20080416Decision Memo.1.pdf

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DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
LEGAL
WORKG FILE
FROM:CURTIS THAEN
DATE:APRI 11,2008
RE:FORMAL COMPLAINT OF SCHMIDT CONSTRUCTION SEEKING
REVERSAL OF UNITD WATER IDAHO, INC. DECISION TO NOT
ADD ADDITIONAL CONTRCTORS TO APPROVED CONTRACTOR
LIST.
On Febru 20, 2008, the Commission received a "Formal" Complaint (Attachment A)
from Mr. Peter Wilson on behalf of Schmidt Constrction against United Water Idaho Inc.
(UWI). Mr. Wilson objects to the decision ofUWI to not add new contrctors to its Approved
Contractor List for 2008. Mr. Schmidt was unatisfied with the outcome of the informal
procedures to resolve his complaint and has filed this Formal Complaint as a result. Mr. Schmidt
requests that the Commission require UWI to evaluate Schmdt Constrction's Application to be
included on the Approved Contractor List. If the Company does not meet the necessar
requirements set fort by UWI, Mr. Wilson asks that UWI provide "detailed reasons why
Schmdt Constrction is not fit to insall United Water Systems,"
BACKGROUN
In October of 2007, Mr, Wilson, Project Manager for Schmidt Constrction, contacted
UWI to request a pre-qualification package because he wanted Schmidt Constrction to be added
to the Approved Contractor List. In December 2007 Mr. Wilson submitted the required
paperwork to UWI. In Febru 2008 Mr. Wilson was notified by letter that UWI was not going
to add any new contractors to the Approved Contractor List in 2008.
DECISION MEMORADUM i APRIL i t, 2008
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In response to Schmidt Constrction's inorm complait, UW sent a wrtten response
(Attachment B) to the Commission. In sumar, UW mainta tht beause of the cost
associated with adinstering new contrctors, the lengt of tring, the reent decrease in
,
constrtion, and the lack of projected projects in 2008, it is not going to add new contractors to
the Approved Contractor List in 2008.
Mr. Wilson filed a "Formal" Complait on Febru 20, 2008. Mr. Wilson provides
reasons why he believes Schmidt Constrction meets UW's qualification requirements and
maintans that if a contrctor meets the requirements, it should be added to the Approved
Contractor List.
Because ofUWI's decision to not add new contractors to its Approved Contractor List,
Mr. Wilson states tht Schmidt Constrction is at a disadvantage when bidding on a project with
a developer because most developers want the same contractor to install both the sewer and water
system. Mr. Wilson also believes that by liiting the number of contractors on the Approved
Contractor List, the supply and demand theory" applies and the cost to install water systems might
actuly increae.
Sta notes tht in Order No. 26898, Cas No. UWI- W -96-4, the Commission approved a
Stipulation and Settement Agreement tht put into place a process allowing developers to
choose from a list of approved contractors to instal facilties with residential subdivisions.
The Agreement allows contractors to install water mains and services if they meet certin
requiements. UWI was ordered to implement a system of procedures to monitor the Labor in
Lieu of Cash program to ensure that the program does not result in an increase in costs to UWI
and its customers. Neither the Stipulation nor Order places a limit on the number of contractors
who can participate in the program. Likewise, there are no limits specified in UWI's taff. UWI
decided earlier ths year to not add more contrtors. to the curent list consisting of i 0
contrctors. Prior to ths Order, UWI facilities were exclusively instlled by one contractor; UWI
did not allow other contractors to paricipate.
STAFF RECOMMENDATION
Schmidt Constrction was not satisfied with the outcome of the Informal Complaint.
Consequently, Mr. Wilson fied a "Formal" Complaint. See Rules 23, 25 and 54, IDAPA
31.01.01.023, .024 and .054.
DECISION MEMORANDUM 2 APRIL i i, 2008
~t e e,
Staff recommends that the Commission issue a Sumons to United Water Idaho
directing the Company to file a response to the Complaint.
