coast Steel, claiming construction errors and not design errors were to blame for the improperly placed rebar, Perini president Craig Shaw released a statement saying Perini “stands by its opinion that design conflicts contributed to the Harmon Hotel structural issues and that portions of the structural drawings, as designed and permitted, contained elements of reinforcing steel that could not be installed as drawn.”
However, in an interview with HotelNewsNow.com conducted Wednesday with two members of the Las Vegas-based construction company, it appears the company has softened that defensive stance.
Pat Hubbs, executive VP of field operations, admitted Perini and Pacific Coast Steel “should have stopped that whole process (of laying concrete over the rebar) long ago.” Earlier in the conversation, he did say the rebar could not be physically laid according to the design.
He also admitted communication between all the involved parties could have been improved.
Richard Rizzo, Perini’s vice chairman, said the construction errors weren’t conducted in a vacuum, and that many involved parties were aware of the modifications.
He said: “There were many people that were involved who were at that point aware of what was being done and were OK with that. It was only after a point where it was discovered by … the structural engineer that what had been done as a modification, he wasn’t comfortable with that, so he put a stop to that. And that started the whole exercise of re-evaluating and deciding what really he felt needed to be done structurally.”
Rizzo said who is at fault is “very blurred,” and that “everybody’s a part of it.”
The county maintains that construction errors, and not design errors, were the source of the problems.
“The design was not the issue. It was that the design wasn’t followed and that the special inspectors did not catch that,” said Dan Kulin, public information officer for Clark County.
The Harmon’s architect, London-based Foster + Partners, said that because the hotel’s delay and altered design were purely a construction-related issue, they would not comment.
And as for MGM Mirage?
“The reinforcing steel that is inside the concrete … that was put in incorrectly, not in accordance to the plans. It was put in incorrectly, and then the inspectors did not catch the mistake, and the mistake was continued for 15 floors,” said Gordon Absher, VP of public affairs for MGM Mirage.
While Murren’s comments suggest MGM Mirage likely will settle blame out of court, the company still has a legitimate cause to recoup losses through litigious action, according to at least one person closely tied to the project.
When asked whether he thought MGM Mirage was going to file a lawsuit against the construction companies and other involved parties, Robert Baker of Baker Project Consulting said, “I can’t imagine they’re not going to do that.”
Baker worked on the Harmon as a quality inspector for Leading Hotels of the World, a luxury hospitality organization representing more than 450 hotels, resorts and spas, in the months leading up to the discovery of the Harmon’s construction errors.
Absher said he’s sure MGM Mirage is reviewing its options, trying to determine where fault lies.
And while Perini’s Rizzo admitted yesterday that MGM Mirage “can do pretty much what they want to do,” he was confident that recouping damages through litigious action was not the casino operator’s intention.
If anything, the construction errors gave MGM Mirage a convenient reason to eliminate the condominium aspect of the project amid financial pressure, Rizzo said.
“I think (MGM Mirage) realizes that,” he said. “And I think they’re just trying to understand where the responsibility lies and try to get everybody to agree to some settlement that will allow them the ability to then decide what they want to do.”
At the time, the delay and design alterations were well received by investors who saw the move as a way to defer approximately US$200 million in construction costs for a year in CityCenter’s US$9.1-billion budget.
Art Gensler, chairman of architectural firm Gensler, which served as lead architect for CityCenter, shared a similar sentiment during an interview yesterday. “I’m sure if (MGM Mirage) had their druthers, they’re very happy not to have those (condo) units there.”
Absher admitted the economy, in part, contributed to the decision to delay the project and eliminate the condo portion.
“Due to the time delay, the additional cost and the condition of the economy, the decision was made to eliminate 200 condominiums that were planned for the upper floors.”
The Harmon evolved
All of Harmon’s structural issues with the rebar have been corrected, and the hotel is slated to open near the end of 2010 with about 400 guestrooms and suites, according to Absher.
Rizzo maintains the Harmon can become whatever MGM Mirage wants it to become.
“It’s just a matter of how much they want to spend,” he said. “Right now, with some modification … if they want to expand it beyond the 20th floor as it is, they can do so. But they’ve chosen not to.”
Rizzo said MGM Mirage likely is waiting to evaluate the absorption rate of the condominiums throughout the rest of CityCenter. Should they sell as the economy improves, the company could alter its plans to either expand the Harmon or make it strictly residential.
The management team at The Light Group, which was chosen to manage the Harmon’s hotel component, is confident the property will indeed remain a hotel and that it will be overseeing operations by late 2010.
“We’re still taking the same approach,” Jodi Myers, president of the Las Vegas-based company, said yesterday, adding she was very disappointed by the project’s delay.
For now, the Harmon sits in silent limbo amid the hustle and bustle of CityCenter’s 18-million square-foot campus. The project’s exterior was rushed to completion so as not to disrupt the visual continuity of the complex’s grand opening yesterday, but construction on the interior has paused for the time being, awaiting direction and answers.
“Whose error was it, who should have caught it—a lot of questions are being asked right now,” Absher said. “We’re focusing on opening CityCenter. I’m sure those thing will work themselves out in the long run.”