ALJDEC

98F-2692-ROC · Registrar of Contractors · 1999-06-08

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARINGS: January 21, April 5, 6, 7, 21, and 23, 1999.

APPEARANCES: COMPLAINANT: by Julianne Wheeler, Esq., with Jose

Castillo, president. RESPONDENT: by Kenneth Millsap Sr., sole proprietor.

ADMINISTRATIVE LAW JUDGE: Anthony Halas _____________________________________________________________________

This matter proceeded to hearing to determine whether Respondent Ken Millsap Sr. dba The Becken Company violated state law as alleged by Complainant Inca Contracting Co. and as cited by the Registrar of Contractors (Registrar). Based on the testimony and evidence presented[1] on those dates, as well as administrative notice of certain events and documents relative to the procedural history of the case, the following Findings of Fact, Conclusions of Law, and Recommended Decision are made and submitted to the Director of the Registrar of Contractors: // // // //

FINDINGS OF FACT

1. Complainant Inca Contracting Company, Inc. (Inca) is a licensed Arizona general contractor, License No. 0-72439, Class A. Jose Castillo (Castillo) is president of the incorporated company and its authorized representative.

2. Kenneth R. Millsap Sr. (Millsap Sr.), dba as sole proprietor of The Becken Company (Becken), is a licensed Arizona contractor, License No. 0-84999, Class B-01, issued December 20, 1989. 3. On or about July 10, 1996, Inca, as the prime contractor, and Becken, as a sub-contractor, entered into a SUBCONTRACT AGREEMENT (Becken’s Exhibit 2 and Inca’s Exhibit D; the “Subcontract” ) in the amount of $431,842.86, for Becken to install an underground waterline at the Roadrunner campground project at Lake Pleasant, to the northwest of Phoenix, Arizona. 4. This Subcontract was within the scope and context of the “Roadrunner” contract, one of two prime contracts Inca had bid and been awarded by Maricopa County Recreation Services Department (the County), which was the owner/developer of the Roadrunner Campground facility, one of several recreational projects developed by the County to address the new shoreline created by the deepened lake resulting from the completion of the new Waddell Dam. 5. The prime Roadrunner contract involved essentially all aspects of the construction of that seventy-six site campground, including underground water, irrigation/landscaping, utility, and electric lines, except for actually bringing water through the lines to the site. Inca, as the prime contractor, entered into a number of separate subcontracts with the various trades necessary to complete the prime contract. 6. Pursuant to a separate bid, the County then awarded Inca a second contract, “Phase Two”, to bring the water to the Roadrunner Campground, eventually by means of the water lines first laid pursuant to the prime Roadrunner contract. Phase Two was the subject of a separate prime contract because of a differing ratio of financial contribution by the Federal government. Becken was not a sub-contractor under Phase Two, although Boss Grading, a licensed contractor owned and operated by Millsap, Sr.’s brother Ronald, did perform as a sub-contractor to Inca under that prime contract. 7. Relative to the Roadrunner prime contract, the County hired Entranco Engineering (Entranco) as its part-time on-site representative to monitor all aspects of the prime contract as it was implemented through the various subcontracts entered into by Inca. Entranco did not have authority to unilaterally modify the prime or sub-contracts, but was required to gain approval from the County for any modifications or change orders. 8. The Subcontract between Inca and Becken provided, among other terms, that the scope of work was as per the schedule of work attached, and that subcontractor Becken agreed “to furnish all labor, material, equipment, supervision and all individual items required to complete all work outlined in the plans, specification and addendum [of the prime contract] …to the complete satisfaction of the [County].” The Subcontract provided a start date of August 5, 1996, with the completion date indicated as “varies”. 9. Thereafter, on June 2, 1998, Inca filed a complaint against Becken with the Registrar of Contractors, alleging Becken had committed several violations of the Arizona contractors’ laws in that the company had: failed to comply with project plans and specs; failed to pay withholding taxes; injured Inca through fraudulent representations and wrongful conduct; failed to complete the work for the agreed price; failed to pay creditors therefore exposing Inca to garnishment; and, refused to correct its deficient work. 10. As a result of that complaint, the Registrar’s inspector, John Ratcliff (Ratcliff) conducted a jobsite inspection of certain aspects of Becken’s work on the Roadrunner campground on June 29, 1998, in the presence of representatives of both Inca and Becken, among others. 11. Inspector Ratcliff then issued a Corrective Work Order (CWO) on July 16, 1998. Administrative notice is taken of the terms of the CWO, and the hand-written notes of the inspector upon which it was based:

Item #1 Valves are not per the specifications. The contractor is to ensure that all valves are per the specifications. Item # 2 Water Piping Leaking From conversations with Mr. Hazelwood of Entranco and documentation provided to this inspector, it appears that the air test was a means to get the contractor’s paid and did not relieve the contractor of his responsibility for the final water test prior to total acceptance. There are conflicting statements with the air tests. 1. The on site inspector stated he checked all air tests prior to backfill. 2. Mr. Hazelwood stated that his inspector did not view all air test but was told they passed. 3. The on site inspector stated he did not check the valves for the air test.

At best it appears that poor testing procedure [were] followed with poor documentation. Mr. Hazelwood stated he saw a section removed from the ground that was not glued. Also a section that was damaged when a tree was planted. Along with this there were sections of pipe that were damaged and/or did [not] appear to be glued correctly on display at the inspection. Due to the above the contractor is to ensure that the water piping passed the required water test.

Item # 3 Involved in this complaint are money issues and wrongful act issues. With both contractors bringing allegations against each other. At this time there is a complaint 98-2692 filed by the Becken Co. against Inca for non-payment. It is this inspector’s opinion that the money and wrongful act issues should be resolved by complaint 98-2692 since complaint 98-2692 has already been cited for a hearing.

