Water Board Finds Insufficient Evidence to Suspend or Debar L. D'Agostini & Sons and DLZ Michigan

On March 14, 2012, the Board of Water Commissioners received the report and recommendations of the Ad Hoc Hearing Committee, which conducted Responsible Vendor Hearings on March 7th and March 14th for L. D'Agostini & Sons, Inc.  and DLZ Michigan, Inc. The Hearing Committee reported that at the present time it did not have sufficient facts or other evidence to warrant taking any action against the two contractors.

In both cases, on a 5-1 vote, with Commissioner Forte abstaining both times,  the Board of Water Commissioners adopted the findings of the Hearing Committee.

A third contractor, Inland Waters Pollution Control, reportedly reached an agreement with the Water Board which will give it 45 days to negotiate a final settlement agreement or (presumably) participate in a Responsible Vendor Hearing.
 

The lone dissenting vote against adopting the recommendations of the Hearing Committee came from the Chairperson of the Water Board, James Fausone. Prior to casting his NO vote, twice, Chairperson Fausone read a statement outlining his concerns and specific reasons regarding each contractor. Both statements contained a common thread: integrity.

The standard that applies is tied to the City of Detroit purchasing ordinance and the burden is on the vendor to demonstrate it has a "satisfactory record of integrity, judgment or performance." The burden is not on this Board. The debarment policy picks up on this on page one --"The BOWC may determine that a vendor is not a responsible vendor if there is a finding that the vendor has failed to demonstrate a satisfactory record of integrity, judgment or performance."

Additionally I would note Section III, #14 of the Debarment policy provides in terms of causes that "any other conduct or activity by the vendor that has a harmful effect upon the integrity of the bidding, contracting or procurement processes of the DWSD or the public trust or confidence in the operations of DWSD" are grounds for debarment.

So I must ask -- what is integrity? The dictionary definition is simple: adherence to moral and ethical principals; soundness of moral character; honesty.

* * * 

The need for integrity in public construction process is paramount. The burden on a vendor is high.

Chairperson Fausone stated that in both cases he believed the vendor -- based on the criminal indictment against Kwame Kilpatrick, Bobby Ferguson and others, which he said could not have been brought without the federal prosecutor satisfying a probable cause standard -- had failed to meet its burden of proof under the Department's Suspension and Debarment Policy.

Commissioner Williams, a member of the Hearing Committee, also read a statement which indicated that he was confident that the Water Board could revisit these issues at a later time if additional (new) facts come out during any subsequent criminal prosecutions or civil actions.  

For more about DWSD Update, click here.

WS-682A, Imperial Construction Submits Low Bid on Water Main Repair Project

On March 15, 2012, Imperial Construction submitted the low bid on the project known as DWSD Contract WS-682A, "Repair of Water Main Systems: Various Pipe Sizes at Various Locations Throughout the City of Detroit."

1.  Imperial Construction  . . . . . . . .$4,395,965

2.  Blaze Contracting. . . . . . . . . . . . $4,496,705

3.  Willie McCormick & Assoc . . . . $4,582,008

4.  L. D'Agostini & Sons . . . . . . . . . .  $7,673,214

5.  Ric-Man Construction . . . . . . . $12,518,706

Contract WS-682A is an as-needed repair contract covering a minimum of 500 water main breaks per year. 

For more about DWSD Update, click here.

Wayne State Law School Symposium, Panel to Address Possible Privatization of DWSD

On Friday, March 23, 2012, the Wayne State University Law School, Journal of Law and Society will host a symposium entitled “Michigan In Transition: The Restructuring of Governance Through Privatization and Corporatization."

Of interest to readers of DWSD Update is Panel 2 of the Symposium, which is scheduled to begin at 2:30 p.m., and will discuss privatization of DWSD.

The second panel will address the possible privatization of Detroit's water and sewage system. Environmental consultant and former assistant director at the Detroit Water and Sewerage Department Jim Ridgway will focus on how the current system functions. Oakland County Water Resources Commissioner John McCulloch will present the suburban perspective on privatization. Shar Habibi of In the Public Interest will provide insight on competition, valuation and delivery under privatized systems. Alex Beauchamp of Food and Water Watch will contribute with his grassroots expertise of water privatization in Atlanta and Chicago.

The Symposium will be held at the WSU Law School, Spencer M. Partrich Auditorium, 471 West Palmer, Detroit, MI 48202.  The  event is free, but attendance limited to 200 people.

If you're interested, click here to register online or call WSU at 313-577-8032.

