HomeMy WebLinkAbout05 - Slurry Seal Program — Award of Contract No. 7893-1 (Project No. 21R04)Q �EwPpRT
CITY OF
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z NEWPORT BEACH
<,FORN'P City Council Staff Report
March 9, 2021
Agenda Item No. 5
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: David A. Webb, Public Works Director - 949-644-3311,
dawebb@newportbeachca.gov
PREPARED BY: Andy Tran, Senior Civil Engineer, atran@newportbeachca.gov
PHONE: 949-644-3315
TITLE: Slurry Seal Program — Award of Contract No. 7893-1 (Project
No. 21 R04)
ABSTRACT:
Staff has received construction bids for the Fiscal Year 2020-21 Slurry Seal Program and
requests City Council's approval to award the construction contract to American Asphalt
South, Inc. This year's project covers the Balboa Peninsula, Newport Terrace, Newport
Shores, Lido Isle, West Newport, and Park Lido communities, and follows the annual
concrete repair program that is currently in progress.
RECOMMENDATION:
a) Find this project exempt from the California Environmental Quality Act (CEQA)
pursuant to Section 15301(c), Class 1 (maintenance of existing public facilities
involving negligible or no expansion of use) of the CEQA Guidelines, because this
project has no potential to have a significant effect on the environment;
b) Approve the project plans and specifications;
c) Award Contract No 7893-1 to American Asphalt South, Inc. for the total bid price of
$1,042,485.00, and authorize the Mayor and City Clerk to execute the contract; and
d) Establish a contingency of $20,200.00 (approximately 2 percent of total bid) to cover
the cost of unforeseen work not included in the original contract.
FUNDING REQUIREMENTS:
Sufficient funding is available in the current Capital Improvement Program budget for the
award of this contract. The following funds will be expensed:
Account Description Account Number Amount
General Fund 01201927-980000-21 R04 $ 1,000,000.00
Water Capital Distribution/Piping 70201931-980000-21 R04 $ 100,000.00
Total: $ 1,100,000.00
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Slurry Seal Program — Award of Contract No. 7893-1 (Project No. 21 R04)
March 9, 2021
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Proposed funds uses are as follows:
Vendor
Purpose
TOTAL BID AMOUNT
Amount
American Asphalt South, Inc.
Construction Contract
$
1,042,485.00
American Asphalt South, Inc.
Construction Contingency
$
20,200.00
Geocon West, Inc.
Materials Testing
$
37,315.00
Pavement Coatings
Total:
$
1,100,000.00
Staff recommends establishing $20,200.00 (approximately 2 percent of total bid) for
contingency purposes and unforeseen conditions associated with construction.
DISCUSSION:
The City of Newport Beach (City) uses and incorporates a Pavement Management
Program to review, monitor and recommend proper and timely street pavement
maintenance, rehabilitation and/or replacement in an effort to keep the overall City street
pavement condition at or around an 80 Pavement Condition Index rating, as requested
by City Council. As part of this Pavement Management Program, the City performs
necessary pavement patching and crack sealing, and then applies an asphalt slurry seal
coat to all residential and collector streets, as well as to City parking lots. The City tries to
maintain a seven-year slurry seal cycle (the City is divided into seven areas, with one
area slurry sealed each year). This annual slurry seal project is an important part of the
regular preventative street maintenance and extends the life of the pavement, which in
turn lowers the overall life cycle cost, as well as improves the aesthetics and rideability of
the City's streets.
At 10 a.m. on February 11, 2021, the City Clerk opened and read the four bids the City
received for this project:
The low bidder, American Asphalt South, Inc., possesses a California State Contractor's
License Classification "A", as required by the project specifications. A review of
references for American Asphalt South, Inc. shows satisfactory completion of similar
contracts for the City and other municipalities.
The low bid was 23 percent above the Engineer's Estimate of $850,000.00. The
difference between the low bid and the Engineer's Estimate was primarily due to
increasing costs for crack sealing, edge grinding and pavement striping. Staff has
witnessed the construction costs for these various bid items increasing over the past
couple of years and was hoping to see some downward movement due to the current
economic climate; however, that did not materialize.
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BIDDER
TOTAL BID AMOUNT
Low
American Asphalt South, Inc.
$
1,042,485.00
2nd
Roy Allan Slurry Seal, Inc.
$
1,149,345.00
3rd
All American Asphalt
$
1,181,304.11
4th
Pavement Coatings
$
1,189,200.00
The low bidder, American Asphalt South, Inc., possesses a California State Contractor's
License Classification "A", as required by the project specifications. A review of
references for American Asphalt South, Inc. shows satisfactory completion of similar
contracts for the City and other municipalities.
The low bid was 23 percent above the Engineer's Estimate of $850,000.00. The
difference between the low bid and the Engineer's Estimate was primarily due to
increasing costs for crack sealing, edge grinding and pavement striping. Staff has
witnessed the construction costs for these various bid items increasing over the past
couple of years and was hoping to see some downward movement due to the current
economic climate; however, that did not materialize.
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Slurry Seal Program — Award of Contract No. 7893-1 (Project No. 21 R04)
March 9, 2021
Page 3
After the bid opening, staff received a bid protest letter from the apparent second low
bidder (Attachment B), Roy Allan Slurry Seal, Inc., claiming that the apparent low bidder
was nonresponsive and not a responsible bidder. American Asphalt South, Inc. submitted
a response to the protest (Attachment C) as did its attorney (Attachment D). Staff has
reviewed the responses and determined that American Asphalt South, Inc. complies with
the bidding specification requirements and is fully qualified to complete this project. Staff
recommends the City Council declare American Asphalt South, Inc. as the lowest
responsive bidder.
The proposed project includes distributing construction notices to affected residents and
businesses; clearing existing pavement of debris, soils, and other loose materials;
removing existing traffic striping, pavement markings, and raised pavement markers;
weed removal and crack sealing; edge grinding; placing asphalt slurry seal; placing
asphalt seal coat, installing new traffic striping and pavement markings; and other
incidental items of work necessary to complete the work within the Balboa Peninsula,
Newport Terrace, Newport Shores, Lido Isle, West Newport, and Park Lido communities.
The project also includes seal coating and striping two large City -owned parking lots at
the Balboa and Newport Piers. Pursuant to the Contract Specifications, the Contractor
will have 40 working days to complete the work. If approved, the work is scheduled to
start in April.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this project exempt from the California
Environmental Quality Act (CEQA) pursuant to Section 15301(c), Class 1, (maintenance
of existing public facilities involving negligible or no expansion of use),of the CEQA
Guidelines, because this project has no potential to have a significant effect on the
environment;
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A — Location Map
Attachment B — Bid Protest Letter from Roy Allan Dated February 17, 2021
Attachment C — Response Letter from American Asphalt South Dated February 23, 2021
Attachment D — Attorney Response for American Asphalt South Dated February 19, 2021
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Attachment A
JOHN WAYNE
AIRPORT
NOT TO SCALE
SLURRY SEAL PROGRAM
LOCATION MAP
CITY OF NEWPORT BEACH
PUBLIC WORKS DEPARTMENT
C-7893-1 1 3/9/21
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Attachment B
Bid Protest Letter from Roy Allan
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RL9 wR I I la
INC.
11922 Bloomfield Ave, Santa Fe Springs, CA 90670
(562) 864-3366 (562) 864-6612 fax CL# 372798
February 17th, 2021
City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
Attention:
James M. Houlihan
Deputy PWD/City Engineer
RE: Bid Protest — Slurry Seal Program Contract No. 7893-1
To whom it may concern,
We are formally protesting the award of Slurry Seal Program, Contract No. 7893-1, to
American Asphalt South (AAS). The bid submitted by AAS is both nonresponsive and they are
not a responsible bidder as required by both Public Contract Code and the contract documents.
The City of Newport Beach should award this project to the lowest responsible and responsive
bidder, Roy Allan Slurry Seal, Inc.
American Asphalt South's bid is not responsive because they did not correctly and truthfully
answer the questions contained within the bid. One page twenty of the bid documents the bidder
is asked for a series of information regarding, "all arbitrations, lawsuits, settlements or the like
(in or out of court) you have been involved in with public agencies in the past five years", to
which AAS answersed, "N/A" to each. In addition, on page twenty-one of the bid documents in
response to, "Are any claims or actions unresolved or outstanding?" AAS circled "No".
Immediately under that question set the bid documents state, "Failure of the bidder to provide
ALL requested information in a complete and accurate manner may be considered non-
responsive."
We believe AAS was nonresponsive by intentionally answering these questions falsely. AAS is
in fact currently under suspension by the City of San Diego, and a complaint has been filed for
permanent debarment by the City with the California Office of Administrative Hearings. AAS
was aware of this at time of the bid and failed to disclose it. We believe AAS purposely mislead
the City of Newport Beach to hide the seriousness of San Diego's claim. This is especially
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significant considering the volume, dollar amount, and length of time AAS has held contracts
with the City of San Diego, which is most likely AAS' single largest customer.
