CASE CLOSED Babik Dispute Resolution Services RBJTRATION DECISION City of Springfield v. C F Inc. d/b/a Springfield Towing Alliance, et al 1. Introduction In August 2006, the City of Springfield (hereinafter, the “City”), published an Invitation for Bid (hereinafter, “IFB”) for Police Department towing and storage services. A year later, the contract was awarded to C-F., Inc. d/b/a Springfield Towing Alliance (hereinafter, “STA"). As part of the contractual arrangement, a joint venturer, Communion Church Extension Fund, issued a letter of credit to secure STA’s performance and payments. United Bank issued a Guaranty of any obligation STA assumed by virtue of the contract with the City. During the first year of performance, the Springfield Finance Control Board was handling all of the City’s finances because of unrelated fiscal difficulties, Supervision of the contract was negligible and STA, an inexperienced contractor, was having its own startup problems. Municipal mischief is likely to run rampant, absent close supervision ina stable political environment. It is clear that the circumstances during this time were not conducive for a healthy relationship between STA management and City officials. About fifteen months into the contract, the City Auditor ~ at the request of the Mayor and the Springfield Finance Control Board ~ reviewed STA’s compliance, The review covered a period of time from May 1, 2007 through July 31, 2008. ‘The Auditor’s findings were negative and elicited counter-charges from STA. Consequently, by letter dated September 30, 2008, the City noticed STA of its intent to terminate the contract,CASE CLOSED Babik Dispute Resolution Services effective November 1, 2008!. The City demanded $142,824.86 for various overdue administrative and remittance fees and miscellaneous claimed unauthorized credits under the contract, In response, on October 23, 2008, STA counter-charged the City $2,891,713.27 for unpaid towing and storage charges for the evidentiary court-ordered tows and storage charges of vehicles in the garage at the time of the termination notice. ‘One has only to contemplate the hostility created by these overinflated claims and counter-claims to realize that our cities and towns are adequately supplied with a watchdog by the Inspector General’s office which came to the rescue. I place great reliance upon the Inspector General’s findings which were made after a thorough scrutiny of the post-contract situation. 2. Contract For police-ordered towing and storage services, STA was to be the exclusive general contractor. The City furnished a garage pursuant to a separate lease, STA, as a general contractor under the contract, had responsibility for the towing and storage of vehicles and charged the owners, not the City, for storage and towing fees. Certain administrative fees were to be deducted from the charges and remitted to the City under the contract. These are the delinquent charges which the City claims are due. STA, through its principal Robert L. Jones, had developed a business plan to divide the City into zones, subcontracting most of the towing services to contract towers in those zones, and to operate a central garage and storage area at 29 Chandler Street which STA separately leased from the City. STA also purchased a computerized “TTOW" system which would collect daily data from tow slips made out by the police * The notice also involved a section of the contract which gave the City aright to conduct an inventory of ‘ehicles and documents prepared by the contractor, STA. 2CASE CLOSED Babik Dispute Resolution Services and the towing sub-contractors. A substantial investment was made by STA for start-up costs. The contract for these police-ordered towing and storage services incorporated by reference an invitation to bid (“IFB") document and was finalized on April 25, 2007. The contract provided that the services to be performed by STA would begin on May 1, 2007 and would terminate on April 30, 2010 unless the City exercised its option to terminate without cause at any time during the three year term, As part of the contractual agreement, the City leased the lot on Chandler Street to STA for a monthly rate of $2,050.00. This space contained a dilapidated office building and room for 500 vehicles, which served as the storage yard for all police-towed vehicles. Although STA repaired the building, the contract did not provide for reimbursement of expenses. It is not necessary to chronicle in detail the history of missed goals and failed performance of both parties which followed, The sad story is contained in Exhibit No. 5, a4l page report of the Office of the Inspector General of the Commonwealth, which focused on the towing activities that occurred during 15 of the 18 months prior to the City’s November 1, 2008 termination date. By the end of February 2008, ‘communications between Jones, the police department and City officials had completely broken down, which compounded the confusion and suspicion on both sides. As aptly described in the Inspector General's cover letter, the major issues relating to the performance of the contract were never mutually resolved and the “dysfunctional” relationship between the parties gave rise to exaggerated claims on both sides, ‘The parties had the benefit of counsel during the drafting of the contract. Unfortunately, a substantial cause of the breakdown in communications occurred because the coniract did not specify whether the City was responsible for payment of the storage