State Ex Rel. American Subcontractors Ass'n v. Ohio State University

[Cite as State ex rel. Am. Subcontractors Assn., Inc. v. Ohio State Univ., 129 Ohio St.3d 111,
2011-Ohio-2881.]
THE STATE EX REL. AMERICAN SUBCONTRACTORS ASSOCIATION, INC. ET AL. v.
OHIO STATE UNIVERSITY.
[Cite as State ex rel. Am. Subcontractors Assn., Inc. v. Ohio State Univ.,
129 Ohio St.3d 111, 2011-Ohio-2881.]
Public construction contracts — Bond of contractor — R.C. 153.54 and Section 8
of 2009 Sub.H.B. No. 318.
(No. 2010-2059 — Submitted May 10, 2011 — Decided June 21, 2011.)
IN MANDAMUS.
__________________
Per Curiam.
{¶ 1} This is an original action for a writ of mandamus to compel
respondent, Ohio State University, to require that a bond be furnished by Turner
Construction Company as construction manager at risk for a construction project.
Because relators are not entitled to the requested extraordinary relief, we deny the
writ.
Facts
{¶ 2} In 2005, Ohio State began work on a $1 billion expansion of its
Medical Center, which has been referred to as “ProjectOne.” In February 2009,
Ohio State entered into an agreement for construction-management services with
Turner on the project. Construction work on the project began in the fall of 2009
and is scheduled to be completed in 2014.
{¶ 3} Under the usual construction method, public institutions of higher
education like Ohio State would be required to employ multiple prime contractors
for constructing, renovating, or improving capital facilities. That method would
require Ohio State to first engage a company to design the project and then seek
bids from contractors to do the construction and would prohibit having one prime
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contractor holding all trade contracts for a project. It is alleged that the multiple-
prime-contractor system has resulted in delays and increased costs.
{¶ 4} In December 2009, the General Assembly enacted Section 8 of
Sub.H.B. No. 318 (“H.B. 318”), a temporary uncodified law that directed the
chancellor of the Ohio Board of Regents to designate during 2010 one
construction project at each of three different state institutions of higher education
as a Construction Reform Demonstration Project. The purpose of the law was to
test alternative methods of securing public construction projects to determine
whether they would afford greater flexibility in increasing efficiency and lowering
costs.
{¶ 5} Pursuant to H.B. 318, Ohio State requested that the Ohio Board of
Regents designate certain core phases of the overall project as a Construction
Reform Demonstration Project. On March 24, 2010, the chancellor designated
portions of the project as a Construction Reform Demonstration Project, and on
April 5, 2010, the Ohio Controlling Board approved the designation. The core
phases of the project encompassed in the designation are (1) constructing a new
cancer and critical-care tower, (2) relocating and upgrading infrastructure and
roadways, (3) upgrading current space in existing Medical Center facilities, (4)
landscaping and urban planning, (5) demolishing Cramblett Hall, and (6)
constructing a chiller plant, with the estimated cost of these phases being $658.3
million.
{¶ 6} One of the specified alternative methods of construction delivery
authorized by Section 8 of H.B. 318 is designated “construction manager at risk.”
On July 8, 2010, Ohio State entered into a construction-manager-at-risk
agreement with Turner for the project. Ohio State selected Turner to serve as
construction manager at risk through a qualifications-based selection process.
This process differed from traditional competitive bidding, which requires
selection of a contractor based on the lowest responsive and responsible bidder.
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January Term, 2011
{¶ 7} Ohio State did not require Turner to furnish a surety bond to secure
the performance of Turner and its subcontractors. Requiring Turner to provide a
bond would have increased the cost of the project by as much as $11.9 million.
Instead, under the agreement, Turner provided to Ohio State a $20,000,000
irrevocable standby letter of credit. Turner also purchased subcontractor-default
insurance to protect Turner against default by the subcontractors performing the
construction. Turner has entered into subcontracts for performance of some of the
work on the project. As of February 2011, Turner and its subcontractors had
entered into 47 subcontracts with 43 subcontractors, and Turner had paid out $5
million, with all payments made within five days of payment to Turner, as
required by the contract.
