Arbitration Reveals Wide Leeway in Scott Reed Contracts

Arbitration Reveals Wide Leeway in Scott Reed Contracts
Scott Reed at the relaunch of K Lofts in 2013. (Mauren Kennedy)

Two weeks ago, we told you about AMR Construction landing an arbitration award for unpaid work on the Main Street Lofts project in downtown Little Rock.

The arbitration ruling provides a glimpse into the chaotic development world of Scott Reed, who led the ownership group and oversaw the project.

Here are some highlights produced from the Jan. 5-11 arbitration hearing and subsequent briefs:

• A complete and final set of plans and specifications wasn’t provided by the owner when the 180-day contract was signed May 22, 2013.

So even though the parties signed a contract that provided for a guaranteed maximum price ($3.4 million), the owner and the contractor knew that changes would be made as the job progressed.

The extensive use of allowances, the decision to begin work without a complete set of plans and the many changes directed by the owner, meant the true nature of the arrangement between the owner and the contractor was more like “design-build” than a traditional design-bid-build contract that would have allow strict enforcement of a guaranteed maximum price contract.

• The guaranteed maximum price was subject to additions and deductions by change order.

Although there were provisions in the agreement that no changes were to be made without a written change order, the parties by their conduct ignored those provisions.

AMR performed work as directed by the owner, the owner performed some of the contractor’s scope of work, and the owner paid AMR for additional work or deducted for work the owner’s forces performed — all without a written change order signed by the parties as the terms of the agreement required.

The owners waived any requirement for written change orders by repeatedly disregarding the requirement.

• The 62,688-SF M.M. Cohn Building at 510 Main St. was not part of the contract.

The evidence showed that the work in the M.M. Cohn Building was necessary in order to supply electricity to and complete the work in the two buildings that were part of the contract.

Everything done by the contractor was with the knowledge and acquiescence of Reed, who directed all of the work throughout the project. As the project developed, the owner directed many oral changes to the work, with the agreement of AMR

Reed testified that he preferred to communicate by phone rather than in writing. Many emails from the contractor to Reed are in the arbitration record with no reply.

AMR is in the process of transforming its $974,784 arbitration award into a judgment in Pulaski County Circuit Court. That will allow the company to pursue a foreclosure action to recover the money owed by Main Street Lofts LLC and Main Street Lofts South LLC. (For more, see AMR Comstruction Begins Foreclosure Action on Main Street Lofts.)