In addition to the bid being nonresponsive AAS is also not a responsible bidder. Public Contract
Code (PCC) section 20162 states that, "When the expenditure required for a public project
exceed five thousand dollars ($5,000), it shall be contracted for and let to the lowest responsible
bidder after notice". Section 1103 of the PCC defines a responsible bidder as, "a bidder who
has demonstrated the attribute of trustworthiness, as well as quality, fitness, capacity, and
experience to satisfactorily perform the public works contract.
It is clear why trustworthiness is listed as the first attribute of a responsible bidder. Before all
else a public agency must be able to trust the contractor, without which the other attributes are
meaningless. An agency must be able to trust that the contractor is not engaging in corrupting
bidding practices, trust that they are not creating a conflict of interest by giving gifts to city
employees to influence their contract, trust that they are not creating fraudulent change orders, or
trust that they are not billing the city twice for completed work. These are a few of the examples
cited by the City of San Diego in the attached documents to permanently debar AAS.
The City of San Diego states in their claim, "The City seeks the remedy of permanent debarment
rather than only temporary debarment because AAS engaged in a pattern of conduct over the
course of many years whose sole aim was to deceive the City and defraud City taxpayer...
Thus, the central questions under Section 22.0807(a)(7) is whether the City, in light of AAS'
many acts, could ever trust AAS in the future. The answer is undoubtedly, no. This case does
not involve a single "bad apple" at AAS. As the above recited allegation make clear, no fewer
than four people at AAS were involved in the collusion, to include AAS' CEO (Mr. Henderson)
and its Corporate Secretary (Mr. Stone)."
In their Notice and of Suspension and Initiations of Debarment Proceedings to AAS the City of
San Diego concludes, "It is in the best public interest to prevent harming the public's financial
well-being and to maintain the public's trust to contract with contractors that do not violate the
law." We believe it is also in the interest of the City of Newport Beach, and its residents, to not
award the project to AAS, but award it to Roy Allan Slurry Seal, Inc, the lowest responsive and
responsible bidder.
Sincerely,
Lawrence Allan
President
Roy Allan Slurry Seal, Inc.
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Attachment: Excerpts from American Asphalt South's Bid Package
Attachment: City of San Diego List of Suspended Persons per SDMC §22.0813(a)
Attachment: City of San Diego v. American Asphalt South
Attachment: Notice of Suspension and Initiation of Debarment Proceeding (City of San Diego)
MU.,
City of Newport Beach
SLURRY SEAL PROGRAM
Contract No. 7893-1
INFORMATION REQUIRED OF BIDDER
Bidder certifies under penalty of perjury under the laws of the State of California that the
following information is true and correct:
Name of individual Contractor, Company or Corporation: 104w�*V9
Business Address:+ FID /Ir4� r�".,/,c�, C'.•� p,�d�
Telephone and Fax Number: .kVZ
California State Contractor's License No. and Class:
(REQUIRED AT TIME OF AWARD)
Original Date Issued: �01/�40Expiration Date
r 1 e
iqv�9r�
List the name and title/position of the person(s) who inspected for your firm the site of the
work proposed in these contract documents:
a -
The following are the names, titles, addresses, and phone numbers of all individuals, firm
members, partners, joint ventures, and company or corporate officers having a principal
interest in this proposal:
Name Title Address Telephone
Corporation organized under the laws of the State of
19
5-9
The dates of any voluntary or involuntary bankruptcy judgments against any principal
having an interest in this proposal are as follows:
��W
All company, corporate, or fictitious business names used by any principal having interest
in this proposal are as follows:
X101
For all arbitrations, lawsuits, settlements or the like (in or out of court) you have been
involved in with public agencies in the past five years (Attach additional Sheets if
necessary) provide:
Provide the names, addresses and telephone numbers of the parties;
Briefly summarize the parties' claims and defenses;
Have you ever had a contract terminated by the owner/agency? If so, explain.
Have you ever failed to complete a project? If so, explain.
For any projects you have been involved with in the last 5 years, did you have any claims
or actions by any outside agency or individual for labor compliance (i.e. failure to pay
prevailing wage, falsifying certified payrolls, etc.)? Yes No
all
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Are any claims or actions unresolved or outstanding? Yes e
If yes to any of the above, explain. (Attach additional sheets, if necessary)
Failure of the bidder to provide ALL requested information in a complete and accurate
manner may be considered non-responsive.
Bidder
';W 2// -
(Print name of OvMfir or President
of Corpo tion/Company)
— 44&==_
Auth ked Signatureffitle
Title
Date
On Fr_ 1 D3 ?. y Z ► ^ before me, ►P. A cd jC2/f , Notary Public, personally appeared
Z 9= P, 44, o. 7: _ 6,.,6�; who proved to me on the basis of
satisfactory a idence to be the person(s) whose name(s),imsf5re subscribed to the within instrument and
acknowledged to me that be/slwlthey executed the same in bis!veritheir authorized capacity(ies), and that
by tris/tier/their signatures) on the instrumentthe person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
RICHARD I:H'fRlILIR
COMM. #2201331 z
77
*_My
Notary Public • California o
_ (SEAL) San Bernardino County
Nntaryu lic in and for said State Comm. Fx ues Jut " 2021
My Commission Expires:
21
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Purchasing &
5 D Contracting
List of Suspended Persons per SDMC §22.o813(a)
Name Fast Known Address Contractors Commencement Hate Expiration Date Reference
License Number
American Asphalt South, Inc. 11436 Santa Ana Ave_, Pon Cana, CA A,784469 June t7, 2020 PENDING
9 2337
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Jennifer L. Riggs (SBN 204417)
jriggs@meyersnave.com
Ian Johnson (SBN 208713)
Uohnson@meyersnave.com
com
MEYERS NAVE
600 B Street, Suite 1650
San Diego, CA 92101
Telephone: 619-330-1700
Attorneys for Complainant
CITY OF SAN DIEGO
EXEMPT FROM FILING FEES
GOVT CODE § 6103
OFFICE OF ADMINISTRATIVE HEARINGS
STATE OF CALIFORNIA, COUNTY OF SAN DIEGO
City of San Diego,
Complainant,
V.
American Asphalt South, Inc., a California
Corporation,
I
OAH Case No.
ACCUSATION IN ACTION FOR
DEBARMENT(San Diego Municipal Code
§ 22.0807)
CITY OF SAN DIEGO'S ACCUSATION IN ACTION FOR DEBARMENT
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11. INTRODUCTION
1. Complainant City of San Diego ("City") brings this Accusation pursuant to the San
Diego Municipal Code ("Code") for an order permanently debarring Respondent American
Asphalt South, Inc. ("AAS") from bidding on, being awarded or performing any contract with the
City either as a general contractor or a subcontractor. The City seeks the remedy of permanent
debarment rather than only temporary debarment because AAS engaged in a pattern of conduct
over the course of many years whose sole aim was to deceive the City and to defraud City
taxpayers. AAS' unlawful and deceitful acts — perpetrated by, among others, AAS' Chief
Executive Officer and another Corporate Officer — include:
• influencing and currying favor with a City employee ("Employee A") by
giving "gifts" to Employee A (tickets, a trip, etc.) in violation of San Diego
Municipal Code § 27.3520(f);
• repeatedly conspiring with Employee A to artificially inflate prices on
option contracts;
conspiring with Employee A so that AAS would receive double payment
for defective work;
• conspiring with Employee A so that AAS would receive payment for work
not performed;
• conspiring with Employee A to manipulate bidding requirements and
violate bidding laws; and
conspiring with Employee A to unlawfully remove approved
subcontractors on projects, which would have allowed AAS to increase
profit margins through "self -performed" work.
2. These facts, which the City will establish at hearing, warrant the immediate and
permanent debbarment of AAS under three separate provisions of the Code:
' The Code provisions related to debarment (Article 2: Administrative Code; Division 8:
Debarment; §§ 22.0801-22.0819) are attached hereto as Exhibit A.
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• Section 22.0807(x)(4) — Providing for permanent debarment where a
contractor "has engaged in any corrupt practice in bidding, award,
administration or performance of a contract";
■ Section 22.0807(a)(3) — Providing for permanent debarment where a
contractor has engaged in collusive bidding practices; and
• Section 22.0807(a)(7) — Providing for permanent debarment where a
contractor "has committed an act or omission so serious or compelling in
nature that it affects the present responsibility of the ... contractor to be
awarded a contract or to participate as a subcontractor."
II. THE PARTIES
3. The City is a local government agency and subdivision of the State of California.
4. AAS is a California Corporation having its address, on information and belief, at
114436 Santa Ana Avenue, Fontana, CA 92337.
III. SPECIFIC ALLEGATIONS
A. The City's SlymmSeal Contracts
5. Slurry seal is an emulsion applied to asphalt street surfaces to preserve and extend
the life of the asphalt. The City regularly enters into public works contracts for the application of
� slurry seal to its streets.
6. Each of the City's slurry -seal contracts is, by law, competitively bid, with the
contract going to the lowest responsible bidder. A contractor who has won a slurry -seal contract
must thus complete the contract at the bid price, subject only to legitimate change and field orders.