{¶ 8} Relators American Subcontractors Association (“ASA”) and
American Subcontractors Association of Ohio, Inc. (“ASA-Ohio”) are trade
associations of suppliers who work primarily as subcontractors on construction
projects. Their purpose is to protect and advance the interests of subcontractors
and suppliers, including those in Ohio. Relator Surety and Fidelity Association of
America (“SFAA”) is a national trade association of companies licensed to write
fidelity and surety bonds and comprises 451 members, including 33 members
with their principal places of business in Ohio. SFAA’s purpose is to protect and
advance the interests of sureties in the nation and in Ohio.
{¶ 9} On November 30, 2010, relators filed this action for a writ of
mandamus to compel Ohio State to require that Turner furnish a bond as
construction manager at risk. After Ohio State filed an answer, we granted an
alternative writ. 127 Ohio St.3d 1530, 2011-Ohio-376, 940 N.E.2d 984. The
parties submitted briefs and evidence.
{¶ 10} This cause is now before the court for our consideration of
relators’ mandamus claim.
Legal Analysis
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Standing
{¶ 11} Ohio State asserts that relators lack standing to institute this
mandamus action. “A preliminary inquiry in all legal claims is the issue of
standing.” Cuyahoga Cty. Bd. of Commrs. v. State, 112 Ohio St.3d 59, 2006-
Ohio-6499, 858 N.E.2d 330, ¶ 22. “Before an Ohio court can consider the merits
of a legal claim, the person or entity seeking relief must establish standing to sue.”
Ohio Pyro, Inc. v. Ohio Dept. of Commerce, 115 Ohio St.3d 375, 2007-Ohio-
5024, 875 N.E.2d 550, ¶ 27. “ ‘[T]he question of standing depends upon whether
the party has alleged such a “personal stake in the outcome of the controversy * *
*” as to ensure that “the dispute sought to be adjudicated will be presented in an
adversary context and in a form historically viewed as capable of judicial
resolution.” ’ ” State ex rel. Dallman v. Franklin Cty. Court of Common Pleas
(1973), 35 Ohio St.2d 176, 178-179, 64 O.O.2d 103, 298 N.E.2d 515, quoting
Sierra Club v. Morton (1972), 405 U.S. 727, 732, 92 S.Ct. 1361, 31 L.Ed.2d 636,
quoting Baker v. Carr (1962), 369 U.S. 186, 204, 82 S.Ct. 691, 7 L.Ed.2d 663,
and Flast v. Cohen (1968), 392 U.S. 83, 101, 88 S.Ct. 1942, 20 L.Ed.2d 947.
{¶ 12} “[A]n association has standing on behalf of its members when ‘(a)
its members would otherwise have standing to sue in their own right; (b) the
interests it seeks to protect are germane to the organization’s purpose; and (c)
neither the claim asserted nor the relief requested requires the participation of
individual members in the lawsuit.’ ” Ohio Contractors Assn. v. Bicking (1994),
71 Ohio St.3d 318, 320, 643 N.E.2d 1088, quoting Hunt v. Washington State
Apple Advertising Comm. (1977), 432 U.S. 333, 343, 97 S.Ct. 2434, 53 L.Ed.2d
383; see also Ohio Hosp. Assn. v. Community Mut. Ins. Co. (1987), 31 Ohio St.3d
215, 218, 31 OBR 411, 509 N.E.2d 1263. We have emphasized that “to have
standing, the association must establish that its members have suffered actual
injury.” Bicking, 71 Ohio St.3d at 320. At least one of the members of the
association must be actually injured. See, e.g., Warth v. Seldin (1975), 422 U.S.
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490, 511, 95 S.Ct. 2197, 45 L.Ed.2d 343; Ohio Licensed Beverage Assn. v. Ohio
Dept. of Health, Franklin App. No. 07AP-490, 2007-Ohio-7147, ¶ 21. “[T]he
injury must be concrete and not simply abstract or suspected.” Bicking at 320.
{¶ 13} ASA and ASA-Ohio claim that their members have been injured in
two distinct ways caused by the lack of a bond provided by Turner on the project:
(1) lost business opportunity for those members who decline to provide labor and
material for the project and (2) increased risk of loss and potential default in other
areas of business for those members who provide labor and material for the
project without the guarantee of payment under a bond.
