DOT admits to a $74 million mistake. BOE shrugs and approves funds anyway
Expanded contract goes to a joint venture with little experience in conduit construction, but plenty of clout at Baltimore City Hall
Above: A close-up of an exposed conduit that carries electric, fiber-optic and traffic signal cables under city streets. (Mark Reutter)
Even by the standards of Baltimore City contracting where “EWOs” (extra work orders), construction delays and cost overruns are a way of life, the admission made on page 72 of this week’s Board of Estimates agenda is remarkable.
The Department of Transportation informed the spending board that an earlier approved contract to repair the city’s underground conduit network was “presented incorrectly.”
As a result, a contract billed as costing $26 million will eventually cost much more – $100 million – according to bid documents obtained by The Brew.
In other words, DOT made a $74 million mistake.
Compounding the oddity of the agency’s admission is the fact that the “mistake” was not made recently.
Instead, the erroneous price was approved by the board 2½ years ago, on August 10, 2016, during the administration of former Mayor Stephanie Rawlings-Blake.
Whether the $26 million figure was really a mistake or a ploy to steer a lucrative contract to two politically-wired businessmen will be examined later in this story.
But first to the events of this week.
Buried in “Routine” Agenda
On Wednesday, DOT asked the spending board to increase by $24 million the original contract price. The agency said it would then request “incremental funding annually” until 2022, when the $100 million price tag is expected to be reached.
The money was awarded without a hitch.
The board, controlled by Mayor Catherine Pugh, approved the $24 million infusion as part of a blanket yes vote of other “routine” items, precluding any board debate or potential questioning of DOT Director Michelle Pourciau, who was present at the meeting.
Along with Pugh, City Council President Bernard C. “Jack” Young, Comptroller Joan Pratt, Public Works Director Rudy Chow and City Solicitor Andre Davis approved the award.
The agency explained the circumstances of Wednesday’s vote as follows: “The original award documents did not adequately explain the terms of this contract wherein each year the value of the award would be increased based on available capital funding. Our recent BOE approval sought to clarify this action.” The agency said the contract has “the potential to be valued at an estimated $100 million,” but nothing is certain.
The Brew reached out to Mayor Pugh and Council President Young to explain their votes on Wednesday. The mayor’s response was incorporated in DOT’s answers; Young’s office didn’t reply.
Big Costs Underground
So why is contract TR 16020, Comprehensive Conduit Facilities Management Services, so important?
It is one of the costliest infrastructure projects underway in Baltimore – the repair, upgrade and capacity expansion of conduits that carry electric, telephone and fiber-optic cables under city streets.
There are hundreds of miles of these subterranean systems, some of them dating back to the 1890s.
By far the biggest user of the network is Baltimore Gas and Electric.
Other users include Comcast, University of Maryland, CenturyLink, Bank of America, Kennedy Krieger Institute, and the city itself, which uses the ducts to support its street lighting and traffic control systems.
The private users pay an annual “conduit occupancy fee” to the city. The Rawlings-Blake administration upped that fee in 2015, sparking a lawsuit by BGE that was settled when the administration pledged to rehabilitate the network, using the increased fees to underwrite the costs.
(While city residents do not directly pay conduit fees, the fees are incorporated in the service costs that BGE, Comcast and others charge their customers.)
From this legal and financial landscape arose TR-16020, a “design-build” contract that had unusual features from the get-go.
For starters, there was considerable confusion about the actual price of the contract. In a pre-bid Q and A with prospective bidders, DOT posted the following information:
Question – Is the contract $20 million or $20 million per year for five years?
Answer – The contract amount is $20 million per year for five (5) years.
DOT’s answer – that the contract was valued at $100 million – was critical because that amount would exclude most Baltimore-area engineering firms who were not pre-qualified to undertake contracts of that magnitude.
But even more unusual was this stipulation by DOT that the two firms who could meet those financial qualifications – Whitman, Requardt & Associates and WSP Parsons Brinckerhoff – were ineligible to compete.
The end result was that just one group actually bid for the contract that was then “mistakenly” submitted to the Board of Estimates as worth only $26 million – or a price low enough for the bidder to meet the city’s financial pre-qualifications.
City Hall Contributors
The winner was “KCI-CG Tri-Venture,” a group consisting of a subsidiary of KCI Technologies of Sparks and Commercial Construction, an affiliate of Commercial Group LLC of Hanover.
Neither company had a track record in large-scale conduit work; in fact, Commercial Construction wasn’t incorporated until mid-2015.
But both companies had plenty of experience handing out campaign contributions to prominent figures inside City Hall.
Nate Beil’s KCI group, for example, plowed a total of $7,800 into Mayor Pugh’s run for mayor in 2016 ($5,300 came from KCI Technologies and $2,500 from KCI Communications Infrastructure, according to online campaign records).
Prior to that time, KCI had made campaign payments to Rawlings-Blake, Jack Young, and former Baltimore County Executive James T. “Jim” Smith, who currently serves as Mayor Pugh’s chief of strategic alliances.
Over the years, KCI has vacuumed up tens of million of dollars of professional service contracts from the city, most prominently from DOT and the Department of Public Works.
And true about nearly all consulting groups who do business with the city, there are personal interconnections. For example, Madeleine Driscoll, former chief of asset management under DPW Director (and BOE member) Rudy Chow, is now senior project manager at KCI.
Greyhound Station Imbroglio
Commercial Construction is a sister company to Commercial Group, a former drywall contractor whose CEO, Kevin Johnson, is a friend of Rawlings-Blake.
Johnson and his companies contributed $8,750 to Rawlings-Blake, campaign records shows, and also helped bankroll Jack Young’s 2011 run as City Council President.
Most famously, Johnson wrested away from rival contractor, Roy Kirby & Sons, the Greyhound Bus Station near the Horseshoe Casino in South Baltimore.
Kirby was the low bidder for the new facility, but Johnson challenged the bid after locating a MBE (minority business enterprise) subcontractor that was un-certified by the state.
KCI’s CEO Nate Beil “is out of the office, on vacation until the next week,” his secretary told The Brew today. Asked if he could be reached before then, she replied, “No!”
After identifying itself, The Brew asked for Kevin Johnson at his Hanover, Md., headquarters. “He just stepped out for the day,” said an office assistant said before adding, “He’s unreachable.”
The Maryland Department of Transportation (under then-secretary Jim Smith) threw out all of the bids. Kirby dropped out of the next round of bidding and Commercial Group won the contract, only to rack up more than 500 days of construction delays before finally completing the bus station.
Relying on Others
Now Commercial Construction and KCI are responsible for a $50 million project – to be increased in increments to $100 million – even though their total pre-qualified financial strength listed in city records is just $32.9 million.
Informed sources tell The Brew that the KCI-CG Tri-Venture does not possess the skilled manpower to rebuild the conduits by itself – and has been relying on other contractors, such as Spiniello Companies, to get the work done.
The $24 million that the BOE added to the contract will only increase the pressure on Tri-Venture – and DOT contract managers – to keep on schedule, which will soon include major conduit rebuilding along Greenmount Avenue.
We asked DOT about the joint venture’s “self-performance” goals. The city tells contractors they must do at least 51% of the work themselves.
Is KCI-CG Tri-Venture anywhere near that 51% goal, we asked, noting our information that the two companies are, in fact, doing little of the construction work.
DOT responded this way:
“As a common practice, the City has a process to monitor the contractor’s performance over the life of the contract. If any issues avail, we work collaboratively with contractors to ensure their work is performed according to contract specifications.”