Contractor’s Delays May Postpone CSSM Opening : Construction: Louetto Construction Co. was granted contract despite its record of many lawsuits.

The general contractor hired to start building the Cal State San Marcos campus received a stamp of approval from Cal State University system officials despite a long history of legal problems, and now construction delays threaten to postpone the opening of the campus.

The Louetto Construction Co. of Escondido failed in September to make two monthly payments totaling $1.3 million to a subcontractor who was hired to grade the university site. The subcontractor, C.W. Poss Inc. of Anaheim, stopped construction after the first monthly installment was missed.

If work is not resumed soon, university officials say, the opening of the new campus, currently scheduled for August, 1992, might be delayed a semester.

University officials did not know when they accepted Louetto’s bid earlier this year that the company has been sued at least 43 times in the past three years by subcontractors, government agencies and individuals, more than any other San Diego commercial building contractor.

Moreover, 25 of those lawsuits have claimed a breach of contract or failure to pay, more often than the eight largest commercial building contractors in the county put together, according to a Times review of legal records.

Louetto was the lowest bidder of the 11 that had been prequalified by the Cal State system, which does not look at companies’ legal histories.

“Companies are pre-qualified in terms of experience and financial liability and are reviewed by the Cal State staff,” said Jim Corsar, construction engineer for the Cal State system.

“I don’t know the answer to whether we should or should not (look into a company’s legal history),” Corsar said. “It sounds like it would take a large amount of research.”

Louetto was required to take out a bond for the $9 million first phase of the San Marcos project, which is scheduled to be completed on Sept. 12, 1991. For every day the project is late, the university system will receive $1,000 in penalties from the bonding company, Corsar said.

But Cal State San Marcos officials said they need the work to resume by the end of the month if they hope to open the campus on time. At this point, campus officials are waiting to hear whether the subcontractor will be paid either by Louetto or the bonding company.

“We’re at a point where we can’t provide the bonding company any more extensions to try to resolve the problems with Louetto,” said Al Amado, assistant vice president in charge of construction at Cal State San Marcos. “We would otherwise have to postpone the opening of the new university by a semester.”

“It’s not surprising,” attorney Bruce Hirsch said of Louetto’s latest problems. He represented Rand E. Electric, an electrical subcontractor that sued Louetto last year

for breach of contract but lost. “That seems to be their mode of operation. They don’t pay subcontractors, and when the subs try to come after them for the money, they say that (subcontractors) were responsible for delays and this and that.”

Louie Pauletto, owner of Louetto Construction Co., said that nine of the lawsuits filed recently against his company were the result of one subcontractor not performing its duties correctly.

“When the subcontractor doesn’t pay his suppliers with the money that we gave him, those people come after us,” Pauletto said. “We do some of the most difficult jobs in the county and many of those projects have been done on a very short fuse.”

Those projects include the Escondido Promenade Shopping Center on 9th Avenue, a $25-million project that Pauletto claims was constructed, for the most part, in about six months.

Pauletto blamed his firm’s legal difficulties on “bad subcontractors” and owners “that haven’t paid in a timely manner.”

“We’re getting a little discouraged because of the type and quality of subcontractors and owners,” said Pauletto, who has been in business for 25 years.

Among Louetto Construction’s supporters is Mark Mullen, president of Mountain Electric Co. in Escondido, a subcontractor that has worked with Louetto Construction in the past.

“We’ve done business with them for a long time, and we’ve probably done over $9 million in work for them,” Mullen said. “As far as payments, they pay within the norms of a lot of general contractors, sometimes they’re prompt, sometimes they’re slow.”

“They’ve always treated me fair, and I’ve found them to be a good contractor, and I’ve done work with them for 13 years,” Mullen said.

Cal State construction engineer Corsar said about “half a dozen contractors every week” that hope for university contracts are pre-qualified by the Cal State system staff.

Corsar said the university system’s requirement that contractors submit performance bonds and payment bonds is its assurance that a project will be completed properly, on time and at the agreed-upon price.

“If you have a contractor that is not performing well or is not financially solvent, then usually it is very difficult for them to get a bond,” Corsar said.

Corsar said the state compiles a list of contractors that are prohibited from bidding on public works projects.

“There are many contractors that we are told not to allow them to bid, and we keep track of those and Louetto is not one of them,” Corsar said.

Corsar said that there is a disqualifying process that can be initiated if a contractor does not perform adequately, but only after a project has been started.

“I don’t know if (the disqualifying process) applies in this situation because what happens in the near or long-term future is unknown at this time,” Corsar said, referring to the fact that the project might be completed on time.