ALJDEC decisions subject to certification as final

18-001BRG-SFB · Arizona School Facilities Board · 2018-01-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the matter of:

Glendale Elementary School District No. 40

(a public school district)

No. 18-001BRG-SFB

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: October 11, 2017, and October 12, 2017, with the record held open until December 11, 2017.

APPEARANCES: Glendale Elementary School District No. 40 was represented by Jennifer N. MacLennan and Carrie L. O’Brien. The Arizona School Facilities Board was represented by Assistant Attorney General Debra Sterling.

ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer

_____________________________________________________________________

FINDINGS OF FACT

Facts Stipulated by the Parties

The Arizona School Facilities Board (Board) was created in 1998 (1998 Ariz. Sess. Laws, 5th Spec. Sess., Ch. 1, § 39, codified at Arizona Revised Statutes (A.R.S.) § 15-2001 et seq. as amended) in response to a decision by the Arizona Supreme Court that the then State system of school capital finance did not conform to the State Constitution’s Article 11, Section 1.A.

In 2008, the legislature authorized the Board to distribute monies from the Building Renewal Grant Fund (Grant Fund) to school districts “for the purpose of maintaining the adequacy of existing school facilities.” 2008 Ariz. Sess. Laws, Ch. 287, § 28 (HB 2211) codified at A.R.S. § 15-2032 as amended.

The statute authorizes the Board to distribute grant funds to school districts to fund “primary building renewal projects” which are statutorily defined as “projects that are necessary for buildings owned by school districts that are required to meet the minimum adequacy standards for student capacity and that fall below the minimum school facilities guidelines, as adopted by the school facilities board pursuant to section 15-2011, for school districts that have provided routine preventive maintenance to the school facility.” A.R.S. § 15-2032(G)(1).

School districts are required to follow the School District Procurement Code. A.R.S. § 15-231; Arizona Administrative Code (A.A.C.), Title 7, Chapter 2, Articles 10 and 11.

The Glendale Elementary School District No. 40 (District) is an Arizona public school district that is eligible for monies from the Grant Fund.

On June 30, 2015, the District submitted an application to the Board for an award of monies from the Grant Fund to correct building flooding caused by drainage issues at Challenger Middle School located at 6905 West Maryland Avenue, Glendale, Arizona 85303 (Drainage Project).

At the September 10, 2015 meeting, the Board awarded monies from the Grant Fund to the District for an assessment of the Drainage Project.

At the Board meeting on August 3, 2016, the Board awarded monies from the Grant Fund to the District for design, bid assistance and construction assistance for the Drainage Project.

At the Board meeting on May 3, 2017, the District requested funding for construction services for the Drainage Project and approval of the use of a general contractor from its Job Order Contract (JOC) previously procured via a request for qualifications/request for proposal for construction services. This request was denied.

At the May 3, 2017 Board meeting, the Board awarded the District an additional $7,000.00 specifically for procurement assistance to conduct a formal bid process to correct drainage issues at Challenger Middle School (project number [number redacted]-999-005BRG), with intent to bid the project in June.

After the May 3, 2017 Board meeting, the District undertook a formal bid process.

At the May 3, 2017 Board meeting, the Board approved the staff recommendation that Eloy Elementary 004 BRG be awarded an additional $133,700.00 in Building Renewal Grant funding to repair/retrofit the HVAC and control system on Building 1001 at Eloy Junior High School (project number [number redacted]-1001-004BRG). This included $12,243.00 in contingency that would only be used with SFB staff written approval.

At the June 7, 2017 Board meeting, the Board approved the staff recommendation that Paradise Valley Unified 004BRG be awarded an additional (not to exceed) $494,075.00 in Building Renewal Grant funding for the roofing at Liberty Elementary School (project number [number redacted]-9999-007BRG).

At the June 7, 2017 Board meeting, the Board approved the staff recommendation that Paradise Valley Unified 006BRG be awarded an additional (not to exceed) $494,075.00 in Building Renewal Grant funding for the roofing at Pinnacle Peak Elementary School (project number [number redacted]-9999-006BRG).

At the June 7, 2017 Board meeting, the Board approved the staff recommendation that Paradise Valley Unified 005BRG be awarded an additional (not to exceed) $497,595.00 in Building Renewal Grant funding for the reroofing phase at Whispering Wind Elementary School (project number [number redacted]-9999-005BRG).

At the June 28, 2017 Board meeting, the District requested that the Board award grant funds for construction services for the Drainage Project with the District to use its JOC general contractor.

The District advised the Board that it cancelled the formal solicitation it had completed for the Drainage Project because the bids were procedurally deficient and substantially non-conforming.

At the June 28, 2017 Board meeting, the Board approved staff recommendation that Glendale Elementary be denied Building Renewal Grant funding to correct drainage issues at Challenger Middle School (project number [number redacted]-9999-005BRG) because the quote provided did not meet the formal bid process.

At the June 28, 2017 Board meeting, the Board approved staff recommendation that Phoenix Elementary 023BRG be awarded an additional $134,369.00 in Building Renewal Grant funding to replace a chiller at Herrera Elementary School (project number [number redacted]-1001-023BRG), with an addendum that the District use a State JOC.