COMMISSION DECISION
Does the Commission wish to accept Mr. Wilson's "Formal" Complait? Does the
Commission want to issue a Summons or proceed under Modified Procedure?Lu.~
Curs Thden
i:udmemosfDecisionmemo #rev_5 Schmidt Contruction.doc
DECISION MEMORAUM 3 APRIL i i, 2008
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'. . i.~ wrtiiÌgIhs i~ttér in regards to United Water's poiicy'onApproved Contráctois:' ~:.'-
",,' ; . . , . cuti:t1y United Wat 'must approve of a .specific constrçtion còrpmy prinr to any' -
- ". .' '~': instàiåti.on ofdofuestç watel~trimišsion li!les'.rn UIlted Watet?;s:jur~dictioIi. 'I ,believe
, ' '. UñiteëtWater;,~es,need to. approye the.' còntra~tors tl .ini,theïi façilttièS Ior . '.'
. .:," .':; 'cÕIlsiste:acé' ànØ qWU' c.ohtr~Ì'; .hdwever '1 d~n't~Geye i(i,s.~pp;rcipràte th~t one. .: . -
.' ",' . 'tòntraÇtortèëîvé-ravåréd':stuWh~ an eCtiy qii~. cQiittacot:i.s:,excluded. " .'. '. ,
......~. ~~~~~,~~¡~l;i,i'io~,b.e:~~~~~~;~tr,~~", ... .."'.'" . that tijuscatiorHot:adoptirig.theproçedûre::s.uggest sômethg îs,staìngurqù,ed. ..., ..
. iiël1t Úiited..Wai~t; soíntig tht tither water's.ystems .in: the ,vál'c' either 'do' not have- ar~
.: have leared tò'deåi:~tl.:' , . .' .... .'. ." '. ~ . . . : _ .,..
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'.s~lecton,plo'céss.~:Thereïs.no 'way-for an outSicie,ob~eiyer. to kÙow what is needed' to ,'. .
. qua;' or..îf an' applicant 'selecteçl was IIdee,î more qualified ttàI anethef rejected .
. aPPcat. Inçle'ed, iftwo'equä applicants pi~sen1:heÍna~lv~s"how w9u1d United Water.
. '. '. . . pick one atd reect another? ~.etlus they)t.eteriine the favored company: Oy who _ .. . '.'
. '.' .a:ppliéd fir$I~ora~keptic migItwoliderwhat 0t1eI'ln9uc~mena cóÚl¡; be iIiyolved to be'
.' '. . '::áppojnti~d'favor~~~s~'..The.seieêÛ9-n pròce~s;åid'érte~ne~~rtö)e 'Open. to .' .. .., :::: . .....
, ,". ~:. ej(WnatqIÌind:cntiaÍsmor'àny' contractôl thàtfits'a.s¡lifedJìstof erltëria, shouldbé,~ . ..'
... · ..;t¡:i¡:~::!::7~:~~~piY.f'~~~ro~to~U~te.' .'. . . d . . Water- sýste;d¿,es not p:i,tp¡essue toiàise pricês; ás supply/demandtleoiy'wpùl(i',. . ..'
· ' ~ ~ .'.' ":;,' 'IIplY~1nthétt :lêS¡hSe, tQthe PU C, Urlt~d' watê~s~ýs~'Tle teii2ørib;act~rs .h~ve been'
. . abh~ io próvide the developmenI êoirunty With çompetitlye pncing, durg the recent.. . .
buidig boom." How can they kiow 1:is 'if they have no bid: outSide: their appro,,ed .