In addition, any contractor bidding on a slurry -seal contract must submit an affidavit pursuant to
Cal. Pub. Cont. Code § 7106 and 23 U.S.C. § 112 that its bid is genuine and has not been
submitted or manipulated through collusion with another.
7. The City's slurry -seal contracts contain per-unit and lump -sum elements. For
example, the application of the slurry seal itself is a per-unit item, e.g., $0.16 per square foot.
Lump -sum items include bonds, mobilization costs and the cost for traffic control. These per-unit
and lump elements are not subject to adjustment.
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8. The value of the City's slurry -seal contracts generally ranges from $2 to $4 million.
The contracts also normally contain an "option" clause, which affords the City a one-time right to
extend the contract at the original contract price. For example, if a $2 million contract called for
the application of slurry seal to certain City streets at a price of $0.16 per square foot, the option
allows the City to demand the application of slurry seal on additional City streets at a price of
$0.16 cents per square foot, but only up to an additional option contract value of $2 million. The
City has sole discretion whether to exercise its right under an option clause. That is, the City can
either trigger the clause to get additional work done at the original contract price or can send the
additional work out to public bid if that promises to result in a lower price.
9. The option clauses also contain important protections for the contractor. First, and
as suggested, the value of the option contract generally cannot exceed the value of the original
contract (i.e., $2 million in the example above). Second, the City can only trigger the clause
within a certain period, thus limiting the time in which the contractor has to hold to its original
price.
10. The City's slurry -seal contracts incorporate by express reference the City's
"Whitebook Standard Specification for Public Works Construction." Section 3-4 of the
Whitebook provides, among other things, that the City's Resident Engineer ("RE") on a project is
to be a contractor's "single point of contact" with respect to the project and that the RE must be
included in all project -related communications. This provision, when followed, ensures that the
City has proper oversight over a project and that a contractor cannot prevail on others at the City
in a bid to secure illegitimate price adjustments, change orders, field orders, etc.
B. Employee A
11. Prior to sending a slurry -seal contract out for bid, the City prepares specifications
for the project stamped by a City engineer. Employee A, no longer employed by the City, was the
engineer who stamped the specifications for certain of the AAS slurry -seal contracts at issue here.
Employee A also had considerable authority over the AAS contracts, including the authority to
approve change orders up to $250,000, to authorize field orders up to $150,000, and, of particular
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importance here, to decide whether to exercise the option in an AAS contract for additional work
or instead to send that additional work out to public bid.
12. Employee A was not, however, the RE on any of the AAS contracts at issue. Thus,
pursuant to Section 3-4 of the Whitebook, AAS was not to communicate privately with Employee
A regarding any of its contracts with or work for the City.
C. AAS Actions Mandating Debarment
13. AAS entered into numerous slurry -seal contracts with the City over the course of
more than ten years. Throughout that time, AAS plied Employee A with unlawful gifts in a
successful bid to secure Employee's A's cooperation in bilking City taxpayers.
1. Unlawful Gifts to E.mnloyee A
14. Employee A was prohibited by the Code and associated provisions in the California
Code of Regulations from receiving gifts in a given year exceeding a certain combined value.
(See Code §§ 27.3501-3595; Cal. Code. R. §§ 1811-18997). The maximum allowable per -year
value for gifts has increased slightly over time, with the cap set at $420 for 2011 and 2012, and
increasing to $500 for 2019 and 2020. AAS sought to buy favor from and influence Employee A
— and did so successfully — by flouting these rules. AAS' gifts to Employee A included:
• Ap_ it 13, 2012 — Tim Griffin, AAS's Operations Manager, sent an email to
Employee A's private Gmail account with an invitation to a golf tournament on
May 11, 2012 at Eagle Crest golf course in Escondido. Employee A responded
"Thanks, Sign me up." Shortly before the tournament, Employee A sent an
email to Lyle Stone, an AAS Corporate Officer, stating, "You're damn lucky
you've got Tim on your side. I was going to put that Valley Slurry job back
out to bid and Tim convinced me to option it to you guys. He's a tough
negotiator." (emphasis added).
•
May 1 l . 2012 — AAS paid for Employee A to attend the 2012 Maintenance
Superintendents Association Golf Tournament in San Diego. AAS purchased
the Platinum Package which included an entry fee of $450 for four golfers, or
$112.50 per golfer.
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• March 28, 2013 — Mr. Griffin of AAS sent an email to Employee A's personal
Gmail account with an invitation to attend the 2013 Maintenance
Superintendents Association Golf Tournament. City Employee A responded
"It's already on my calendar. Thanks Tim!"
MU 28, 2013 — Employee A sent an email on his personal Gmail account to
Mr. Stone to explain he had won a TV in an AAS -sponsored raffle. He wrote,
"No joke. Keep it quiet," and stated, "I was joking with Tim after the raffle that
you guys should have just signed the TV over to me instead of giving those
people false hope."
• March 26, 2014 — Mr. Griffin sent an email to Employee A's personal Gmail
account inviting him to the 2014 Maintenance Superintendents Association
Golf Tournament. City Employee A responded "I already reserved the date.
Thanks!!"
• On or about December 20, 2014 —AAS paid more than $500 for Employee A
to attend a football game in Oakland, California, which included flight, hotel
accommodations and tickets to the game. This gift, in itself, exceeded
permissible thresholds and thus violated the law.
• ,I ul y H. ?f)15 —Mr. Griffin emailed Employee A's personal Gmail account with
an invitation to attend the 2015 Maintenance Superintendents Association Golf
Tournament. City Employee A responded "I am all in!" Shortly after the
tournament, on November 11, 2015, Employee A emailed Allan Henderson, the
President and CEO of AAS, via his personal Gmail account, stating "Tim
[Griffin] is a shrewd negotiator. He made me option about $6M in contracts
to your company about 2 weeks ago. I wanted to go out to bid to get better
pricing but he told me no." (emphasis added).
■ April 7, 2016 —Mr. Griffin sent an email to Employee A's personal Gmail
account with an invitation to attend the 2016 Maintenance Superintendents
Association Golf Tournament. City Employee A responded "I'll be there!"
6 6
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2. AAS Conspires with Em }lo vee A to Defraud San Diego Taxpayers
15. AAS' various gifts to Employee A had their intended effect. Over the course of
several years, AAS and Employee A regularly conspired in a series of acts intended to benefit
AAS at the taxpayer's expense, which ranged from artificially (and unlawfully) increasing option
contract prices, to securing payment for defective work, to manipulating bids and flouting bidding
statutes. Moreover, and as the foregoing suggests, they often did so through secretive
correspondence using Employee A's private Gmail account, which not only violates the above-
described contract specifications requiring the RE's participation in all communications
(Whitebook § 3-4) but also serves as compelling evidence of an intent to deceive.
(a) Unlawful Increase in Contract Option Prices
16. As noted, the option clause in the City's slurry -seal contracts ensures that the City
has the right to secure additional work at the original contract price. However, AAS routinely
colluded with Employee A to unlawfully increase prices under option contracts to above the
original contract price. AAS did this in essentially two ways: (1) increasing the per -square -foot
price in the option contract, and (2) increasing the price in the option contract for traffic control.
17. Per -Square -Foot increases — A very small increase in the per -square -foot price on a
slurry -seal contract — e.g., an increase of only two or three cents — can have a huge impact on
overall cost given that the contracts involve many millions of square feet. The per -square -foot
increases in option contracts on which AAS and Employee conspired include:
• March 7, 20I3 — Employee A sent an email using his personal Gmail account to
Mr. Stone of AAS, with the re line "Option Contracts." Employee A stated in
the email, "[Y]ou may have noticed I significantly bumped up a few lump sum
bid items to your benefit and I changed one contract you bid at $0.14/SF to
$0.17/ SF." Mr. Stone responded, "I did notice that the unit price and the
TC [Le., traffic control] was bumped up. I greatly appreciate that!"
(emphasis added).
+ Mar 21, 2013 — The original contract, which AAS won on January 31, 2012,
stated a price of $0.16 per square foot. Employee A triggered the contract
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option on May 21, 2013, again "bumping up" the price to $0.19 per square foot.
This, on information and belief, resulted in an additional payment to AAS of
approximately $157,000, to which AAS was not lawfully entitled.
• July 2014 — The original contract, awarded to AAS on February 27, 2013,
stated a price of $0.16 per square foot. Prior to the option being triggered,
Mr. Griffin of AAS emailed Employee A, again using the personal Gmail
account, outlining a proposal for the option contract that increased the price to
$0.22 per square foot. Employee A agreed to "bump up" certain items
proposed by AAS — e.g., doubling the price for traffic control from $40,000 to
$80,000 — and stated that AAS could obtain additional "bump ups" in change
orders: "[You'll] make it up in about $3 or $400k in change orders for
mill/paves AND check out the bonus I'm giving you guys in bid items 12,
13, & 15! PARTY! Make sure you guys get yourself a little something
special." (emphasis added).
