Colorado Springs will pay $10 million to settle a breach of contract dispute with the contractor it hired in 2018 to upgrade the city’s oldest water treatment plant.

A notice filed in El Paso County district court on Tuesday states both parties entered into a settlement resolving claims contractor Myers and Sons Construction brought in late 2020, alleging the city breached the parties’ construction contract to perform upgrades to the Phillip H. Tollefson Water Treatment Plant on Mesa Road. The agreement also settles a counterclaim Colorado Springs filed in 2021 alleging the contractor breached contract.

The Colorado Springs City Council approved the settlement amount on its consent agenda during the board’s regular meeting Tuesday. Items on the consent agenda are considered as a whole and passed by the council with one vote and no discussion.

The settlement avoids a jury trial that was scheduled to begin April 24.

“The settlement amount will not impact Springs Utilities’ ability to prioritize and accomplish needed work within our appropriated budget and financial objectives for 2024,” Jennifer Jordan, a spokeswoman for the city enterprise, said in a written statement this week.

Myers and Sons’ Colorado office in Brighton did not return The Gazette’s call requesting comment. Attorneys for both the construction company and the city did not return emails seeking comment.

Myers and Sons sued Colorado Springs in El Paso County district court Oct. 2, 2020. The company claimed in an 11-page complaint Colorado Springs Utilities breached its March 26, 2018, agreement for work with the contractor in several ways.

The contractor alleged the city failed or refused to pay Myers and Sons its full amount under the contract — $30.9 million after change orders, according to court documents.

The lawsuit also claimed, among others, Colorado Springs Utilities failed to issue and approve change orders; “disregarded or disputed” most of Myers’ requests for payment related to interruptions and changes to project work that increased contractor costs, such as city-caused delays and impacts from COVID-19; and “wrongfully suspend(ed), then terminat(ed),” Myers and Sons in September 2020, when its work to upgrade the water treatment plant was more than 90% complete.

The project was the first phase of planned upgrades to the plant that was commissioned in 1942 and expanded in the 1960s and 1980s. Jordan said work included building a new pre-treatment building and auxiliary buildings, reconfiguring drying beds that dewater sludge, and a new raw water vault.

Upgrades to the plant are part of a broader effort to optimize local water supplies and increase the redundancy of Colorado Springs’ water system, she said.

The city’s action to terminate Myers and Sons in 2020 prevented the contractor from completing its work, the company said in its lawsuit.

“Myers has incurred additional charges, extra work, impacts and delays in an effort to complete its work on the project without any resolution by (Colorado Springs Utilities),” the lawsuit stated.

In a 45-page amended counterclaim Colorado Springs filed April 27, 2021, the city denied Myers and Sons’ accusations.

The city alleged the contractor breached the contract because Myers and Sons failed to “substantially complete” its work on the water treatment plant by Nov. 2, 2020, and failed to complete the project by March 23, 2021, per the revised contract schedule.

The counterclaim states the contractor agreed to “perform all of the work within the contract times and within the contract price in accordance with the terms of the contract.”

Myers and Sons failed to do that, Colorado Springs claimed.

The contractor’s “continuous failures to provide resources necessary to meet the revised contract schedule delayed and protracted the work required by the contract and jeopardized milestone deadlines,” the city said.

The city eventually hired a new contractor, MWH Constructors, that completed the first phase of work on the plant, Jordan said this week.

The Tollefson plant produces about 20% to 25% of Colorado Springs’ drinking water, blending water from Pikes Peak with supplies transported from the Continental Divide, she said.