Stanislaus County fines Gallo contractor $190,538

Says the heating firm

December 12, 2007 


    The Stanislaus County Board of Supervisors on Tuesday:
    • Voted to support the Dos Rios Ranch Land Protection and Habitat Restoration Project. The 1,600-acre ranch at the confluence of the Tuolumne and San Joaquin rivers would be bought by River Partners in conjunction with the Tuolumne River Trust, and would become a part of the existing San Joaquin River National Wildlife Refuge.
      Vote: 5-0, as part of the consent calendar.

    • Agreed to spend $277,671 for Alternative Care Site trailers and equipment with a Homeland Security Grant. The trailers would provide basic nursing care for people displaced from hospitals, nursing homes and other care facilities in a disaster.
      Vote: 5-0, consent calendar.

    • Established an involuntary home detention program for misdemeanor offenders. the program provides electronic monitoring devices for 500 adult and juvenile offenders who otherwise would be in the county jail or other correctional facility.
      Vote: 5-0, consent calendar.

    • Awarded a contract for improvements to Pirrone Road in Salida to George Reed Inc. The project will resurface and widen the road, and put in curbs, gutters, sidewalks and street lights. The contract is for $450,000, and the work is expected to be completed by Feb. 21.
      Vote: 4-0, with Supervisor Jeff Grover recusing himself because he does business with George Reed Inc.

    • Set a public hearing Dec. 18 for the proposed update of the agricultural element of the county's general plan.
      Vote: 5-0, consent calendar.
    • Approved the 2008 Williamson Act contracts, which give a property tax break to farmers in exchange for a pledge to keep the land in farming for at least 10 years.
      Vote: 5-0, consent calendar.

    • Received a letter from the Newman City Council opposing the PCCP West Park LLC proposal to develop a business park and short-haul rail link on 4,800 acres around the Crows Landing Air Facility.
      -- Tim Moran

Clark & Sullivan, the prime contractor on the Gallo Center for the Arts building, will be fined $190,538 for hiring a subcontractor for the project without county permission.

The Stanislaus County Board of Supervisors voted 3-1 Tuesday morning to levy the fine, with Supervisor Jim DeMartini casting the dissenting vote. Supervisor Tom Mayfield was absent from the meeting.

According to county staff, a growing dispute between Clark & Sullivan and its heating, ventilating and air conditioning subcontractor, Custom Air, led Clark & Sullivan to bring in a second company, Modern Air.

The Public Contract Code requires that a prime contractor get the county's consent before hiring a subcontractor not listed on the bid documents.

The county sent a letter to Clark & Sullivan in May of last year when it became aware of the substitution, warning that the firm needed permission, according to Patty Hill Thomas, county chief operating officer.

By June of last year, Modern Air had replaced Custom Air on the project. Clark & Sullivan requested permission for the substitution on July 31, 2006.

A hearing was held on Aug. 16, 2006, before an independent hearing officer, who concluded that Clark & Sullivan had violated the Public Contract Code. Under the code, the Board of Supervisors can levy a penalty of up to 10 percent of the subcontracted work, $190,538 in this case.

Custom Air in financial trouble

"I have a radically different interpretation of what happened," said Dick Cowan of Clark & Sullivan.

Cowan said Custom Air was experiencing financial problems and that his staff believed the company could not meet the construction schedule or quality standards. Cowan said he discussed the situation with county staff, who urged him to take action to correct the situation.

Modern Air was suggested to him by a county construction manager, Cowan said, and in May, he brought in Modern Air to assist Custom Air. At that point, it was not a substitution of a subcontractor, Cowan said.

By June 9, 2006, Custom Air had abandoned the job, leaving Clark & Sullivan to pay the ma-terial suppliers, Cowan said. That amounted to nearly $1 million, he said.

Custom Air's contract never was canceled, Cowan said, though the company subse-quently filed a Chapter 7 liquidation bankruptcy.

"Every step of the way, we've done what is right for the project and what is right for the county," Cowan said. "The project would not be at completion if we had waited. I had to pursue the project."

Eric Firstman, an attorney representing the county, said Custom Air was the low bidder for the contract and by law was entitled to a hearing before losing the contract. Clark & Sullivan was notified by letter about the need for permission to make the substitution two months before the company requested the authority, Firstman said.

Company 'has lost enough'

Supervisors said the situation put them in a difficult position, but most of them sided with staff on levying the fine.

DeMartini commented that the law on substitution is designed to prevent prime contractors from "bid shopping," looking for a lower-cost subcontractor after bids are awarded.

"The project could have stopped, putting the county in a worse situation," DeMartini said. "I have trouble seeing how the county was harmed by the substitution. ... I think Clark & Sullivan has lost enough on this job without a penalty."

Supervisor Jeff Grover said the staff, county counsel and the hearing officer all agreed there was a violation. "I'm comfortable supporting the staff recommendations," he said.

Board Chairman Bill O'Brien said it was a matter of timing. "The county letter in May said they needed to do it. The subcontractor abandoned the job in June, and on July 31 they asked for a substitution. It makes no sense to me at all," he said.

Delays in the Gallo Center's construction are at the center of a lawsuit Clark & Sullivan filed against the county in January seeking more than $1 million. The company alleges the county provided conflicting designs and changed plans while the project was under way, causing delays and running up costs.

The county has countered that Clark & Sullivan "failed to perform all conditions, covenants and promises required to be performed."

Last month, supervisors voted to withhold about $2.2 million from Clark & Sullivan until the contractor and the county resolve their billing discrepancies.

Bee staff writer Tim Moran can be reached or 578-2349.

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