Associated Students battles with contractor over late project
John Lydecker and Tiffany Yost, student government officers at Chico State University, have mixed feelings when they look at the new, improved Bell Memorial Union. The building, which includes a bookstore, student government offices, an auditorium, a dining room and kitchen, meeting rooms, a game room and more, is indeed impressive. There’s more room to serve students better, and that, the officers say, is what the Associated Students is all about.
But behind the glossy new windows and towering walls is a struggle that could drag on years after the students it currently serves have moved on.
The two-phase project, which was paid for with a $30 million bond after students in 1997 approved future fee increases, came in more than a year late and over budget. If the contractor, Allen L. Bender Inc. of Sacramento, were held to the letter of its contract, it could owe as much as $1.8 million in “liquidated damages,” charge A.S. officials.
Lydecker, who serves as vice president of facilities and services for the A.S. and presides over Bell Memorial Union Committee meetings, said the situation doesn’t simply grate at students’ sense of fairness. The students have done their legal homework and believe they have standing to recover some of the money.
“We couldn’t run our businesses. We couldn’t effectively run our programs,” Lydecker said. Student needs were “put on hold” as construction lagged. “We want to make it very clear that we’re owed our liquidated damages.”
But, at the same time, the A.S. owed the contractor several hundred thousand dollars for “change-orders"—agreed-upon additions or adjustments made to the project-in-process. When a bill for $792,000 came down in October, the students came up with the idea of paying the contractor but somehow attaching to the payment a letter pointing out that Allen L. Bender did not live up to its end of the bargain and the A.S. expects to get some money of its own.
The BMUC approved the change order payment but, according to its minutes, did so “under protest” and formally acknowledging, via a resolution, that damages were to come. University officials disagreed with the idea.
That’s not how the building business works, said Dennis Graham, Chico State University’s vice president for business and finance.
“A project of this size is complex, and there are a lot of construction laws that are involved,” Graham said. “The process is that it’s important to pay them for what they’re legitimately entitled to.” The battle over the damages, he said, “shouldn’t be at the same time.”
The resolution was ultimately rescinded but will be reinstated if the university changes its mind and agrees it’s appropriate to add such a letter.
The payment was stopped in its tracks anyway, Graham said, because by then the subcontractors and the contractor were at odds and a lien was placed on their dealings.
The situation should shake out at a planned claims review board hearing at the California State University Chancellor’s Office, Graham said.
Graham added that he is not pleased with the contractor either and the university is backing up the A.S. in its quest for liquidated damages, which could run as much as $2,900 per day.
Lydecker said he’s confident the university represent the students fairly and “make sure we receive an equitable settlement.”
Yost, who is the A.S. vice president for business and finance, calculated that the BMU opened 394 days late but acknowledged that some of that time was justified. To add insult to injury, when the completed BMU finally opened this year, the roof leaked and the A.S. had to pay $210,000 to repair it.
Dave Hoskins, longtime project manager for Allen L. Bender, told the News & Review via an employee that it is the company’s policy never to give interviews. (In reality, Allen L. Bender representatives have been quoted in news stories over the years.)
Allen L. Bender, a 30-year-old firm that is run by two brothers, Blake and Brian Bender, has been the low bidder on several projects in the region, including $6 million worth of work at the Butte County Jail in 1994, a $4 million Chico parking structure and the Redding Civic Center, the company’s Web site reports. In 1992, Allen L. Bender was the contractor on the $8.2 million O’Connell Technology Center, did $9.5 million in work on Plumas Hall and also a $7.3 million BMU remodel.
Mike Pyeatt, Butte County’s general services director, said the construction of the new main jail was “probably the most smoothly run construction project in the county. The project went off like clockwork.” The jail job had the same project superintendent, Patrick Nixon, as did the BMU, and Pyeatt said it was on time with a minimum of change orders.
Similarly, Chico City Manager Tom Lando said the city had “a very good experience” with the firm, although the contractor and its subcontractors did have some disagreements.
In the type of twist that is only possible in higher education, the students technically don’t even own the new BMU they paid for. “The building is a [CSU] Board of Trustees building, a state building,” Graham explained, and the university is legally responsible for it. The A.S. is a third-party beneficiary, meaning it’s the only entity that can ever occupy the building.
The situation hints at the long-held, sometimes-tense relationship between the nonprofit auxiliary organization and the university, which always holds the tacit threat that it can veto budget-related resolutions by the A.S.
The lack of continuity in the A.S. is a function of the turnover as students graduate and leave or administrations with different political leanings are elected.
Still, the Associated Students is big business on campus. Chico is the only school in the state university system where the students have so much in the way of business-generated money and power, owning both the bookstore and food services.
In its 2000-01 annual report released just last week, the A.S. showed a grand total of $20.5 million in revenues taken in last year.
Yost, who also chairs the A.S. Businesses Committee, said the Bookstore is doing better than expected, but food services worries her even as the division moves to tighten its belt.
Yost said that, while the BMU construction was taking longer than planned, people got out of the habit of eating on campus and now food services, despite a new manager and greatly improved food, isn’t drawing in enough dollars. “It took so long to get into this building, so therefore our projections were off,” Yost said. “We’re not making as much money as we thought.”
Yost worries that Chico State administrators would jump at the chance to have control of the Bookstore and food services.
In an extreme case, the university could end up taking over losing ventures if they can’t turn a profit within three or four years. The 2002-03 school year “looks profitable,” Yost said. “That’s the last shot we have before the university comes.”
But Graham said that, unless A.S. businesses were to struggle for so long that it was hurting the student body, the university has no interest in a takeover.
At any rate, Yost and Lydecker agreed, relations with the university are getting better. “We want to work together,” Yost said. “We don’t want there to be any tension between the A.S. and the university.”
Still, Yost sighed, she and her peers never thought a student government position would lead to a lesson in complicated construction law. "We thought we would be working with student issues and student events—[something] positive. This issue has consumed a lot of us."