October 2015 — The original contract, awarded on June 11, 2015, stated a price
of $0.30 per square foot. AAS and Employee A conspired to increase the price
to $.32 per square foot for the option contract, which resulted in an additional
unlawful payment to AAS of more than $87,000.
18. Traffic Control — The cost for traffic control in an option contract must be
commensurate to the cost in the original contract. Generally speaking, this would mean that the
cost for traffic control in the option contract would go down if the option contract has a smaller
scope than the original contract, i.e., fewer square feet of street. However, in several instances,
AAS and Employee A colluded to increase the price of traffic control even where the option
contract had a smaller scope:
•
May 13 —The original contract involved 7.4 million square feet and
traffic control costs of $116,085. The option contract priced traffic control at
$130,000 even though it involved only 6.9 million square feet.
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• May 21, 2013 — The original contract involved approximately 7.1 million
square feet and a traffic control cost of $129,000. The option contract involved
only circa 5.2 million square feet — some 1.8 million fewer square feet — and yet
fixed traffic control costs at $135,000.
• October 5. 20 15 — The original contract was for approximately 7.5 million
square feet and set the price for traffic control at $148,615. The option contract
increased the price of traffic control to $168,000 despite the fact it involved
only approximately 6.3 million feet.
3. Double Pa meat for Defective Work
19. AAS served as the slurry -seal subcontractor on a 2012-2013 project along Aldine
Drive in San Diego. City field engineers later determined that AAS's work on the project was
defective and demanded remedial repairs. However, Employee A agreed to accept the work and
then added the remediation work to a separate AAS contract. AAS was thus paid for defective
work and then paid to cure its own defect.
4. Payment for Work Not Performed
20. On more than one occasion, AAS received payment for work it did not perform. In
March 2015, for example, AAS billed the City for 300,000 linear feet of "crack seal," even though
it had in fact applied only 182,000 linear feet. When City personnel balked at paying the invoice,
Employee A — all the while conspiring with AAS via his private Gmail account — pressured City
personnel to pay $111,000 on the invoice, although AAS was entitled to only approximately
$67,000. In addition, Employee A approved a $111,000 change order under that same contract for
an additional 300,000 linear feet of crack seal. AAS, on information and belief, did not apply
600,000 linear feet of crack seal under the contract and change order.
21. On another occasion in September of 2013, a member of City staff rejected an AAS
invoice seeking full payment (100%) for street striping that had not been completed. Employee A
then directed the staff member by email to have AAS resubmit the invoice to seek payment for
95% completion. Employee A later forwarded that email to Mr. Griffin of AAS, stating
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"Obviously, don't tell them we talked." Mr. Griffin responded, "That's for sure. I'll let you know
as soon I [sic] get something."
5. Manipulation of Bidding ReguirementsNiolation of Bidding Laws
22. AAS' collusion with Employee A extended to the manipulation of bids and the
violation of public -bidding statutes. For example, and as discussed above in connection with
AAS' "gifts" to Employee A, AAS and Employee A conspired on at least two occasions to have
additional work performed under an option clause rather than sending the work out for public bid
so to as obtain the lowest competitive price. As Employee A stated in an email of November 11,
2015 to AAS' CEO — sent shortly after yet another golf outing with AAS — "Tim [Griffin of AAS]
is a shrewd negotiator. He made me option about $6M in contracts to your company about 2
weeks ago. I wanted to go out to bid to get better pricing but he told me no." (emphasis
added).
23. AAS collusion with Employee A also extended to altering project requirements so
that AAS could qualify to bid. In 2010, for example, Employee A prepared specifications for a
contract in which he specified the use of a particular PASS scrub seal product. Prior to bid
opening, Mr. Stone of AAS emailed Employee A to state that AAS could not obtain that product,
the implication being that AAS could thus not qualify to bid. Employee A responded that he
would change the specifications to allow AAS to use its own proprietary "in house" product and
stated that he was willing to delay all of his projects by a month to change specifications to permit
use of AAS' own product. Employee A then sent an internal email to City staff instructing them
to delay bid openings. He later forwarded that internal email to Mr. Griffin, who responded,
"You're the MAN!!!!!!! 1! ! ! 11 ! 1! !" Employee A replied, "[The manufacturer] doesn't have me in
their pocket AND I don't take kindly to them playing dirty. It's a good thing AAS has you
working for them and we both like guns."
24. AAS and Employee A also conspired to ignore public bidding rules altogether. On
one occasion in February 2012, for example, Employee A offered AAS work that involved laying
pavement for a library parking lot. However, and as AAS well knew, this work was not within the
scope of any AAS contract and should have been put out to bid in accordance with the applicable
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public contracting laws so as to secure the best competitive price. In addition, Employee A
forwarded to AAS an internal email exchange among City staff, which gave AAS insider
knowledge on what City staff expected, the urgency of work, and willingness to execute a contract
that AAS could leverage to obtain favorable terms.
6. Attempt to Remove. Subcontractors
25. Section 4107 of the Public Contract Code prohibits general contractors from
removing subcontractors from a publicly -bid and awarded contract, save in very limited
circumstances not applicable here. On at least two occasions, AAS took steps to violate that
statute so that it could self -perform subcontractor work and thus unlawfully increase its profit
j margins.
26. In January 2014, for example, Mr. Griffin of AAS emailed Employee A regarding
an option contract and stated his intent to "get rid" of one of its subcontractors, Frank & Sons, so
that AAS could self -perform the work. Mr. Griffin later sent a very similar email to Employee A
on another project, discussing AAS' removal of subcontractor Safe USA to allow for self -
performance of the work. These are yet additional examples of AAS' steadfast willingness to
flout public contracting rules to obtain a financial advantage.
7. Miscellaneous Wrongful Acts by AAS
27. Certain of AAS's acts, while clearly improper and worthy of debarment, do not fall
neatly into any particular category. On June 14, 2012, for example, Tyler Skender of AAS sent an
email to Employee A's personal Gmail account with the re line "June Billings for FY 11 Groups 6
7 8." Mr. Skender stated in the email, "When we spoke a couple of weeks ago, you told me to
send the June billings to you before sending them to the City for your review. I have attached
the 3 estimated Billings that would be completed at that time." (emphasis added).
28. Employee A responded on June 18, 2012, writing, "Looks good. I noticed the
`Crack Seal' bid item is really low on the billing. Can you bill me a lot more for that and still
justify it to Field [i.e., the Resident Engineer] without them questioning you?" (emphasis
added). Mr. Stone of AAS replied to Employee A's email, stating in essence that a "padded bill"
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I would not work because the City — i.e., the RE — was aware that the crack seal work had been
completed in May.
29. This is thus an instance in which AAS found itself unable to extract unlawful
payments from the City. However, it also (1) exemplifies AAS's steadfast willingness to collude
with Employee A by, among other things, shutting the RE out of communications relating to
pricing and billing; and (2) establishes that AAS and Employee A conspired to bilk the City and
its taxpayers almost as a matter of course.
30. Yet another miscellaneous act of collusion occurred in February 2016, when AAS
sought to increase the unit price for asphalt pavement repair and other items. After City staff
rejected the request, Mr. Griffin of AAS emailed Employee A's personal Gmail account asking
him to intervene on AAS' behalf. Employee A then secretly counseled Mr. Griffin via Gmail
emails to hold onto work force reports required by the City until the City caved and acquiesced to
AAS' demands. This only underscores AAS' willingness to go outside contractually -mandated
communication channels to extract concessions to which it had no legal claim.
IV. LEGAL BASIS FOR PERMANENT DEBARMENT
31. Debarment should in many instances be only a temporary measure, one designed to
ensure that a contractor that has engaged in lower -level misconduct does not repeat that
misconduct in the future. Indeed, the Code expressly contemplates debarment for a period of one,
two or three or more years. (See Code at § 22.0807(b) -(d)). However, the Code also makes clear
that certain types of misconduct — persistent and collusive misconduct meant to defraud and
deceive — should result in the stricter remedy of permanent debarment so as to protect the City and
its taxpayers from still further harm. This case involves just that sort of misconduct.
A. Cade 22.0807_(3) and (4): Corrupt Practices and Collusive 13idding
32. Section 22.0807(a)(4) of the Code provides that a contractor may be permanently
debarred when it "has engaged in any corrupt practice in bidding, award, administration, or
performance of a contract." Section 22.0807(a)(3) provides that permanent debarment may be
ordered where a contractor has violated Section 97 of the City Charter ("Section 97"), entitled,
"No Collusion in Bidding." Section 97 states:
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If at any time it shall be found that any party or parties to whom a contract has
been awarded has, in presenting any bid or bids, been guilty of collusion with
any party or parties in the submission of any bid or for the purpose of
preventing any other bid being made, then the contracts so awarded may be
declared null and void by the Council and the Council shall thereupon re -
advertise for new bids for said work or the incomplete portion thereof. The
Council shall debar from future bidding all persons or firms found to be in
violation of this Section, or any future firm in which such person is financially
interested.