12. When the matter was not resolved administratively, the Registrar issued CITATION AND COMPLAINT in Case No. 98-3126 on August 13, 1998, charging Respondent Becken Company with possible violations of A.R.S. §§ 32- 1154.A.2, .3 (with the rule violation that of A.A.C. Rule 4-9-108, Workmanship), .5, .7, .9, .11, and .23. 13. On August 21, 1998, Respondent timely filed its answer to the CITATION AND COMPLAINT, and the Registrar referred the case for hearing. 14. The matter was initially consolidated for hearing with the CITATION AND COMPLAINT in Case No. 98-2692. However, as noted above, that case was dismissed during the course of proceedings by stipulation of Ken Millsap, Sr., as sole proprietor of The Becken Company, the complainant therein. 15. At the initial and further hearings, Complainant Inca was represented by counsel, with its president, Jose Castillo, appearing as its authorized representative. 16. Respondent Ken Millsap, Sr., dba The Becken Company, was initially represented by counsel until April 6, 1999, when Millsap Sr. confirmed his attorney’s filing providing notice dismissing Becken’s complaint against Inca, and counsel’s withdrawal. From that date, Millsap Sr. represented his interests as sole proprietor of The Becken Company. 17. During the course of the proceedings, extensive testimonial and documentary evidence was presented by both parties, all of which has been considered by the undersigned, to the extent deemed relevant and probative. 18. Complainant Inca offered the testimony of Castillo; Ken Clark; David Hayes; Shirley Bowser Olson; James Host; Judy Bateman; Lynn Pate; Mike Barone; and Herb Hazelwood. All such testimony was subject to cross- examination by Respondent. 19. Inca also offered Exhibits 3, A – Z, and AA – FF. Many of the exhibits contained multiple documents identified as subparts, and the exhibits included, but were not limited to, Inca’s response, with attachments, to Becken’s complaint in Case No 98-2692; the prime and sub- contracts, and modifications; “MAG” specifications, particularly § 610.; correspondence and faxes, with attachments, to and from each party; correspondence to and from third parties; minutes of on-site progress meetings; various Conditional Waiver and Release forms; photographs of the jobsite with supporting documentation; a videotape of the jobsite; and pipes and valves identified as from the jobsite to demonstrate alleged installation defects or damage. 20. Respondent Becken offered the testimony of Millsap Sr.; Ken Millsap, Jr.; Leonard Moreno; Bruce Balls; Robert Millsap; and Ronald Millsap. All such testimony was subject to cross-examination by Complainant. 21. Becken also offered Exhibits 1 – 2, and 4 – 22. The exhibits included, but were not limited to, The Becken Company’s resume of projects; the sub-contract; Becken’s final payment request; a number of Contingency Fund and Additional Work Authorization forms; Summary of Units Paid; correspondence and faxes, with attachments, to and from the parties; minutes for onsite progress meetings; proposed supplement to MAG specifications; and hand-drawn jobsite water plan and bollard charts. 22. Objection was made by each party to various of the exhibits and testimony offered by the other party, with rulings as to admissibility made in each instance by the undersigned. If an objection was sustained, then no further consideration was provided by the undersigned to that particular exhibit or testimony, within the scope of the objection. If the objection was overruled, the exhibit or testimony was given the weight deemed appropriate by the undersigned, according to relevance and probative value. 23. Jose Castillo testified as Complainant's president, and described the two separately-bid but related prime contracts his company had bid on and been awarded by the County, as the “lowest responsible bidder”: the Roadrunner contract to build the campground of that name - under which he negotiated a subcontract with Ken Millsap Sr. for the underground installation of the main water line; and the Phase Two contract to provide water and utilities to the campground. 24. Castillo stated that the Roadrunner prime contract with the County was for $3,500,00.00, and the original subcontract with Becken for $431,842.86. After adding subsequent approved modifications/change orders, and backcharges incurred during construction, he calculated the final subcontract amount at $548,652.67. 25. He explained that a significant modification to the sub and prime contracts resulted from the grading (not required of Becken), and the trenching, digging, and installation difficulties Becken encountered as a result of the extensive but unexpected “hard rock” underlying the job site (Exhibit A, subpart 10 ( “ A/10” )). 26. He further described the printed subcontract terms of § 11, “Contractor’s Services Clause”, of the subcontract, as annotated in handwriting he testified was not his own, initialed and dated 8-5-96 (see Exhibit D), to explain why he did not believe the subcontract required “backcharging” to be done in writing by Inca within 48 hours, although at one point (in April, 1997), just before being ordered to garnish its payments to Becken, Inca had proposed but not finalized such notice to Becken (Exhibit K), and in any event, he thought that Becken had approved all such backcharges as of October, 1997, shortly after leaving the jobsite that September (Exhibit 4). 27. Castillo stated Inca had ongoing difficulties in determining specific payment amounts to be made to Becken for work completed, particularly since Becken did not provide Inca regular monthly pay applications; the unit quantities itemized by Becken required Inca to negotiate with the County before payment would be authorized; and Inca often was forced to seek lien releases from Becken’s subs and suppliers before it could pay Becken, which also wanted Inca to guarantee payment to Becken’s suppliers (Exhibit L). 28. Castillo described the circumstances and events requiring Inca to garnish its payments to Becken (for Becken’s failure to pay a “temp” labor provider on an unrelated matter) (See Exhibits A/11, A/12, and A/16), and charges incurred by Inca on behalf of Becken (Exhibit A/15), and questions which arose regarding the accuracy of Invoices (Exhibit A/13) and Unconditional Waivers (Exhibits H and I) Becken provided Inca. He also explained his understanding of the federal and state withholding taxes for which Inca became liable when Becken failed to pay them (Exhibit A). 29. He explained that the prime Roadrunner contract required that “MAG” (Maricopa Association of Governments) specifications be met, such that the subcontract with Becken was also controlled by those specs, particularly § 610. (Exhibit M). 30. Castillo emphasized § 610.14 as the particular specification requiring that the water line, a pressurized system, meet a “water test” for its ability to sustain particular pressure over certain periods of time, conceding that such a test could not be conducted any time before April, 1998, when water to the campground became available upon completion of the separate Phase Two prime contract (some six months or more after Becken had provisionally completed its subcontract work under the Roadrunner contract and demobilized). 31. It was for that reason, Castillo testified, that the County (through its on-site representative Entranco) and Inca allowed Becken to conduct an “air test” (which took days or weeks in late 1996 - he was not certain of the date - and the replacement of certain valves by Becken, before it was completed) as a temporary measure to check the water line integrity and to allow Becken to be paid for work done. 32. Castillo asserted that the permission granted Becken to conduct the air test had never waived the MAG-specified water test, referencing as evidence of that the on-site progress meeting minutes, §§ 9-A-5 and 8-C-7, of November 18, 1996 (Exhibit N), and the absence of any writing modifying the contract specifications to allow the air test to substitute for the water test. 33. Castillo then described his understanding of the circumstances of the water test conducted in April, 1998, and subsequent leak detection testing by various methods, and eventual water line repair ongoing through August, 1998, without anyone from The Becken Company on hand at any time until the Registrar’s jobsite inspection, and not since then, despite prior and continuing notice (Exhibits Y, Z, and AA) to Becken. 