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Home My WebLink AboutCOM 0116.002 2016-2018 Eileen O'Hara -"-•"• Phone: (808) 965-2712 Council Member Fax: (808) 961-8912 Council District 4 ",��`l. � Email: eileen.ohara@hawaiicounty.gov Chair: Environmental Y_ Vice Chair Planning Committee and • Management Committee ;r+.E Co;•;,;�+� Agriculture, Water&Energy Sustainability Committee County of Hawaii Hawaii County Council COUNTY CLERK 25 Aupuni Street, Suite 1402 • Hilo, Hawaii 96720 COUNTY OF HAWAI'I RECEIVED Time M.3-1 ?.,m.By Date M P 0 7 7011 DATE: March 7, 2017 TO: Valerie T. Poindexter, Chair Hawai`i County Council FROM: Eileen O'Hara, Council Member Hawai`i County Council SUBJECT: Informational materials for Environmental Management Committee meeting on March 7, 2017 Attached please find informational materials relating to Communication No. 116 on the agenda for the EMC meeting on March 7, 2017. It would be greatly appreciated if the materials could be copied and distributed to Councilmembers before the presentation begins. Thank you for your attention to this matter. EO:bl Att. omm. No. Ref. To: Ref. Dote AR Hawai`i County is an Equal Opportunity Provider and Employer. Joseph K. Kamelamela HarryKim .pJt�.ac h� !'.,,. Corporation Counsel Mayor ° • •r� Renee Ni. C. Schoen Assistant Corporation Counsel COUNTY OF HAWAII OFFICE OF THE CORPORATION COUNSEL 101 Aupuni Street,Suite 325 • Hilo, Hawaii 96720 • (808)961-8251 • Fax(808)961-8622 March 6, 2017 Mr. John Brigham Senior Vice President Hawaiian Earth Recycling P.O. Box 861601 Wahiawa, HI 96786 Dear Mr. Brigham: Re: Response to Hawaiian Earth Recycling, LLC's letter dated March 1, 2017; Service Agreement for an Organics Diversion Program on East Hawai`i and West Hawai`i Between the County of Hawaii and Hawaiian Earth Recycling, LLC, Dated July 1, 2016 This letter responds to Hawaiian Earth Recycling, LLC's Letter dated March 1, 2017 ("HER's Letter") regarding the County of Hawai`i's Notice of Termination of Service • Agreement dated February 16, 2017 ("Termination Notice"), as it relates to the Service Agreement for an Organic Waste Diversion Program on East Hawai`i and West Hawai'i Between the County of Hawaii ("County") and Hawaiian Earth Recycling, LLC, ("HER") dated July 1, 2016 (Hereinafter "Contract"). The assertions in HER's Letter regarding the Termination Notice is unsupported by the contract itself, the law and the facts and circumstances in this case. The County denies HER's request to rescind the Termination Notice. The County has exercised its express contractual right to terminate the Contract for convenience pursuant to Article XV, Section 15.6 of the Contract. Instead of complying with the contractual terms delineated in Section 15.6, HER attempts to convince the County to rescind its Termination Notice by making specious allegations of bad faith, and misrepresentations as to the operation of the provisions of the Contract. See, HER's Letter, at pages 4 through 6. HER's Letter is an emotional response based solely on conjecture as to presumed outcomes concerning the Termination Notice. Id. As you are well aware, the County is exercising its express right, as agreed to under the Contract. Therefore, HER's request for informal discussions, purportedly under Hawaii Administrative Rules § 3-126-25 ("HAR"), is inapplicable to HER's threatened breach of contract action. See, HER's Letter, at page 7. HER would be well-advised to not attempt to unjustly enrich itself through unjustifiable claims and demands for additional Hawaii County is an Equal Opportunity Employer and Provider Mr. John Brigham March 6, 2017 Page 2 of 4 payments that are not supported by the Contract or the law. The County and HER, however, can discuss HER's obligations relating to the Termination Notice. See, Section 15.6, Termination for Convenience, Contract. The County acted in and for its interest Under the Contract, the County needs to only make a determination that "the interests of the County so requires" the termination of the Contract "for the convenience of the County." See, Section 15.6 (A), Contract. When a County contract is terminated for the convenience of the County, the County mustonly establish that the decision is in "the interests of the County." Id. HER's "best interests" arguments of no changed circumstances, lost Community benefits, and no sustainable economic alternative relates to HER's desires to continue the lucrative contract and are not a proper basis for a correct determination. Id., at pages 2 through 4. HER asserts that "[t}he county administration's statements and actions have placed its motivations to terminate the Agreement squarely at issue." HER's Letter at p. 6. The County's motivations as