33. The allegations recounted above, when established at hearing, mandate AAS'
permanent debarment under both of these Code provisions. AAS, after plying Employee A with
gifts over the course of several years, regularly and routinely colluded with Employee A to
(1) increase amounts paid by the City for work by, among other things, "bumping up" option
contract prices, (2) to violate public -bidding statutes by, inter alfa, placing additional work under
option contracts when, by Employee A's own admission, the work could have been put out to
public bid to obtain a better price; (3) to secure payment to AAS for work never performed; and
(4) to secure double payment to AAS for work it defectively performed. This is a longstanding,
well-documented and egregious pattern of misconduct warranting immediate and permanent
debarment.
B. Code 22.0807(a)(7): Acts and Omissions of a Serious and Compelling
Nature
34. Section 22.0807(a)(7) of the Code provides that a contractor may be permanently
debarred when it "has committed an act or omission so serious or compelling in nature that it
affects the present responsibility of the contractor to be awarded a contract or to participate as a
subcontractor." Section 1103 of the Public Contract Code explains the meaning of
"responsibility" in this context, stating that a "responsible bidder" is one "who has demonstrated
the attribute of trustworthiness, as well as quality, fitness, capacity, and experience to
satisfactorily perform the public works contract." (emphasis added). Thus, the central question
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under Section 22.0807(a)(7) is whether the City, in light of AAS' many acts, could ever trust AAS
in the future.
35. The answer is undoubtedly, no. This case does not involve an isolated incident or
two, but rather involves a years -long pattern of conduct with a single aim: to take money from the
City to which AAS was not entitled. Nor does this case involve a single "bad apple" at AAS. As
the above -recited allegations make clear, no fewer than four people at AAS were involved in the
collusion, to include AAS' CEO (Mr. Henderson) and its Corporate Secretary (Mr. Stone). Also,
the fact that Employee A has left the City's employ does nothing to obviate concerns about
potential misconduct by AAS in the future. AAS, left to its own devices, would simply look for
some other means of circumventing contractually -mandated hierarchies and communications
channels.
V. PRAYER FOR RELIEF
36. Based on the foregoing allegations, each re -alleged and incorporated here, the City
respectfully prays for an order permanently debarring AAS pursuant to Code §§ 22.0807(a)(3), (4)
and (7). Pursuant to Code § 22.0814(a), AAS, by the order of debarment would be "excluded
from submitting bids, submitting responses to requests for proposal or qualifications, receiving
contract awards, executing contracts, participating as a subcontractor, employee, agent or
representative of another person contracting with the City." In addition, pursuant to Code
§ 22.0815(a), any affiliate of AAS, as defined in Code § 22.0802, would be likewise permanently
debarred.
DATED: February 2, 2021 MEYERS NAVE
By:
Jennifer L. Riggs
Ian Johnson
Attorneys for Complainant CITY OF SAN
DIEGO
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CITY OF SAN DIEGO
KRIS MICHELL
CHIEF OPERATING OFFICER
June 16, 2020
Mr. Allan A. Henderson, President & CEO
American Asphalt South, Inc.
14436 Santana Ave
Fontana, CA 92331
Re: Notice of Suspension and Initiation of Debarment Proceedings
Dear Mr. Henderson,
This letter is to inform you that the City of San Diego (City) is suspending American Asphalt
South, Inc., pending debarment, proceedings, along with its officers, and its affiliates under
San Diego Municipal Code (SDMC) §22.0807(a)(4) and 22.0807(a)(7). The grounds for
suspension pending debarment are based on the following facts and evidence:
On April 13, 2020, the Office of the City Auditor issued a report entitled "Hotline
Investigation of Gifts Received by a City Employee" (Attachment 2). This report prompted
City staff to review and conduct a separate, internal investigation, of potential wrongdoing
based on behavior identified by vendors included in the report. After conducting an internal
investigation of City email correspondence and reviewing the City Auditor's confidential
report, staff determined that American Asphalt South, Inc. (AAS) has acted in ways that
justify debarment as described in San Diego Municipal Code Chapter 2, Article 2, Division 8
(Debarment).
1. AAS created a conflict of interest by providing gifts, travel, and entertainment to City
Employee A, a public employee with the authority to award option contracts, approve
change orders up to $250,000, and authorize field order money up to $150,000 on AAS
contracts.
City Employee A confirms he received gifts from contractors. Specifically, from AAS,
tickets to a football game at Levi's Stadium in the San Francisco Bay Area, including
hotel and airfare. The value of this gift totaled $563.6o.
Further, City Employee A received and attended invitations to Annual MSA Golf
Tournaments between 2012 and 2016. The cumulative value of these tournaments
totaled $382.50 (refer to Attachment 2 for detailed information).
2. AAS has engaged in corrupt practices in the bidding, award, administration, or
performance of a contract (SDMC §22.o807(a)(4)).
' The City's debarment procedures are described in San Diego Municipal Code §22.0801 through 22.o826. Refer to
Attachment 1.
202 C STREET, 9TH FLOOR, NIS 9A • SAN DIEGO, CALIFORNIA 92101
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Page 2 of S
Mr. Allan A. Henderson, President & CEO
lune i6, 2020
A contractor may be permanently debarred from City contracts when "... engaged in any
corrupt practice in bidding, award, administration, or performance of a contract." For every
bid submitted, AAS certified under the penalty of perjury a "Non -Collusion Affidavit" under
23 United Stated Code 112 and Public Contract Code 71o6. In all instances where AAS was a
prime bidder, this certification was attested to. However, based on the examples noted
within this recommendation, the evidence found during the investigation indicate AAS
frequently and actively engaged in dishonest and corrupt behavior in connection with City
contracts, conspired with City Employee A to receive competitive advantages, and submitted
sham bids. Based on the evidence, the following corrupt practices committed by AAS staff
and officers include:
A. Scheming with City Employee A to extend bid opening dates and alter bidding
documents via addendum to allow AAS to bid on projects.
On at least one occasion, AAS obtained a competitive edge by convincing the City to accept a
different slurry seal material, because AAS was unable to obtain the material that was
originally called for in the invitation to bid.
In an email between City Employee A and a representative from AAS, a bid item for
"Scrub Seal" on the FY '10 Slurry Seal Group V project that was actively advertising, the AAS
representative asked City Employee A to delete the item:
AAS Representative: "You can't just delete the item."
City Employee A: "Nope. It's set in stone... politics bro."
In a separate email related to the same bid, a representative from AAS forwards an email
between AAS and Petrochem Manufacturing, Inc. (PMI) indicating PMI has decided not to
quote AAS. By PMI indicating they would not quote AAS for the proprietary product
(Rubberized Emulsion Aggregate Slurry, known as REAS) specified in the bid, AAS would not
be able to bid the project. Instead, working with City Employee A to change the proprietary
product to a non-proprietary product, AAS put itself in a position to bid.
City Employee A: "Looks like I may be switching to RPMS then. Hang tight, l just discussed
this with our Purchasing Dept. and they asked me to consult with my attorney. I'll get back to
you. If PMI does have the legal right to do this, then I will have to delay the bids on all my
projects one more month in order to switch the product."
Subsequently, the bid opening date was extended, and a change in product was made to
include an "or equal clause." This permitted AAS to submit a bid to include Rubber Polymer
Modified Slurry (RPMS) in lieu of the proprietary PMI product.
AAS Representative: "You're the MAN!!!!!!!!! !!!! ! '
City Employee A: "PMI doesn't have me in their pocket AND I don't take kindly to them
playing dirty. It's a good thingAA[S] has you working for them and we both like guns."
B. Conspired with City Employee A to remove subcontractors listed in bid documents,
in violation of WHITEBOOK requirements, create fraudulent change orders, and
complete an excess of $715,000 of subcontractor work in-house.
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Page 3 of 8
Mr. Allan A. Henderson, President & CEO
June 16, 2020
Subcontractors listed on bid documents cannot be substituted without the express
authorization of the City. Contractors' must follow the subcontractor substitution procedure
contained within City of San Diego Standard Specifications for Public Works Construction,
"The WHITEBOOK", including complying with Public Contract Code (PCC) 4107. Substitution
requests must comply with one of the nine (9) reasons identified under PCC and as mirrored
in the WHITEBOOK. Verification that a valid reason to substitute exists is conducted prior to
authorizing such a substitution by appropriate City staff. Unauthorized, or illegal
substitution of a subcontractor will result in a penalty being assessed as outlined under PCC
4110.
In an email from an AAS representative and City Employee A:
AAS Representative: "Here is the information on the last 2 options FY10 group III and FYio
group V. FY10 group III on this one we can delete theAC item (to get rid of Frank and sons)
and CCO its back in afterwards so we can do it in house. Sub out the crack seal and striping
depending on the $ amount to meet the goals to meet the 15.1% subcontracting goals. FYio
group Von this one we have to give the AC to PAL due to the SLBE and ELBE goals. But we
could not list Safe USA for the crack seal and do it in house."
