Road Builders Lose First Round In MDOT Suit

April 22, 2002
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LANSING — Four road-building trade groups have asked an Ingham County Circuit Court to remove a new type of warranty recently placed on two projects in southeastern Michigan by the state Department of Transportation (MDOT).

The Michigan Road Builders Association (MRBA), the Associated Underground Contractors, the Michigan Concrete Paving Association and the Michigan Pavement Association (MPA) filed the lawsuit on behalf of their members earlier this month.

Called performance warranties, these require contractors to repair problems they feel are not related to normal wear and tear. The trade groups don’t think that builders should be held liable for glitches in design, engineering or other facets of a job they don’t perform.

“We have no problem backing our work, yet this new performance warranty requires that contractors guarantee aspects of a project that are not under their control,” said Tony Milo, MRBA executive vice-president.

The trade groups said they had no other choice but to sue, as the State Transportation Committee refused to intervene.

“This issue represents a dramatic shift of engineering and design responsibility for road repair projects from the owner agency to the private sector and this is bad public policy,” said Bob Risser, MCPA executive vice president.

The associations sought to prevent MDOT from awarding bids for work on I-94 and U.S. 24, which have performance warranties, as part of their April 4 lawsuit. But their request for an injunction was denied and both contracts were awarded the next day.

The trade groups also tried to get the warranties removed before the bidding opened.

“We were not successful in having the performance warranty specifications removed from the projects prior to the opening of the bids,” said Gary Naeyaert, MRBA director of government and public relations.

The I-94 project carries a seven-year warranty, while the U.S. 24 work has one that will last for five years.

“We’re looking to put warranties on so we can protect the investment that we are making for everyone. We want contractors to stand behind their work,” said MDOT spokesman Ari Adler.

Alder told the Business Journal that the I-94 and U.S. 24 projects became the second and third jobs to have performance warranties attached. The first was applied to a U.S. 23 project in 1996, and that one is nearing expiration.

A date to hear the associations’ complaint in Lansing has not yet been set.

“We expect that the court date will be scheduled within the next couple of months, and it will look at whether or not MDOT overstepped its authority in placing these warranties on these two projects,” said Adler.

A decision could impact all future road projects in the state.

“It depends on the ruling,” said Adler. “The court could actually tell us to cease and desist the warranties even on those two projects that already have them in place.”

Patrick Isom, an attorney in the transportation division of the Attorney General’s office, is representing MDOT in the case. Butzel Long of Lansing is representing the trade groups.

The industry has based its case on a 1980 opinion from longtime Attorney General Frank Kelley. The groups interpret his opinion as reading that the state can’t be indemnified against losses that come from design failures.

“We have been working cooperatively with MDOT to develop a workable performance warranty provision, but these particular warranties were added without the input of the entire industry,” said MPA Executive Director Mike Nystrom.

But the Michigan Asphalt Paving Association is not taking part in the legal action against the state. MAPA said last year that it fully supported the changes MDOT wanted to make to the bidding process, including the addition of the new warranties.

“Performance warranties ensure builders will have to put forward their best product,” said MAPA Executive Vice President Reaburn King, “and are a response to the public’s demand for accountability.”         

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