The city of Monticello, through its attorney Cliff Gibson of Monticello, has filed a motion for partial summary judgment asking a judge to dismiss Siemens’ lawsuit against the city because the contract is illegal and void since it was not let for competitive bids. Siemens has 14 days to respond. [See list of related stories below for information and events that led to the lawsuit and Monticello’s countersuit against the company.]
Siemens, according to the motion, solicited and obtained a contract with the city to install new water meters and lines in the city. The work and material to be provided under the contract should have been subjected to competitive bid under state law, but it wasn’t. Arkansas law is clear that $10 million construction projects are required to be bid.
Citing state law, Gibson wrote, “No contract providing for the making of major repairs or alterations, for the erection of buildings or other structures, or for making other permanent improvements shall be entered into by… municipality… with any contractor in instances where all estimated costs of the work shall exceed the sum of twenty thousand dollars ($20,000) unless… (the) municipality… shall have first published notice of its intention to receive bids…”
Siemens actually drafted and guided the solicitation and contract process beginning with drafting of the request for proposals, statement of qualifications, and the notice to be published by the city seeking proposals. Siemens instructed the city on handling those matters and was the only contractor to respond to the request for proposals, according to the motion for summary judgment, which included numerous supporting exhibits.
There is a limited exception to the law’s competitive bid requirement for performance-based efficiency projects done under a “Qualified Efficiency Contract”, but the Siemens’ contract with the city does not constitute a “Qualified Efficiency Contract” exempt from competitive bidding requirements, according to the motion.
Performance-based efficiency projects are projects where the dollar benefit to be derived from constructing/installing proposed improvements will at least equal the cost of paying the bonds issued to finance the construction of those improvements.
The Siemens contract, according to the motion, does not contain the statutorily required terms providing for financial assurances backing up the efficiency savings promised by Siemens to the city. Further, despite repeated demands made by the city on Siemens to provide the statutorily required financial assurances, Siemens has failed to provide those assurances.
Siemens did provide a one-year surety bond to secure the promised efficiency savings, but that ignores the requirement of multi-year surety bonds that cover the aggregate amount of promised efficiency savings throughout the term of the 30-year revenue bonds issued to finance the improvements and the 10 years of efficiency savings promised by Siemens to the city. The city pointed this out to Siemens and reiterated its demand for the statutorily required financial assurances backing up the guaranteed efficiency savings, according to the city’s motion for partial summary judgment.
“The bottom line is that Siemens, a clearly sophisticated company, was directly involved in convincing the city to not competitively bid the project, drafted and guided all of the associated paperwork including the contract itself, and at the same time did not include the statutorily required terms in the contract that the legislature had decided were needed to allow the project to be exempted from the usual competitive bidding requirements applicable to $10 million construction projects,” Gibson wrote in the motion.
Related stories in chronological order
Monticello mayor wants independent review of $10 million water project
Monticello mayor breaks tie to hire attorney to resolve water project issues
Gibson says he’s going to ‘shine light’ on Siemens issues
Monticello eyes possible mediation with Siemens
Outgoing mayor requests state police investigation of $10 million water project
Monticello, Siemens going to mediation
Monticello, Siemens apparently headed to court
Monticello sues Siemens for fraud, breach of contract
Federal judge denies Siemens motion to dismiss Monticello’s fraud claim