The Pine-Strawberry Water Improvement District’s decision to award contracts for $80,000 in work without competitive bidding has raised questions from some customers.
The district bid contracts to install 13 generators separately, all of which went to Hat Creek Electric.
State law would have required competitive bidding had the district lumped the contracts together. State law requires competitive, sealed bids and a public vote of the board on contracts worth more than $25,000.
Critics say the arrangement evaded state and district rules, which benefitted a company once owned by a board member.
“The district did not follow purchasing rules in the regulations document,” claims Water for Pine Strawberry spokesman Sam Schwalm.
PSWID board member Don Smith said the board should have approved the purchase and installation of the backup generators.
“It is my understanding that all purchases should be approved or ratified in open public meeting,” Smith said.
“To my knowledge we, as a board, have never publicly approved the purchasing of the compressors (generators).”
Smith remembers in June 2011, an amount of money being allocated in the budget to purchase generators, “but little detail has been forthcoming, except through the district manager’s weekly reports.”
District officials say the arrangement allowed contractors to adapt their bids to each well site and saved the district money.
“Thirteen projects were created on the specific needs for each generator at each site,” said board attorney Daniel Torrens. The contracts covered the purchase and installation of back-up generators at 13 well sites in both Pine and Strawberry. The generators will also help pump water into storage tanks for district customers during power outages.
None of the 13 separate contracts exceeded the $25,000 limit, thus eliminating the need for a formal bidding process and a full board vote, the attorney said.
As a result, District Manager Brad Cole in August 2011 put out a verbal bid and selected Hat Creek as the contract recipient over the only other bidder, Double C Electric of Apache Junction.
Hat Creek’s bid was $12,870 less than Double C’s.
Questions have also been raised about board member Mike Greer’s connections to Hat Creek Electric. Greer owned and operated the company for years.
However, at a November board meeting, it was announced that Greer no longer owns Hat Creek and that the firm has been taken over by Dale Barnes.
The petition to remove Greer as an agent for Hat Creek, however, was not filed with the Arizona Corporation Commission until Aug. 30, 2011. His name was not removed from ACC contractor records until Oct. 24, 2011. Cole awarded the installation contract to Hat Creek on Aug. 26, four days before the ACC was instructed by Greer to remove his name as an officer for the LLC.
In an e-mail to members of the group and others, Schwalm alleges that breaking up the generator installation contract into pieces violated board statutes and that the transfer of ownership of Hat Creek’s contractor license to Barnes from Greer, “did not occur until after the contract was awarded.” Last week, the Roundup submitted questions to Pine Strawberry Water Improve-ment District chairman Gary Lovetro about the contracts. He forwarded those queries to Torrens, the PSWID attorney. Torrens said in his response that breaking up the contracts into 13 smaller ones enabled a bidder to “charge more or less depending on the particular circumstances of each location.”
Cole seems to have confirmed what Torrens says when in August 2011 the district manager wrote in a memo to the board that, “the rationale behind a site by site bid was the belief certain sites would be more costly than others” and “site by site would allow PSWID the flexibility to select one or both contractors based on the lowest bid for each location.”
PSWID regulations say “it is prohibited to break up a contract into pieces in order to avoid ... the approval requirements of a formal competitive sealed bid.”
Also, state law bars breaking up a project with numerous similar components into smaller projects to circumvent a prescribed bidding and awarding process.
Torrens denied Greer’s links to Hat Creek posed a conflict of interest. Torrens wrote, “I can confirm that Hat Creek was instructed to show the district’s manager the purchase agreement between Mike Greer and Dale Barnes before the contracts for the generators were assigned.”
He added, “The more salient point is whether Mike Greer benefited from the generator contracts to which Mr. Greer’s response to me was, ‘not one dime.’”
Schwalm said, “Mr. Greer’s removal from Hat Creek Electric after the award of the contract and his holding of the contractor’s license for several months after that has the appearance of a continuing interest in Hat Creek Electric.”
Lovetro and Torrens say critics should take notice the $265,000 contract for the entire project including generators, permits, concrete, labor, materials and propane set up was done for about $183,000, producing a savings of almost $82,000.