The subcontractors on these projects were listed for $377,842 (Frank and Sons) and $338,340
(Safe USA) worth of work. The award to AAS was made based on low bid, but also the
mandatory subcontractor participation requirements identified in the contract. Listing
subcontractors to meet subcontractor participation requirements, and subsequently
removing them to perform work in house is a violation. It is evident that AAS submitted a
sham bid as AAS had no desire to provide the subcontract opportunities to the listed
subcontractors. AAS intended to remove the subcontractors and retain the City money that
would have gone to those listed subcontractors.
C. Submission of unreasonably low bids with a covert understanding that City
Employee A would later approve change orders and price increases.
Prior to submitting its bids, AAS sought to gain a competitive advantage by asking City
Employee A to comment upon or revise its bid.
A representative from AAS sent an email to City Employee A regarding the bid proposal for
contract Option 14 Sl.
AAS Representative: "I made this sheet for you to look at."
City Employee A: "See attached proposal. You guys are fleecing me! Yes, it's lower
than the original contract, BUTyou'll make it up in about $3 to $400k in change orders for
milVpavesAND check out the bonus I'm giving you guys in bid items 12, 13, & 15! PARTY!
Make sure you guys getyourself a little something special."
D. Conspiring with City Employee A to obtain favorable prices and terms on City
contracts to the detriment of the City, including being paid twice for completed
work, creating change orders for payment of work already listed in contract
documents and submitting invoices for incomplete work.
In an email exchange regarding Slurry contracts:
AAS Representative: "Attached is the proposal for Granada Avenue."
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Page 4 of 8
Mr. Allan A. Henderson, President & CEO
June i6, 2020
City Employee A: "Thanks! Looks good. Don't think I didn't see the $75o/ton digouts. I'm
going to ask Field to ask you for a quote. Stay tuned."
In an email exchange for a specific contract (FYii, Group 6), Transportation & Storm Water
(TSW) Staff question a quote submittal by AAS for PCC Trench Resurfacing with City
Employee A:
TSW Staff: "These tons were already identified in the bid docs. The contract states no
additional payment shall be made for milling, grinding, or saw cutting PCC or other
material. The REs don't understand why a perfectly good PCC trench cap needs removal—most
likely due to failing sub around the trench. I know PAL doesn't like PCC but our contract is
pretty clear. I've told the REs before that the issue is between PAL andAmerican, not us.
Do you want to approve all this `extra work' that isn't?"
City Employee A: "I see your point, but their claim is that it's a full digout of the PCC which
by what I can tell isn't covered under milling, grinding, or saw cutting. In future overlay/slurry
contracts, we're going to include a bid item for utility trench R&R."
TSW Staff: "These were marked out and quantified as dig outs. What is the difference with so
much PCC in the streets? AC contractors should know about San Diego streets being full of PCC
trench caps. I'm missing the point of adding more bid items that don't get inspected.
Contractors could claim all AC work is trench work and the RE wouldn't be the wiser. And,
since Field won't enforce the contract, contractors get away with so many CCOs for `extra
work'. I know, I know --it is none of my business. I'll approve all CCOs without comment."
In another instance, City Employee A forwards an email exchange amongst internal City staff
related to work related to the Governor Drive Library. By forwarding such exchanges, AAS is
given insider knowledge on what City staff is expecting, urgency, and willingness to execute
a contract. Insider information allows a bidder to formulate their bid or quote in such a way
that will appear attractive to the reviewer of such quote.
City Employee A: "Can you do a Type 2 over 3 on this? I'll pay the extra."
AAS Representative: "I don't see why not. I'll look at it in the morning."
AAS and City Employee A also plotted to alter AAS billing so that AAS could obtain more
money than they were entitled to. AAS sent these communications to City Employee A's
personal email account so that their scheming would not be discovered:
AAS Representative: "Hi [City Employee A), When we spoke a couple of weeks ago, you
told me to send the June billings to you before sending them to the City for your
review. I have attached the 3 estimated billings that would be completed at that time.
Please let me know if there are any changes you would like me to make."
City Employee A: "Looks good. I noticed the `Crack Seal' bid item is really low on the
billing. Can you bill me a lot more for that and still justify it to Field without them
questioning you?"
AAS Representative: "I have talked to our subcontractor for Crack Sealing and he was
completely finished in May. He told me that [Name redacted] is aware of that."
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Page 5 of 8
Mr. Allan A. Henderson, President & CEO
June 16, 2020
City Employee A: "Ok. Submit the invoices to Field Division today. Don't worry, you'll
get all that money left on the contract. Thanks.
3. American Asphalt South has committed an act or omission so serious or compelling
in nature that it affects the present responsibility of the bidder or contractor to be
awarded a contract or to participate as a subcontractor (SDMC §22.o8o7(a)(7)).
To promote integrity in the City's contracting processes and to protect the public interest,
the City shall only do business with responsible bidders and contractors. A "responsible
bidder" is defined as a one that has the quality, fitness, and capacity to satisfactorily
perform the proposed work, while a non -responsible bidder does not. Further, Public
Contract Code section 1103 defines "responsible bidder" - means a bidder who has
demonstrated the attribute of trustworthiness, as well as quality, fitness, capacity, and
experience to satisfactorily perform the public works contract. The City makes the
determination if a contractor has the capability to fully perform contract requirements and
the business integrity to justify the award of public funds.
Further, in City of Inglewood- GA County Civic Center Auth. v Superior Court, 7 Cal -3d 861, 863
(1972) the court defined responsible to include attributes of trustworthiness.
Based on the findings of the investigations conducted by Public Works and Office of the City
Auditor, AAS has committed acts so serious that it affects their ability to perform as a
responsible bidder, reveals their lack of business integrity, and puts into question their
trustworthiness. The following acts committed by AAS and their staff supports these
conclusions:
A. AAS circumvented official City communications policy and protocol to achieve
preferential treatment from City Employee A. AAS was informed through the
WHITEBOOK, City bidding documents, and preconstruction meetings that a project's
resident engineer is the single point of contact between the City and the contractor.
AAS staff consistently sidestepped this policy and communicated directly with City
Employee A on both his work and personal email accounts.
Minutes of preconstruction meetings wherein AAS was a prime contractor all show the same
direction was given to AAS regarding a single point of communication:
"There is a single point of contact between the City and the contractor, and that is the
Resident Engineer, All communication and correspondences between the City and
Contractor shall be through the RE, unless agreed to otherwise by the Resident Engineer. The
contractor is represented by the Superintendent."
AAS continuously circumvented this direction by reaching out directly to City Employee A,
instead of the assigned resident engineer.
In an email exchange regarding a change in REAS to Type II Slurry, the AAS representative is
showing their willingness to circumvent field engineering staff, the designated point of
contact, and instead work through a project manager to get the product changed. Failure to
follow clear, defined direction shows a lack of responsibility.
City Employee A: "I toldyou. The lab does not approve anything. They are there to do
testing. I would find out who the project manageron the job is and go through that person to
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Page 6 of 8
Mr. Allan A. Henderson, President & CEO
June 16, 2020
change the product. Don't ever deal with Field Division on issues like this. Tell the project
manager thatyou've already spoken with me and I'm ok with using RPMS."
AAS Representative: "I'll find out who the PM is."
City Employee A: "I just thought of something that may help. [City employee name
redacted] going to be upset if he finds outyou went around the RE and asked the project
manager directly. Give me an intersection near the project and I can look up the project
manager for you with his email. Then, email your question to the RE and cc the project
manager. That way you're letting the project manager what you want to do AND your still
dealing directly with the RE.
AAS Representative: "I see, good idea!"
In an email related to an invoice for a group project, an AAS representative forwards an
exchange between TSW staff and AAS to City Employee A with the following question:
AAS Representative: "Do we really have to deal with the field orders on March invoice?"
Here, the AAS Representative is questioning the resident engineer's request to correct the
invoice as submitted. The resident engineer states that money needed to be allocated to the
field order for extra work and that the quantities needed to be agreed upon prior to the
submittal as opposed to trying to back track charges.
Another email shows an exchange forwarded by an AAS Representative to City Employee A
regarding the Aldine Drive Slope Restoration project, awarded in April of 2011, where AAS
was performing as a subcontractor. The scope of the project was to install a retaining wall to
stabilize the slope on Aldine Drive segment between Van Dyke and Fairmount Avenues in the
Kensington neighborhood. The work would also include restoration of private property,
installation of irrigation, and street resurfacing and/or slurry. The application of the slurry
product by AAS was showing signs of failure and noted by City staff and AAS. The AAS
Representative indicated they [AAS] could make the repairs but would not be able to slurry
until August to help minimize shade and dry out wet areas.
AAS Representative: "Can they fix the seeping water?"
City Employee A: "No."
AAS Representative: "Have you decided whatyou want to do with this? This guy from
(Contractor Name Redacted] is something else. He called my office wanting to talk to my boss
so we gave him to [AAS Representative Name Redacted] and told him he needs to deal with
me on it. Haha!!!! He said he just needs something from the city saying it is accepted because
field is saying it is not. If you want I can re -slurry it again this time in a full closure in august
and hope it holds until winter. just to make it go away!"
A separate email string with the same email string shows a separate question after City
Employee A says, "No.":
AAS Representative: "Why not add it to one of my contracts and do an over lay?"
