Haywood County is headed to arbitration in a lawsuit over the $8.2 million renovation to the historic courthouse.

The contractor sued the county for $2 million after being fired from the job in May 2008. The county claimed the contractor was “significantly behind schedule” and was “incapable” of finishing the job they were hired to do.

Meanwhile, KMD Construction claims it was working off inaccurate blueprints. As a result, the project took a lot longer than expected, and was more expensive.

The county refused to pay for cost overruns, however. KMD says it was left holding the bag and wants the county to pay up. The suit cites wrongful termination by the county and negligence by the county’s architect.

Last week, the county learned arbitration to settle the ongoing dispute has been scheduled for May 2011.

The county and contractor butted heads for most of the project, but the final straw came when the county learned the contractor was cutting corners that compromised the structural integrity of the building, according to court filings. Specifically, a cinder-block wall of an interior staircase at the rear of the courthouse was being put up without proper internal support.

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“KMD management was aware of the unsafe, improper and defective construction and intended to cover it up,” the county claims in court filings, defending its firing of KMD.

Another construction error involved leaky conduit for electrical lines feeding an emergency generator. The conduit was not properly sealed, and leaks damaged the switch for the emergency power supply, according to the county.

In yet another mishap, kerosene heaters were left burning unattended to make drywall mud dry faster. One malfunctioned and smoke and soot got into the ventilation system and filled the building.

KMD, however, says the architectural plans were inadequate and failed to meet building code, leaving out key support beams in several places.

The construction plans also failed to reflect the condition of the historic building, such as the varying thickness of the stone exterior walls and undulating slopes in the floor, which required extensive leveling, KMD claims in its suit.

The county admits that the blueprints weren’t perfect, but that goes with the territory when making renovations to a historic 1930s-era building.

“Haywood County admits that the project designs required revisions through the course of construction to meet unknown conditions in the existing building,” wrote Bob Meynardie, an attorney representing the county, in court filings.

The county countersued the contractor, claiming it racked up additional expenses of its own during the drawn-out project. It had to pay rent on satellite office space during the renovations, pay architects for additional time and hire a scheduling consultant to keep the project on task.

The county withheld payments from the contractor to cover most of the extra costs it incurred as a result of the quagmire, while other costs were picked up by a surety bond taken out by the county as insurance against just such a scenario. As a result, the county didn’t pay any more for the project than it had budgeted originally. It was completed a year late, however.

What now?

Arbitration will bring a final resolution to the dispute and is similar to a court trial.

“The contractor will present their case, we will present our case and the arbitrators will decide whether or not to make an award to either side,” said Meynardie.

Both sides will present evidence, call witnesses and put on exhibits.

The only difference is that arbitration isn’t held before a judge. Instead, the decision rests with a three-person panel selected jointly by both sides: one chosen by the county, one by the contractor, and the third chosen jointly by the first two. The American Arbitration Association certifies architects, engineers, contractors and lawyers to serve as arbitrators. In this case, the panel will be comprised of three construction lawyers.

The architect and engineer for the project are named by KMD in the suit as well, but the county will hold the primary burden of countering KMD’s claims.

It does not appear that the county will try to point the finger at the architects and engineers in order to absolve itself.

“We believe the contractor had more responsibility for what wrong out there than anybody,” Meynardie said.

Issues with the contractor’s work were brought to the county’s attention by the architect. The architect also recommended firing KMD. But the county stands behind its decision.

“The contractor didn’t live up to its contractual obligation. We had to make our own assessment of that,” Meynardie said.

Even if the county prevails at arbitration, it will still be out the legal costs of defending itself, Meynardie said.