EWING LUNDBERG ASSOCIATES v. ILLINOIS DEPARTMENT OF HUMAN SERVICES (2009)

ORDER

This is a breach of contract action brought pursuant to the Court of Claims Act, 705 ILCS 505/8(b). Claimant is seeking $32,019.97 in damages for security guard services performed during July 2002. This case is before the Court following an evidentiary hearing before a commissioner which took place on November 30, 2007.

Claimant, Ewing, Lundberg & Associates, doing business as ELA Security (“ELA”), was a supplier of security guard services to the Department of Human Services (DHS) for an extended period of time beginning in 1999. These services were provided pursuant to a contract which ELA obtained following a competitive bid. ELA's contract expired on June 30, 2002. Respondent held a bidder's conference on May 24, 2002, for a new contract to provide security guard services from July 1, 2002 through June 30, 2003. ELA was the successful bidder; however, the new contract specified lower staffing levels than the previous contract between Claimant and Respondent.

EVIDENTIARY HEARING

The following witnesses testified at the evidentiary hearing: Peggy Lundberg (“Lundberg”), Vice President of Operations Support for ELA, Daniel Overton (“Overton”), President and Chief Executive Officer of ELA, Lynette McKinney-Colman (“Colman”), Public Service Coordinator for DHS, and Mae Ward-Cleveland (“Cleveland”), an employee of DHS.

Lundberg testified that she has been the Vice President of Operations Support for ELA for seven and a half years. She testified that on July 18, 2002, she received a phone call from Cleveland about several guards that did not show up to provide services at their assigned locations. Prior to this date, Cleveland would routinely call ELA to make adjustments in the field. According to Lundberg, Cleveland had initially called to advise her that there were the wrong number of guards at four of the sites, or that certain guards were unarmed and should have been armed. Lundberg responded that she would look into the matter as she did not know what was provided by the old contract or bid.

Lundberg further testified that she examined the prior contract and determined that they had the correct number of guards at the sites in question, and that said guards were unarmed or armed as required. Lundberg found other discrepancies at other sites which she related to Cleveland. Lundberg asked Cleveland if ELA should be pulling the guards out if it was not going to get paid. Lundberg testified that Cleveland stated she was going to continue her investigation, that ELA should keep the guards as is, and that ELA would be paid for the guards' services.

Lundberg further testified that she prepared informal notes of the first of those conversations showing the phone number from which Cleveland called, she prepared a memo to Overton outlining the situation, and she wrote a letter to Cleveland about the matter before the final telephone call from Cleveland directing that the guards should stay in place. Lundberg testified that she heard nothing further from DHS until she received a letter on July 31, 2002 from Victor Kurpita (“Kurpita”) stating that ELA should reduce its level of staffing to the level set forth in the bid documents and apologizing for any “inconvenience” to ELA. ELA responded by doing so immediately.

Overton testified that he is the President and Chief Executive Officer of ELA Security which is a licensed private security contractor and licensed detective agency. On May 31, 2002, Overton signed the contract at issue in this case. According to the contract, the effective dates were from July 1, 2002 until June 30, 2003. On July 18, 2002, Lundberg told him that ELA was providing more security officers than was required under the bidding documents that had been completed and submitted to DHS. On July 31, 2002, ELA received a fax from Kurpita directing them to comply with the staffing levels of the contract that was effective July 1, 2002.

Overton further testified that requests for changes in security guard services came in fairly frequently, every four to six weeks. He stated that they were usually oral then followed up in writing, though there were times when there was no written follow up. In each of those cases, ELA had received payment for the services requested pursuant to the informal change. Overton also testified that he regarded the staffing levels contained in the bid documents to be mere estimates or projections for use in formulating the numbers for a bid; thus, when he prepared the new bid, he did not assume that the new contract would automatically contain a different staffing level than the old contract.

Colman testified that she was an employee of DHS for 18 years. In July 2002, her position was Public Service Administrator and one of her duties entailed managing the contract with ELA. Colman and Kurpita were designated as Security Coordinators for the subject contract which gave them authority to make staffing changes. Colman further testified that she was aware that there was a dispute with Claimant regarding staffing levels for the month of July, but she could not authorize payment for services not covered in the contract.

Cleveland testified that she has been employed by the State of Illinois for thirty years and by DHS from 2000 to 2002. Cleveland's duties in July 2002 involved managing, inspecting, monitoring the performance of security guard services, and ensuring on a daily basis that all the facilities for which she was responsible had security officers sufficient for the protection of DHS clients, staff and property. Once Cleveland became aware that a facility was short a security guard, she would notify her supervisor, Kurpita, who would then contact ELA. Arrangements would then be made for the facility in question. This request for additional guards was done orally and if it was followed up in writing, it would be done by Kurpita. Cleveland had no role in ensuring that ELA would get paid for the services it provided. Cleveland denied having a conversation with Lundberg in July 2002 or otherwise telling her to keep staffing levels as they were or that ELA would get paid for the disputed security guard services. Cleveland also denied receiving a letter from Lundberg and denied discussing this issue with Kurpita.

It was also adduced at trial that in the spring of 2002, a solicitation notice, general information, and a copy of the bid which included the level of security guards for which to bid were placed on the Illinois Procurement Bulletin as a small business set aside bid. Subsequently, a Notice was placed on the Illinois Procurement Bulletin to retract the bid. The Department went out for bid again and placed the Procurement on the Illinois Bulletin. The Procurement contained the levels on security services that would be bid upon. The information in the Invitation to Bid, including the staffing levels, did not change from that contained in the first bid.