34. He explained that the water test had failed to meet the required specifications for pressure and duration, such that Inca had incurred significant delay and expense in determining (Exhibit P) and repairing the water line leaks, and as a result was now subject to paying liquidated damages per the terms of its prime contract with the County (Exhibits Q, R, and S). 35. Castillo testified that no one on behalf of The Becken Company had responded in any way to address the Registrar’s Corrective Work Order. 36. He conceded that he was not at the Roadrunner campground jobsite every day, and did not know to what extent, if any, Inca’s crew or its other subcontractors had damaged any of the water or utility lines, all laid in the same trench, either before Becken left the jobsite in September, 1997, or after that time, including times during which Inca’s crewmembers were using an auger to dig holes for “bollards” , or later, when Inca was using heavy equipment such as a backhoe to troubleshoot the water leaks found after the water test failed. He admitted it was possible that Inca’s crew had damaged some portions of the water line while auguring the bollard holes. He also agreed that it was theoretically possible that Inca’s crew had damaged the water line in any of a number of ways while operating a backhoe or other heavy equipment, but he was not aware of any such damage. 37. Castillo stated that he had not been aware during the course of the subcontract that Ken Millsap Jr. was not authorized to speak or act on behalf of The Becken Company, and he denied ever coercing Millsap Jr. to do so. 38. Ken Clark (Clark) testified to describe his significant experience in the construction trades, and his present association with “Pipeline Technologies”. He confirmed that at the time the Roadrunner campground was under construction, he was Inca’s project manager in the office and on-site, with Albert Creech also supervising on-site for Inca. 39. He explained the MAG specifications as they addressed the “bedding” to be laid by Becken in the combined water line/utilities trench it dug, noting that while Becken was not contracted to “grade”, it was required to haul away the “spoils” dug from the trench. 40. Clark stated the air test was simply a preliminary test, which nevertheless took time and effort by Becken in replacing valves in order to pass, and that the air test was never meant to waive the MAG spec requiring the water test, but was the only way he knew of to test the water line until the water eventually became available. In considering Becken’s memo of December 4, 1996 (Exhibit 16), he did not believe it provided any basis to believe the water test had been waived. 41. He stated that in retrospect, given the leaks and defects found by Inca in the water line after the failed water test, he was uncertain how the water line as a whole could have passed the earlier air test without being “plugged” in some way, agreeing with Millsap Sr. that in some ways an air test was harder to pass than a water test. 42. He described his negotiations with several individuals associated with Becken, including Ken Millsap Jr., which resulted in the work trade-off “Field Agreement” (Exhibit U) he had made with Becken, explaining that he thought those individuals had the authority to act for the company. 43. Clark confirmed he had been onsite and observed Inca’s employee Mike Barone using a “Bobcat”-mounted auger to dig holes for some of the several bollards necessary at each campsite to protect the above-ground fixtures, and that in the course of that work, some damage had been done to some of the ¾” water line risers, but that none of that damage was of significance to the overall integrity of the main water line, or its eventual inability to pass the water test, since the auger, if it hit the water riser, would have little impact on the underlying 4” water main line. 44. He conceded the theoretical possibility that the backhoe used by Inca as part of its probe to find water line leaks could have smashed water line valves, or moved underground rock adjacent to the water line in such a way to damage it, but was not aware of any actual damage occurring in that way. 45. David Hayes (Hayes) testified to describe his qualifications (Exhibit V) as a registered civil engineer and geotechnical consultant with ATL, Inc., and his inspection and observation on June 29, 1998, at Inca’s request, of the Roadrunner campground jobsite during the water line Helium leak detection testing done by Mike Barone. 46. He confirmed that as a result of those observations, he had authored a report dated July 2, 1998 (Exhibit P), and he clarified the substance of the conclusions he had expressed in that report. One such conclusion was that although he had not been on-site to observe at the time of the original air test, and didn’t know (relative to Exhibit 19) exactly where or how the air test was done, if the condition of the water line was then as he had observed it on June 29, 1998, the line as a whole could never have passed a properly-done air test, although individual sections might have passed. 47. Hayes opined that the Helium test itself, by plan and as he had seen it done by Barone (without knowing Barone’s actual experience in such testing), was non-destructive of the water line, and revealed a number of leaks and defects, which if the line had originally been installed according to spec, were not likely caused by either auger damage or heavy equipment operation on the surface above the water line. 48. In his own experience, he had never known of a municipality, such as the County, to contract for a water line and then to waive the requirement of a water test, since that test was the most appropriate means to measure just what the water line was meant to accomplish. 49. Shirley Bowser Olson (Olson), a credit analyst for Mesa Sprinkler Company, now known as Horizon Irrigation, testified to describe supplying Becken with materials used on the Roadrunner campground, and two documents she considered to be true copies (Exhibits X and W) of “Conditional Waiver and Release on Progress Payment” forms she had prepared and provided, probably by fax, to Becken on September 9 and October 3, 1996, in the amounts of $14,282.28 (for materials/services through 9/7/96) $5242.16 (for materials/services through 8/30/96). 50. She compared those with documents (Exhibits H and I, respectively), which she then concluded were very similar but altered by someone unknown to her, to show increased amounts. 51. Olson confirmed that her company had been paid only the lower amounts indicated on the true copies. 52. James Host (Host) testified that as a design supervisor for the County, he had been project coordinator on its prime Roadrunner and Phase Two contracts with Inca, with the County’s interests monitored by Entranco Engineering. He explained why the water line was constructed under the Roadrunner contract prior to water actually being made available under the Phase Two contract. 53. He estimated that he had been on-site about once per week, working there and off-site with Entranco’s Herb Hazelwood, as supervisor, and Russ Davie, as field manager, who were overseeing and monitoring on- site (but not every day, due to budgetary constraints). 