by Thomas K. Pendergast

What started with a misplaced decimal point could end up costing

San Francisco taxpayers as much as $120,000, should the SF

Board of Supervisors (BOS) pass an ordinance before them to approve

a lawsuit settlement.

Then again, had the decimal point been in the correct position,

the City might have paid out more than twice that amount, assuming

they would have still found the initial bid attractive enough to accept it.

The question of whether the BOS approves the deal is now

sitting in the BOS’s Government Audit and Oversight Committee,

so no one from the SF Recreation and Park Department (RPD) can

talk about it right now, according to RPD spokesperson Joey Kahn.

But court records tell much of the story. On or about May 6, 2015, the

construction company CF Contracting submitted a bid to

the SF Department of Public Works to build a new playground

at Mountain Lake Park as part of a $2 million renovation project,

which the construction company secured with a bid bond. Shortly thereafter,

the City advised CF Contracting that it was the accepted low bidder and would

be awarded the contract.

In the job specifications of the bid documents, however, a decimal point was

misplaced and a cost of $350,000 was, on paper, knocked down to $35,000.

About a week later, on May 11, 2015, according to court documents, someone

noticed the mistake and CF Contracting advised the City that it made a “significant

clerical error” in composing the bid. “The request was made in a timely

manner, the nature of the mistake was clearly stated, and the worksheet showing

the clerical error was submitted,” said the contractor’s lawyer, Robert N. Weaver, in

a court document.

On May 19, 2015, according to the contractor’s initial complaint, a “division

manager” with the City named Stacey Camillo told the contractor it was “clear

that CF Contracting’s intended bid amount materially differed from the

amount provided on the bid form,” but they “would not be relieved from its bid

and denied the request for relief from the bid.”

In subsequent conversations with a Recreation and Park Department manager,

Mary Hobson, CF Contracting and its principal, Coby Friedman, allege they

were told that if the contractor failed to sign the contract, the City would make a

claim on the bid bond. Because the contractor had signed a

contract with the bonding company, it was ultimately responsible for the cost.

“At the same time the project manager threatened to collect on the bid bond, that

same project manager advised the principal (Coby Friedman) that if CF

Contracting proceeded to enter the contract and perform the work, CF

Contracting would be made whole in the course of performing the work, and would

not lose money, which was understood to mean that pricing would be adjusted or

additional work on the project would be given to CF Contracting to make up the

shortfall in the primary work,” Weaver said in a summons to the City.

On or about July 16, 2015, CF Contracting entered into an agreement

with the City, acting through the General Manager of the Recreation and Park

Department, to facilitate the Mountain Lake Park Playground Renovation.

“In entering into that agreement, CF Contracting did so in reliance on the representations

of the project manager that it would be made whole and not lose money

on the job. As part of the agreement, CF Contracting posted a performance bond

which was subject to the indemnification agreement referenced above, exposing CF

Contracting and its principal to personal liability if the bond was enforced,” the

summons said.

The City responded to the lawsuit and complaint by essentially saying that a

contract is a contract and that’s it. David R. Hobstetter, an attorney representing

the City, responded to the contractor’s complaint: “At its core, CF’s Complaint argues

that even though CF executed a written contract with the City to perform work for

a set amount of money, the City cannot enforce that contract because a City employee

made an oral promise to pay CF additional sums for the work. The alleged

promise is unenforceable against the City because it contravenes the City’s requirements

for public works contract formation, and it is settled law that only contracts that

satisfy such requirements can bind the City; moreover, the law deems CF to

know and understand this.

“After signing the contract with full knowledge of the relevant facts and law,

CF cannot use the alleged promise to void or change the terms of the contract.”

According to Hobstetter, CF Contracting did not appeal the City’s denial

of bid relief. Furthermore, CF Contracting asserts, “that because the City

promised CF would be made whole and would not lose money, and CF believed

that this promise entitled it to additional payment,” CF should recover “the reasonable

value of the additional costs and expenses incurred by plaintiff on account of

the actions of DPW and Rec. and Park. (However,) CF is not entitled to (compensation

because it would) contravene City law requiring that construction contracts

be in writing.”

“Established law dictates that CF cannot recover without a written contract

incorporating the alleged promise. CF’s reliance on Hobson’s statement was

unreasonable as a matter of law. City law does not allow Hobson’s alleged oral statement

to commit the City to adjusting the contract to give CF more money, and the law

presumes that CF knew the limit on Hobson’s authority. Also, the fact that the

City denied CF’s request for bid relief, and the fact that the parties subsequently executed

a written contract that did not compensate CF for its alleged shortfall, contradicted

the notion that Hobson had the authority to promise CF more money.”

The ordinance now before the BOS Government and Audit Committee would

authorize a settlement for $110,000, plus an additional $10,000 to be paid if CF

Contracting reaches substantial completion of the playground in early 2017.