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by Mark Reutter7:58 amJun 22, 20230

Already loose, the criteria for approving Extra Work Orders are being expanded

The Scott administration is changing the way vendors can win “EWOs” (cost overruns) on their contracts, saying the construction industry has suffered greatly from inflation

Above: City Hall’s walls are undergoing an expensive facelift. Work is now proceeding on the northeast facade, seen here covered with construction mesh. (Fern Shen)

The Board of Estimates has expanded and extended to 2024 a policy that recently allowed the board to hike the bill for re-pointing and cleaning the stone walls of City Hall by $1.6 million.

Yesterday’s approval of a seemingly innocuous resolution – “Amendment Relating to Cost Escalation Change Orders Due to Adverse Economic Conditions” – by Baltimore’s three top elected officials alters the rules for Extra Work Orders, or cost overruns, established by the City Charter and the 1,050-page “Green Book” of construction specifications.

Previously, contractors could submit EWOs under three broad conditions:

• if the mandated quantity of materials was increased,

• if the scope of work was altered, or

• if unforeseen and unforeseeable site conditions were experienced.

Otherwise, “bids are irrevocable,” according to the City Charter, and contracts enforceable by a performance bond guaranteeing that work is completed or else the city is compensated.

That language meant that contractors were supposed to stick to the price that won them the contract in the first place, although this website has documented many instances – for sewers, bridges and other big-ticket items – where EWOs were awarded on dubious grounds.

Opened last November, the Harford Road Bridge was 30% over bid price due to a raft of EWOs due to flood damage and unexpected rock excavation. (Baltimore DOT)

The new Harford Road Bridge, opened last November, was 30% over its bid price due to a raft of EWOs involving flood damage and unanticipated rock excavation. (Baltimore DOT)

Protecting Contractors from Inflation

Now Mayor Brandon Scott, backed by City Council President Nick Mosby and Comptroller Bill Henry, will extend through June 30, 2024 a policy first instituted in December.

It lets contractors go back and renegotiate contracts approved by the spending board before July 2022 – then seek price increases based on “adverse economic conditions,” including for “high inflation and supply-chain disruptions.”

The Board of Estimates can then retroactively approve the new prices through EWO submissions.

Individual line items can be raised as much as 50% above the original bid, according to the resolution.

That’s far above the 19.6% construction input inflation rate at the height of U.S. inflation in 2021.

Individual line items can be raised as much as 50%, or much more than most measures of inflation.

Some of the language in the new policy is worth quoting.

For example, it requires the project estimator to “conduct a cost-benefit analysis of rejecting vs. approving vs. negotiating the change order result.”

“If it is in the public interest to negotiate on a change order request,” the document continues, “the cost-benefit analysis performed by the project estimator must be submitted to the Change Order Review Committee and the Board [of Estimates].”

The Change Order Review Committee, which already exists, next to never raises questions or objections to EWOs. And even more rarely does the Board of Estimates fail to approve the new prices.

The resolution asserts that adherence to the new procedure “will ensure that change orders related to cost escalations due to adverse economic conditions are reasonable and justifiable.”

Election-Year Politics

Scott, Mosby and Henry are all up for re-election next year, and contractors rank with real estate developers and attorneys as their most reliable sources of campaign contributions.

Already have P. Flanigan & Sons (street paving), R.E. Harrington Plumbing (sewer rehab), The Goode Companies (garbage services) and Whiting-Turner Contracting (building construction) each given the maximum $6,000 contributions to “People for Brandon M. Scott,” the mayor’s campaign committee.

Scott did not comment yesterday on the new EWO policy while his infrastructure “czar,” Matthew Garbark, spoke of the importance of helping a struggling construction industry.

“Inflation remains at particularly severe levels. The construction industry is particularly hit”  – Matt Garbark, Mayor Scott’s infrastructure czar.

“The original resolution is due to expire on June 30th. At this time, inflation remains at particularly severe levels. The construction industry is particularly hit by it, and there are a number of actions that agencies are working on,” Garbark said.

“If we do not extend this, what happens?” Mosby asked.

“Then any negotiations on these particular types of change orders could not go forward,” Garbark replied, “This resolution should give us enough time [to renegotiate] these contracts.”

“So while this is really important, this will not have a huge adverse impact on us from a budgetary perspective. Is that accurate?” Mosby wondered.

After Garbark nodded in agreement, the five-member board, which includes Public Works Director Jason Mitchell and Acting City Solicitor Ebony Thompson, approved the measure.

Back in July 2021, the southwest facade of City Hall, along Fayette Street and Guilford Avenue, was under wraps. (Mark Reutter)

Back in July 2021, the southwest corner of City Hall, facing Guilford Avenue and Fayette Street, was under wraps. The restoration project began in 2020. (Mark Reutter)

Costly Facelift

The policy already has resulted in an extra $1,616,000 paid to Lorton Stone LLC last month because “the contractor has experienced an unanticipated rise in inflationary costs since the time of the bid,” according to BOE records.

In February 2020, the Virginia-based company bid $6.1 million to repair City Hall’s exterior walls, window sills and gutters. Since then, 19 EWOs have been awarded to the company, increasing the cost of the project to $8.5 million.

After the latest $1.6 million EWO for City Hall building restoration, the project price is now nearly double the original bid.

The $1.6 million added for unanticipated inflationary costs will bring the price tag to $10.1 million, or nearly double the original bid.

The Department of General Services has justified the cost increases based on a consultant who identified unexpected deterioration of mortar joints, leaking gutters and misaligned stones as workmen slowly made their way around the building, an outer wrapping of dark mesh marking their progress.

Looking for Federal Dollars

Last June, Scott created the Mayor’s Office of Infrastructure Development and appointed Garbark, a former City Hall staffer and DPW deputy director, as program director with a $2 million budget.

Modernizing city contracting processes and procedures is the first step toward tapping into federal infrastructure funds and making a difference in people’s lives, Garbark says. Speaking to Politico, he described his office’s priorities:

“Over the years, right, wrong or indifferent, there have been promises made throughout the city for major projects, whether it’s a multi-million dollar transit line, which was canceled, or reconnecting communities from highways.

“I think there are a lot of people, especially in underserved neighborhoods, that hear things and they dismiss them. They say, ‘Show me the progress.’ There’s a lot of work that we need to do to show that we’re taking advantage of this. I think once we start getting shovels in the ground and projects underway, they are going to realize how impactful this is going to be.”

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