{¶ 14} They have not supported these claims, however, with any credible
evidence. All subcontractors working on the project have been timely paid. No
subcontractor working on the project has complained to Ohio State or Turner
about the lack of a bond, and the bidding for work on the project by
subcontractors has been at the expected level. The evidence shows that Turner
has finished many construction projects for Ohio State and has completed many
of them without a surety bond, and the construction-manager-at-risk agreement
has multiple safeguards to ensure that subcontractors are timely paid for their
performance of services and provision of materials.
{¶ 15} In fact, if Ohio State had requested that Turner furnish a bond,
Turner would have required bonds from its subcontractors, which might have
inhibited EDGE-certified subcontractors from bidding. See R.C. 123.152(A),
defining “EDGE business enterprise” as “a sole proprietorship, association,
partnership, corporation, limited liability corporation, or joint venture certified as
a participant in the encouraging diversity, growth, and equity program by the
director of administrative services under this section of the Revised Code.”
{¶ 16} Therefore, ASA and ASA-Ohio have not established that any of
their members have been injured by Ohio State’s decision not to require Turner to
provide a surety bond. At best, they raise an “abstract or suspected” claim rather
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than an “actual” or “concrete” one. See Bicking, 71 Ohio St.3d at 320, 643
N.E.2d 1088. ASA and ASA-Ohio thus lack standing to raise their mandamus
claim.
{¶ 17} Conversely, SFAA has established that at least one of its members
is actually injured by the lack of a surety bond provided by Turner. Turner has a
multisurety agreement with five companies that have agreed to provide
performance and payment bonds to Turner when a bond is required for a project.
SFAA is a trade association of these bond companies, and relators have
established by affidavit that each of these sureties is a member of SFAA. Ohio
State concedes that “these companies stand to lose the profit they would have
earned—a handsome profit no doubt—on any bond Ohio State required from
Turner.”
{¶ 18} Because these SFAA members would otherwise have standing to
sue in their own right, because the interests SFAA seeks to protect are germane to
its organizational purpose of advancing sureties’ interests, and because the
individual sureties’ participation is not required for this mandamus case, SFAA
has established that it possesses the requisite standing to raise the mandamus
claim. Bicking, 71 Ohio St.3d at 320.
{¶ 19} Therefore, we dismiss ASA’s and ASA-Ohio’s claims for lack of
standing and proceed to address the merits of SFAA’s mandamus claim.
Mandamus
{¶ 20} SFAA requests a writ of mandamus to compel Ohio State to
require Turner to furnish a surety bond for its position as construction manager at
risk. To be entitled to the writ, SFAA must establish a clear legal right to the
requested relief, a corresponding clear legal duty on the part of Ohio State to
provide it, and the lack of an adequate remedy in the ordinary course of the law.
State ex rel. Am. Civ. Liberties Union of Ohio, Inc. v. Cuyahoga Cty. Bd. of
Commrs., 128 Ohio St.3d 256, 2011-Ohio-625, 943 N.E.2d 553, ¶ 22.
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{¶ 21} SFAA bases its entitlement to the writ on Section 8 of H.B. 318
and R.C. 153.54. Section 8(A) of H.B. 318 states, “During fiscal year 2010, the
Chancellor of the Ohio Board of Regents, in consultation with representatives of
state institutions of higher education and with Controlling Board approval, shall
designate one construction project at each of three different state institutions of
higher education as a Construction Reform Demonstration Project that may utilize
alternative methods of construction delivery in accordance with this section.”
Under Section 8(C)(1)(a), one of the authorized alternative methods of
construction delivery is to develop the project using a construction manager at
risk:
{¶ 22} “For purposes of this section, ‘construction manager at risk’ means
a person with substantial discretion and authority to plan, coordinate, manage,
direct, and construct all phases of a project for the construction, demolition,
alteration, repair, or reconstruction of any public building, structure, or other
improvement and who provides the state institution of higher education a
guaranteed maximum price utilizing an open book pricing method, wherein the
construction manager at risk provides the state institution of higher education all
books, records, documents, and other data in its possession related to itself, its
subcontractors, and material suppliers pertaining to the bidding, pricing, or
performance of a construction management contract. The construction manager at
risk shall be selected using a qualifications based selection process, including best
value criteria. ‘Best value criteria’ includes technical design, technical approach,
quality of proposed personnel, management plan, or other factors that are
determined to derive or offer the greatest value to the state institution of higher
education.”