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,,~,~, ': : ", ',~ th~k'šelecte~ conjtctors 1I~xeGutúg Urrted ~Watei.'proJecis:, TheY:raktúb.è e-mÝagàni., . '.,
Clai tft '~Ùi:ted Wàiér hàs lemd thfeaCJ:l newly appiov-èd .èontrt9Ì Wïli gQ' ". . '. : . :
thqugh ã twò year leaiÍig curVe befote ihe"óóIitiaetor.heëöméi: effèiertt.íi:"the"Unit~a ", . .~'
. :'\~ter J~fOÇešs. ~.. : They 'add, tht ~.Ìi~~ co~tiáctòr: cá~es sign~tly)ñ&re. cost iI .', '.' ,.ip.speêtP'iídand:iiemgemënt:,tbatianjipptovtdcòjltrRclù,; Théfe.:ât~ ,w.eII.rtwatèr c'; ':i; r/:.: ,
,sÝ~teira.:all, Qv~r.the: Treasure \ta1~y ilåt â;ü~~ iIanfë'ontictöis t~ i~tán 'thei: sY~J.~ni: ~.. .' ,
: '" Wht,ls i(~bòut Uirted wateë.s system 'thål is 'so .útterì~' liqtie'that.a cçIttactor tha;Í haS -, :. ,
-:," , ' ,':,' ....' ,~ ~;':':ii1ialt1~f.systenis'för Iierl4iâi).v,atèris.in,d.pãbJeòt'~effc.i~Îltlýin;ta1~g 'Q.nelørnnítea~
. .. Water? - If these di~tincrions exist the 'PUC Inäy b~.Întèstèd in clieckig t6 ;see'jf the-, " ;. .
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. _ 'understa~g of United .Water' s è:KectatÎ.ons: ",. ", .. ': .. '''~''',' " ' . ",- - ':. '- .: _ ' ,"
',," ' :\ieve¡~prhehtS ÌIafart:iJ n~~d; '-Waté'ëii jürscIêti~n; If-a pdváte.develo.pêr ;"ants' to- Usè
. s~iii~t CònsthcttóIÌ'tö qilld à proj:~ct, Wr irs' :owp fuds, 'p'aylng. Unit.ed. Water fòr the , :c ' '
, ',~tåaièlhisp~c~on-r~t~sdaidj)emi¡ts'.#apayuig::S,~idipqIÍštÌStiö.n',wlth:Í?l1vite',;:" ,
',.'C,: " :' : ..'ftds. Howcan:United Watel' discriàte3ïitht sititioií?:,: ,i ',:d' ,.,"; ,. ,." - .... .... ...- :. ~,~:..:' ~"':", - . ..', " .'~ .' . .'
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ths hYßayiÍg th.lhey, can oIiy accept new'cogtráctors around the'fist of every year, and
they wqíid':con~ider us next Dècember. That ~i1'not be acceptable, Schmt .'
- '.ConsctiQIi worked'very dilgently, submitting the .application on time in Noveml;er
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JOHN LEE
Constction Coordinator
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o.~oo United Water...- ,.:. nn:' ~', 0 -S'-ez.t"i!:L'i",_i~~ .. . ..... .UNITED WATER IDAHO INC,
8248 West Victory Road, Boise, 10 83709
P,O. Box 190420, Boise, 1083719-0420
Tel: 208,362,7329 . Fax: 208,362,3858
john,lee~unitedwter,com
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February 5, 2008 UTì~~i~f~~)(l~~;~t¡~r§S¡C '
Mr. Curtis Thaden
Idaho Public Utilities Commission
PO Box 83702
Boise, ID 83702-0074
Dear Mr. Curtis:
United Water has received your letter regarding complaints from Mckay Construction and
Schmidt Cönstruction. We want you to know why United Water did not add these
contractors to the approved list and that United Water believes it made its decisions
based on what we believe is best for our customers.
In the Idaho Public Utilities Commission Case No. UWI-W-96-4 1997 Stipulation and
SettlementAgreement United Water was order~gJ~YJ.e Commission to "implement such
systems and-proceaures ã-sarenecessary to monitor the implementation of a labor in lieu
of cash program to insure that implementation of the program does not result in
increased administrative and inspection costs for United and its customers generally..
In the labor in lieu program the contractor works directly for the developer and is
frequently more interested in serving the developer's desire of lower initial cost than
trying to achieve lower future operation and maintenance cost, therefore from past
experience United Water has learned that newer, less experienced contractors will lower
the quality of installation which often increases future operation and maintenance costs.
When a new contractor is add to the approved list United Water administration must
invest a significant amount of time and effort training the contractor in estimating, in
construction standards, and in providing as-built information which is all necessary
before the contractor can even provide developers with accurate bids base on United
Water standards. Once a contractor knows the process and begins their initial project on
a United Water installation the United Water inspector will often be required to spend
two or three times more than the normal inspection time for similar projects. This is
because newer contractors are not familiar with United's specifications for installation
from a hands-on perspective.
