SIEMENS Case History & Summary
March 9th, 2016 by
In September, 2013, the City of Monticello granted a contract to Siemens for the installation of approximately 4,300 new water meters city-wide, and for the replacement of some of the old water mains in the core of the City and construction of other water system infrastructure. Mayor Allen Maxwell died on March 10, 2014, before any work on the project had commenced. Within a couple of days following the death of Mayor Maxwell, Siemens made demand on the City for payment of approximately $5 Million, and payment of that money was made by the City to Siemens on the day of Mayor Maxwell’s funeral. The funds came from a revenue bond borrowing done by the City to finance the project. Work on installation of the water meters then began, and a couple of months later Siemens made another demand for payment of approximately $2 Million, and that was paid by the City to Siemens.
Beginning mid-summer of 2014 the City began to raise complaints about multiple instances of defective installation of water meters, the installation of water meters that were not the type specified by the contract, and Siemens’ plans to install new water mains in areas of the City where that was not needed. Then on a split vote then Mayor Joe Rogers and the City Council employed attorney Cliff Gibson to evaluate and address the problems associated with the water project. In behalf of the City, Gibson wrote several letters to Siemens raising the problems being experienced by the City and demanding that Siemens provide, among other things, a performance bond, and a multi-year surety bond backing up Siemens’ promises of efficiency savings that the City would realize from making the water system improvements.
In an effort to resolve the problems between the City and Siemens, in January, 2015, Mayor Zack Tucker and the City Council authorized Gibson to engage Siemens in a mediation meeting which was scheduled and held in Little Rock on April 21, 2015. The mediation failed to reach a resolution of the problems.
A week later, on April 28, 2015, the City learned that Siemens had filed a Federal Court lawsuit against the City on the same day the mediation had been held in Little Rock. Siemens’ lawsuit demanded the City be required to perform its obligations under the contract, and was later amended by Siemens to seek an award of damages against the City for what it said was breaches of contract by the City.
Gibson filed a counter suit against Siemens in behalf of the City requesting, among other things, that the contract between the City and Siemens be declared illegal, null and void for failure of project to be let for competitive bidding as required by Arkansas law. The counter suit noted that there was an exception to the requirement for competitive bidding where the contractor did the things necessary to have a Qualified Efficiency Contract under the Arkansas Performance-based Contracting law, but asserted that Siemens had not provided the financial assurances and other things required to have a bid-exempt performance contract.
In December, 2015, the Gibson filed a motion in behalf of the City to dismiss the Siemens lawsuit and claims against the City based on the contract being void for failure to comply with competitive bidding laws. Siemens opposed the motion, and Federal Judge Price Marshall held a hearing in Little Rock on the motion yesterday at which both the City and Siemens presented their arguments. At the conclusion of the hearing, Judge Marshall ruled in favor of the City, granted its motion, and dismissed Siemens’ lawsuit against the City with prejudice. Judge Marshall found that Siemens had not provided the financial assurances required to have a contract with the City that is exempt from Arkansas’ competitive bidding laws. Judge Marshall left standing the City’s counter suit against Siemens for return of its $7 Million advanced to Siemens on the project and for fraud on the part of Siemens.
Gibson stated that he was most pleased with the ruling from the Federal Court. “The lawsuit isn’t over”, Gibson said, “because we have the City’s claims against Siemens to bring before a jury.” A jury trial has been scheduled in Federal Court on the case for October 11 through 14, 2016.
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