TRANSMITTAL LETTER FOR BOARD MEETING OF NOVEMBER 5, 2026
COMMITTEE ON JUDICIARY
Mr. John P. Murray, Executive Director
Title
Authority to settle the Show Cause Complaint filed in Metropolitan Water Reclamation District of Greater Chicago v. Capital Industrial Coatings, LLC, Case No. 26B-006
Body
Dear Sir:
Capital Industrial Coatings, LLC (“Capital”) is a contractor offering services in industrial and heavy commercial coatings for steel, bridges, storage tanks, pipelines, and other commercial applications. On December 21, 2023, the District awarded Capital Contract 23-684-22 (Re-Bid), Equipment Painting & Rehabilitation at Various Locations, Groups A, B, and C in an amount not to exceed $3,323,600.00 (“Contract”) making Capital the Prime Contractor on the Contract. As a construction contract with a value of over $100,000.00, the Contract was subject to the District’s Affirmative Action Ordinance, Revised Appendix D (“Appendix D”), as well as the District’s Veteran-Owned Business Enterprise Ordinance, Appendix V (“Appendix V”) (collectively, “the Appendices.”) The Contract contained Appendix D goals of 20% MBE, 10% WBE, and an Appendix V goal of 3% VBE. As a prerequisite for being awarded the Contract, Capital agreed to abide by the requirements of the Appendices.
Over the course of the Contract, Capital met the MBE and VBE requirements but failed to meet the WBE requirements. The District’s Diversity staff was in contact with Capital throughout the life of the contract, but ultimately, Capital failed to meet certain contractual requirements, namely meeting WBE requirements as required under Appendix D and the Contract. Consequently, upon the closure of the contract, the District notified Capital that it would be pursuing sanctions for non-compliance.
On August 4, 2026, the District initiated Show Cause proceedings against Capital (“Show Cause Proceedings”). Thereafter, the District’s Law Department and counsel for Capital entered settlement negotiations and the District and Capital reached a proposed settlement agreement (“Agreement”).
Under the Agreement, the District and Capital agree that:
1) Capital will pay $205,000.00, as a settlement for the value of the work it self-performed instead of subcontracting to WBE contractors.
2) The Hearing Officer will retain jurisdiction over this case for a period of one year following the date that the Board approves the proposed Agreement.
The District currently holds $769,730.50 under Capital’s original purchase order. If the Board approves this Agreement, the District will issue a final payment to Capital, upon execution of the Agreement, which will be the remaining amount after the $205,000.00 is deducted as well as confirming that all subcontractors have been paid for work performed on the Contract.
Diversity and Law Department staff worked closely to effectuate settlement on terms and conditions favorable to the District, and Capital has agreed to these terms. The Board-appointed Hearing Officer helped negotiate the terms of the Agreement, determined that it was appropriate, and is prepared to sign an Agreement, if approved by the Board.
Accordingly, the General Counsel respectfully requests that the Board of Commissioners authorize a settlement of the Show Cause Complaint filed in Metropolitan Water Reclamation District of Greater Chicago v. Capital Industrial Coatings, LLC, Case No. 26B-006, and to authorize the General Counsel to execute all other documents in furtherance thereof.
Requested, Susan T. Morakalis, General Counsel, STM:BO’C:nl
Disposition of this agenda item will be documented in the official Regular Board Meeting Minutes of the Board of Commissioners for November 5, 2026