54. Host stated that Entranco’s representatives had no authority to verbally modify any terms of the contracts, and that any modifications had to be authorized in writing by the County, in any event. 55. He described discussions involving the County, Entranco, Inca, and Becken in which it was concluded that an air test was the most reasonable way to assess the integrity of the water line and allow construction to proceed, until water was actually available, when the water test would still be required. He denied that the air test was ever meant to substitute for the water test required by MAG spec, nor was any such contract modification ever made, verbally or in writing, or even proposed by Inca or Becken. 56. Host explained the County’s position relative to Inca’s performance (confirming that the County had no direct contractual relation with Becken) once it was known that the April, 1998, water test had failed, and confirmed the manner and extent to which the County deemed Inca subject to liquidated damage penalties, particularly for the delay in making the water line water-tight from April to August, 1998. 57. He stated that Russ Davie was on-site for Entranco, part-time, to observe and clarify ongoing construction, and had monitored and approved the air test, which Host had not attended, such that the trench could be backfilled and construction continued. 58. Host noted that the buildings on-site were essentially completed in August, 1997, shortly before Becken left the site in September, and that during the ongoing work on-site after Becken’s departure, he was unaware of any damage to the waterline by Inca or its other subs, and first knew of water line integrity problems only when water became available and the water test failed in April, 1998. 59. Judy Bateman (Bateman), the bookkeeper and office manager for Western Tree Company, testified to explain that company’s actions in supplying trees to Becken for the Roadrunner campground, and the invoices (Exhibit A/13) she sent Becken for the material provided. 60. She described Ken Millsap Sr.’s request that her company bill at twice the invoice amount as a means of providing a “trade discount”, which request her boss addressed by agreeing to bill at the “book” price, an amount greater than the invoice amount but less than the doubled amount Millsap Sr. had requested. 61. Bateman confirmed that she had limited knowledge of Millsap Sr.’s dealings with Tom Jones, a salesman with her company, for the trees in question, or any need Becken had for money up front for watering the trees “in perpetuity”, once planted at the campground, which apparently meant until water became available on-site. 62. Lynn Pate (Pate), an Inca vice-president since 1990, testified to describe his involvement in, and awareness of, various aspects of the Roadrunner and Phase Two construction. He explained the concerns raised by the unexpected extent of the “hard-rock” to be dug, and how that affected Inca’s prime contract with the County, and particularly the work to be done by Becken under its subcontract with Inca. 63. He stated he had negotiated with Entranco’s Herb Hazelwood to increase the percentage of monies due Becken for its increased costs as a result of the hard rock, as documented in the minutes of the December 2, 1996, on-site meeting (Exhibit 17). 64. Pate then described the contents and purpose of the several faxes he supervised the sending of to Becken: first, to advise of the impending water test (on April 6, 1998; Exhibit Y); then, to allow Becken opportunity (before hiring someone else do it, and then backcharging Becken) to address testing and repair necessary once it was apparent the water test did not meet spec (on April 7, 1998; Exhibit Z); and then again to provide Becken opportunity to do the work needed (on April 10, 1998; Exhibit AA). 65. He stated that no one from Becken ever appeared on-site or responded in any other way to the faxes. 66. Pate also explained why the circumstances and “offset” terms of the separate “North Entry Boat Ramp” subcontract Inca had with Becken allowed Inca to reduce monies it would otherwise owe Becken on the Roadrunner subcontract. 67. Mike Barone (Barone) testified that he currently was a project foreman for Inca, a position he had held since about April, 1998. Previously, he had been working on-site for the company on the cement crew. 68. During his time on the cement crew (with dates uncertain, but at least prior to the water test) he stated he had operated an auger to dig most of approximately 3 bollard holes at each of the 77 Roadrunner campsites. He explained that the auger was mounted on and powered by a “Bobcat”, a small backhoe/loader (and not the standard -sized backhoe he had later used while leak-detecting), and that each bollard was a reinforced pole, cemented in the 2 ½’ - 3’ holes he dug, to protect the water line risers from vehicle or other damage. He conceded that on one occasion while he was augering, Robert Millsap had told him to “quit tearing up the lines”. 69. Barone confirmed he had not observed or been part of the actual water test in April 1998, or the earlier air test, but explained his subsequent efforts on behalf of Inca to find and determine the cause, if possible, of the multiple leaks preventing the water test from meeting the MAG specs. 70. He described the three primary leak-detection test methods he had used (in addition to simple visual observation and other limited testing, such as two types of acoustic testing): first, by means of a pressure pump and a 30-gallon water source, a method he found too imprecise for specific leak detection; second, by means of the normal water pressure as it was pumped; and then, eventually by use of pressurized Helium gas injected into the water line system at various intervals. He confirmed that Entranco’s Russ Davie had kept a daily log of the leak detection testing. 71. Barone conceded and confirmed that his prior experience in installing or testing pressurized water lines was essentially limited to small-scale residential-type light-weight PVC pipe sprinkler systems, such that he was primarily self-taught in the testing methods he had used for leak detection on the much larger scale “Schedule 80” plastic piping on the Roadrunner water line. 72. He explained how he would proceed to determine just where a leak was in the Roadrunner water line, and the equipment he would use to excavate to the leak in order to determine the cause and repair. That equipment included both hand-digging and use of a standard-sized backhoe, operated on occasion by his 16 year-old son, but Barone asserted that the use of the backhoe had not caused the leaks he found, since each leak was known to exist before the backhoe would be used to dig, and the nature of the defects he found to be causing the leaks was not the damage an auger, or a backhoe (or other heavy equipment on the surface) would cause. 73. Barone referenced his documentation of his testing results and conclusions by means of photographs (Exhibit DD), an index to the photographs (Exhibit CC), actual sections of water line and valves he considered to be defective, as found in the course of his testing and investigation (Exhibits EE/ ”520” , EE/ ”53” , EE/ ”South of 6” , EE/ ”CorpStop” , EE/ “58” , EE/ “39” ), and a videotape (Exhibit FF) he had made during his investigation of the leaks. 74. He used the multiple sections of pipe and valves in Exhibit EE to demonstrate the various defects resulting in the leaks he had found. These included, in his opinion, an absence of glue to join pipe sections; improperly seated pipe sections; misused “gookum” putty; and broken valves. He also demonstrated one section of damaged pipe (Exhibit EE/39) which he opined demonstrated augering damage, but he denied that particular pipe section had been a leak source. 