There were initially six contractors approved in 1997 when the labor in lieu program was
implemented. Since then, based on contractor performance, United Water has dropped
some and added some so that now there are ten approved contractors on the I ist. The ten
contractors have been able to provide the development community with competitive
pricing during the recent building boom.
WWW.UNITEDWATER.COM
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Through this past experience United Water has learned that each newly approvedcontactor will go through a two year learning curve before the contractor becomes
efficient in the United Water processes. During this two year time frame United Water
incurs more administrative and inspection time.
Taking all this into account and due to the recent housing market downturn and lack of
anticipated projects for 2008, and the associated cost of administrating new contractors,
United Water decided not to add any new contractors to our approved list in 2008.
The following are answers to your specific questions:
1,) At he end of December 2007 United Water made its decision not to add
contractors and thus did not invest the time to review the six pre-qualification
packages which were submitted to United Water in December of 2007.
Therefore we have not made any determination as to if McKay Construction and
Schmidt Construction meet all requirements. McKay Construction was previously
an approved contractor but chose not to keep United Water insurance
requirements and was dropped off of the approved list in October of 2005 (See
enclosed correspondence with McKay Construction).
2.) During any given year United Water will receive requests through out the year
from contractors wish i ng to become approved United Water I daho contractors. In
order to efficiently implement the labor in lieu program United Water will give
the pre-qualification package to any contractor requesting the information and at
the same time, tell the contractor that United Water does not review completed
packages until January of the next year and mayor may not add contractors.
3.) All six of the contractors submitting completed pre-qualification packages were
notified in writing with a letter stating that United Water is not adding any
contractors to the approved list in 2008. Some contractors phoned and inquired
about approvals and were informed of the decision prior to the written letter.
4.) United Water currently has ten approved contractors.
If you have any questions, please feel free to call me.
Sincerely,
d'~ 4-,
~h~Lee
Construction Coordinator
CC: Patt Foss, Scott Rhead, Greg Wyatt
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United Water Idaho Inc.
8248 W. Victory Road
P.O. Box 190420
Boise, ID 83719-0420
telephone [phone]
facsìmile 208 362 3858
July 15, 2005
McKay Constrction, Inc.
Mr. Mike McKay
PO Box 3066
Boise, Id 83703
Dear Mr. McKay:
United Water is in the process of revising our pre-qualification contractor requirements
for installng water main in the United Water Idaho's certificated area. Previously,
approved contractors wil not be afected by the new pre-qualcation requirements.
Along with the new pre-qualifcation requiements we are also implementig an anual
review process for all contractors. We wil evaluate each contractor on each project. I am
enclosing a copy of the evaluation form; The form is intended to smooth the flow of
projects and capitalize on both Contractor's and United Water's time. You wi be rated
on a scale from one to five on various stages of your projects. Five is a favorable ratig
anytg below four is unacceptable, These forms wil aid us in our anual review
process.
We also need to have updated inormation regarding the insurance requirements that
United Water contractors are required to car. I am enclosing a copy of page 3 of ourstandad contract that refers to the inurance coverage amounts. Please send us your
insurance coverage inormation by July 27th, 2005.
If you have any questions, please feel free to calL.
Sincerely,~~
John Lee
Constrction Coordinator
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Enc: Evaluation Form
Page 3 Mai Extension Contract
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United Water ""~~.d~(~~~~' 't;.# "',
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United Water Idaho Inc.
8248 W. Victoiy Road
P.O, Box 190420
Boise. ID 83719-0420
telephone [phone]
facsimile 208 362 3858
August 16, 2005
McKay Constrction
Mr. McKay
PO Box 3066
Boise, ID 83703
Dear Mr. McKay:
On July 15th I requested information from you regarding proof of insurance coverage
necessar to become an approved United Water contractor. As of this date I have not
received any proof of insurance from you.
Our files indicate that we have not received any insurance inormation from you since
January of 2004. It is imperative that you send your proof of insurance by September 1,
2005. United Water wil not allow McKay Constrction to star any new projects unti we
haVe received inormtion from your insurance agent that proves McKay Constrcton
meets the necesary limits.
