Sacramento sues Teichert Construction for non-compliant work and ‘fraudulent billing’ on water meter contract: Contractor disputes the claim

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Image from a video posted on Tiechert's Facebook page after it won the Sacramento water meter project

The City of Sacramento has filed a 256-page lawsuit against Teichert Construction for non-compliant work and fraudulent billing related to Teichert’s work on the Accelerated Water Meter Program (AWMP), part of its $62 million contract with the city.

The contractor disputes the city’s allegations.

The city’s lawsuit contends that Teichert used improper construction materials and methods, that its work did not meet contract specifications and that Teichert billed the city for materials and labor not used in its work.

These issues do not affect how the meters track water usage for households. However, they undermine the longevity and durability of the installation, meaning the city will face excessive costs for replacement or repair sooner than intended, the city asserts.

FAQs from the city for residents regarding the lawsuit

“Teichert’s deficient work and ongoing refusal to comply with the terms of its contract has left the city with no other option than to file a lawsuit,” city Attorney Susana Alcala Wood said in an April 13 statement. “We have tried multiple times to address this with Teichert but have found over and over again that the city is alone in the desire to do the right thing for the ratepayers of Sacramento.”

“We strongly dispute the city’s characterization of Teichert’s work on the Sacramento water project,” the contractor said in a statement released to California Construction News on April 17. “The system, which was inspected by the city at the time it was completed, is performing as it should and – as the city itself has noted – ratepayers should not expect any problems with their service.”

“We have offered to work with the city to address its concerns but the city seems to be focused on an unwarranted payday rather than a constructive resolution,” the contractor says.

“Teichert, a local, family-owned company founded in 1887, is owed more than $2 million by the city and is fully prepared to defend the integrity of its work.”

Teichert was one of several companies that contracted to install water meters throughout the city in 2017-2020 under the AWMP. Teichert was hired to install approximately 13,000 water meters in the South Land Park, Tradewinds, North Sacramento, Meadowview, Golf Course Terrace, and Lemon Hill neighborhoods.

The city says in 2019 it became aware of improper installations at several residential properties in Teichert’s contracted areas. The city repeatedly asked Teichert to disclose all locations where it deviated from the contract specifications, but Teichert refused to provide the information.

The city ultimately launched a comprehensive investigation into Teichert’s work, through which the city found a 90 percent rate of non-compliant work, the city said in its statement. “Examples of the deficient work by Teichert included, among other deficiencies, not installing special equipment designed to hold meters in place, backfilling excavations with unapproved materials, and using plastic pipe instead of copper pipe.”

“It is unfortunate that Teichert decided to cut corners and misrepresent its work to the city,” Alcala Wood said. “By filing this lawsuit, the city is holding Teichert accountable for violating its contract and for depriving ratepayers of materials and services they paid for.”

The  lawsuit filed in Sacramento County Superior Court, claims breach of contract, negligence, breach of warranties, violation of California False Claims Act, fraud and deceit, negligent misrepresentation, enforcement of performance bond, and violation of contractors state license laws, the Sacramento Bee reported. The lawsuit also names Massachusetts-based Liberty Mutual Insurance Company as a defendant.

Teiechert provided the following background documentation to CCN:

  • In 2017 and 2018, Teichert Waterwork Services entered into six contracts with the City of Sacramento for the Accelerated Water Meter Program (AWMP). Teichert contracted to install more than 10,000 residential water meters on existing service lines.
  • City-hired inspectors were on site on a daily basis and carefully observed, directed and approved Teichert’s work. Teichert completed a fully functional water metering system on all six projects ahead of schedule and within budget. Four projects have received formal certification from the City that the projects were completed in accordance with the special provisions and/or the standard specifications of the City of Sacramento.
  • The water meters are functioning properly and ratepayers should not experience any issues with water delivery related to this dispute.
  • The six projects are:
    • The Tradewinds Project – $500,000 in total work to retrofit approximately 400 water meters, completed on June 21, 2018.  The City recorded a Notice of Completion on June 27, 2018.
    • The North Sacramento Project – $1.9 million in total work to retrofit approximately 1,500 water meters, completed on January 10, 2019.  The city recorded a Notice of Completion on March 12, 2019.
    • The South Land Park Project – $2 million in total work to retrofit approximately 1,300 water meters.  A city Inspectors Completion Report noted that project was complete on May 21, 2019.
    • The Golf Course Terrace Project – $6.6 million in total work to retrofit approximately 4,400 water meters, completed on Sept. 30, 2019.
    • The Fruitridge Project – $3.8 million in total work to retrofit approximately 2,500 water meters, completed on Jan. 11, 2019.  The city recorded a Notice of Completion on March 12, 2019.
    • The Pipeline Project – $100,000 in total work to retrofit approximately 75 water meters, completed on Feb. 1, 2020.
  • In 2019, the city complained to Teichert that the company deviated from certain contract requirements in the installation of some meter boxes. The city raised concerns that Teichert’s work might affect the longevity of the meter boxes.
  • Teichert disputes the city’s concerns. Its purported deviations from the contract were performed with the full knowledge of the city’s inspectors.  In many cases, Teichert’s work improved the quality of the water meter system.
  • To address any city concerns regarding the overall longevity of the equipment, Teichert has offered to extend warranties well beyond the one year outlined in its contracts with the city. The city has not accepted this offer.
  • The City still owes Teichert more than $2 million for its work on the AWMP.

Water meters and pipe 

  • Teichert moved forward with an alternative installation approach where appropriate, receiving approval from the city inspectors and following instructions of city representatives. For backyard installations, the result was a decreased likelihood of flooding and the avoidance of ratepayer complaints.
  • In some areas where copper pipe was in place, Teichert used HDPE pipe, a high-density polyethylene pipe with no functional difference, which is actually the specified product for new construction in the city.
  • All installations of HDPE pipe were observed and approved by the city.

Litigation

  • This is the only litigation involving the City of Sacramento and Teichert. Teichert was mentioned – but was not a plaintiff or defendant – in a January 2020 amended lawsuit filed in United States District Court for the Eastern District of California against the City of Sacramento and Marc Lee, who oversees the AWMP. The lawsuit was filed by an inspection firm and two of its principals. Among numerous claims in that lawsuit: that Teichert was the low bidder on a project, but Lee manipulated the scoring system to award the contract to another firm whose bid was $936,982 higher. The U.S. District Court (Eastern District of California) lawsuit is Case: 2:19-CV-02156-MCE-KJN. The lawsuit alleges numerous other issues with the city’s administration of the AWMP.

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