{¶ 23} Pursuant to Section 8 of H.B. 318, certain core phases of
ProjectOne were designated as a Construction Reform Demonstration Project, and
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Ohio State used the required qualifications-based selections process to choose
Turner as the construction manager at risk on the project. Section 8(C)(2) states:
{¶ 24} “In developing their Construction Demonstration Reform Projects,
the state institutions of higher education are not exempt from the applicable
provisions of law concerning any of the following:
{¶ 25} “* * *
{¶ 26} “(b) Bonding.”
{¶ 27} SFAA claims that R.C. 153.54 is a bonding provision that is
applicable to Construction Reform Demonstration Projects like ProjectOne. R.C.
153.54 provides:
{¶ 28} “(A) Each person bidding for a contract with the state or any
political subdivision, district, institution, or other agency thereof, excluding
therefrom the department of transportation, for any public improvement shall file
with the bid, a bid guaranty in the form of either:
{¶ 29} “(1) A bond in accordance with division (B) of this section for the
full amount of the bid;
{¶ 30} “(2) A certified check, cashier's check, or letter of credit pursuant
to Chapter 1305. of the Revised Code, in accordance with division (C) of this
section. * * *
{¶ 31} “(B) A bid guaranty filed pursuant to division (A)(1) of this section
shall be conditioned to:
{¶ 32} “(1) Provide that, if the bid is accepted, the bidder, after the
awarding or the recommendation for the award of the contract, whichever the
contracting authority designates, will enter into a proper contract in accordance
with the bid, plans, details, specifications, and bills of material. * * *
{¶ 33} “* * *
{¶ 34} “(C)(1) A bid guaranty filed pursuant to division (A)(2) of this
section shall be conditioned to provide that if the bid is accepted, the bidder, after
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the awarding or the recommendation for the award of the contract, whichever the
contracting authority designates, will enter into a proper contract in accordance
with the bid, plans, details, specifications, and bills of material. * * *
{¶ 35} “If the bidder enters into the contract, the bidder, at the time the
contract is entered to [sic], shall file a bond for the amount of the contract to
indemnify the state, political subdivision, district, institution, or agency against all
damage suffered by failure to perform the contract according to its provisions and
in accordance with the plans, details, specifications, and bills of material therefor
and to pay all lawful claims of subcontractors, material suppliers, and laborers for
labor performed or material furnished in carrying forward, performing, or
completing the contract * * *.
{¶ 36} “(2) A construction manager who enters into a contract pursuant to
sections 9.33 to 9.333 of the Revised Code, if required by the public owner at the
time the construction manager enters into the contract, shall file a letter of credit
pursuant to Chapter 1305. of the Revised Code, bond, certified check, or cashier's
check, for the value of the construction management contract to indemnify the
state, political subdivision, district, institution, or agency against all damage
suffered by the construction manager's failure to perform the contract according to
its provisions, and shall agree and assent that this undertaking is for the benefit of
the state, political subdivision, district, institution, or agency.” (Emphasis added.)
{¶ 37} In determining whether R.C. 153.54 is the applicable bonding law
for Construction Reform Demonstration Projects under Section 8 of H.B. 318, we
must read words and phrases in context according to the rules of grammar and
common usage, and we may not add words to the statute if it is unambiguous.
See Hudson v. Petrosurance, Inc., 127 Ohio St.3d 54, 2010-Ohio-4505, 936
N.E.2d 481, ¶ 30, and cases cited therein.
{¶ 38} The plain language of R.C. 153.54(A) specifies that the bonding
requirement applies to persons “bidding for a contract * * * for any public
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improvement.” See R.C. 153.54(A). “Bid” generally means a “submitted price at
which one will perform work or supply goods.” Black’s Law Dictionary (9th
Ed.2009) 183.
