20080415_2219.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER RED FO RD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:CURTIS THADEN
DATE:APRIL 11,2008
RE:FORMAL COMPLAINT OF SCHMIDT CONSTRUCTION SEEKING
REVERSAL OF UNITED WATER IDAHO, INc. DECISION TO NOT
ADD ADDITIONAL CONTRACTORS TO APPROVED CONTRACTOR
LIST.
On February , 2008 the Commission received a "Formal" Complaint (Attachment A)
from Mr. Peter Wilson on behalf of Schmidt Construction against United Water Idaho Inc.
(UWI). Mr. Wilson objects to the decision ofUWI to not add new contractors to its Approved
Contractor List for 2008. Mr. Schmidt was unsatisfied 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 Schmidt Construction s Application to be
included on the Approved Contractor List. If the Company does not meet the necessary
requirements set forth by UWI, Mr. Wilson asks that UWI provide "detailed reasons why
Schmidt Construction is not fit to install United Water Systems.
BACKGROUND
In October of2007, Mr. Wilson, Project Manager for Schmidt Construction, contacted
UWI to request a pre-qualification package because he wanted Schmidt Construction to be added
to the Approved Contractor List. In December 2007 Mr. Wilson submitted the required
paperwork to UWI. In February 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 MEMORANDUM APRIL 2008
In response to Schmidt Construction s informal complaint, UWl sent a written response
(Attachment B) to the Commission. In summary, UWI maintains that because ofthe costs
associated with administering new contractors, the length of training, the recent decrease in
construction, 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" Complaint on February 20 , 2008. Mr. Wilson provides
reasons why he believes Schmidt Construction meets UWl's qualification requirements and
maintains that if a contractor meets the requirements, it should be added to the Approved
Contractor List.
Because ofUWl's decision to not add new contractors to its Approved Contractor List
Mr. Wilson states that Schmidt Construction 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 limiting the number of contractors on the Approved
Contractor List, the supply and demand theory applies and the cost to install water systems might
actually increase.
Staff notes that in Order No. 26898, Case No. UWl-96-, the Commission approved a
Stipulation and Settlement Agreement that put into place a process allowing developers to
choose from a list of approved contractors to install facilities within residential subdivisions.
The Agreement allows contractors to install water mains and services if they meet certain
requirements. 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 UWl
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 UWl's tariff. UWI
decided earlier this year to not add more contractors to the current list consisting of 10
contractors. Prior to this Order, UWl facilities were exclusively installed by one contractor; OWl
did not allow other contractors to participate.
ST AFF RECOMMENDATION
Schmidt Construction was not satisfied with the outcome of the Informal Complaint.
Consequently, Mr. Wilson filed a "Formal" Complaint. See Rules 23 , 25 and 54, IDAPA
31.01.01.023
, .
024 and .054.
DECISION MEMORANDUM APRIL 11 , 2008
Staff recommends that the Commission issue a Summons 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" Complaint? Does the
Commission want to issue a Summons or proceed under Modified Procedure?
Curtis Thaden
i:udmemos/Decision memo #rev 5 Schmidt Contruction.doc
DECISION MEMORANDUM APRIL 11 , 2008
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4662 HentyStr~~t, Su.iteB
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UTjUTIES"lQmc~H~L36277227
Excavafuig ~Pi~e ritractor "
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J~allje~ell~ ~ecretary
. IdahoPriblicUtillties Commission
PO Box 83720
Boise, ID~3720~OO74
Dear Ms. Jewell'
, Ianlwritihg this i~tter ill regards ,toUpited Water~s po!icyon Approved Contnictofs;
Cutn~ntlyYriiteaWat~r must ,approve of a. specific constru9tion company prior to atiy
. in~taJ1ationofdotnestic waterJnmsmissionlilles:tn UnitedWatei'j11I'i~diction, Ipelieve
lJirited;Wat~rdo'.ne~d toapprov~,th~ coritractors thatinstaJltheir facilW~s Io~
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c9n~istelwe' and qll.ality ' c6htrol;however ldbn tbeitev~ itisappropriate that oile"
, contra ~rt~ceiY~,~Ctvoredstatuswhile im equally q~~li~ed' ~Qhtractmis"exduded.