75. He confirmed that while earlier operating the auger to dig the bollard holes, he had hit several, exact number unknown, but perhaps two or three, sections of the water line, which were then repaired. He denied Becken’s assertion that he had augered into water line pipe more than 20 times, and explained why he did not think that augering could readily “spin” an unseen underground rock or boulder into the water line with sufficient force to damage it. 76. Notwithstanding his relative lack of experience in laying water line, Barone thought it very unlikely that the whole water line could have passed the air test if the line had the same multiple defects then that he found as the source of the many leaks in need of repair after the failed water test. 77. He explained his understanding of the difference between “corp stop” valves and “gate” valves, and just what the MAG specs required, based on the size of the valve. 78. Barone confirmed that Inca, rather than Becken, had broken two valves, one of which he demonstrated (Exhibit EE/South of 6), and another, not in evidence, in an area of the Roadrunner jobsite northwest of space 73. 79. Herb Hazelwood (Hazelwood) testified to explain his thirty- eight years experience as an engineer, thirty as a licensed engineer in Arizona, his work as Entranco’s resident construction engineer on the Roadrunner project for the County, on-site two days per week, and his current position, part-time, for ATL, Inc. 80. He also explained Russ Davie’s (Davie) position and duties on that project as Entranco’s chief inspector for the County, confirming that he did not know Davie’s whereabouts since Davie had left Entranco’s employment. 81. He stated that he knew the circumstances of the air test, although he had not observed it; and that the test had been monitored by Davie, although not section by section, since it was not considered the final test. Hazelwood stated that Becken was specifically advised that the air test was to be permitted as an interim courtesy, for the benefit of all parties, given the absence of water, but had never been intended as a substitute for the water test required by spec. His personal opinion was that an air test of a water line, all things being equal, would be easier to pass than a water test. 82. Hazelwood opined that in a properly-installed water line, the pipe itself was the weakest link, rather than the valves or joints, and concluded that based on his observation of the various parts of Exhibit EE, some of them clearly could not have held the pressure indicated in the air test results which Davie had relied on to approve the test. 83. Ken Millsap Sr. testified to describe his thirty-five years experience in the trade of construction excavating, grading, and landscaping, and his operation of The Becken Company as a licensed Arizona contractor in that trade since 1985 (Exhibit 1). 84. He described past projects completed by the company similar in scope to the Roadrunner subcontract, noting that this was the only one in which water was not available during the course of the project, and how that made completion significantly more difficult. 85. Millsap Sr. described the essential terms of the “unit price” Subcontract Agreement with Inca (Exhibit 2), including landscaping, trees, misting systems, and approximately 14,000 lineal feet of trenching into which Becken would install a main water line, and into which other trades would lay other electric and utility lines. He confirmed that Becken had not been subcontracted to grade the site, which he understood was Inca’s responsibility. 86. He asserted that the subcontract, as annotated in handwriting before being scratched by someone other than himself (Exhibit 2, p. 6, § 11) provided that Becken was to be notified within 48 hours of any backcharges levied by Inca, but that Inca had failed to do so, despite Becken’s consistent submission of monthly statements. 87. He stated he was on the jobsite almost every day, and that his on-site managers were his brothers Robert and Ronald Millsap (who was an employee of Becken on that project but later subcontracted with Inca on Phase Two as Boss Grading), and his son, Ken Millsap Jr., who handled billing and unit itemization. He described day-to-day dealings on-site with Albert Creech and later Ken Clark, for Inca, and Russ Davie, for Entranco, the County’s on-site monitor. 88. He conceded that Becken had run out of working capital during the course of the subcontract, and described his efforts to keep the company solvent, and his ongoing concern that Inca had never paid Becken monies owed under the contract, which resulted in Becken’s cash flow problems. 89. Millsap Sr. explained his understanding of the garnishment Inca had been required to make on its payments to Becken, and confirmed that the garnishment remained in effect at the time Becken had warranted its work. He conceded that the Becken letter over his signature of June 18, 1997 (Exhibit 3) was in violation of the writ of garnishment, but asserted that Inca’s Ken Clark had told him to write it. 90. He also stated his understanding that Inca had agreed to pay both wages and withholding tax for Becken, disputing that Becken was to pay withholding tax while Inca paid the wages for Becken’s employees. 91. Millsap Sr. was not sure and did not specifically recall receiving notice from Lynn Pate prior to the water test in April, 1998, but he denied ever receiving notice from him, or Inca, since then (until receiving Inca’s complaint through the Registrar, and attending the Registrar’s Jobsite Inspection in June 1998) that the water test had failed, or that Becken should consider returning to the site for testing or leak repairs. 92. He conceded conversations with Judy Bateman of Western Tree Company, but stated he had not asked her to increase the amounts she was invoicing Becken, but only to provide a trade discount as everyone did it, since Becken had to “perpetually maintain” the trees on-site with a water truck until water was made available. 93. Millsap Sr. denied ever altering “Conditional Waiver” forms sent or faxed to Becken by Mesa Sprinkler Company. 94. Ken Millsap Jr. (Millsap Jr.) testified to describe his position as Becken’s superintendent, and his particular duties from about August, 1996, when Becken began work on the Roadrunner subcontract, including directing Becken’s crews, quality control, some accounting, and regular progress payment requests to Inca.. 95. He asserted, contrary to testimony for Inca, that he and The Becken Company had submitted invoices and unit itemizations to Inca regularly throughout the course of the work; that Inca had never backcharged Becken until it was already off-site as of September, 1997 (Exhibits 14 and 15); and that pursuant to the terms of the subcontract, Becken was not required to haul off the “spoils” from its trenching, or to do any grading. He also asserted that once the “hard rock” problem was apparent, the County had agreed to pay 100% of the additional costs resulting, such as hiring J.H. Dykstra to provide the heavy equipment “Ramhoe” necessary to dig the rock. 96. Millsap Jr. explained Becken’s Final Payment Request (Exhibit 4), dated October 30, 1998, which he said was submitted to Inca after Becken had been told its work was completed and had demobilized from the jobsite. He stated the Request was in the amount of $549,039.40, based on the initial subcontract and subsequent modifications, which were addressed in Contingency Fund and Additional Work Authorization forms (Exhibits 5 - 13). 97. By his calculations, based on those modifications to the original contract and additional itemization of actual units used (e.g., Summary dated January 19, 1998, Exhibit 13), Millsap Jr. asserted that that Becken was owed by Inca a balance due in excess of $120,000, such that Becken’s position was that Inca’s failure to pay was a major breach of the subcontract which relieved Becken of any further performance in attending the water test or correcting any leaks found as a result.

