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Lawyers question trade group’s role in lawsuit

By: Dan Shaw, [email protected]//April 30, 2014//

Lawyers question trade group’s role in lawsuit

By: Dan Shaw, [email protected]//April 30, 2014//

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In suing the city of Middleton over its bidding procedures, the Associated General Contractors of Wisconsin is doing something it has not done in at least two decades.

Online state court records, which go back to 1991 for some counties, show no other instance in which the AGC, a trade group representing more than 230 contractors in the state, has filed a lawsuit against a local government. Bob Barker, executive director of the organization, said Wednesday that staff members have sent protest letters when they have had reason to question a particular bid result, but, “to the best of my knowledge, and I’ve only been here 15 ½ years, we’ve never sued a municipality.”

Barker said the AGC’s suit against Middleton stems from what he deemed the particularly suspect way city officials chose to award a public works building contract to a company that was not the lowest bidder. Members of the Middleton Common Council voted March 4 to accept a bid by Madison-based Newcomb Construction Co., even though the offer was about $59,000 higher than the $9.34 million low bid by Fond du Lac-based C.D. Smith Construction Inc.

But, while Barker and other AGC representatives say they are trying to ensure the intent of public-bidding laws is fulfilled, others are questioning the organization’s motives. Cari Anne Renlund, a lawyer for Newcomb Construction, said she thinks it is no coincidence that of the nine companies that vied for the Middleton project, six are members of the AGC, whereas Newcomb Construction is not.

She speculated that if the organization’s members had been both on the winning and losing side of the deal, “I don’t see how you could get the AGC to bring the suit under any circumstances.”

In court documents submitted to the Dane County Circuit Court, where the suit was filed, Renlund and other representatives of the defendants repeatedly have questioned whether the AGC has legal standing to bring the suit. Judge Rhonda Lanford provided a stopgap answer March 19 when she placed a temporary restraining order on the construction of the Middleton public works building after finding that the AGC could “suffer irreparable harm” if the work proceeded.

Lanford noted that courts have determined a bid dispute is not enough justification to order re-bids of projects that have progressed beyond a certain point, and she said that precedent could prevent the AGC from obtaining relief if a temporary restraining order did not halt the Middleton project at an early stage.

The ruling was not the end of the matter, though. The AGC has asked another Dane County judge, Peter Anderson, to make the injunction against the project permanent and order the work to be re-bid.

Anderson is scheduled to hand down a ruling Monday.

Renlund said she and other lawyers for the defendants will continue to question the AGC’s role in the case. She said arguments in favor of halting the project might be on firmer ground if they came from one of the companies that did not win the Middleton contract. But the connection is tenuous between the Middleton contract and the AGC, Renlund said.

Representatives of C.D. Smith and Plain-based Kraemer Brothers LLC, another AGC member and the source of the second-lowest bid on the Middleton project, declined to comment.

Ted Wisnefski, a lawyer representing the AGC in the case, said Wisconsin case law has established that trade groups have a right in legal matters to “step into the shoes of their members.” Judges, he said, have recognized that bringing suits against government entities puts companies at risk of being branded troublemakers and losing business.

For that reason, the courts have recognized that one important function of the AGC and similar groups is to step in as a proxy, Wisnefski said. The justification, he said, becomes stronger when a dispute involves the interests of an entire industry, and not just a few companies, as he said is the case with the Middleton project.

“This case is particularly indicative of a pattern where municipalities and other government agencies seek to test and stretch the rules,” Wisnefski said. “And I think the concern is that the stretching of the rules can set a negative precedent in the industry that undermines the goal of competitive bidding.”

According to court documents, AGC lawyers also noted that the organization is supported by dues paid by members, giving it a direct interest in making sure those companies have a fair chance at making money under the state’s public-bidding laws. In response, the defendants have said arguments along those lines would give AGC the right to litigate not only on behalf of members that might have received unfair treatment, but also those that have been disappointed.

“Under this theory, the AGC would suffer irreparable harm on any bid anywhere that is not won by one of its members,” according to an official transcript of Renlund’s comments at the March 19 hearing. “The court does not want to open those floodgates.”

A top official at another construction-trade group, though, said the AGC’s actions might be unusual but are not unwarranted. John Mielke, president of the Associated Builders and Contractors of Wisconsin, said he thinks the complexity of public-bidding laws makes them susceptible to misinterpretation. He said he is glad someone is trying to ensure that local officials are making decisions for the right reasons.

Mielke said the ABC of Wisconsin has filed lawsuits on behalf of its members but he is not aware of any cases directed against municipalities. About the only action against a government entity he could recall, he said, was in 2010, when the ABC of Wisconsin took the state’s Department of Workforce Development to court in an unsuccessful attempt to fight changes made to prevailing-wage rules.

The ABC, Mielke said, has had better success intervening whenever it has had reason to question a local government’s bidding practices. Those disputes have never gone to court, he said, but there is no reason why they should not if the offense is great enough.

Matt Fleming, the lawyer representing Middleton, said the defendants in the lawsuit have not put the bulk of their efforts into raising doubts over the AGC’s legal standing in the case. He said, despite precedent in case law, he believes an argument could be made that the AGC does not have legal standing, but that persuading a judge would require going into a lot of nuance.

A far simpler line of defense, Fleming said, has been to argue that Middleton officials were acting in accordance with the discretion given them by the state’s public-bidding laws. Although Newcomb did not submit the lowest bid for the project, it did send in the only proposal calling for the use of tilt-up concrete, an alternative construction method allowed in the contract specification.

City officials chose Newcomb, in part, after the architecture and engineering firm hired for the project, Janesville-based Angus-Young Associates Inc., found that the use of tilt-up concrete would make the new building more energy efficient and allow for a better interior arrangement.

Fleming said city officials had assumed a concrete building would cost more than Newcomb offered and jumped at the opportunity to get a better structure at no great increase in cost. Because no other company submitted a bid for that alternative construction method, city officials reasoned Newcomb had won the contract by default.

AGC representatives, though, have pointed to a provision in the Middleton contract that prevented all companies except those that are members of the Tilt-Up Concrete Association, of Mount Vernon, Iowa, from performing the tilt-up work, which involves casting concrete panels onsite and tilting them into their final position. The AGC representatives argued one of the basic goals of public-bidding laws, ensuring contractors a fair chance to show they can offer the best price for a specific project, would be undermined if city officials could decide, after bids have been submitted, to go with an alternative construction method.

The existence of all those points, Wisnefski said, renders moot the question of whether the AGC would be pursuing the suit were Newcomb a member.

“If that hypothetical were true, the same concerns with respect to the bidding process would remain,” he said. “But obviously, that’s not the case.”

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