The request from the AAS Representative shows a blatant disregard to the use of public
funds. Instead of working to resolve the project under the warranty provisions of the
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Page 7 of 8
Mr. Allan A, Henderson, President & CEO
lune 16, 2020
appropriate contract [Aldine Drive Slope Restoration, referenced above], AAS shows clear
intent on requesting this be moved to a separate contract and to be paid for the same work
for a second time.
B. City Employee A covertly forwarded and blind copied AAS staff to internal City email
communications. AAS staff received City communications involving citizen
complaints, contractor performance issues, billing and invoicing disputes, changes
in bidding documents, and internal City email communications. AAS was privy to
internal City dialogue regarding their contracts, and benefited from advanced, inside
knowledge.
In an internal City email exchange forwarded to an AAS representative related to a Field
Engineering/Street Division Coordination Meeting, the AAS Representative becomes aware of
internal discussions and concerns related to AAS invoicing:
City Employee A: "FYI. Stop submitting incorrect invoices."
AAS Representative: "That's not the issue. [City employee name redacted] is not making
sense"
City Employee A: "It's always funny to hear theirside of the story. How can there be
quantity disputes every month? Why isn't the RE verifying quantities as the work occurs???"
AAS Representative: "I know, we have not had any disputes on quantitiesyet that 1 know of.
The on ly problem we have is the as builts not being correct until mid -month sometimes"
City Employee A: "So then what's [City employee name redacted] crap about the invoices
always been wrong?"
AAS Representative: "She had [City employee name redacted] change the dates and move
stuff around (CCO)"
City Employee A: "You guys love to get abused. DON'T EVER CHANGE DATES. Make them
payyou what the invoice you submit says and deal with the change orders as a separate
issue."
The preceding examples show the City's inability to trust AAS, as AAS was going behind the
back of City employees that administer the contract, to obtain advice from City Employee A
on how to gain advantages over the construction managers. These examples are not
necessarily exhaustive of all communications between AAS and City Employee A. AAS has
shown their willingness to manipulate prices and the contracting process. These actions
make AAS a non -responsible bidder and unable to perform on City work.
It is in the best public interest to prevent harming the public's financial well-being and to
maintain the public's trust to contract with contractors that do not violate the law.
Presentation of Evidence. Armiments. and Burden of Proof -
Pursuant to SDMC section 22.o8og, an independent hearing officer will hear evidence and
arguments from AAS and the City. The City shall bear the burden of proof by a
preponderance of the evidence.
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Page 8 of 8
Mr. Allan A, Henderson, President & CEO
June 16, 2020
Debarment proceedings before an independent hearing officer and the debarment process
are also governed under Administrative Regulation 25.90 (Attachment 3). The City will
contact you regarding scheduling a hearing.
You have the opportunity to appeal this suspension prior to the debarment hearing. If you
want to appeal this suspension, you must submit a timely request to:
Ms. Alia Khouri, Deputy Chief Operating Officer
City of San Diego
202 C Street, 91h Floor, MS 9A
San Diego, CA 92101
Upon receipt of your written appeal, I will provide you with an opportunity to appeal the
suspension at an informal meeting within seventy-two (72) hours, unless there is good
cause to extend the time. Refer to the attached Administrative Regulation 25.90 for
additional information.
By:
,:; - _-
KrAlic le
Chief Operating Officer
Attachment(s): 1. SDMC §§ 22.0801-22.0826 - Debarment Ordinance
2. Hotline Investigation of Gifts Received by a City Employee (Report)
3. Administrative Regulation 25.90 - Procedures for Initiating
Debarment and Debarment Hearings
cc: Aimee Faucett, Chief of Staff, Office of the Mayor
Jeff Sturak, Assistant Chief Operating Officer
Rolando Charvel, Chief Financial Officer
Eric Caldwell, Deputy Chief Operating Officer, Smart & Sustainable Communities
Alia Khouri, Deputy Chief Operating Officer, General Services
Johnnie Perkins, Deputy Chief Operating Officer, Public Utilities
Matthew Helm, Chief Compliance Officer
Kris McFadden, Director, Transportation Storm Water Department
James Nagelvoort, Director, Public Works Department
Kristina Peralta, Director, Purchasing & Contracting Department
Myrna Dayton, Assistant Director, Public Works Department
Cassandra Mougin, Deputy City Attorney, Office of the City Attorney
Christina Rae, Deputy City Attorney, Office of the City Attorney
Claudia C. Abarca, Deputy Director, Public Works Department
5-34
ATTACHMENT C
American Asphalt
South, Inc.
February 23, 2021
City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
Attn: James M. Houlihan
Re: Protest letter for Slurry Seal Program; Contract No. 7893-1
This letter -is in response to the protest letter received by the City of Newport Beach from Roy
Allan Slurry Seal for the above referenced projects.
First, regarding American Asphalt South, Inc. putting N/A for all arbitrations, lawsuits,
settlements, or the like, we did not list the City of San Diego's case because it just filed and it
does not pertain to our quality or performance of work which was our interpretation of the
question. We are currently investigating the matter regarding the City of San Diego with our
Attorneys and trying to understand the basis for their claims. We are confident that this matter
will eventually be resolved. Please note that we are not debarred, and we are currently working
for the City of San Diego on four existing contracts that will not be completed until the Spring of
2021.
Regarding the second matter, with our circling "NO" for the question pertaining to any claims or
actions by any outside agency or individual for labor compliance, the answer is correct. Once
again, Roy Allan Slurry Seal attempted to use a bogus case filed by the Laborer's Union several
years ago and sued us to try to get them awarded jobs that we were low bidder on and they or
Doug Martin Contracting were second. This matter was resolved over five years ago but I believe
we received a check for Attorney Fees from Roy Allan Slurry Seal and Doug Martin Contracting
just last year.
We have worked for the City of Newport several times and I am confident that our performance
has never been an issue.
We look forward to being awarded this project and anticipate continuing our successful working
relationship with the City of Newport Beach
Sh 7eA,�
Jeff Petty
President
www.americanasphaltsouth.com
Lic. # 784969
MAILING ADDRESS: P.O. BOX 310036 • FONTANA, CA 92331 • PHYSICAL ADDRESS: 19792 EL RIVINO ROAD • RIVERSIDE, CA 92509 • (909) 427-8276 • FAX (909) 427-8279
5-35
Attachment D
Attorney Response for American Asphalt South
5-36
ATKINSON, ANDELSON, LOYA, RUUD & ROMO
A PROFESSIONAL LAW CORPORATION
FRESNO
PLEASA NTON
(559) 225-6700
ATTORNEYS AT LAW
(925) 227-9200
IRVINE
12800 CENTER COURT DRIVE SOUTH, SUITE 300
RIVERSIDE
(949) 453-4260
CERRITOS, CALIFORNIA 90703-9364
(951) 683-1122
(562) 653-3200 - (714) 826-5480
MARIN
SACRAMENTO
(628) 234-6200
(916) 923-1200
FAX (562) 653-3333
PASADENA
WWW•AALRR.COM
SAN DIEGO
(626) 583-8600
(858) 485-9526
OUR FILE NUMBER:
SOgle@aalrr.com
(949) 53 6-22 25
008905.00027
31562416.1
February 19, 2021
VIA EMAIL AND OVERNIGHT MAIL
City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
Re: Slurry Seal Program, Contract No. 7893-1
Bid Protest by Roy Allan Slurry Seal, Inc.
Dear Mr. Tran,
Our firm represents American Asphalt South, Inc. ("AAS") and we are writing in response to
letter from Lawrence Allan, president of Roy Allan Slurry Seal, Inc. ("Roy Allan"), dated
February 17, 2021. Roy Allan is protesting the bid AAS submitted for the above -referenced
project/bid.
The Project Bids
On September 25, 2020, the City of Newport Beach opened bids for Slurry Seal Program
Contract No. 7893-1 (the "Project"). AAS is the apparent lowest responsive responsible bidder
and Roy Allan is the second lowest bidder. In a letter dated February 17, 2021, Roy Allan
protests the bid submitted by AAS and alleges without evidence that AAS intentionally provided
false answers in its bid to conceal legal disputes with the City of San Diego. As discussed
below, the bid protest from Roy Allan is without merit as AAS's bid is responsive and there is no
basis to award a contract for the Project to any bidder other than American Asphalt.
Roy Allan's protest baselessly imputes nefarious motives on AAS in an attempt to poach the
Project contract at a significantly higher cost to the City of Newport Beach. In contrast to the
conniving scheme that Roy Allan has manufactured from whole cloth, the reality of the situation
is far more banal. The answers cited in Roy Allan's letter regarding a lack of recent litigation
were the result of a simple misunderstanding on the part of AAS. As Southern California's
largest slurry contractor, AAS completes many bids in connection with dozens of public entities
since its formation in 1999. Many of these bid documents include a similar question regarding
recent and ongoing litigation—but with a critical difference that they limit relevant actions to
only those involving breach of contract claims. AAS has a proven track record as the premiere
slurry contractor in Southern California and it has never been sued for breach of contract in its
existence. In answering "N/A" in response to the questions regarding recent and ongoing
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ATKINSON, ANDELSON, LOYA, RUUD & ROMO
City of Newport Beach
February 19, 2021
Page 2
litigation with public agencies, AAS provided a truthful answer to the question it mistakenly
believed the document to be asking (i.e., has AAS been involved in any recent legal disputes
with any public agencies involving breach of contract claims?).