98. He stated that he had been present for the air test conducted over a period of time by early December, 1996, with a gauge and air compressor used to gradually raise pressure in the water line to 126 psi, at the direction of Russ Davie, who he recalled had physically checked each valve beforehand. Millsap Jr. confirmed that initially the test did not pass, but that after Becken changed certain of the valves to meet MAG specs, at the recommendation of the manufacturer, then Russ Davie said the air test passed as of December 4, 1996 (Exhibits 16 and 17) after the water line held sufficient pressure per spec for 26 hours. He agreed that each line of sectionalizing valve was not tested separately. 99. In his initial testimony, Millsap Jr. initially asserted that the air test substituted for the water test, by permission of Russ Davie and Entranco, and based his conclusion on the terms of § 7 of the Proposal Pamphlet (Exhibit 18), which allowed for substitute construction methods or procedures. However, in subsequent testimony he conceded that after further research he had concluded that the air test was not a substitute for the water test. 100. Millsap Sr. made no such concession, asserting throughout the proceeding that by successfully meeting the air test specs, and because it had not been paid the balance it considered was due from Inca, Becken was not required to meet the water test requirements, and therefore did not attend that test or take any further action based on its results. 101. Millsap Jr. explained how Becken had completed its contract by September 27, 1997, and left the site with no indication that the water line leaked or did not meet spec, concerns the company did not learn of until about April, 1998, but that in the interim, Inca and other subs continued working, with Mike Barone augering bollard holes, and with other work being done using various types of heavy equipment, such that his concern was that the reason the water line test did not meet spec was due to defects or damage caused by Inca and its subs after Becken left the site.. 102. With regard to the garnishment Inca was required to pay for Becken’s failure to pay wages for the Advance Labor personnel, Millsap Jr. stated that the garnishment was only necessary as the result of Inca’s failure to timely pay Becken. 103. He stated that neither he nor Robert or Ronald Millsap were authorized to sign documents for Becken, and that any such signatures were made under duress, including the warranty he had authored for Becken and his letter for Becken dated June 18, 1997 (Exhibit 3). 104. Leonard Moreno (Moreno) testified as owner of Moreno Welding, a subcontractor to Inca on the Roadrunner campground responsible for ramada work. He explained he was at the Registrar’s jobsite inspection due to his concern for Inca’s failure to pay his company, but did not recall Jose Castillo saying anything then about Inca hitting pipe and being responsible for damage. 105. Moreno described the jobsite as a very rocky, hard dig, and stated that in his time onsite, he had never observed Becken to do any shoddy work, conceding that he had no responsibility to inspect any of Becken’s work. He did not understand how the air test could be passed, but not the water test. 106. Bruce Balls (Balls), the general manager of Phoenix-based B & F General Contracting, Inc., testified as an expert with 22 years experience in underground pipeline construction: neither he nor his company had been on-site in any capacity at any time on the Roadrunner project. 107. Balls explained the risks of using a backhoe on rocky ground in the vicinity of underground water line already laid: such heavy equipment was so powerful that even an experienced operator could too easily nudge the pipe with the blade or bucket, or by pushing rock against it, causing damage to the pipe or its joints and valves by direct impact, or by stress and deflection of the pipe. 108. He also described how, in his experience, augering in the vicinity of water lines, to provide holes for things such as bollards, would “invariably” damage the water lines; nevertheless, he still probably would have used an auger, carefully, to drill the bollard holes at the campground, if it had been his responsibility. 109. Balls stated hypothetically that if his company had laid a water line subject to a water test - which he opined would generally be easier to pass than an air test - he would do everything in his power to attend such a test in order to prove the integrity of the work, and if the work did not pass, to find out why and repair it in the least invasive manner possible, section by section, without the use of, and possibility of damage by, a backhoe. 110. He further stated that if the water line had already passed an air test, he would consider the work accepted, and require reimbursement to attend any subsequent water test. 111. Balls considered several of the demonstrative sections of pipe and valves, and opined that one evidenced auger damage (Exhibit EE/39); that on another the glue appeared cracked on one side (Exhibit EE/53); and that on a third, the threads appeared pulled out and the bottom section appeared not glued (Exhibit EE/58), noting parenthetically that he hated glued pipe and would rather use rubber gaskets, which rarely leaked. 112. Robert Millsap testified that he was Millsap Sr.’s brother and had been Becken’s working foreman/superintendent on the Roadrunner subcontract, and had later worked with Boss Grading, owned by his brother Ronald Millsap, in its subcontract with Inca on the Phase Two project. He described having over 50 years experience in operating heavy equipment. 113. He confirmed the hard rock on site, and explained how that resulted in both water and utility lines being laid in the same trench, with the bollards placed directly over the water lines. 114. He described witnessing Mike Barone hit the lines while augering bollard holes, and how that was the reason that Becken had reached an agreement (Exhibit U) with Inca’s Ken Clark to trade-off Inca’s repair of a roadway section while Becken would repair bollard hole-digging damage.

