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Judge halts Sacramento sewer project due to questionable contract process

Sacramento Regional County Sanitation District’s board, in awarding a contract for a sewer improvement program, chose Teichert Construction’s bid. But a lower bidder is suing, alleging the process prevented competition.
Sacramento Regional County Sanitation District’s board, in awarding a contract for a sewer improvement program, chose Teichert Construction’s bid. But a lower bidder is suing, alleging the process prevented competition. Sacramento Bee file

A Sacramento Superior Court judge has ordered the Sacramento region’s sewer agency to halt construction of a storage project, finding enough probability that a $114 million contract awarded to Teichert Construction of Davis violated state law.

During a hearing Friday, Judge Timothy Frawley called the Sacramento Regional County Sanitation District’s contracting process “troubling” and “misleading.”

Another contractor, Steve P. Rados Inc. of Santa Ana, filed a lawsuit against the district accusing the agency of violating state law when it did not award Rados a sewer improvement contract last month. Rados was the low bidder for the job, submitting an estimate that was almost $14 million less than Teichert’s.

The “flow-equalization project” will create 110 million gallons of wastewater storage and is part of a larger $2 billion project under construction to meet more stringent water-quality regulations.

Rados sought to halt the storage work so money isn’t spent on the contract until the parties can have a full hearing before Frawley. The judge agreed to the request Friday evening.

In the order, he wrote, “In this case, the court is persuaded that there is a reasonable probability that petitioners will prevail on the merits of their claim that an award to Teichert violates the Public Contract Code either because Teichert was not the least responsive and responsible bidder or because the district’s bid specification unlawfully limited bidding for a portion of the work to a single subcontractor.”

The district board voted 10-4 last month to award the contract to Teichert instead of two lower bidders – Rados and Balfour Beatty Infrastructure Inc. During the meeting, board members in favor of Teichert said Rados failed to list the license of a subcontractor, Peltz Co. of Alliance, Neb., in its contract bid. Peltz did not have its California license at the time of the bid but received it the day before the contract was awarded.

The sewer agency prequalified three subcontractors for part of the job, including Peltz, and the main contractors had to use those companies. Of the three, only the subcontractor chosen by Teichert had its state license. Peltz did not and the third subcontractor did not bid for the job.

Teichert’s attorney and district officials were not available Friday evening to respond to Frawley’s decision.

Dustin Jones, an attorney representing Peltz, said the agency’s actions unintentionally created a “sole source” contract, which laws generally prohibit because they prevent competition. In this case, the only subcontractor deemed eligible bid almost twice as much, and $10 million more, than Peltz.

“You had a monopolistic situation that was taken advantage of,” Jones said.

Frawley criticized the agency for telling bidders the unlicensed subcontractor was eligible for the project and then rejecting contractors for choosing that company.

“The most troubling part of this is the precertification process, which turns out to be very misleading,” Frawley said.

The chair of the sanitation district board, Jeannie Bruins, defended the contract decision Friday before the judge halted the work.

“They were the lowest responsive bidder,” she said of Teichert. “They had all of their licenses and permits in place, which were required to bid.”

Attorney William Warne, representing Teichert, said during the hearing that the company followed the law and deserves the contract.

“This isn’t about the low bidder,” he said. “This is about the lowest responsive bidder.”

Call The Bee’s Brad Branan, (916) 321-1065. Follow him on Twitter @BradB_at_SacBee.

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