> November 6, 2007

Testimony to: Subcommittee on National Parks of the Senate Committee on
Energy and Natural Resources

Testimony from: Ron Steed

> R & W Excavating

PO Box 840830

Hildale, UT 84784

Subject: H.R. 1191

Suggested reference: Testimony of Mike Richardson dated March 24, 2006
submitted to the U. S. House of Representatives Subcommittee on National
Parks

We want to thank the Chairman and this Committee for taking the time to
hear and consider this testimony with regards to the events and
circumstances that have led to legislation of H.R. 1191 to authorize the
National Park Service to pay for work performed by subcontractors of PGI
at the Grand Canyon National Park.

Early in 2003 several companies in northern Arizona and southern Utah
were solicited by Pacific General Inc. (PGI) a California Corporation to
offer quotes for the construction of a new EMS building at the North Rim
of the Grand Canyon National Park. They said they had been awarded a
five year Indefinite Delivery/Indefinite Quantity (IDIQ) contract with
the National Park Service (NPS) and had several million dollars work on
hand with the anticipation of several years of future work

R & W bid on the EMS and was awarded a subcontract with PGI to do the
earthwork and utilities and mobilized in June 2003. PGI had many
projects underway by the time we mobilized, mostly at the South Rim. R &
W offered quotes on many task orders and was awarded several of them.

From the outset, PGI was slow to pay draws submitted to them and as the
season went on, the payments got later and later. We applied as much
pressure on PGI as we felt was reasonable without jeopardizing our
relationship with them, anticipating working with them over a long
period of time. By November, 2003 the draws were just not being paid. I
contacted the Contracting Officer (CO), Mr. Gordon Plaisted by phone to
inquire into the status of certain draws to see if they were being
delayed for reasons we were responsible for. He informed me that the
draws in question had been approved by him and to look to PGI for
payment. Not receiving payments from PGI we requested bond information
so we could file claims against their performance and payment bonds. The
CO told us he would provide the name of the Surety who provided the
bonds but he later admitted that bonds did not exist.

The question may be asked, how did so many subcontractors get into so
many projects without the general contractor acquiring performance and
payment bonds as required by law? PGI had contracts with the government
valued at millions of dollars; they were being awarded numerous new
contracts and task orders on an ongoing basis and they had a track
record of large government contracts over many years time. It
[should]{.underline} be safe to assume that if the government is
awarding these numbers and magnitude of contracts to a General
Contractor that that contractor is conducting business in a proper and
legal manner.

The bigger question is how did PGI obtain so much work with NPS without
providing bonds? The Federal Miller Act and the Federal Acquisition
Regulations provide that since subcontractors cannot place liens on
public lands the general contractor must provide performance and payment
bonds for contracts over \$100,000.00. If subcontractors are not paid,
the claim is against the payment bond. The Miller Act has been a part of
contracting for decades and there should be no question that it is being
applied as required. Large Government contracts must be bonded, but the
CO in total disregard for the law kept issuing task orders
[knowing]{.underline} PGI could not or did not provide the bonds. He
also approved payments [knowing]{.underline} that PGI had provided
certification that their subcontractors and suppliers had been paid when
in fact they had not paid them. How do we know he knowingly and
blatantly violated of the law? Several calls had been made to him
personally for bonds and payment inquiries, yet he continued to issue
task orders and approved payments to PGI! We requested information
through the Freedom of Information Act (FOIA) and did get some
information up to April, 2004. Subsequent multiple requests for FOIA
have been denied. It appears the NPS has information they do not want
aired. Just what are they hiding?

When so many subcontractors were inquiring of the NPS about payments,
what happened? We were informed that the CO responsible to administer
the contracts abruptly resigned. What was the condition he left behind?
See Attachment "A" Mike Richardson Statement, Memorandum dated March 10,
2004 the Superintendent, Grand Canyon National Park:

> A review of the GS-13's contract files revealed a consistent lack of
> documentation. There were few independent Government estimates;
> missing or unsigned documentations of price reasonableness, source
> selection decisions, sole source actions, and contract award; missing
> pricing information; missing or limited statements of work; use of
> incorrect forms; lack of electronic processing of the entire contract
> action through IDEAS and electronic commerce interfaces; and no
> Solicitor review of solicitations or awards as required by DOI policy.
> There was no documentation indicating required sources of supply had
> been considered. For example, contract files for environmental
> services did not document any review of whether these services could
> have been acquired by task order under GSA Schedule. Files were
> disorganized. Pieces of the procurement process were found in other
> files or not found at all. One program office had source selection
> information, but the contract file did not contain this information.
> There were no indications that requirements over \$25,000 were posted
> to FedBizOps for advertisement, because IDEAS was not being utilized.
> Unadvertised procurements circumvent the Competition in Contracting
> Act and Federal Acquisition Regulations. This is a grave concern.
> Missing or unsigned award documents raise the question whether a
> contract exists.....