stated in the Termination Notice and publically, however, have only supported its intention to terminate based upon the County's interest. Mayor Kim stated.that "[t]he County's dual interest in increasing waste diversion and being fiscally prudent obligates this termination for convenience." Even publicly, Mayor Kim had stated that the Contract was terminated because of the "financial commitments of the County, and limited nature of the contract regarding composting." See, "Mayor Cancels Compost Contract," news article, Hawaii Tribune- Herald ("HTH"), Front Page, Saturday, February 18, 2017 ("1/18/17 news article"); and "Kim: No Penalties For Cancellation," news article, HTH, Front Page, Wednesday, February 22, 2017. Mayor Kim never stated that his decision was based on site location, on a Kona Waste-to-Energy Project, and on disallowing a submittal by HER of a reimbursement claim. Id. Please be advised that in order to substantiate a claim of bad faith, HER must prove by "clear and convincing evidence" that the County, Mayor Kim, intended to unreasonably harm HER. HER cannot prevail in a bad faith suit against the County because there is not a scintilla of evidence for its claim. There is no Hawaii Procurement Code Violation HER asserts Hawaii Procurement Code violations because of a failure to do contract deductive changes or modifications, and of the County's intent to re-solicit a bid for an organic waste diversion program. See, HER's Letter, at page 4. There are no such procurement violations. Under the Contract, there is no duty by the County to do deductive changes or modifications. Section 10.29, of the Contract, provides that "the County, subject to Mr. John Brigham March 6, 2017 Page 3 of 4 mutual agreement of the parties and all appropriate adjustments, may, make modifications within the general scope of this" Contract. Modifying the Contract was an option but it was not the only option for the County. Id. Under the Contract,.when the County exercised its right to terminate for convenience, there was no obligation by the County to engage in the process of deductive changes or having informal discussions under HAR §3-126-25. Id. Accordingly, Mayor Kim appropriately exercised the County's right of termination for convenience in the Contract. Lastly, HER's speculative accusations of favoritism due to the re-solicitation of a bid to do enhanced mulching or composting are false. See, letter, at page 5. There is no evidence .of favoritism to another possible bidder. HER's Interests are Not Harmed HER has agreed to an adequate remedy of law for the Termination for Convenience in the Contract. HER can submit a claim for reimbursement pursuant to Section 15.6 of the Contract. It has a year from the effective date of termination, that is, June 30, 2017,. to file such a claim. Id. Upon receipt of HER's asserted $4 million claim, the County will scrutinize the assertion in regards to each item, associated cost or expense, and supporting evidence, at least, under the following inquiries: 1. Is the claimed payment item relevant and reasonable? 2. Does the claimed payment item include anticipatory profit (which is improper)? 3. Does the claimed payment item include consequential damages (which is improper)? 4. Did HER reasonably mitigate its damages as expressly required under the Contract? Contrary to HER's assertions, the Mayor did not complain of HER's performance in its Termination Notice or publically. In Fact, Mayor Kim has publically stated that he "didn't have an issue with the company's performance." See, 1/18/17 news article. Summary The County, through Mayor Kim, legitimately terminated for convenience the Contract in the interests of the County. There is no reason to rescind the Termination Notice. And the interests of HER are adequately protected. On matters relating to HER's obligations after receipt of the Termination Notice, please continue to work with Mr. William A. Kucharski, Director of Environmental Management, and his. staff. Mr. John Brigham March 6, 2017 Page 4 of 4 If any other representative of HER wants to meet with me to discuss the threatened lawsuit or the claim for reimbursement, HER's attorney(s) must be present during the discussion. Respectfully, Joseph K. Kamelamela Corporation Counsel JKK;clf c: Mayor Harry Kim County Council Chair Valerie Poindexter County Council Member Aaron Chung County Council Member Susan Lee Loy County Council Member Eileen O'Hara County Council Member Jennifer Ruggles County Council Member Maile David County Council Member Dru Mamo Kanuha County Council Member Karen Eoff County Council Member Herbert "Tim" Richards III Director of Environmental Management William A. Kucharski Finance Director Collins Tomei