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A $13 million payment to a company that lost its Interstate 15 bid was the only instance in the past five years when the Utah Department of Transportation has paid to settle a contractor protest.
The consortium of Flatiron/Skanska/Zachry (FSZ) disputed UDOT's decision to award the $1.1 billion I-15 project to Provo River Constructors, arguing that the department strayed from its stated criteria in awarding the massive contract.
Provo River was a consortium that has contributed $87,500 to Gov. Gary Herbert's campaign including a $5,000 check last week prompting Herbert's Democratic opponent, Peter Corroon, to question if the company got special treatment.
UDOT Executive Director John Njord has said it is not unusual to have a contractor protest a bid. "We kind of predict that this might occur," he said Monday, indicating money has been budgeted for such matters.
"This is the sort of thing we deal with on a regular basis," he said Tuesday on KSL Radio.
But it is unusual for UDOT to pay a settlement. Of nine companies filing bid protests since 2005, FSZ was the only one to receive such a payment, according to UDOT records.
"They put everything into this to get it, and when they didn't, I think there were hard enough feelings that after meeting with us they still wanted to fight this decision," said UDOT spokesman Nile Easton. "Rather than enter into a protracted legal battle, we agreed to pay any costs they incurred bidding on it."
UDOT paid $1.5 million to each of the two losing bidders to cover part of their costs of preparing the detailed proposals. In exchange, the agency can use some of the companies' design elements. FSZ's promised $1.5 million was included in the $13 million settlement.
Utah legislators are uneasy they weren't told of the settlement made several months ago. Senate President Michael Waddoups, R-Taylorsville, said lawmakers may take steps to ensure they're in the loop in the future.
The governor and legislative leaders now have to approve any settlement over $500,000, and the governor and full Legislature have to sign off on settlements over $1 million, but the law specifically exempts UDOT.
"I don't think we want to have them reporting every little negotiation they do to us, but on the other hand $13 million isn't a little negotiation. …I think we'd like to have known about that a little sooner," Waddoups said.
Herbert said he did not learn of the settlement until a reporter asked him about it Monday.
Waddoups said he still thinks UDOT did the right thing, since litigation over the issue could have halted construction and cost millions more and tied up traffic in Utah County.
Njord told legislators a one-year delay would likely have cost $70 million.
"I think it was a good business decision because it got the project rolling faster," Waddoups said.
But the senator said lawmakers are considering changing the law to make clear that the state will not pay for bid costs, or that UDOT settlements over a certain threshold would require legislative approval.
Senate Minority Whip Ross Romero, D-Salt Lake City, said he was bothered by the settlement.
"As a member of leadership, I didn't know anything about this proposed settlement," Romero said. "I don't feel I was included and that frustrates me."
Various records obtained Tuesday by The Salt Lake Tribune through an open records request shed additional light on some of the meetings and campaign contributions that the Corroon campaign called into question in a 57-page memo distributed to news outlets last week.
In October 2009, Greg Fredde, vice president of government affairs for Merit Medical, contacted the governor's office to set up a meeting with the governor and Merit Medical CEO Fred Lampropoulos "to discuss the status of Merit Medical's recent application to the Industrial Assistance Fund."
The governor's chief of staff, Jason Perry who had previously been the director of the Governor's Office of Economic Development (GOED) had been "spearheading the effort," Fredde said, and may want to attend, as well.
A week after the Oct. 21 meeting, the Herbert campaign received a $25,000 check from Merit. A month later, GOED awarded $4.4 million in tax incentives to the company, which it can qualify for by creating 400 jobs over 10 years.
Lampropoulos on Monday angrily denied the suggestion that the tax break was related to the campaign contribution.
"We've played by the rules. We've made and stepped up to our commitment, and now we're being questioned if it's appropriate," Lampropoulos said during a news conference called by Herbert's campaign.
The governor's spokeswoman, Angie Welling, said Tuesday it is not uncommon for those seeking incentives from GOED to want to meet with the governor, but the decision to award the incentives are made by the GOED board without input from the governor.
The Corroon camp also questioned meetings Herbert had with Guy Wadsworth, president of Wadsworth Brothers Construction, a partner in the group that later won the I-15 contract.
In an e-mail to Perry in September 2009, UDOT's executive director warned that Wadsworth was upset about losing a competition to build the Bluff Street interchange in St. George based on a contracting method that, according to Njord, Wadsworth believed was unfair.
On Oct. 5, 2009, Wadsworth gave Herbert's campaign $50,000. They met again Nov. 12, 2009. On Dec. 9, 2009, Provo River Contractors, a group of companies that included Wadsworth, won the $1.1 billion bid to rebuild 24 miles of I-15.
Both Merit and Wadsworth were top-tier sponsors of the governor's gala, held Oct. 30, 2009, which raised about $1 million for his political action committee.
The Nov. 12 meeting between Herbert and Wadsworth was arranged, e-mails show, by Mike Deaver, who was one of the organizers of Herbert's fundraising gala. Welling said Deaver arranged a series of meetings between the governor and the largest donors to the gala.
"It wasn't uncommon for the governor to meet personally with sponsors of the gala and thank them personally for their support," she said.
Wadsworth did not return a phone call on Tuesday, but issued a statement blasting Corroon's tactics.
"This ill-spirited political attack by Peter Corroon is an affront to the years of effort we have invested in building our company and making Utah a better place to live," Wadsworth said. "It is sad to have our name and reputation savaged in the press in this manner after years of working quietly behind the scenes to better the lives of our fellow Utahns."
The UDOT exception
Utah law requires the governor and legislative leaders to sign off on any claim settlement over $500,000. The governor and full Legislature must approve settlement payments of $1 million or more. But the statute contains a handful of exemptions one of them for the Utah Department of Transportation to resolve construction contract claims. In such a case, the law allows the agency to make payment without approval or even notification of any elected officials.