{¶ 39} But “[u]nder the standard for construing statutes in pari materia,
statutes relating to the same subject matter must be construed together to give full
effect to the provisions.” State ex rel. Lucas Cty. Republican Party Executive
Commt. v. Brunner, 125 Ohio St.3d 427, 2010-Ohio-1873, 928 N.E.2d 1072, ¶ 14.
As used in R.C. Chapter 153, “bidding” on a public-improvement contract is tied
to awarding the contract to the “lowest responsive and responsible bidder in
accordance with section 9.312 of the Revised Code.” R.C. 153.08; see also R.C.
9.312(A). That is, the term “bid” for purposes of R.C. Chapter 153 refers to a
selection process for the lowest responsive and responsible bidder.
{¶ 40} In fact, although SFAA attempts to argue otherwise in its reply
brief, in its initial merit brief, SFAA conceded that H.B. 318 mandated a “non-bid
method of selecting entities principally responsible for alternative methods of
construction delivery.” (Emphasis added.) That is, in essence, SFAA admitted
that the qualifications-based selection process set forth in H.B. 318 is inapplicable
to the bidding requirements of the low-cost selection process of R.C. Chapter 153,
including bonding. Its new argument in its reply brief is forbidden. See Am.
Fiber Sys., Inc. v. Levin, 125 Ohio St.3d 374, 2010-Ohio-1468, 928 N.E.2d 695, ¶
21.
{¶ 41} Conversely, because there is no bidding as that term is used in R.C.
Chapter 153 for the qualifications-based selection of a construction manager at
risk under Section 8(C)(1)(a) of H.B. 318, Ohio State was under no duty to
require that Turner furnish a bond under R.C. 153.54 because that section is
manifestly inapplicable. SFAA’s claim that the solitary reference to “bidding” in
the construction-manager-at-risk section of H.B. 318 establishes the legislative
intent that R.C. 153.54 apply to this alternate construction-delivery method lacks
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merit. H.B. 318 merely requires “an open book pricing method, wherein the
construction manager at risk provides the state institution of higher education all
books, records, documents, and other data in its possession related to itself, its
subcontractors, and material suppliers pertaining to the bidding, pricing, or
performance of a construction management contract.” (Emphasis added.) Section
8(C)(1)(a) of H.B. 318. Under the language of this section, bidding—at least in
the meaning of the low-cost bidding specified in R.C. Chapter 153—is not
required.
{¶ 42} In effect, SFAA’s arguments contravene the plain text of the H.B.
318 and R.C. Chapter 153. And regardless of whether R.C. 9.333 is applicable to
additionally authorize Ohio State’s contractual provision that Turner furnish a
letter of credit instead of a bond, neither H.B. 318 nor R.C. 153.54 required that
Turner provide a surety bond for its construction-manager-at-risk agreement. We
cannot read into this legislation a nonexistent bonding requirement. State ex rel.
Columbia Res. Ltd. v. Lorain Cty. Bd. of Elections, 111 Ohio St.3d 167, 2006-
Ohio-5019, 855 N.E.2d 815, ¶ 32 (court cannot “add a requirement that does not
exist in the statute”). In fact, if the purpose of the temporary law was to afford
greater flexibility and lower the costs associated with the multiple-prime-
contractor method, that purpose is not advanced by adding to that law a
requirement that would have increased the cost of ProjectOne by as much as
$11.9 million.
{¶ 43} Therefore, SFAA is not entitled to the requested extraordinary
relief in mandamus.
Conclusion
{¶ 44} Based on the foregoing, we dismiss the claims of ASA and ASA-
Ohio because they lack standing, and we deny SFAA’s mandamus claim.
Judgment accordingly.
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O’CONNOR, C.J., and PFEIFER, LUNDBERG STRATTON, O’DONNELL,
LANZINGER, and CUPP, JJ., concur.
MCGEE BROWN, J., not participating.
__________________
Williams & Petro Co., L.L.C., John J. Petro, Richard A. Williams, and
Susan S.R. Petro, for relators.
Michael DeWine, Attorney General, Alexandra T. Schimmer, Solicitor
General, and Jon C. Walden and Jerry K. Kasai, Assistant Attorneys General; and
Porter, Wright, Morris & Arthur, L.L.P., Kathleen M. Trafford, and Ryan P.
Sherman, for respondent.
______________________
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