ALJDEC decisions subject to certification as final

2012A-3899-ROC · Registrar of Contractors · 2013-03-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 8, 2013, at 8:00 a.m. APPEARANCES: Select Development and Construction Inc (hereinafter “Complainant”) appeared through its project manager, James William Olson. Jeffrey C. Stone Inc dba Summit Builders (hereinafter “Summit”) appeared through its attorney, John Randall Craig, Esq., Fennemore Craig, P.C. ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________

Evidence and testimony were presented and the following Findings of Fact, Conclusions of Law and Recommended Order are made: FINDINGS OF FACT 1. Summit is the holder of License No. B-1.073472-C issued by the Registrar of Contractors. 2. This is a commercial matter wherein Complainant performed paving, concrete, excavation, and earthwork as a subcontractor for Summit for the Naco Border Patrol construction project (the “construction project”). 3. During the course of construction, Complainant encountered “hard-dig” conditions that allegedly required extra work to complete. Complainant submitted a “pass-through” claim to Summit that was then presented by Summit to the United States Army Corps of Engineers (“the Government”) for approval. The Government reviewed the claim and denied it on the basis that the claimed extra work was included in the original scope of work in Complainant’s subcontract agreement. 4. Complainant submitted a change order request for the cost of asphalt concrete (“AC”) haul-off and recycling. Summit initially denied the claim on the alleged basis that the only material that Complainant hauled off was its own AC that did not meet specifications for the construction project and was rejected after it was placed. During the hearing, Complainant acknowledged that it had been paid for the haul-off and that it was no longer an issue. 5. On August 2, 2012, Complainant issued a letter to Summit demanding payment for the construction work performed by Complainant on the construction project. Complainant also terminated its contract with Summit for Summit’s alleged failure to pay Complainant for extra work performed as a result of the hard dig in areas that were allegedly requested and approved by Summit.[1] 6. On August 15, 2012, Summit issued a formal notice of termination based upon Complainant’s stated unwillingness to complete the work described in the parties’ subcontract agreement.[2] Summit stated that the subcontract was terminated because Complainant was requiring additional compensation from Summit for construction work that Summit felt was part of the original subcontract agreement.[3] 7. The Government received Complainant’s pass-through claim for extra costs incurred in the alleged hard-dig area and denied the claim. The Government found, in pertinent part, as follows: The [Government’s] investigation revealed the following evidence of hard rock material similar to that identified on the main site: caliche strata in the excavation for the retention pond, an exposed vein of caliche along Naco Highway where the forced main exits the existing station (this is also indicated on Select Development’s sketches), caliche material waste at each utility pole location along Naco Highway, some material along the Garnet and Macdonald streets right-of-way(including several exposed areas at the end of Macdonald street where the pavement ends, and finally, the entire length of Della Street is caliche material right to the surface. It is noted that all of these indications of hard material were observable with a reasonable site investigation (reference FAR 52.236-3, Site Investigation and Conditions Affecting the Work). It is also noted that no borings or other information were provided in the contract to represent conditions at the existing station or at other areas where work extends beyond the boundaries of the main site. As such, [the Government] does not agree that responsibility for added costs or delays for the removal of hard material in the areas off the main site rests with the Government….[4]