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My'concem ~thtlllspra6tibeis1:Wo fold. . One~that th(pmcedure isa;rbitrary,.aud two
th~t theju~tifidttiori for-adoptingtheprocedliresuggesfssOlhething is startlinguriiq~e:
" abollt ' U nitedwat~r; ,some~hing thatcjtherwater systems inthevalley eitherslo 110t ,have or. have learned to deal with:
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, C~ncerningthepoHcy,b~ing arbitrary, United ,Water has no.Pllblishedc~iterla for theit'
selection process.Thereis,rioway for an outsideobseryer to know what is needed
qualiry; droif 9IlapplicaIltselecteciwas inde,ed more qualifiedtl1i..'1 ai19thefrejected
applicarit. Indeed, if tWo equal applicants present themselves
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how would Unit~dW ater
pick ol1e arid tej ect another? ,Pernaps they.'d~termine theJavored~ompanyby, who
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applied first :ora skeptic might wopder what otherin~ucements ~O1lld be inyolved to be
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appointed favore.d~ta~s.TheselectiQn prbcess and criteriane~dstob~opento
' examinationancVcriticismorany contractor that fitsaspecifiedlisfuf criteria, shouldbe c 'approvedto:wbrkonUmtedWaterProjects:
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O~e has .toq~estion.toQ,whether reduCing the sllppl yo(cont~actms to iftstallU ni ted .
Water systerlls does notput pressure to raise prices as supplYJdeman~tlieory;w()Uld'
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imply. Inthelrrespohse, tothePUC, United'Water says "'The tencontractbrs ,have bee:p'"
, abH~toprovidethed~velopmentcom.munity withcompetittvepfidng during the recent'
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building b60m;"Howcan they know this if they haveJ1o bi4s outside their approved
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Thedeve'ropmen(conllp.unity-today; IO6)cs fora'ontr'actoJ: thafcan, complete the ,~l1tire '
' :projdct,lJ.dthllE:todothe;~wei work arid ~~epar:atetodoth~~at~r.Theycal1g~tbetter
~priceswhenohe C()htpictorca.n dcql1e ~nfireproj ectThat isWl1ySch.t1:J:idfConsttu(:tion is
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at~:dis~dv~tage~h9ihdIig#1l~wed On t~e: appi6\red list~chmidt'Con.stfttCtion shouid
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:ha"etl1~~~~oppo1jlinity'as~eq~3Jl)tci1Jalffi~d approvgd c6htractor to b'ici on pfiyaie
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ide'Ve~()p~~nt~thaf'ariii1tJn4t~d"Wat~r'sjui:lsdiction.If.a.privateAevdop~r W~L1'ltstouse "
s~hrhiclfConstrllCtionto~\iild~ proj~ctWithhisoWnfuhds paying United. Water .for the
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: standard insp~ction' fe~ 'sandpermiisanQpayil1gSchmidtc:o.nstIuctiowwith pii vate
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funds. How can United Wate:rdiscriminatejnthat situi~ti()n?, '
Office (208))62-7227'
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4662Jlenry Street, Suite '13 ,
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Jew.? "Cali Ywted"~atersh~'Wtl1ai'their ~~vin.gs are"h~t'6ffseiin hig~e?i~s~aU~ti9~ co#s
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.Ar~tl1eratep~y'erstiu1y.helpedbylifl1it~ng1:omi?9titi()n?
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Asjustiftcati9nfor their pdlicy,b llited Wate(pO'ints to savings tBrough'the ,effiCi~ncy.of. '
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theirseIeCte9.cont~a.ciorsinexecutii1g .United 'w ate(projects~Theymaketheextravagarit
Clainithaf"tJnited Waterl1asleirlled thareachnewly~ppioved.colltraCt()rWilLgo,
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thrOllgl1~twO"yeaf learilln,gcurvebefof~ the 6oi1tra.Ctorb~cbines efficient,inthe'United "
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\\1 aterProcess~'; :Tp.~iadd, that~ ne\VcOlltiLtct6r catise~slgmfi6ahtl y:ni~r~ ,costin
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'ln~p~cti()ris aIld Imll1a.gementth~ai1approved co!lfr1ictdf.; There are weU'rtm water
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sYSterri~alr bv~t'theTrea..sUre ViaUey, thaianq~illany"cm:itractC)rSt()illstal1 :theil'syst~nis.
