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Colorado limits the ability to conceal government contracts

On Behalf of | Sep 18, 2022 | Business Litigation

Construction firms and contractors looking to bid on government projects can take heart from a recent ruling by the Colorado Court of Appeals. It said that the Colorado Open Records Act (CORA) applies to all documents for public use, even if a third party holds those documents.

Among other things, this means government officials cannot limit public access to contracts, invoices, change orders and other documents related to government projects. Firms and contractors can request this information to inform their future bids. Government officials cannot store documents with third parties to cover up any self-serving deals.

What was at stake in Leonard v. Interquest?

The case began when Timothy J. Leonard and the company, Deepwater Point Company, requested a variety of documents from the Interquest North Business Improvement District. Interquest produced some of the documents, but not all. Because Interquest did not produce all of the documents, Leonard sued.

Notably, the Interquest North Business Improvement District had deep ties with the developer Nor’Wood Development Group. This included the related business, InterQuest Marketplace LLC. The Court of Appeals noted that “many” people held ranking positions with both the developer and the Business Improvement District (District).

The District formed according to the rules set forth by the Business Improvement District Act. Its powers included the rights to “finance, operate, and maintain public improvements” for the property it oversaw. The Court of Appeals noted the District had paid the developer approximately $15 million for related work.

In a statement to the Colorado Freedom of Information Coalition, Leonard framed his concerns. He wanted taxpayers to know how this “developer-controlled” District was spending their money. At the same time, Leonard is also a former state representative, and Deepwater Point Company is a global consulting firm. It is possible Leonard and Deepwater wanted the business documents to better advise their clients.

Interquest’s responsibilities under CORA

Construction companies and contractors on public jobs should expect some scrutiny. The District’s reimbursement agreement called upon an independent engineer to review bills. This engineer would ensure the bills were reasonable. Upon the engineer’s approval, the District would reimburse the developer. The District would then need to collect any and all “contracts, pay requests, change orders, invoices, the final AIA payment form (or similar form), canceled checks and any other requested documentation” to verify its expenses.

After Leonard filed his suit, the District passed a new resolution. The resolution said the District would accept the independent engineer’s opinion in place of the documentation required by the District Reimbursement Agreement.

Leonard’s request included the following documents:

  • Construction contracts
  • Consulting contracts
  • Invoices for Nor’Wood, InterQuest Marketplace LLC and related entities

In district court, the District stated it had produced all the records it had in its possession. The court then ruled the District no longer had an obligation to produce records held by InterQuest or other parties. Leonard appealed, arguing that the district court had misinterpreted CORA. The Court of Appeals sided with Leonard.

Understanding the court’s decision

According to the Court of Appeals, the issue was largely a matter of interpreting the statute. Here, it noted that the General Assembly wrote that “all public records shall be open for inspection by any person, at reasonable times,” with only some specific exceptions.

Thus, the focal question was: Was Leonard requesting “public records”? The records concerned public works and funding, but the entity holding them was a private entity.

To answer the question, the Court of Appeals looked at how CORA defined public records:

“[A]ll writings made, maintained, or kept by the state, any agency, institution, a nonprofit corporation incorporated pursuant to section 23-5-121(2), C.R.S., or political subdivision of the state, or that are described in section 29-1-902, C.R.S., and held by any local-government-financed entity for use in the exercise of functions required or authorized by law or administrative rule or involving the receipt or expenditure of public funds.”

The Court of Appeals emphasized that the definition included all writings “made, maintained, or kept” by the state as well as all writings “involving the receipt or expenditure of public funds.”

As a result, the court held that determining whether the records were, indeed, public meant examining two things:

  • Who made, maintained, or kept the records
  • Why the person or entity did so

With these two standards in place, the Court promptly determined that the documents Leonard requested were “intimately related” to public funds. The District was a public entity, and it was spending public funds to improve public property. It further noted that the contracts and payment records could help others understand the “propriety and reasonableness” of all such payments.

The second step was slightly trickier. The Court had to determine whether the District had “made, maintained, or kept” the records. After all, the District had fully granted the independent engineer the power to determine whether bills were reasonable. In doing so, the District had limited the amount of information it held within its walls. However, the Court of Appeals noted that an earlier Colorado Supreme Court ruling had stated someone “keeps” a record if that person or group “directs another to have care, custody, or control of the document.”

Accordingly, the Court of Appeals ruled that the District’s contractual right to access information from the Developer “necessarily” required the Developer to hold the documents. It didn’t matter that the District didn’t hold or use that information. What mattered was that the District had directed the Developer to serve as custodian for that information.

The District had authority to request the documents from the Developer. It had an obligation under CORA to produce those documents upon a reasonable request. The Court of Appeals overturned the district court’s previous ruling and forced the District to produce the documents.

Public records are subject to public review

With its opinion, the Court of Appeals firmly reinforced the idea that public records are subject to public review. Special Districts created to manage certain projects cannot hide their records by leaving them with a third party. Taxpayers and businesses have a right to review them.

Businesses may use this right to inform themselves ahead of future bids. Businesses that win public bids want to remember their records will be subject to review.