A bidder's conference on the second bid was held on May 24, 2002. David Thompson, ELA's chief operations officer, was present at the bidder's conference. Thompson received documents that were presented at the conference which pertained to the subject contract, including the staffing levels that were to be bid upon. The information that was provided to Claimant up to this point, including the staffing levels, was the same information that was provided to the new potential vendors. It was made clear at the bidder's conference that the start date for the contract was July 1, 2002.

Overton signed the subject contract on May 31, 2002. On June 7, 2002, Claimant submitted its Best and Final Bid to the State. The Best and Final bid is an attempt by the State to see if it can get a lower price from its bidders. Taking into consideration the information in the bid, including the staffing levels, and the figures that were previously submitted, Claimant provided a price. On June 19, 2002, the notice that Claimant had won the contract was published on the Illinois Procurement Bulletin. This publication included information that Claimant had won the contract with the requirements of the new staffing levels.

The following exhibits were admitted at the evidentiary hearing:

Contract between Claimant and Respondent for security guard services effective July 1, 2002 ending June 30, 2003.

Letter from Lundberg to Cleveland dated July 18, 2002

Fax from Lundberg to Cleveland dated July 18, 2002

Group exhibit containing various requests for changes in staffing of security officers

Personnel Evaluation of Cleveland from 12/17/99 to 3/1/02

ELA invoice dated 8/21/2002

Notes taken by Lundberg

Letter from Kurpita to Lundberg dated July 31, 2002

Timeline authored by Lundberg

Spreadsheet identified by Lundberg

Solicitation overview

LEGAL ANALYSIS

In dealing with an agent of the State, one must ascertain at his peril the authority of the agent and the mere assertions of the agent are not sufficient to bind the State, and implied contracts are not favored by this Court. Melvin v. State, 41 Ill Ct. Cl. 88 (1989), see also New Life Development Corp. v. State, 45 Ill. Ct. Cl. 65 (1992). In Melvin, this Court set forth the following with regard to contracting with the State:

For all of the involved testimony, the numerous exhibits, and the extensive briefs, this case comes down to a simple case of contract construction. This case is also a primer on how to deal with the State on a construction project. Anyone who deals with the State has to understand that you do not work on a handshake. Every “i” must be dotted and every “t” crossed. Whether it was wishful thinking or pure naivete, Claimant did not follow the letter of the contract but only the spirit. Under the present state of the law, that is not good enough. The written contract prevails here. Claimant's position that an oral contract or implied contract exists must fail as this is not a contract of an emergency nature.

The instant case comes down to the subject contract that was in place on July 18, 2002. In construing this contract and determining the intentions of the parties, the instrument must be considered as a whole. McDonnell Douglas v. State, 36 Ill. Ct. Cl. 46 (1984). Contract obligations derive from the plain words of the contract themselves. R.W. Dunteman Co. v. State, 52 Ill. Ct. Cl. 33 (1999). It is the generally accepted rule of law that the rights and obligations of the party to a contract are determined from the plain, unambiguous wording of the contract. Hoel-Steffen Construction Co. v. State, 35 Ill. Ct. Cl. 108 (1982). The terms and conditions of a contract, if unambiguous, are enforced as they appear and will control the rights of the parties. Johnson v. State, 55 Ill. Ct. Cl. 410 (2002).

While Claimant alleges that the new contract was not in effect at this time, the language of the new contract explicitly states that the beginning of the new contract was July 1, 2002. There is no ambiguity and Claimant was aware of the terms of the contract, including the reduction of staffing levels since the spring of 2002 when the bidding process began. On May 31, 2002, Overton signed the subject contract; thus Claimant was bound by the terms of that contract. Notwithstanding prior additions of security guards and funding for same, a new contract was in effect that specifically reduced the number of security guards. That reduction was an integral part of the bidding process and the basis of Claimant getting the contract.

Claimant maintains that the additional security guard services were an implied or oral contract separate from the existing contract. However, it is well established that oral or implied contracts are not favored by this Court. Evans Construction Co. v. State, 44 Ill. Ct. Cl. 112 (1988). In Evans, a contractor sought compensation for additional work that was performed outside the scope of the written contract in connection with the rehabilitation of an underground parking garage. The project engineers of the State gave oral and written directives to the claimant for the additional work to be performed. This Court held that while the disposition seemed harsh, the Court must give deference to the rule of law fashioned to protect the public monies and those expenditures not specifically approved as required by the contract were not recoverable.

Claimant also argues that Cleveland had authority to approve the additional security guards since she functioned as the “Security Coordinator.” As such, Respondent is bound by her representations that Claimant would be paid for the additional services requested. However, it was never clearly established at the evidentiary hearing whether Cleveland was a Security Coordinator under the new contract in effect at the time. Further, it was Respondent's position that Cleveland never made any representations to Lundberg regarding payment for the month of July 2002.

Assuming arguendo, that Cleveland made the statements testified to by Lundberg, the doctrine of apparent authority has limited, if any, application to the State where contractors are required to ascertain at their own peril the true authority of purported agents of the State. Dunteman v. State, 38 Ill. Ct. Cl. 51 (1985). As this Court has pointed out, when dealing with the State, one cannot do so on a handshake. New Life, supra, see also, Rubidoux and Sasak v. Northeastern Illinois University, et al., 53 Ill. Ct. Cl. 215 (2000). While Respondent concedes that Cleveland had the responsibility of ensuring that all the facilities under her command had the appropriate levels of security guards, there was no genuine proof that she was the Security Coordinator under the subject contract and therefore no evidence that she had the authority to guarantee payment for changes in the staffing levels not specified in the contract. As such, even if Cleveland assured Lundberg that Claimant would get paid for the additional security guards, Lundberg should not have relied on Cleveland's assertions in the face of the unambiguous written contract.

Accordingly, this claim is DENIED.

IT IS SO ORDERED.

BIRNBAUM, J.