Additional Resources:

• Brown, "Water Privatization Can Help Detroit from Drowning in Debt," Michigan Privatization Report (Mackinac Center for Public Policy, 2001). 
• Wolfram, "Don't Waste Water Treatment Privatization Opportunities," Michigan Privatization Report (Mackinac Center for Public Policy, 2001).
• "The Fiscal Condition of the City of Detroit," Citizens Research Council, April, 2010, p. 60 [discussed here]

For more about DWSD Update, click here.

Board of Water Commissioners, Hearing Committee to Conduct Responsible Vendor Hearings

The Board of Water Commissioners has scheduled a Special Meeting on March 7, 2012 at 1:00 p.m. to authorize a Hearing Committee to review the status of three contractors as responsible vendors under the DWSD Suspension and Debarment Policy adopted on January 25, 2012.

According to the Agenda for the Special Meeting published earlier today (here), the following contractors are scheduled to participate in a responsible vendor hearing: 

• Inland Waters Pollution Control, Inc.
• DLZ Laboratories, Inc.
• L. D'Agostini and Sons, Inc. 

Based on statements made at prior Water Board meetings, tomorrow's Responsible Vendor Hearings will be open to the public.

The Hearing Committee will consist of Commissioners Thrower, Kenoyer and Williams.

The Board of Water Commissioners have also scheduled a Special Meeting on March 14, 2012 at 1:00 p.m. to receive, discuss and (presumably) act upon the recommendations of the Hearing Committee.

For more about DWSD Update, click here. 

DWSD Cancels Biosolids RFP, Plans March 15-16, 2012 Biosolids Management Symposium (UPDATED)

Following her announcement (here) that DWSD was terminating its RFP for Contract PC-781, Director Sue McCormick has outlined plans for a 2-day Biosolids Management Symposium to be held on March 15-16th. The objective of this event is to "gather industry information to optimize the re-procurement of PC-781."

DWSD plans to invite two participants each from large wastewater utilities, academia,  national industry experts, and local representatives from the Michigan Department of Environmental Quality (MDEQ) and the Board of Water Commissioners. DWSD plans to invite several (wholesale) customer representatives, as identified by the Technical Advisory Committee (TAC), to participate as well. 

DWSD will be represented by at least four staff members including (presumably), Director McCormick.  The teams who submitted proposals last August, and any new teams or prospective bidders, would also be invited to attend. 

Among the subjects to be covered:

• Overview of DWSD WWTP processes, history, current conditions, regulatory compliance history
• Plant tour
• Overview of DWSD biosolids production history, needs and objectives for biosolids management
• Identification of technologies that may be appropriate for DWSD's needs
• Issues in contracting for biosolids management services
• Risks and risk mitigation strategies 

The symposium will be held at a hotel (TBD) near Metro Airport.

Update (2/27): I understand now that this symposium may not be a public event. If things change, I'll pass along any new information.


For more about DWSD Update, click here.

Weiss Construction Nets More Than $59 Million in New Contracts, Change Order Work with DWSD

Weiss Construction Co., LLC (Detroit) was awarded two contracts, and a change order  totaling more than $59 million. These contracts were approved by the Board of Water Commissioners earlier this afternoon at its regularly scheduled meeting. 

• PC-783 (U/G Electrical Ductbank Repair) . . . $27,620,000
• PC-787 (Replacement of Belt Filter Presses) . . .  $30,216,000

But wait, there's more . . . 

Weiss Construction also received approval for a not-to-exceed (NTE) $1.25 million change order to Contract PC-776 ("RAS Pumps, Influent Mixed Liquor System and MCC Improvement for Secondary Clarifiers"). Based on questions by the Board and answers by Assistant Director Sam Smalley and Deputy Director Darryl Latimer, this change order is to replenish a provisional allowance that was spent by DWSD on other, unrelated contracts for sudden, unexpected needs.   

In other contract news:

• The Board removed from the Agenda a proposed $14,650,467 contract for Detroit Radio Team for design-build services related to DWS-882, “SCADA Radio Network Upgrades.” Detroit Radio Team is a joint venture between Motor City Electric and PCI. The Chair did not explain why this contract was removed from the Agenda.  
• The Board also removed from the Agenda a $500,000 legal services contract (LS-1530) for Miller Canfield. Again, no explanation.
• The Board did approve a $298,386 increase, and a 24 month extension for Camp Dresser & McKee (CDM) for Contract CS-1364 ("Oakwood CSO Control Facility and Pump Station").
• The Board also approved a $5,724,850 design/build contract with Detroit Electrical Services, LLC for Contract No. DWS-881 ("Data Center Reliability/Availability Improvements") 
• Regarding the Biosolids contract (PC-781), the Director indicated during her oral report that DWSD is going to cancel this RFP. The Department plans to host a symposium in Detroit and will discuss various ideas/technologies with experts and then come out with a more comprehensive and well-defined RFP.  The Director encouraged Board members to participate in the symposium (either through committees or assignment or personally). Stay tuned for more details (when and where) 

For more about DWSD Update, click here.


