In a Surprise, Flagler Commissioners Vote 4-1 to Indemnify Contractor of South-Side Library for Up to $1.25 Million

In one of the most unusual–if not unprecedented–moves on behalf of a building contractor, the Flagler County Commission this morning voted 4-1 to indemnify Ajax Construction for up to $1.25 million for non-structural-related contractual matters in its construction of the Nexus Center, the south-side library Ajax is building for the county. 

“I don’t like the idea of having to indemnify a major contractor to things that seem relatively needed in the industry, like background checks, licensure requirements, EEOC,” County Commissioner Leann Pennington, the dissenter, said. “Seems to me that that would all be in line with them, and they’d be able to stand up to it. But here we are going forward with contracts, knowing that we could have outstanding grants. This stuff should be built into those agreements.”

In January 2024, Flagler County government landed a $4 million grant for the $16 million Nexus Center. The grant of federal funds was channeled through the state Department of Commerce. County staff started submitting payment requests to the state in May. 

The department’s auditor then informed the county that the grant agreement required Ajax to sign an indemnification agreement protecting the Department of Commerce in case of issues with the project. 

Ajax was “willing” to sign, according to a county staff memo to county commissioners–as long as the county, in turn, indemnified Ajax for the same amount. If the county didn’t go along, it would have had to forfeit the $4 million grant. 

The indemnification item had been placed on the commission’s consent agenda portion this morning–the portion made up of what are supposed to be routine, non-controversial items the commission approves in bulk, unless a commissioner or a member of the public wishes that an item be pulled for discussion. Pennington pulled that one. 

“Those provisions of the grant agreement were not included in the original construction agreement,” Hamid Tabassian, the county engineer, said.

Ajax is to be held harmless from any liabilities, losses or expenses arising from the construction. “It looks to me like we’re indemnifying them over doing what is typical in the course of business for construction,” Pennington said. 

“The funds that the Department of Commerce is providing, they’re actually ARPA funds,” County Attorney Michael Rodriguez said, referring to the acronym for the American Rescue Plan Act of 2021, the Biden administration’s Covid-related aid package to state and local governments. “They come with specific strings. And because Ajax entered into the contract with us for this construction, that contract did not contemplate these specific federal strings that are tied to that funding.”

Normally the funds are produced at the front end of the project. This was done at the back end as reimbursements for construction work mostly completed. “Because Ajax did this, they did not want to be on the hook after the fact, so they requested such an indemnification for those terms that were included in the agreement with Commerce that may cover them,” Rodriguez said. 

The indemnification covers only certain provisions such as the backgrounding of subcontractors, confidentiality requirements, unemployment assistance, compliance with work-hour and equal-opportunity employment provisions, licensure and other federal standards. 

“Anything outside of that, that they might have done, is not covered under this indemnification clause,” Rodriguez said. “Those specific federal clauses are not included in our contract if we have similar clauses, but aren’t exactly to the terms of the federal clauses.”

Rodriguez said based on his inquiries to the state, the audit found that Ajax “substantially complied” with the contract requirements, and that “the indemnification is just kind of an added protection in the event somebody comes out of the woodwork and files a claim.”

But if someone does, Ajax is not on the hook. Flagler County and its taxpayers are. 

“It’s just a shame that a major company can’t stand up to that, but here we,” Pennington said, “and then the taxpayers could be on the hook for $1.25 million should any of this come back up in an audit.” 

Rodriguez recommended Pennington’s suggestion–that with future contracts, “the conditions that are imposed as part of these grants mirror those that already are in our contract so we would not have to enter into these situations.” 

“But you’re not suggesting that regular contracts be held to the federal standard throughout?” County Chair Andy Dance asked. Rodriguez said it would be a case-by-case analysis. 

Whether it’s been the county-owned properties at Bing’s Landing or Bull Creek, the briefly-owned former Sears building on Palm Coast Parkway, a sheriff’s substation on Palm Harbor Village Way  or the former Sheriff’s Operations Center off State Road 100, the county had been on a run of challenging and costly building projects and related issues, underscoring the nervousness of county officials–publicly verbalized or not–when it comes to any sort of indemnification.

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