In fact, Roy Allan's desperate attempt to paint AAS a fraudulent schemer attempting to "pull a
fast one" falls apart upon even a cursory reflection. No one is more aware than AAS that its
ongoing and highly publicized disputes with the City of San Diego have been very public
knowledge for the better part of a year—in no small part due to Roy Allan's repeated efforts to
divert work rightfully awarded to AAS by parroting unproven and erroneous allegations as if
they were fact. In light of the numerous newspaper articles and television news casts, it is
frankly absurd that anyone would believe that AAS is operating under an illusion that it could
much less would—keep its disputes with the City of San Diego a secret, particularly from the
other cities with which AAS has performed public contracts for decades. To the contrary, AAS
has been and will remain transparent regarding its vigorous defense against the City of San
Diego's misrepresentations and distortions, and AAS looks forward to its ultimate exoneration.
Litigation With The City Of San Diezo
Contrary to Roy Allan's groundless allegations, AAS has nothing to hide. Below is an
explanation of the details related to each of AAS's recent and ongoing legal disputes with a
public agency—all of which solely involve the City of San Diego. In total, AAS and the City of
San Diego have been involved in three lawsuits (or comparable actions) in the last year.
First, on October 20, 2020, AAS filed a petition for writ of mandate with the Superior Court of
San Diego (Case No. 37-2020-00038338-CU-WM-CTL) in connection with numerous Public
Records Act requests that the City of San Diego had wrongfully failed to execute. The requested
documents were (and remain) critical and time -sensitive as the withheld documents represented
the purported evidence by which the City of San Diego suspended AAS on June 16, 2020.
Nonetheless, the City of San Diego dragged its feet for months and still has yet to produce
records in response to requests that AAS submitted as early as July 2, 2020—over seven months
ago. As the City of San Diego has yet to comply with its obligations under the Public Records
Act, this lawsuit is still pending.
Second, as of late January 2021, AAS had been suspended from bidding on public contracts with
the City of San Diego for more than seven months based on unproven and inaccurate allegations.
Since November of 2020, AAS has repeatedly requested the City of San Diego to schedule the
evidentiary hearing so that AAS may exonerate itself and debunk the false allegations that Roy
Allan has so actively sought to spread for its own financial benefit. However, the City of San
Diego repeatedly refused to even initiate the process that would lead to the scheduling of the
hearing by failing to file its accusation with the Office of Administrative Hearings. In fact, the
City of San Diego violated its own regulations by failing to initiate this process within 30 days of
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ATKINSON, ANDELSON, LOYA, RUUD & ROMO
City of Newport Beach
February 19, 2021
Page 3
issuing the suspension.1 Instead, AAS's supposedly temporary suspension—which began on
June 16, 2020—was prolonged for months as a result of the City of San Diego's inexcusable
delays. As a result, AAS has been effectively debarred without any opportunity to rebut the
supposed evidence, which is a compilation of mischaracterized and misinterpreted snippets
emails without context. Thus, on January 29, 2021, AAS filed a second lawsuit against the City
of San Diego, this time before the United States District Court for the Southern District of
California (Case No. 3:21-cv-00176-DMS-NLS), seeking a preliminary injunction against the
continued enforcement of the improperly extended suspension without a hearing.
Third, after unjustifiably delaying for over seven months, the City of San Diego finally filed its
accusation the very next business day after AAS filed its complaint for a preliminary injunction.
Now that the accusation has been filed, AAS and the City of San Diego can finally schedule the
evidentiary hearing, which will likely be held in June 2021. AAS eagerly looks forward to its
hearing and has no doubt that it will be exonerated and its business practices vindicated.
Bid Responsiveness And Bidder Responsibility
A contract advertised for bid under mandatory competitive bidding statutes must be awarded to
the lowest "responsive" and "responsible" bidder. Public Contract Code § 20162. As a result, a
contract must be awarded to the lowest responsive bidder unless it is found that bidder is not
responsible. "A bidder is responsible if it can perform the contract as promised. A bid is
responsive if it promises to do what the bidding instructions require." Bay Cities Paving &
Grading, Inc. v. City of San Leandro, 223 Cal. App. 4th 1181, 1187 (2014). A mistake in a bid
must be material to render the bid nonresponsive. See Valley Crest Landscape, Inc. v. City
Council, 41 Cal. App. 4th 1432, 1443 (1996).
Here, AAS's bid is responsive as it undoubtedly promises to do what the bidding instructions
require. Not even Roy Allan's protest claims that AAS's bid fails to comply with specifics of the
Project. As noted above, AAS did mistakenly misinterpret the bid instructions concerning its
ongoing litigation with the City of San Diego, but that innocuous and immaterial mistake does
not render the entirety of the bid non-responsive. Indeed, two of three belatedly disclosed
actions solely involve allegations against San Diego, not AAS. The final proceeding, as
discussed in detail below, has not resulted in any finding of wrongdoing by any judicial or other
governmental entity. Thus, the wholly inadvertent mistake in AAS's bid is immaterial and there
is no basis to find it nonresponsive.
Furthermore, AAS is a responsible bidder as it can perform the contract as promised. Any
arguments to the contrary are definitively rebutted by the fact that AAS has successfully and
efficiently performed similar contracts for the City of Newport Beach and many other public
' See S.D. Admin. Reg. No. 25.90 § 4.2.7 ("When a bidder is suspended, the Chief Operating Officer should appoint
a Board or an independent hearing officer to hear the debarment within a reasonable amount of time, based on the
circumstances of the case, not to exceed 30 calendar days unless the bidder or contractor presents good cause to
extend the time.")
5-39
ATKINSON, ANDELSON, LOYA, RUUD & ROMO
City of Newport Beach
February 19, 2021
Page 4
agencies, resulting in considerable savings to their respective taxpayers. The protest appears to
argue that the unproven allegations raised by the City of San Diego are sufficient for the City of
Newport Beach to redirect the Project contract to Roy Allan. However, in accordance with
binding California Supreme Court precedent, before a bid can be awarded to anyone other than
the lowest bidder, the public body must "afford [the bidder] an opportunity to rebut such adverse
evidence, and permit him to present evidence that he is qualified to perform the contract." City
ofinglewood-L.A. Cty. Civic Ctr. Auth. Superior Court, 7 Cal.3d 861, 871 (1972). AAS remains
eager and willing to rebut any purported evidence of wrongdoing, but Roy Allan's protest
provides none. Instead, the protest merely regurgitates untenable assertions that the City of San
Diego has alleged but has been (and will remain) unable to prove. Thus, AAS remains a
responsible bidder and awarding this bid to anyone other than AAS would violate Public
Contract Code section 20162 and the binding California Supreme Court decision in City of
Inglewood.
Request for Notices
Our firm, on behalf of AAS, further requests the following:
1. Pursuant to Government Code §54954.1, mailed notice of all meetings of the City
Council at which any issues pertaining to the award of a contract for the Project is on the
agenda, as well as a copy of all documents constituting the agenda packet. If there is any
fee associated with this request, please provide that information to the undersigned
immediately by facsimile (562-653-3333) or email (sdauscher@aalrr.com), so we can
promptly pay any fees;
2. We request to be informed by facsimile (562-653-3333) or email
(sdauscher@aalrr.com) as soon as any staff reports or recommendations concerning any
issues pertaining to the award of a contract for the Project are available, so we can
immediately inspect such reports or recommendations; and
3. Pursuant to Government Code §54954.3(a), an opportunity to address the City
Council before or during consideration of any issues pertaining to the award of the
Contract.
Conclusion
AAS's bid as submitted is responsive and any arguments by Roy Allan to the contrary are
meritless. Furthermore, AAS's proven track record of quality service for the City of Newport
Beach and many other public entities establishes that AAS has the ability to perform the Project
as described in the bid proposal. In contrast, no one—including the City of San Diego and Roy
Allan—has provided any evidence to show AAS is not a responsible contractor. Any
determination to pass over AAS based on bidder responsibility issues triggers AAS's due process
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ATKINSON, ANDELSON, LOYA, RUUD & ROMO
City of Newport Beach
February 19, 2021
Page 5
rights including a hearing before the City Council to rebut any finding that AAS is not a
responsible contractor.
Thank you for your consideration. We look forward to receiving the City of Newport Beach's
determination in this matter as soon as possible. If you would like AAS to address any other
issues related to its bid for the Project, please contact us.
Nothing in this letter shall be construed as a waiver of the AAS's rights or remedies which are
expressly reserved.
Very truly yours,
ATKINSON, ANDELSON, LOYA, RUUD & ROMO
Shawn M. Ogle
SZO:AWS
5-41