LITTLE ROCK — Highway contractors eager for work but barred from bidding on new contracts because of missed deadlines can no longer circumvent the ban by submitting bids through another company with the same officers.
The Arkansas Highway and Transportation Department has tightened rules that prevent road construction contractors who have missed deadlines — making them ineligible to bid on other jobs — from seeking new state contracts until the delayed jobs are complete.
“We don’t want them to take on added work until they clear what’s already on their plate,” said Randy Ort, a department spokesman.
In a 28-month period from January 2009 to April 2011, the department found 10 instances in which a company pursued a bid proposal when a company related to it had missed a contractual deadline on another state highway contract, according to Frank Vozel, the Highway Department’s chief engineer and assistant director. In seven of those cases, they submitted bids, and twice they were the low bidder and were awarded a contract.
The period covered 19 bidletting dates in which contractors submitted bids for 544 jobs, Ort said last week.
“It is not a widespread practice, but it is something the commission needed to address,” he said.
In response, the Arkansas Highway Commission last month amended its bidding requirements to prohibit any company from bidding on a project if any of their corporate officers are also officers in a company working on a past-due project. Companies also will be required to certify their officers with the Highway Department before being allowed to submit bids.
The rule preventing companies from bidding on one job while working on one that has exceeded its construction deadline has been in the department’s standard bid specifications since 1996. Highway Commissioner Tom Schueck of Little Rock said that allowing companies to get around that rule isn’t fair to other companies complying with the rule or to taxpayers tired of seeing unfinished projects on which no work is being done.
“The biggest problem is, why does it take so long and why can’t we get [these projects] completed?” Schueck said in an interview. “The principals [of the companies] are the same. That’s the key word — principals. It closed a loophole.”
When a company goes beyond the deadline set in the construction contract, it is assessed a daily “liquidated damages” fee for every day it exceeds the time limit. The fee is meant to offset the added expense the department incurs on overdue projects.
“If a contractor is working, we have people working out there as well,” Ort said.
Liquidated damages are assessed on a sliding scale depending on the scope of the work and whether it is a contract bid on the number of working days or bid on a fixed date to be completed.
The “working day” contract’s scale ranges from $400 a day for a project costing up to $50,000 to $2,500 a day on a project worth $20 million or more. “Fixed date” contract scales range from $90 a day for the smallest contract to $750 per day for the largest.
Once a contractor is assessed liquidated damages, that contractor cannot bid on another job, Ort said. A contractor goes out of liquidated damages when the contract is “substantially complete” or motorists can use the road, he said.
Schueck first raised the concern of circumventing the bidding restriction at a meeting of the commission in December. But R. Madison Murphy of El Dorado, commission chairman, asked for time to allow more deliberation. Schueck came back last month with a written proposal and more information to bolster his case.
At the same December commission meeting in which Schueck raised the matter, the commission awarded a $44.6 million contract to a company with ties to another company that was in liquidated damages.
The project will widen 8.203 miles of Interstate 40 from two lanes to three lanes in each direction at Conway. Mid-South Pavers Inc. of Nashville, Tenn., submitted the lowest of the three bids made on the project.
Two listed principals for Mid-South Pavers — managers Gerard V. Geraghty and Daniel C. Rose — are officers in the Rogers Group Inc., according to incorporation records at the Arkansas secretary of state’s office. The records list a Bloomington, Ind., address for Rogers Group, but the company website lists the same Nashville address as Mid-South Pavers for its headquarters.
Rogers Group is in liquidated damages on five projects in Arkansas, Ort said Tuesday.
The biggest project is a $5.6 million contract to do the base and surfacing work on a section of the Russellville bypass around Pottsville. The contract required the project to be completed in 115 working days, Ort said. The company had used 128 days as of last week.
The other work in which the company is in liquidated damages are four resurfacing projects in the Fayetteville Shale. They were awarded in May and August of 2011 and should have been completed in September, October or November, Ort said.
Mid-South Pavers filed its paperwork at the secretary of state’s office in 1996 and is in good standing, according to the office. The Highway Department was unfamiliar with the company, however.
A spokesman for Rogers Group confirmed in an e-mail that Mid-South Pavers is an “affiliate of the Rogers Group, Inc. entities.” But Tom Kenley said, “Mid-South is a separate legal entity with its own employees, equipment and dedicated construction manager.”
“In order to operate as efficiently as possible and avoid duplicate functions, Mr. Geraghty and Mr. Rose serve in official capacities for both entities,” he said.
Rogers Group intends to abide by the new rules. “As a result of the recently amended bidding requirements and specifications issued by the Arkansas Highway Commission, Mid-South Pavers would not bid on new Commission contracts to the extent that a Rogers Group contract was in liquidated damages,” Kenley said.
John Burkhalter, a commission member from Little Rock, opposed Scheuck’s proposal to tighten the bidding requirements, saying such incidents were too “isolated” to warrant changing the regulation, which he believes might increase the costs of projects.
“You are putting more risk or teeth into the contracts,” he said. “They are going to have to add more dollars to their bid to cover the risk.” At the commission meeting earlier this month, Burkhalter asked staff members to look at what other states are doing.
Mark Lamberth, a Batesville contractor, expressed disappointment with the hastiness of the decision but recognized the department’s predicament.
“I wish we had a little bit more time to make our case,” said Lamberth, a board member of a state contracting association, Associated General Contractors. “I understand their position. I don’t have a problem with it.”
But he echoed Burkhalter’s concerns.
“If you eliminate contractors, you eliminate competition and you certainly have the possibility of higher prices to the department,” he said. “Maybe they only get one bid or no bids, or higher prices. It’s a double-edged sword.”
Front Section, Pages 1 on 02/29/2012