We could quote further but the entire memo is available as mentioned
above.

A General Contractor may be able to defraud the Government for a while,
but even after all the attention that was attracted to the situation
towards the end of 2003, there were still task orders issued. The
duration of time and number of contracts issued without following proper
guidelines cannot be considered an isolated situation. The CO was
completely aware of the problems and when he saw things tightening
around him, he resigned.

The subcontractors of PGI have explored every avenue to collect for the
work performed by them at the Grand Canyon. In fact, several
subcontractors have obtained uncollectible default judgments against
PGI. In 2005, the owner Robert McFarland and his wife filed for personal
bankruptcy naming all the PGI subcontractors as creditors on his
bankruptcy petition.

There has been an IG investigation into the PGI contracts and in July,
2007 Robert McFarland, president and owner, and Wayne Heidle, vice
president, were indicted for conspiracy, false claims, mail fraud and
false statements. Again, we have been denied FOIA information from NPS
and do not know if any charges have been filed against Gordon Plaisted.

In February, 2004, the NPS issued a suspension of work, due to lack of
insurance certificates, and bonds. A notice to cure was issued days
later demanding that PGI provide performance and payment bonds. It is
virtually impossible to get bonding for work already in process and in
arrears with subs and suppliers, not unlike getting automobile insurance
after your car has been involved in a crash. PGI of course could not do
this and consequently their contracts were terminated.

During the time just prior to the termination, PGI offered to allow the
NPS to joint check the subcontractors or assign draws for payment to
them. The PGI task orders had amazingly high margins and were 100
percent subcontracted. Just to name two examples, R & W was awarded a
contract to install a water system at the North Rim; the R & W contract
including change orders was \$414,000, the task order to PGI including
change orders was \$675,000; to clean storm culverts, R & W contract was
\$30,000, the task order to PGI was \$54,000. Considering the enormous
mark-ups, it is likely there were enough funds left to complete the
projects and pay all subcontractors. But the NPS would not agree to that
plan.

We respectfully request this committee to consider these items:

> 1\) The NPS Contracting Officer issued numerous task orders to PGI
> without following the Miller Act which requires the Prime Contractor
> to provide bonds prior to commencement of work.
>
> 2\) Payments were approved with knowledge that PGI was not paying
> their subcontractors.
>
> 3\) The behavior of the CO went far beyond gross negligence. It was
> his willful disregard for the law which placed the subcontractors in a
> devastated financial condition forcing some into bankruptcy and others
> to have to lay off many of their employees, and leaving them with no
> recourse to obtain compensation for their work.
>
> 4\) At this point, we cannot provide absolute proof, but clearly it
> "appears" there was a collusive relationship between Mr. Plaisted and
> PGI.
>
> 5\) The NPS is sympathetic with the plight of the subcontractors and
> even though it was their CO that violated the law that placed them in
> this plight, they claim they have no legal basis to pay for the
> services the subcontractors provided. In other words the law does not
> require them to be responsible for the illegal and unscrupulous
> actions of its people.
>
> 6\) The NPS held money from PGI and is still holding money that was
> intended to be paid to subcontractors. Clearly, the NPS has benefited
> from the work of the subcontractors without paying in full for the
> work.

The Miller act apparently has no provision to hold the Government liable
when it does not follow its own rule that requires performance and
payment bonds on large contracts. If the Government fails to require
bonds, it opens the door for General Contractors to financially
devastate the subcontractors who perform the work that benefits the
government. In this case, the NPS contracted with PGI without bonds,
then say "we have a contractual relationship with the prime contractor
but not with the subcontractors and therefore have no legal basis to pay
the subcontractors." Laws are written to provide guidance in how society
should work together. No law could provide a perfect solution for every
situation. We believe H.R. 1191 provides the means the NPS needs to
correct the breach of trust that forced the subcontractors and their
families into dire financial straits when it allowed PGI to contract for
work without bonds.

For four years the subcontractors have been seeking compensation for the
work performed for the NPS. We hope that H.R. 1191 will also allow for
reasonable finance charges to help offset the tremendous financial
strain this has caused them.