Contractors and city schools at odds over millions in pay

Firms say they're owed for finished work

system says it's back up to speed

October 29, 2003|By Liz Bowie | Liz Bowie,SUN STAFF

When general contractor Charles W. Over marshaled 23 subcontractors and more than 100 workers to complete a $5 million job in just seven weeks at Northern High School, he never imagined the school system would claim he shouldn't be paid.

But 14 months later, school officials are saying that although they wanted the work done - and paid for most of it - he's not entitled to the money.

School officials contend they never gave Over a signed contract and say they violated state law by not asking for bids on the contract. Therefore, they say in a claim filed in court in July, they shouldn't have to pay Over the remaining $1.5 million he is owed - and he should return what he was paid.

"There is a huge injustice being done here," said Over, who notes that the school system has never questioned the quality of the work.

C.W. Over & Sons Inc. is one of several construction contractors who say city schools owe them millions of dollars in payments for renovation projects that in most cases were completed at least a year ago. Three have filed suit.

Contractors warn that the school system's failure to pay is causing severe financial hardship for some small subcontractors and will discourage competition for contracts, ultimately driving up costs.

Some contractors believe the cash-strapped school system is engaging in delaying and bullying tactics to stretch out the payments it has to make.

"What is happening with the school system is well outside the norm," said William Huddles, an attorney for a contractor that contends it is owed $700,000.

Barring disputes or other reasons why an owner might legitimately withhold a payment, contractors are paid within 30 to 45 days after completion of the work, said David Lever, executive director of the Maryland school construction program.

Interim schools chief Bonnie S. Copeland acknowledges that six or seven months ago, the school system was having difficulty paying its bills as it faced a budget deficit now totaling $52 million. "I know that some of these payments were late because of a cash flow issue," said Copeland, who began the job July 1.

Today, though, she says, the payment schedule for all vendors is back to normal, despite what some contractors say. She said the school system is withholding payment to the three contractors who have filed suit because it disputes their bills. Funds have been budgeted to pay those contractors if they're found to be owed money, a school spokeswoman said.

School board President Patricia Welch said it is clear that administrators may not have followed procedures as closely as they should have with a number of contracts.

"We are revising those processes and making sure we remain good partners for the business community," said Welch, who declined to comment on the cases in litigation.

Although disputes between contractors and government agencies are not uncommon, contractors say they have seen a change in the way the school system does business, particularly in the past year. One of them is Roy Kirby, president of the prominent Baltimore firm Roy Kirby & Sons Inc., which filed suit in February to obtain $236,000 from a major renovation of Harbor City High School completed in November 2000.

Kirby, who said he has never filed suit to get paid in 38 years in the contracting business, said he was forced into the position because the school system refused to negotiate.

Before 1997, when the city schools became independent, the city used to handle contracting for the school system. Kirby said he would walk into the director of public works' office and hash out the dispute quickly.

Baltimore generally pays contractors within two months, said J. Keith Scroggins, head of general services in Baltimore's Department of Public Works.

"If we have a dispute we will sit down with them to try to clarify it," he said. "There are disputes that arise on many projects. ... Generally, it is resolved amicably."

The long-term effect of the school system's payment record, said Kirby, will be to "stifle competition. You will have fewer contractors who want to do work for the city. And the ones who do work ... will add costs. That is what reality becomes when you adopt this cavalier, smug attitude."

School system spokeswoman Edie House disagreed.

"We think we are good business partners. We think that is evident by the number of contractors who bid on these contracts," House said.

Kirby cites as an outrageous example of the school system's practices its legal maneuvering against contractor C.W. Over & Sons Inc., in connection with work it did to divide Northern High School into two schools in summer last year.

Over filed suit in April, saying the firm is still owed $1.5 million. But the school system filed a counterclaim in July, demanding that the contractor return $2.4 million of the $3.5 million it received.

The school lawyers say the onus was on Over "to determine the procurement rules that apply and to ensure compliance with requirements" of state law for contracting.

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