8. Complainant’s superintendent, Phillip Andrews (hereinafter “Mr. Andrews”), testified that he believed that if Complainant encountered hard-dig areas, it was to document the hard-dig area and submit a change order to Summit that would then be passed through to the Government. Mr. Andrews stated that Complainant did encounter unexpected hard-dig areas and submitted change orders for the unexpected additional work to Summit. 9. Complainant’s president, Thomas Brian Neal (hereinafter “Mr. Neal”), testified that Complainant’s demand for extra payment was based on additional work under a verbal change order that Summit had implicitly approved. Mr. Neal stated that Complainant had been paid for the AC haul- off by Summit’s bonding company. Mr. Neal testified that he felt it was Summit’s responsibility to protest the Government’s refusal to approve the change order submitted by Complainant. Mr. Neal stated that Complainant stopped work and left the construction project because of Summit’s alleged breach of contract in failing to protest the Government’s refusal to approve the requested change order. 10. Mr. Neal testified that Complainant’s claim against Summit was based on three unapproved change orders for extra work that Complainant performed in hard-dig areas. Mr. Neal stated that hard-dig costs were not part of the parties’ subcontract. Mr. Neal testified that Summit had not been paid by the Government for Complainant’s claim for payment for the extra hard-dig costs incurred by Complainant. Mr. Neal acknowledged that Complainant had not provided the Government with any additional evidence to support its claim for the extra hard-dig costs. 11. Complainant’s project manager, James William Olson (hereinafter “Mr. Olson”), testified that Complainant indicated that Summit owed Complainant $196,619.83. Mr. Olson testified that Complainant had received some money from Summit and Summit’s bonding company and that the dispute between the parties primarily involved the sum of $46,688.08 claimed by Complainant for alleged extra costs in the hard-dig areas of the construction project. Mr. Olson acknowledged that Complainant’s claimed change orders for extra work performed in hard-dig areas were denied by the Government. 12. Summit’s letterhead on the parties’ written contract does not display Summit’s license number preceded by the acronym “ROC.”[5] Summit’s letterhead in its August 2, 2012 letter does not display Summit’s license number preceded by the acronym “ROC.”[6] Summit’s letterhead on its August 9, 2012 Formal Notice of Default does not display Summit’s license number preceded by the acronym “ROC.”[7] CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in these matters is by a preponderance of the evidence. See A.A.C. R2-19-119. 2. 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). 3. Complainant presented change orders to Summit for alleged extra work performed by Complainant in hard-dig areas. Complainant’s change orders were passed through to the Government in accordance with the parties’ written contract. The Government reviewed Complainant’s claims for additional money and denied the claims on the basis that the claimed extra work was included in the original scope of work in Complainant’s subcontract agreement. This Tribunal concludes that Complainant failed to meet its burden of proving that Summit violated the charged provision of A.R.S. § 32-1154(A)(11).[8] 4. Summit’s letterhead on the parties’ written contract does not display Summit’s license number preceded by the acronym “ROC.” Summit’s letterhead in its August 2, 2012 letter does not display Summit’s license number preceded by the acronym “ROC.” Summit’s letterhead on its August 9, 2012 Formal Notice of Default does not display Summit’s license number preceded by the acronym “ROC.” This Tribunal concludes that Summit violated the charged provision of A.R.S. § 32-1154(A)(13),[9] namely A.R.S. § 32-1124(B).[10] RECOMMENDed order In view of the foregoing, it is recommended that commencing on the effective date of the final Order, License No. B-1.073472-C of Summit shall be suspended until the Registrar of Contractors receives and accepts written proof that Summit has brought all of its letterheads and other documents that it uses in its contracting business to within full compliance with the provisions of A.R.S. § 32-1124(B). It is further recommended that if on or before the effective date of this Order, Summit submits acceptable written proof to the Registrar that it is within full compliance with the provisions of A.R.S. § 32-1124(B), then the above-provided License suspension shall not take place and this matter shall be closed. In the event of certification of this Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 40 days from the date of the certification.

Done this day, March 18, 2013.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors

----------------------- [1] See Exhibit No. C-11 (8/2/12 letter). [2] See Exhibit No. R-1 (Agreement). [3] See Exhibit No. C-12 (8/15/12 Formal Notice of Termination). [4] See Exhibit No. R -2 (11/7/11 Department of the Army Letter). [5] See Exhibit R-1 (Contract). [6] See Exhibit No. C-11 (8/2/12 letter). [7] See Exhibit No. C-12 (8/15/12 Formal Notice of Termination). [8] A.R.S. § 32-1154(A)(11) includes among the grounds for disciplinary action against a contractor’s license, failure by a licensee or agent or official of a licensee to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee's operations as a contractor when the licensee has the capacity to pay or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased. [9] A.R.S. § 32-1154(A)(13) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in any material respect to comply with this chapter.” [10] A.R.S. § 32-1124(B) provides, in pertinent part, as follows:

Licenses issued under this chapter and any renewals shall be signed by the registrar or the registrar's designated representative and by the licensee. The license shall be nontransferable, and satisfactory evidence of possession shall be exhibited by the licensee upon demand. The license number appearing on any licenses held by the licensee shall be preceded by the acronym "ROC" and shall be posted in a conspicuous place on premises where any work is being performed, shall be placed on all written bids submitted by the licensee and shall be placed on all broadcast, published, internet or billboard advertising, letterheads and other documents used by the licensee to correspond with the licensee's customers or potential customers in the conduct of business regulated by this chapter. A violation of this subsection relating to posting and placement of license numbers shall be, at the discretion of the registrar, grounds for disciplinary action pursuant to section 32-1154, subsection A, paragraph 13, but not grounds for preventing the award of a contract, voiding an awarded contract, or any other claim or defense against the licensee. For the purposes of this subsection, advertising does not include a trade association directory listing that is distributed solely to the members of the association and not to the general public.

-----------------------

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826