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
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.