At the June 28, 2017 Board meeting, the Board approved staff recommendation that Tolleson Union 013BRG be awarded an additional $363,500.00 in Building Renewal Grant funding to replace a controller and install new JACEs to the control system at Westview High School (project number [number redacted]-9999-013BRG).

Facts Determined by Administrative Law Judge

On or about November 10, 2015, the District signed Terms and Conditions for Acceptance of Monies from the Building Renewal Grant Fund (Terms and Conditions). The Terms and Conditions required the District to comply with procurement rules adopted by the State Board of Education and the Arizona Procurement Code, as applicable. The Terms and Conditions did not state that if a project would exceed $100,000.00, the District was required to initiate a formal bid process and could not use an alternative project delivery method.

In response to the District’s formal bid process, Chasse, the JOC contractor, did not sign they recognized the addendum and the two other bidders did not properly submit the bid package. As a result, all three bids were deemed non-responsive.

Chasse was performing work at Challenger Middle School under the JOC. The District requested that it be allowed to award Chasse the project after the failed formal bid process due to the existing relationship and because there may be some duplication of work if a different contractor completed the Drainage Project. Furthermore, that duplication of work could result in increased costs and “fingerpointing” if warranty issues arose at a later date as to which contractor would be responsible for the work.

As to the other bids referenced in the stipulated findings of fact, the Eloy Elementary, Phoenix Elementary, and Tolleson Union projects involved cooling systems in the schools and were considered urgent projects to allow students to return to school.

In contrast, the three Paradise Valley Unified projects involved metal roofing being installed at different campuses. The Board determined that because the contractor Paradise Valley Unified wanted to use had installed the same roofing at five other Paradise Valley Unified campuses, consistency of the contractor and warranty concerns justified awarding the almost $1.5 million total projects without requiring a formal bid process.

No statute, regulation, or formal policy set forth that projects over $100,000.00 required a formal bid process, or detailed when that formal bid process could be bypassed.

/ / / / /

CONCLUSIONS OF LAW

The District bears the burden of proof and the standard of proof on all issues is by a preponderance of the evidence. See A.R.S. § 41-1092.07(G); A.A.C. R2-19-119. A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law Of Evidence, § 5 (1960). Proof by preponderance of the evidence “is evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary 1182 (rev. 6th ed. 1990).

The District argued that the June 28, 2017 decision of the Board to deny the Drainage Project was “illegal, arbitrary, capricious or involved an abuse of discretion.” Eaton v. AHCCCS, 206 Ariz. 430, 432, 79 P.3d 1044 (App. 2003). Specifically, the District asserted the following:

The Board did not have statutory authority to create any internal rule, standard or procedure that all Building Renewal Grant projects over a $100,000.00 threshold must undergo a formal bid process;

The Board did not properly adopt or create an internal regulation regarding its stated procedure; and

The Board applied its stated procedure in an arbitrary and capricious manner.

The interpretation of a statute by an administrative agency that administers it is entitled deference unless clearly erroneous. See e.g. Berry v. State Dep’t of Corr., 145 Ariz. 12, 13, 699 P.2d 387, 388 (App. 1985).

The Board asserted that its interpretation regarding the administration of the Grant Fund was consistent with its long-standing interpretation regarding the administration of the New School Facilities Fund (Facilities Fund). The Board pointed out that the authorizing statutes relating to the Grant Fund and the Facilities Fund both use the phrase “administer the fund and distribute monies.” The Board has duly-promulgated rules for the Facilities Fund that require school districts to follow specific procedures when requesting monies for either additional square footage or land and the Board has specific policies available online for the administration of funds and the distribution of monies from the Facilities Board. The Board argued that because the same language was used in both the statutes relating to the Grant Fund and the Facilities Fund, the Board has the authority to require school districts to follow its policies for the distribution of State monies from the Grant Fund.

The Board has the authority to administer the Grant Fund in the manner it sees fit including interpreting the statutes and rules relating to the Grant Fund. In furtherance of its ability to administer the Grant Fund, the Board also has the authority to implement policies detailing specific procedures. However, that does not mean the Board may implement those statutes, rules, or policies without consistency.

The Board purported to have an unwritten policy that projects over $100,000.00 require a formal bid process. However, at hearing, the Board detailed certain exceptions to that policy including urgent projects, consistency with the contractor, warranty concerns, and whether the project involves a building.

From the evidence presented, the District and Paradise Valley Unified presented similar arguments to the Board during the process as to why the Drainage Project and the roofing projects, respectively, should not require a formal bid process. Both the District and Paradise Valley Unified cited an existing relationship with the contractor and warranty concerns as the basis of the request to use a specific contractor. The only difference between the projects identified by the Board was that one was directly related to a building and one involved the landscaping around a building without identifying why such a distinction was important to the Board.

The Administrative Law Judge concludes that the District sustained its burden of proving by a preponderance of the evidence that the Board’s June 28, 2017 denial of the District’s request of an award from the Grant Fund for the Drainage Project was arbitrary and capricious.

RECOMMENDED ORDER

Based on the above, the Board’s determination denying the District’s request for funds from the Grant Fund should be reversed.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification.

Done this day, January 2, 2018.

/s/ Tammy L. Eigenheer

Administrative Law Judge

Transmitted electronically to:

Paul G. Bakalis, Executive Director

Arizona School Facilities Board