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What .,
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~bout 'Uill fed ,water's., ~ys!eni'1:hat' is sQlitter uniqli~thaffl~ontrac~oi thathas :
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iristall~cl'sy~t~ins'for, Meridian Water 'isiricapabJe' ofefficielltly.iristalli~g 'oIleforUnite(:l.
w.~ter?'Ift~ese di~sti':lciiopsex~$t; il1ePIlGm aybfil1terested iuFne..6kingt6;see,ifthe.
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ratepayer1s\\T~dl: serv~d bythoselllliquecriteria')f there Js'l1othinguniq uea1JollKUnite
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w~ter;theIi'whaHss()byzah#Ilein;th~irprojectsthat'ittakes 2years,rha~ter? If :
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' UIrit~dWatef.1Sptoperly documentil1g,itsdesigii CJ::iteria installati6ri.requiremerits;
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~:'ilispection proqeduresthen.~u1Y 60n1Panye)(p'eriep,cedj~ insta,llingwatersysteinsin..tl1e
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valley, ,s~()llidbeabtetOaI~ii6ipaie thb~e'ne~d~andafter on~pr.6jeCt have:a!hor9ugh '
un&~tsta1lgirigofDIIitedWater s exp~ct~ti("ns:
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Uriited cWater is bhibiting Schmidt Construction (rom beingJnc1udecl'on the apprdved
list, even though SchmidtConstructiop has over 25 years of experience in this incJ.ustry
andcarriesaAAAPublic"WorksLicehs~.ScfuhidtC()tistnictidn can see no reasOnable
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, reasonJocUnited Water d€:myingns qualification. Umted Water might iry.and ~ack outof
, thisbX,saying tgattheycan orily acceptnewcol1!ractorsarourid the 'first of every year
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and
the~ would consider us next December. That ~innot beacceptable, Schmidt "
Construction worked 'very diligently, submittingtheapplicatioilon time in November
2007 for the DE:cember revieW-and Approval proces~ in January., D riless they are lay~ng"
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UNITED WATER IDAHO INC,
8248 West Victory Road, Boise, 10 83709
O, Box 190420, Boise, 10 83719-0420
Tel: 208,362,7329 . Fax: 208,362.3858
john.lee(f!lunitedwateLcom
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United Water
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JOHN LEE
Construction Coordinator
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February 5 , 2008
Mr. Curtis Thaden
Idaho Public Utilities Commission
PO Box 83702
Boise, I D 83702-0074
Dear Mr. Curtis:
United Water has received your letter regarding complaints from Mckay Construction and
Schmidt Construction. 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-96-4 1997 Stipulation and
Settlement Agreem ~nJ_ldr1i c:JJY~ter was or ~r~(LQyth~ Co mission to "implement suchsystems and procedures as are necessary 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 list. The ten
contractors have been able to provide the development community with competitive
pricing during the recent building boom.
WWW.UNITEDWATER.COM
Through this past experience United Water has learned that each newly approved
contactor 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),
) During any given year United Water will receive requests through out the year
from contractors wishing to become approved United Water Idaho contractors.
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.
) 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.
) United Water currently has ten approved contractors.
If you have any questions , please feel free to call me.
Sincerely,
Construction Coordinator
CC: Patty Foss , Scott Rhead , Greg Wyatt
/C-
United Water
(8)
United Water Idaho Inc.
8248 W, Victory Road
O. Box 190420
Boise, 10 83719-0420
telephone [phone]
facsimile 208 362 3858
July 15, 2005
McKay Construction, 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 installing water mains in the United Water Idaho s certificated area. Previously,
approved contractors will not be affected by the new pre-qualification requirements.
Along with the new pre-qualification requirements we are also implementing an annual
review process for all contractors. We will 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 will be ratedon a scale from one to five on various stages of your projects. Five is a favorable rating
anything below four is unacceptable. These forms will aid us in our annual review
process.
We also need to have updated information regarding the insurance requirements that
United Water contractors are required to carry. I am enclosing a copy of page 3 of our
standard contract that refers to the insurance coverage amounts. Please send us your
insurance coverage information by July 27 , 2005.
If you have any questions, please feel free to call.
