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City breaks own rules

The city of Dickinson paid about $200,000 to a contractor while he was unlicensed and a $90,000 Armory roof project was not approved by the City Commission as city ordinance requires.

City leaders say they will look more closely at how projects are handled in the future, from licensing to contracts, and may be making some changes to practices.

Brian Kjerstad, owner of Two Rivers Construction, LLC, confirmed on May 6 that his company was operating without proper licensing.

The unlicensed period is believed to be from March 1, 2009, through April 23, 2010.

Kjerstad said once it was brought to his attention, he rectified it immediately.

"By law, it is the responsibility of the contractor to ensure that he is properly licensed to do the work," City Attorney Matt Kolling said in an e-mail. "Any penalties for being improperly licensed are assessed against the contractor, not against the owner of the project."

Calls to Kjerstad Wednesday and Saturday were not returned.

When a city hires a contractor to do work in excess of $2,000, North Dakota Century Code requires they have a contractor's license, according to counsel for Forum Communications Co., parent company of The Dickinson Press.

"Any person acting in the capacity of a contractor without a license is guilty of a class A misdemeanor," according to the Century Code.

A class A misdemeanor in North Dakota can carry a potential sentence of up to one year in jail and $2,000 in fines, according to state criminal code.

Two Rivers is still the contractor on the Armory project, said City Administrator Shawn Kessel.

It is unclear if any charges have been filed.

Kolling said the person entering into an agreement with the contractor is responsible for checking licenses.

"Generally that's going to be the department head, depending on the contract, it'd be the city administrator," Kolling said.

Kessel said he is not sure if the city has checked licenses in the past.

Mayor Dennis Johnson said he is not sure there is a process to confirm a contractor is licensed.

"The city deals with many contractors and I don't know that they always check to see if a contractor has a license or not," Johnson said. "I think it's just kind of assumed that they do."

In fact, licenses hadn't been checked.

"I had not before, and to tell you the truth, I had never really thought about it," Public Works Manager Skip Rapp said of checking licenses. "I just assumed that they had everything up to date. It's not something I'd ever done in the past."

Rapp said he didn't check on Two Rivers licenses, but he will check all agreements the city presently has.

Was ordinance followed?

"Although the city didn't break any state laws or city ordinances regarding the Armory renovation, we are currently reviewing our procedures regarding contracts and bid procedures in an effort to be more consistent across all departments," Kessel said in a text message Friday.

The City Commission must approve all contracts obligating the city, according to Dickinson Municipal Code. No formal motion was made approving the Armory roof, according to city staff. City Commission meeting minutes on the city's website also show no history of a motion on the project, nor do Press archives.

"Dickinson Municipal Code is very specific," The Press' counsel said in an e-mail Friday.

Another section of city code was not followed in the Armory project.

In instances where the city purchases or contracts services with an estimated cost in excess of $20,000 without publicly advertising, city code requires a written report be filed with the city administrator. The code requires that report to be attached to the bill or contract stating why public advertising was not used.

The report must also list all suppliers contacted, bids obtained, the acquisition price and, when possible, background information leading to the acquisition.

"I have no comment related to that," Kessel said. "I consulted our city attorney and that ground's been covered."

No report was found in city documents.

City ordinance also requires the city administrator approve the purchase of supplies, materials or equipment prior to awarding a bid.

Kessel said after receiving a quote from Twin City Roofing Inc. for a flat roof, the option of installing a pitched roof was explored by Rapp. Quotes were obtained and Kessel said since the pitched roof was cheaper than a flat and would alleviate standing water, he advised to go with the pitched roof.

"So he went and awarded the quote to Two Rivers," Kessel said.

Kessel said since Rapp and he discussed the roof options and prices, he approved the purchase of supplies, materials and equipment prior to the bid being awarded.

Financial records reviewed

After the Associated General Contractors of North Dakota requested the city send copies of all contracts, commission meeting minutes where projects were approved and the written reports required by city ordinance, Kolling sent a letter dated May 17 to the AGC, citing four projects awarded to Two Rivers during the unlicensed time.

Those 2009 jobs include a project to remove and replace City Hall carpet, estimated at $10,460, a lift station project estimated at $14,999, a water fill building construction project estimated at $14,999 and the Armory roof project with an estimated cost of $89,940.

The National Guard contributed about $20,000 to the roof project and about $40,000 from a federal energy conservation grant was also used, with the city covering the remaining amount.

Kolling's four cited projects total $130,398.

However, city transaction records indicate eight payments, totaling $196,403, were made to Two Rivers during the time the company was unlicensed.

After an inquiry by The Press on Friday, Kolling drafted another letter to the AGC on Saturday, including additional projects performed by Two Rivers.

"Since my May 17, 2010, letter to you (AGC), Dickinson city staff has done some further research regarding projects awarded to Two Rivers Construction by the city of Dickinson," Kolling wrote. "I did go through the list of payments that were made to Two Rivers and it looks like most of those projects should have been included in my letter to Associated General Contractors."

In addition to the four projects in Kolling's May 17 letter, his Saturday letter included an additional 12, bringing the total to $233,342.

It is unclear why there is a difference in the total from Kolling's letters to the total in accounts payable records.

Contracts being mulled over

Though no contract was signed in the Armory project, Kolling says neither state law nor local ordinance requires the city do so.

"We didn't need to, so we didn't," Kessel said. "There's no requirement in either ordinance or state law that a contract has to be signed."

However, other departments at the city have signed contracts for projects less than $100,000, and the process is being reviewed by officials.

"Because the standard of complying with state law and local ordinance was met, doesn't mean that we shouldn't be obtaining contracts and such, and we're looking into when contracts should be signed," Kessel said.

He said the city needs to be more consistent across departmental boundaries, where allowed.

"I certainly would agree that there's scenarios that exist between 20 and 100 (thousand) where the bid limits are where a contract would be beneficial to the city," Kessel said. "This is probably one of those scenarios where a contract would have been advantageous for us to sign. Preliminarily, certainly contracts for service seem to be an area that we can be more consistent on, and the Armory was certainly a contract for service."

Johnson agrees the process needs to be reviewed.

"The city, for projects less than $100,000, doesn't have a purchase order process and I think that's something we need to look at," Johnson said. "In the past what they've done with projects less than $100,000, or if they're not public improvements less than $20,000, it's done on a verbal commitment."