Black Hawk Casino Expansion Marred by Contractor’s Lawsuit

The Monarch Casino and Resort is in the midst of an expansion it says will be a “game changer” for the town of Black Hawk. 

But Monarch is now facing a lawsuit from the construction company on the project, and each side blames the other for delays and cost overruns.

PCL Construction, which is leading Monarch’s expansion and renovation project, is suing the casino in Denver district court for breach of contract, among other claims. 

PCL alleges Monarch has been improperly withholding payment for work on the construction project through a “piecemeal” approval system the casino has imposed on PCL and its subcontractors.

The Monarch expansion, which began November 2016, will roughly double the size of the hotel and casino, adding a 23-story, 500-room tower where a parking garage once stood.

Neither Monarch nor PCL has disclosed estimates for the total cost of the project, but PCL claims in its complaint it has billed Monarch for over $205 million in construction costs so far.

Monarch estimates the expansion will wrap up first quarter next year, with renovation on the existing structure finishing in the second quarter. PCL and Monarch originally slated the project to be completed second quarter this year.

According to the complaint filed Aug. 30, PCL agreed to proceed with building the Monarch expansion with the understanding that Monarch would at some point approve a cap on the project’s costs and scope. But Monarch has repeatedly refused to certify any guaranteed maximum price PCL has proposed, and it instead directed the company to keep working on the project on an ad hoc basis, PCL claims.

“Essentially, Monarch wants to have its cake and eat it too,” PCL says in the complaint. “It rejected each of PCL’s GMP Proposals but now does not want to live with the consequences of that decision and refuses to pay for the full cost of construction.” PCL claims Monarch has improperly withheld more than $3.3 million for work PCL and subcontractors performed.

In a Sept. 3 statement, Monarch called the lawsuit “preemptory” and “an attempt to deflect attention from [PCL’s] failures to deliver the completed project in a timely and cost appropriate manner.”

“[W]e have worked tirelessly to move the construction project forward,” the statement continues. “While Monarch has been frustrated with PCL’s numerous construction delays and cost increases, we have remained focused on the transformation of Monarch Casino Black Hawk.”

Monarch added that it is responding to the complaint with affirmative defenses and counterclaims, but as of Wednesday the company has made no filing to the Denver district court. Monarch’s statement alleges PCL committed “numerous contract and performance breaches” but doesn’t specify what they might have been.

Through a corporate consulting company, Monarch declined to provide Law Week comment beyond the company’s Sept. 3 statement.

Denver construction litigation firm Beltzer Bangert & Gunnell is representing PCL in the lawsuit and did not respond to questions about the case.

With the lawsuit more than a month old, no outside counsel is listed for Monarch, and the company would not confirm whether it has retained or was seeking outside counsel for the case.

When Monarch contracted PCL to lead the expansion project in 2016, each side agreed PCL would begin pre-construction work — such as planning, estimating costs and drawing up schedules — without a GMP established yet, according to the complaint. 

According to PCL, the contract “contemplated” the parties agreeing to a cap before PCL began construction, except they could agree on “early work packages” like excavations or foundations.

In March 2017, PCL proposed a GMP for a cost unspecified in the lawsuit, which Monarch allegedly refused. 

But Monarch directed PCL to keep building the expansion on a cost-plus basis without a guaranteed schedule or defined scope, PCL claims. 

“[U]sing a procedure not contemplated by, nor part of, the agreement,” Monarch had PCL buy out the project with various subcontractors for different scopes of work, and then had PCL submit the proposed subcontracts to Monarch for approval, or authorizations for expenditure, according to the complaint.

PCL claims it submitted two more GMPs to Monarch in September 2017 and Sept 2018, with the casino letting each proposal expire. 

Monarch kept PCL on the project and “agreed to pay the costs” PCL and its subcontractors took on “for as long as the Project took to construct, accepting the risk the cost and duration of the Project would be more than Monarch originally planned,” according to the complaint.

PCL insisted that with no GMP in place, the project isn’t bound to a timeline, and it blamed delays on Monarch’s decisions and “incomplete design documents.” Monarch assumed the risk of its piecemeal approach but “refuses to accept the consequences of that decision,” PCL said.

Monarch said its “disappointment” with the construction delays is “palpable,” but it will continue to work with PCL to finish the project, according to its Sept. 3 statement.

“While PCL’s performance has delayed our opening from our earlier announced dates, it will only increase the excitement of our team to deliver Black Hawk’s best-in-class resort and hospitality destination for visitors from across the Denver metropolitan area.” 

— Doug Chartier

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