Friday, May 13, 2005
Copyright © Las Vegas Review-Journal

First arbitration decision goes against the county

Ruling states not enough evidence to prove construction company double-billed for work on Regional Justice Center

The first arbitration decision in the ongoing dispute between Clark County and AF Construction favored the company hired to expand the Clark County Detention Center and build the Regional Justice Center.

There's not enough evidence to prove the construction company double-billed the county for work on the $69 million expansion of the detention center, the ruling states. And the facts didn't support holding an evidentiary hearing on the matter, according to the judgment.

As with most of the controversies surrounding the over-budget and tardy projects, the ruling's meaning was interpreted differently by each side.

AF Construction officials repeatedly have declined to discuss the problem-plagued buildings, but a company source said the decision means arbitrators reject county officials' claims.

However, county officials, who vowed to challenge the ruling, said they're still entitled to recover the money. Spokesman Erik Pappa said the county has also been granted a re-hearing, which is scheduled for Wednesday.

In a written statement Deputy District Attorney Lee Thompson said: "Although the county cannot recover twice for the damage caused by AFC's overbilling, the arbitrators should allow the county to present evidence of the entirety of AFC's scheme, which

encompassed both portions of the contract."

The controversy stems from a 2002 agreement to renegotiate the contract for the 1,300-bed detention center expansion. Instead of paying a lump sum, as the original contract required, both sides agreed the contractor would be paid for work completed to that point, then compensated for time and materials it used to complete the remainder of the project.

In 2003, Clark County demanded a $15 million refund from AF Construction, saying it was overbilled when the construction company submitted bills that had already been paid.

The disagreement began when work on the detention center converted to time and materials, meaning workers were paid by the hour rather than a set fee listed in the original contract.

At that point, the county claims AF Construction had been paid for 92 percent of the work. The company billed the county $33 million, half the cost for the entire project, for the remaining 8 percent of the work.

In a statement, Thompson said: "The county investigated this gross disparity. ... It became very clear that the project was nowhere near 92 percent complete and that (AF Construction) had submitted incorrect billings."

The county objected to AF Construction's motion for summary judgment, saying it was still in the process of collecting evidence. Despite the county's position, the three-member arbitration panel moved forward.

"Since that time, the county has found additional evidence that it believes refutes this hearing," Thompson's statement read. "The ruling allows the county to recover punitive damages from AFC for billing the county twice for the same work."

However, the statement went on to say that the county will challenge the "erroneous" ruling.

"Nevada courts can be expected to take a dim view of contractors that bill the county or any public agency twice for the same work," according to the statement.

The source familiar with AF Construction's plight said company representatives requested a tour of the detention center before the contract was re-negotiated to ensure both sides agreed to the percentage of the project that was completed. County officials never took part in the tour with AF Construction, the source said.

According to a transcript of a November 2002 meeting between representatives of AF Construction and the county, during which the detention center contract restructuring was discussed, AF Construction official Shawn Goecke repeatedly expressed concerns about costs at the detention center.

"Why should you worry about it costing more?" asked Ben Leonard, a Bechtel employee and the county's authorized representative.

Goecke also tried to determine what the county expected from the company.

"If we ask you to turn (the building) upside down and paint it pink, you're going to get paid 100 percent of your time for doing that, so why is there any argument; what difference should it make to you guys?" Leonard responded.

Leonard again asks Goecke why he is concerned about the cost of the project, which was funded by a $120 million public safety bond approved by voters in 1996.

"We are out here to spend as little money as possible and get it done as quickly as possible and get out of here," Goecke said, according to the transcript.

Said Leonard: "No you are not, you are here to service on an hour-by-hour basis to comply with the needs on a time-and-material basis. That's what you are out here for."

Regarding the 2002 exchange, Pappa said: "AF should be paid only for work it performed properly."

The arbitration process is expected to take years. Last week the county terminated AF Construction's contract on the justice center, which is three years late.

In March 2003, the county stopped paying AF Construction for work on the justice center project. Since August 2003, the county has assessed the company $12,000 a day in liquidated damages, a fee that has amounted to about $14 million.

The three-member arbitration panel is expected to review those charges.