115. He opined that an auger should not have been used on the Roadrunner site, since the ground was too rocky, and that later on, a backhoe - and particularly one operated by Barone’s 16 year old son - should never have been used to search for and repair water line leaks, since it was too easy to damage underground pipe with that sort of equipment. 116. He described laying identical pipe without any problem on the Phase Two project with the same crew which had done Becken’s work on Roadrunner, except that the pipe his crew laid was perforated for leaching purposes and not subject to pressure-testing. 117. He conceded he had signed the “trade-off” document (Exhibit U) as Becken’s representative without disclosing that he had no such authority. 118. He recalled that he or other Becken people had told Ken Clark four or five times that pipes were damaged by Inca’s work, and that he had heard Castillo say at the Registrar’s jobsite inspection that Inca had damaged pipe. 119. Ronald Millsap testified that he was Millsap Sr.’s brother, and had also been an equipment operator and working foreman for Becken on the Roadrunner project, later subcontracting directly with Inca on the Phase Two project as the owner of Boss Grading. 120. He stated that once the water line was laid and backfilled, he would not have used an auger to dig the bollard holes, or a backhoe for any reason, even with an experienced operator, even if he knew the surveyor’s plat of “as-builts” , since the ground was too rocky. 121. Notwithstanding the extent of the record made, and the relatively technical nature of certain of the evidence and testimony, the undersigned finds the essential question to be: why did the water test fail, and who bore responsibility to repair the water line to ensure its integrity to eventually pass such a test? 122. Inca’s evidence questions whether the initial air test was bona fide, at least in the hindsight provided by the inability of the water line to meet spec at the water test in April 1998; concedes certain limited and insignificant damage to the water line during its bollard- augering; and denies any significant damage to the line of any other sort at any other time, either before or after the air test and/or Becken’s demobilization in September, 1997. Inca further asserts that Becken made no effort to either attend the water test in April 1998 and troubleshoot or repair defects revealed by that procedure, or to respond to the requirements of the Registrar’s Corrective Work Order issued in July, 1998. 123. Becken’s evidence relies on the air test as sufficient to meet its essential requirement to pass spec, since “air-tight” was arguably harder to meet than “water-tight”, and therefore sufficient to excuse its compliance with the contractual demands of the water test, with the further assertion that Inca’s failure to pay amounts owed excused Becken’s duty to appear and perform under the contract at or after the water test, or in response to the Registrar’s CWO. 124. By implication based on observation of certain of Inca’s augering activities, but without further specific proof of when or how, Becken also asserts that Inca’s various activities of augering and backhoe/heavy equipment operations, before and after Becken’s September, 1997 demobilization, were the cause of the water line’s failure to meet the specs required of the water test. 125. The undersigned finds the air test, and its results, to have been limited in scope, purpose, and manner accomplished - even if theoretically more difficult to meet than a water test - and not intended to waive the contractually-specified requirement that the water line meet the demands of the water test defined at § 610.14 of the MAG protocol. 126. This is so notwithstanding the very real and pragmatic concerns that water was not available for such a test until after Becken had demobilized from the Roadrunner jobsite. Nonetheless, it is further found that the water test, and subsequent delay for the detection and repair of the leaks, at Inca’s direction and expense, was done only after appropriate notice to Becken, such that Becken’s disregard of that testing and repair, and failure to complete the project to eventually meet the MAG requirements, was voluntary and at its own risk. 127. The undersigned further finds that the failure of the April 1998 water test was the result of defects and deficiencies in the water line joinery and valving such that the line failed to meet the essential requirements of the water test, and therefore failed in its intended purpose to transport water under the pressures specified. 128. With regard to those defects and deficiencies, it is found that a significant measure, though not necessarily all, of such workmanship problems were attributable to the work of Becken, and were the subject matter of the Registrar’s CWO, but that Becken failed, without valid justification, to take any appropriate corrective action. 129. The uncontroverted record is further found to demonstrate that Becken failed to pay certain of those taxes imposed on the company pursuant to title 42, chapter 8, of the Arizona Revised Statutes. Although it is further found that Becken’s inability to pay such sums was unintended and apparently the result of cash flow difficulties not entirely within the company’s control, that inability does not excuse compliance with the statutory demands of that title and chapter. 130. Reference by the undersigned to the public record maintained on the Registrar’s computerized database reveals this matter to be the only complaint on record against Respondent Becken, consistent with the testimony of Millsap Sr.

