UA dorm details ruled shut for now
Posted on Saturday, November 3, 2007
EDITOR’S NOTE: A previously published article on this court case ran in Friday’s edition. This is the article that should have run Friday.
A private contractor doesn’t have to turn over receipts and other financial details related to a $ 35 million University of Arkansas dormitory the firm built, at least not yet, the Arkansas Supreme Court ruled Thursday.
In a unanimous decision in Little Rock, the court ruled that Nabholz Construction Corp. of Conway can’t be sued alone under the Arkansas Freedom of Information Act.
The court didn’t go so far as to say whether the documents in question ultimately should be released. It just said that the public can’t seek the documents from Nabholz directly.
Still, Richard Peltz, an associate professor with the William H. Bowen School of Law at the University of Arkansas at Little Rock, said he worries that government agencies will use the ruling as reason to refuse the release of public documents that are not under their “administrative control.”
“It opens up a gaping hole in the applicability of the [Freedom of Information Act ] to private entities that receive public funds,” Peltz said.
The high court warned that it will not permit government agencies to circumvent the law with a “hand-off” of documents to entities that aren’t covered. But the court agreed with Nabholz’s argument that the company is not an entity subject to the Freedom of Information Act, and therefore can’t be sued to comply with the law.
Peltz said he hopes the court will later “put its money where its mouth is” on the question of whether UA must produce the documents.
The ruling reversed a March decision by Pulaski County Circuit Judge Marion Humphrey, who had ordered Nabholz to release the information. The Supreme Court then dismissed the case.
“Were we to hold in this case that Nabholz, a private corporation, had to comply with a request under the act, it would then be in the position of making a crucial decision under the FOIA, that is, whether or not the requested records constitute public records and are subject to disclosure,” Justice Paul Danielson wrote for the court. “We cannot say that such was the intent of the General Assembly.”
During oral arguments, justices said they wondered why the plaintiffs didn’t sue UA.
The plaintiffs, Contractors for Public Protection Association, are ready to do that if necessary, said the organization’s attorney, Ron Hope. The group sought the documents from UA again this week and said it hasn’t heard back.
Contractors for Public Protection Association wanted Nabholz to turn over receipts and other records detailing the cost of building the Fayetteville campus complex known as the Northwest Quad. The group wants a detailed account of the charges as part of an investigation into the state practice of hiring building contractors without competitive bids.
Most of the general contracts for the state’s most expensive construction projects have been awarded that way since 2001, when the Legislature allowed the practice for state agency projects in which building costs exceed $ 5 million.
State officials say the method produces a better building and is a better deal financially because contractors are chosen based on their track records and are on board from the beginning of the design process. But the plaintiffs in the lawsuit say it’s resulted in a small number of construction companies hogging the majority of the bigger state projects.
At issue are more than $ 800 million in state building contracts in the past six years, mostly academic and residential buildings on college campuses throughout the state.
They’re inspecting construction expense records statewide to support their argument that the law should be changed. In the case of the UA residence hall, the plaintiffs want a detailed accounting of $ 2. 5 million that UA paid Nabholz for expenses known as “general conditions,” as well as other itemized costs.
Bill Hannah, chief executive officer of Nabholz, said the information the plaintiffs sought is proprietary and shouldn’t be made public. He said the company is “very pleased” with the Supreme Court ruling.
“And not just for Nabholz Corp., but for every private business that does work for the state of Arkansas,” Hannah said.
He said turning over the information the plaintiffs want would put Nabholz at a competitive disadvantage. He said it’s the company’s obligation to provide the documents to UA, but not to the public.
Fred Harrison, general counsel for UA, said last week that the university had not sought the documents in question. He wouldn’t say Thursday what UA planned to do with the plaintiffs’ most recent Freedom of Information request.
He said he thought the court ruling was “well reasoned” but wouldn’t comment further on it.
Asked if Nabholz would turn over the documents to the university if asked, Hannah said, “The university is entitled to that information.”
He said the public shouldn’t have access to documents that show Nabholz’s “process” and the information the company uses to produce its price projections, for example.
The contractors’ group sought in its records request, among other things, documentation of: all money spent on the projects, monthly billings, results of audits, labor costs, each item charged as part of the general conditions at the project site and bond costs.
Hope argues that if UA is entitled to the information, the public is, too.
Humphrey, in making his ruling, said turning over such documents is “the cost of doing business with the state.” He ruled that the plaintiff has a right to the documents with some exceptions, regarding labor and bond costs, for example.
The plaintiffs had argued that the situation was similar to that in the case of City of Fayetteville v. Edmark, which involved documents in the possession of law firms hired by Fayetteville officials. The city refused to turn over the documents, arguing in part that they weren’t public records because they were in the hands of a private contractor.
The Supreme Court disagreed in a 1990 ruling, saying that the Freedom of Information Act “cannot be circumvented by delegation of regular duties to one specifically retained to perform the same task.”
In the Nabholz ruling, the court referred to previous rulings in which it has applied the Freedom of Information Act in cases in which private entities received public funds. But in each case, the request for records was directed to a public agency and not the private entity itself.
UA’s contract with Nabholz allowed the university as the project owner to inspect, audit and copy account records.
Peltz, the UALR law professor, said it seems that the plaintiffs may have to seek a court order compelling UA to exercise its rights under the contract.
That may work this time, but “what happens when the contract doesn’t have that provision ?” he asked.
He said that raises the question of how the Freedom of Information Act would be enforced. If the public official is the one responsible under the act but can’t get information from a contractor, it’s hard to argue that the public official did anything wrong, he said.
“What happens when the contractor says, ‘We’re not bound by the law’ ? That’s going to allow a circumvention of the [Freedom of Information Act ],” he said. “They don’t even have to have a contract that disallows it, just a contract that’s silent.”
He said he hopes the Legislature closes what he sees as a loophole created by the Supreme Court decision before it becomes a problem. The Legislature might want to require a public disclosure provision in all public contracts, he said.
Harrison didn’t return a message Thursday seeking comment on the Supreme Court ruling.
At the Supreme Court, the case is 07-843, Nabholz Construction Corp. v. Contractors for Public Protection Association.
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