I am enclosing a copy of my previous request and the insurance liabilty miumrequired.
If you have any questions, pleae feel free to calL.
Sincerely,tf~
Constrction Coordiator
Enc: Letter Dated July 15, 2005
Page 3 Mai Extension Contract
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Unitad wair Idaho Inc." '
. 8248 W ot:Vicr.oiY . Road): J' . "'" :::....
P.O. Box 19~20 " " " ~::
Boise, 10 83719.:2Ò~, '~":";:., ,.. .
telephone [phone]OÓ'o, (,,\,i"'
facsimilè 208 362 3858
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August 22, 2005
McKayCo:rtrction, Co, Inc.
Mr;M,c:Kay,
POBox 2450
Eaglé;IE,83616. " -
Pt?ar Mt.McKay:
,Tliap you for your response to my request for updated inurance inormation. The, . ; ,
''information, which you sènt to us, indicates that you do not have the minum ï.Waice-
necessar to be an approved-United Water Contractor. ' .' ':,' , ' "
When you are able to meet the requied inurance coverage mium you wUl be
alowed to perform constrCtipn on United Water Idaho projects. '
If you have any questions, please feel free to calL.
Sincerely,C'k
Constrction Coordinator
¡ il. ,Comple.e iter 1, " , ,,dd 3, Also ~o~plete
, ite 4 if Restricted Deliveiy is desired~
¡ . Prihtyouf name and addreSs 01), the revers
!' so that we èan return t1e card to you, .' "
.~ . Attch, this card to the back .of ,the mailpiec,
¡ or ori the fro!'t if space permits.
;'1. Artcle Addresse;;~~",(.~__ ,_ ,- .. '
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Mr. MêKay
McKay Constrcto~ IncPOBòx2450 '
Eagle, lD 83616
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Cl Unitd Watr Idaho Inc.
8248 W. Vict Road
P.O. Box 190420
Boise, 10 83719-0420
teephone 208 362 7300
, facsimile 208 362 3858
September 19, 2005
Mr. McKay
McKay Constrction, Inc,
P.O. Box 2450
Eagle, il 83616
Dear Mr. McKay:
We stll have not received verification frm either you or your inurance provider
tht your company cares the mium insurce required by United Water
Idaho to be an approved contrctor. Ifwe do not receive verfication of thenecessar insurance mimums by September 30, 2005, we will have no
alternative but to remove McKay Constrction, Inc. from our approved contractor
list.
If you have any questions, please feel free to cal.
Sincerely,r~
John Lee
Constrction Coordinator
Enc: Letter Dated August 22, 2005
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United Watr Idaho Inc.'
, 8248W. VictryRoad
..- 'P.O, Bpx,HI042
Bois,iD,~719-0420
telephone 208 3~ 7300 "
fâcsimile 2U8 362 3898
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october 4, 2005
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'Mr. McKay
McKay Construction, Co, Inc.
PO Box 2450
Eagle, ID 83616
Qear Mr. McKay:
,Theletter is to inform you that McKay Construction, hic. has been removed from
Onited Water Idaho's list of approv:ed contractors. This decision results from a
'faìïure to provide our office with a Certificate of Insurance from your insurance
cärrier guaranteeing minimum insurance coverage as requi,red by the contract. As
stipùlated in our September 19, 2005 letter to you, this Certificate of. Insurance
was to b~in our office by September 30, 2005.
, ,If you have any questions, please feel free to calL.
, Sincerely,...~.~
: Cori~tiuèti ort.Goord i n ator:' . ;;.:,,;:;~'i ." ~::
Èntlósure:'~,L,eÜerPàted September 19 J 2005
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t . Complete items 1, 2, and 3. Also, complete
., item 4 if Resrict Delivery Is desire.'r Ii Print your naie âiid addre on the ree
¡ so that we cari $rn the ca to you.
1 ,. Att thiS ci to the bac of the malpiec,
,1 or on the frnt if spac perit.
J 1. Are Aded to:
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COMPLETE THIS SECTION ON DELIVERY
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