Contractor Fights Eminent Domain: Charleston WV State Journal, 2/8/07

DOH lawsuit involves 'rare' road work bid situation for W.Va. 10 project in Logan County

By Juliet A. Terry

The welcome signs at West Virginia's borders say "Open for Business," but one contractor said his experiences of late prove the slogan is anything but true.

David Heeter has been in business in the Mountain State for nearly 40 years. His company, Heeter Construction Inc. and its affiliates, routinely bid on and complete projects valued from $10 million to $40 million.

His latest foray in competitive bidding for state highway projects has led him to the courtroom, however, not the construction site.

The dispute concerns a piece of land in Logan County that Heeter owns and the state wants to take through eminent domain proceedings. The land would be for waste disposal from a 2.5-million-yard excavation project that is part of plans to make W.Va. 10 a four-lane highway.

Circumstances behind that disagreement concern not just eminent domain law but also rules and practices affecting the bidding process for state road projects.

"There is something underhanded going on here," Heeter said of his dispute with the DOH [Dept of Highways].

The state insists it simply is trying to level the playing field in the bidding process for the Route 10 project. No one is playing favorites, according to Tony Halkis, director of the DOH legal division.

Heeter and the DOH have taken their dispute to the courtroom. A bench trial before Logan County Circuit Judge Eric O'Brient began Feb. 6 and will continue Feb. 12.

W.Va. 10 Bid
In April 2006, Heeter submitted a bid of $21.7 million for a W.Va. 10 project.

One of his sister companies, Contractor Enterprises Inc., purchased one of six potential waste sites suitable for the project in Logan County. Heeter paid $125,000 for the land and spent an additional $300,000 clearing the site so it would be ready to receive waste from the massive excavation project at Rita, about three miles north of Man.

Four other companies also bid on the project, and, according to court documents, Heeter's bid was the lowest of the five, but all the bids were at least 50 percent higher than the estimated cost of the project.

"When the bids came in 50 percent higher than the job ought to cost, we asked why," Halkis said. "It was determined that this waste area was key."

So the state invalidated the bids, re-estimated the cost of the project and prepared a new bid process. The DOH also set about obtaining Heeter's waste area through eminent domain proceedings.

Contractor Enterprises then sued the DOH in circuit court to stop the eminent domain proceedings.

According to DOH engineers, Halkis said the waste site was the only one big enough to accommodate the project. Acquiring the land for waste disposal would mean that all contractors who bid on the project a second time would have the option of using the land rather than Heeter having a competitive advantage because he already owned the land.

"Mr. Heeter was smart enough to buy it, and when we condemn it, we will pay him full market value," Halkis said. "We have the absolute right to condemn waste areas. ... We don't really want to take a waste site ... but we're trying to level the playing field here."

Heeter said the state has offered to pay him $118,000 for the site - far less than his total costs for purchasing and preparing the land.

He also said that other contractors who bid on the project testified that they had planned on using nearby lands for waste disposal, which contradicts the DOH assertion that Heeter's land is the only suitable site for waste disposal.

'Rare' DOH Move
As Halkis indicated earlier, the state is not in the habit of using eminent domain to take land for waste disposal on road projects.

Former Department of Transportation Secretary Fred Van Kirk testified Feb. 6 that the department never acquired a waste area in his 39 years there.

Halkis, who has been with DOT for more than 40 years, admitted the DOH was faced with a unique decision when it decided to take the eminent domain route.

"I've been here since 1961. It has happened before ... but it is rare," he said. "... That's the ideal site, according to our engineers. It's the only site for this project."

Cost Disparity
Heeter said he believes the eminent domain proceeding is more about helping out-of-state contractors than anything else.

"I've already built three sections of Route 10 in the past six years. We've saved the state $4 million on those projects," Heeter said, adding that his $21.7 million bid on the latest project was $4 million lower than the next-highest bidder.

"If we were awarded this one, we would have saved the state a total of $8 million in taxpayer money."

He said the state's project estimate of $14 million was outdated. The disparity between the estimate and the bids was from increases in construction costs and fuel, not the cost of providing a waste disposal area, Heeter said.

"The whole deal is that (DOH) has a whole bunch of new people down there, and they want to give somebody an advantage over me," Heeter said. "... I see some favoritism going on. They want to see someone else get this job. Eminent domain doesn't mean they can take this land to drive the price of the project down."

Heeter, a Spencer resident, has contacted Delegate Bob Ashley, R-Roane, for help. After looking at the situation, Ashley told The State Journal it has raised a few red flags.

"I am really concerned the state is starting a new precedent of acquiring spoilage (land)," Ashley said. "I don't know if there is anything I can do right now, but I don't understand why we're picking on a West Virginia contractor if we're supposed to be open for business."

Halkis said the DOH is trying to preserve a level playing field in its bidding process, not discriminate against Heeter.

"He's a fine contractor. It's just unfortunate we are in this situation," he said.

The Contractors Association of West Virginia filed a brief with the court in support of Heeter's position. The group said it supports the state's right to take land through eminent domain but said the state should have exercised that right before the project first was advertised for bid.

"It is not good policy to bid a project, review the bids, refuse the bids, condemn property that would have been used as a waste site and was owned by a sister corporation of the low bidder, then re-bid the project with that property available to all bidders as a waste site," the association said. "Such an approach does not ... encourage entrepreneurship and competition."

Halkis said the W.Va. 10 project is slated to be available for re-bid in March.

Charleston WV State Journal: http://www.statejournal.com