Sincerely,
John Lee
Construction Coordinator
Enc: Evaluation Form
Page 3 Main Extension Contract
www.unitedwater.com ~'-"'ez
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United Water
CID
United Water Idaho Inc.
8248 W. Victory Road
O. Box 190420
Boise, 10 83719-0420
telephone [phone]
facsimile 208 362 3858
August 16 2005
McKay Construction
Mr. McKay
PO Box 3066
Boise, ID 83703
Dear Mr. McKay:
On July 15th I requested information from you regarding proof of insurance coverage
necessary 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 information from you since
January of 2004. It is imperative that you send your proof of insurance by September 1
2005. United Water will not allow McKay Construction to start any new projects until we
have received information from your insurance agent that proves McKay Construction
meets the necessary limits.
I am enclosing a copy of my previous request and the insurance liability minimums
required.
If you have any questions, please feel free to call.
Sincerely,
Construction Coordinator
Enc: Letter Dated July 15, 2005
Page 3 Main Extension Contract
www.unitedwater.com
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United Water
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United Water Idaho Inc.
8248 w.VictoryRoad '
. P.O. Box 190~20 ,
Boise, ID837J9cO42Q;'
telephone [phone]
facsimile 208 362 3858
August 22, 2005
McKay Construction, Co, Inc.
McKay
PO Box 2450
Eagle, ID 83616
Dear Mr. McKay:
Thank you for your response to my request for updated insurance information. The
infonnation, which you sent to us , indicates that you do not have the minimum igsQrance
necessary to be an approved -United Water Contractor.
When you are able to meet the required insurance coverage minimums you wilJ. be
allowed to perfonn construction on United Water Idaho projects.
If you have any questions, please feel free to call.
Sincerely,
John Lee
Construction Coordinator
\2, ArtiCle Number 7003 3110 0001 1948 8723
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Complete items 1 ,And 3, Also complete
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item 4 if Restricted Delivery is desired~
: . Print your name and address 01'), the reverse
so that we can return the card to you..
: . Attach,this card to the back of the mailpiece,
or on the front if space permits.
DAgen!
D Addressee
C; Da!e,ofQeliirery
1-1. Articl~jdressed !~i~,
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Mr. McKay
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McKay Construction? Inc
PO Box 2450
Eagle, ill 83616
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United Water
(8)
United Water Idaho Inc.
8248 W. Victory Road
O. Box 190420
Boise, 1083719-0420
telephone [phone]
, facsimile 208 362 3858
September 19, 200S
Mr. McKay
McKay Construction, Inc.
O. Box 2450
Eagle, ill 83616
Dear Mr. McKay:
We still have not received verification from either you or your insurance provider
that your company carries the minimum insurance required by United Water
Idaho to be an approved contractor. Ifwe do not receive verification ofthe
necessary insurance minimums by September 30, 200S, we will have no
alternative but to remove McKay Construction, Inc. ftom our approved contractor
list.
If you have any questions, please feel ftee to call.
Sincerely,
John Lee
Construction Coordinator
Enc: Letter Dated August 22, 200S
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United Water Idaho Inc.
8248 W. Victory Road
. P.O. Box1~0420
Boise ID83719-0420
telephone [phone] '
facsimile 208 362 3858
october 4 , 2005
. Mr. McKay
McKay Construction , Co , Inc.
PO Box 2450
Eagle , ID 83616
Qear Mr. McKay:
The letter is to inform you that McKay Construction , Inc. has been removed from
United Water Idaho s list of approved contractors. This decision results from a
failure to provide our office with a Certificate of Insurance from your insurance
carrier guaranteeing minimum insurance coverage as required by the contract. As
stipulated in our September 19 2005 letter to you ,this Certificate of Insurance
was to bein our office by September 30, 2005.
If you have any questions , please feel free to call.
Sincerely,
ConstructiopCoordinator
En~losure:;;
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p~!~.~;p
ber 19, 2005
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~~NDER:C()MPLETE THIS SECTION
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ON7PLETETHISSECTION ON DELIVERY
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0 Agent
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C. Date of Delivery I;
t . Complete items 1, 2, and 3. Also complete
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item 4 if Restricted Delivery is desired.
i . Print your name and address on the reVerse
so that we can return the card to you.i. Attach this card to the back of the mail piece
or on the front if space permits.
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