APPLICABLE LAW

A.R.S. § 32-1154.A provides, in pertinent part, as follows:

A. The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: . . . . . 2. Departure from or disregard of plans or specifications or any building codes of the state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code.

3. Violation of any rule adopted by the registrar. . . . . . 5. Failure to pay income taxes, withholding taxes, or any tax imposed by title 42, chapter 8, and incurred in the operation of the licensed business. . . . . . 7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. . . . . . 9. Failure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract, or in any modification of the contract. . . . . . 11. 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. . . . . . 23. Failure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving written directive from the registrar. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for violation of this paragraph until after a hearing has been held pursuant to the provisions of this article. . . . . .

The CITATION AND COMPLAINT names A.A.C. R4-9-108 as the rule violation charged pursuant to A.R.S. § 32-1154.A.3. That rule provides that all work shall be done in a professional and workmanlike manner, and in accordance with any applicable building codes and professional industry standards.

CONCLUSIONS OF LAW

1. To warrant action by the Registrar pursuant to the statutes above, Complainant must demonstrate by a preponderance of the evidence that Respondent violated any one, or more, of the statutory sections cited. Culpepper v. State of Arizona, 187 Ariz. 431, 437-38, 930 P.2d 508 (Ariz. App. 1996). A “preponderance of the evidence” means that the evidence is sufficient to persuade the finder of fact that the proposition is “more likely true than not.” In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). It “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). 2. Complainant Inca fails to demonstrate, by the required preponderance of the evidence, any fraudulent conduct on the part of Respondent, so no violation of that language of A.R.S. § 32-1154.A.7 is found. 3. Nor does the evidence establish, by a preponderance, Respondent’s failure to pay monies in excess of $750.00 when due for materials or services, so no violation of A.R.S. § 32-1154.A.11 is found. 4. However, the preponderance of the evidence does demonstrate workmanship defects and deficiencies found and concluded to be attributable to Respondent, and therefore sustains Complainant's burden of demonstrating violations of A.R.S. §§ 32-1154.A 3,and .7. “A workmanlike manner means doing the work in an ordinary skilled manner as a skilled workman should do it.” J.W. Hancock Enterprises, Inc. v. Registrar of Contractors, 126 Ariz. 511, 514, 617 P.2d 19 (1980) (quoting Brown v. Eakins, 220 Or. 122, 348 P.2d 1116, 1117 (1960)). In this instance, the failure of Becken to install or repair the water line with sufficient structural integrity to meet its intended purpose in conveying water under pressure is concluded to be a failure in workmanship and a wrongful act. 5. Despite notice and the opportunity to satisfy the water test requirements specified by contract, and find, address, and determine the cause of defects perhaps not of its causing, Becken’s failure to act to meet those requirements is found and concluded to evidence, by a preponderance, a disregard for the contract specifications in a material respect, and in a manner prejudicial to, and without the consent of Inca, and therefore in violation of A.R.S. § 32-1154.A.2. 6. It is found and concluded that the evidence, by greater than a preponderance, establishes a violation of A.R.S. § 32-1154.5, given Respondent’s failure to pay those taxes imposed pursuant to title 42, chapter 8, Arizona Revised Statutes. 7. The preponderance of the evidence further establishes that because Respondent Becken failed to take action reasonably directed to meeting its contractual responsibility to confirm the water line it had installed would pass the water test, or could do so upon necessary repair, the company materially failed to complete the construction project for the price stated, as modified, and is therefore in violation of A.R.S. § 32- 1154.A.9, with the material failure resulting in significant additional time and expense to Complainant Inca in order to complete its prime contract to the County. 8. Finally, the evidence is undisputed, and therefore by greater than a preponderance, that Respondent Becken failed to take any corrective action at any time subsequent to the Registrar’s written Corrective Work Order on July 16, 1998, and it is concluded herein that such failure was without valid justification, despite Becken’s theory, not persuasive herein - and at significant risk to its retrospective attempt to prove the workmanship problems were other than its own - that it had no such duty to do so. Therefore, the evidence establishes a violation of A.R.S. § 32-1154.A.23. 9. By standing motion of the Registrar, in the event of any finding of a charged violation, Respondent’s prior disciplinary record of final agency orders, if any, may be considered in mitigation or aggravation when determining an appropriate disposition of this matter. As found hereinabove, there are no complaints or other adverse orders on Respondent’s record, such that Becken’s record should be considered very good, and appropriate for mitigation in determining disposition of this case. // // // // //

RECOMMENDED DECISION

In light of the foregoing, IT IS RECOMMENDED that commencing on the effective date of the Registrar’s Order in this matter (thirty-five days after issuance), the Class B-01 license held by Respondent Ken Millsap Sr., dba The Becken Company, shall be suspended for 30 days, and that disciplinary probation be imposed, to run concurrently, for a period of 180 days. IT IS FURTHER RECOMMENDED that by reason of the violation of A.R.S. § 32-1154.A.23, Respondent shall pay the sum of $500.00 to the Registrar of Contractors by way of a civil penalty pursuant to A.R.S. § 32-1154.D.A. The failure by Respondent to pay the entire amount of that civil penalty on or before thirty days following the effective date of the Order entered in this matter shall result in the automatic revocation of Respondent’s Class B-01 license, effective on such deadline date, and no future license shall be issued to any entity consisting of persons associated with Respondent, as defined in A.R.S. § 32-1101.A.5, unless payment of any outstanding civil penalty is tendered. Done this day, June 28, 1999.

______________________________________ Anthony Halas Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 1999, to:

Registrar of Contractors Michael P. Goldwater 800 West Washington, 6th Floor Phoenix, AZ 85007

ATTN: Joyce Armijo

By ___________________________

----------------------- [1] The hearing in this matter was originally consolidated with the hearing set in Case No. 98-2692 (Docket No. 98F-2692-ROC), which arose out of a complaint filed by Ken Millsap Sr. dba The Becken Company against Inca Contracting Company, Inc., on the same contract. Complainant dismissed that complaint during the course of the proceedings, and therefore that case was not decided on the merits but was subject to a separate RECOMMENDED DECISION to dismiss the complaint. However, the testimony and evidence adduced therein prior to dismissal has all been considered herein, to the extent relevant, by agreement of the parties.

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

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