Clarification (2/23): Several of you wrote me asking whether I was suggesting that the contracts awarded to Weiss Construction were excessive or unnecessary (ie., "pork").  No, that's not the case.  I was in the BFP Complex II a couple of years ago, and can attest first hand to the need for new belt filter presses. The picture of bacon was a reference to "bringing home the bacon" and intended to be congratulatory.   


Photo credit (here)

Walsh Construction Awarded $92.9 Million Contract for Ann Arbor WWTP Project

Earlier this evening, the Ann Arbor City Council tentatively approved a $92,929,000 contract to Walsh Construction for major renovations to the City of Ann Arbor's wastewater treatment plant (WWTP).  As we reported (here), Walsh Construction was third bidder at the time this project was bid on January 11, 2012.

After the bid opening, the City and its engineering consultant, Malcolm Pirnie, met with the three low bidders and solicited additional information about their bids and prior experience building comparable projects.  

At tonight's meeting, officials cited a lack of comparable wastewater construction experience by the low and second bidders. City officials discounted Granger's recently-completed $70 million D.K. Shine Water Treatment Plant expansion for Wyoming Twp. because it wasn't a wastewater project and only had one tie-in at the end of the project, rather than the multiple tie-ins that will be required over the course of the Ann Arbor WWTP project.

Tentative approval of Walsh Construction's contract is required for the City of Ann Arbor to obtain a low interest loan from the State Revolving Fund (SRF) program administered by the Michigan Department of Environmental Quality (MDEQ) to finance construction.

For more about DWSD Update, click here.  

Flint Emergency Manager Considers Sale of City Sewer and Water System (UPDATED)

The Flint Journal is reporting (here) that Michael Brown, the City of Flint's Emergency Manager, is considering the sale of Flint's water and sewer system. Shaky finances and the need to raise cash are part of the reason Brown is considering "all options."

The sale of Flint's water and sewer system would complicate plans by the Karegnondi Water Authority, which has urged Flint to break ties with the Detroit Water and Sewerage Department. KWA officials recently have been lobbying Flint's Emergency Manager to join the new authority.

No word about who might be interested in buying Flint's water and sewer system or who will foot the bill for the $61.5 million worth of upgrades to Flint's water treatment plant that will be required, according to Rowe Engineering (here and here); KWA would only be furnishing Flint with raw water, not the finished water currently supplied by DWSD.

Want more information about the Karegnondi Water Authority?

• Karegnondi Water Authority (Homepage)
• Karegnondi Water Authority (Wikipedia)
• DWSD Update (Prior Posts)

Update (2/3): The Flint Journal reports (here) that the Flint Emergency Manager is also considering interim use of the Flint River until the new KWA pipeline is completed. Still no word as to how Flint would finance the necessary upgrades to its water treatment plant.

For more about DWSD Update, click here. 

Tarolyn Buckles to Serve as Technical Advisor to Detroit Board of Water Commissioners

On January 25, 2012, the Board of Water Commissioners hired Tarolyn Buckles to serve as the Board's Technical Advisor.  The Board approved a one-year, $100,000 contract with Ms. Buckles.

Tarolyn Buckles - Technical Advisor

Ms. Buckles is President and CEO of Onyx Enterprise, Inc., a firm providing engineering consulting, project management, and construction management services.  She previously served as Project Manager for METCO Services, and Project Engineer and Diversity Manager for Arcadis. Ms. Buckles earned a Bachelor of Science in Civil and Structural Engineering from the University of Michigan in 1993.

Ms. Buckles joins Butler Benton, who was hired as the Board's Financial Advisor in October, 2011.  Ms. Buckles and Mr. Benton will assist the Board in reviewing rate setting, capital projects and other financial and operational matters. 

Staff positions were created under the February 11, 2011 Order, and formalized under Article VII of the Board's Amended By-Laws. A third staff position, not yet filled, will advise the Board on legal matters.

For more about DWSD Update, click here.  

Detroit Water Board Adopts Suspension and Debarment Policy, Clarifies Earlier Actions (UPDATED)

The Detroit Board of Water Commissioners today approved a resolution rescinding ab initio the suspension resolution it adopted on December 21, 2011 and amended its January 11, 2012 resolution, which lifted suspensions as to 5 contractors, to cover all contractors originally suspended on December 21, 2011. The Board then took up and adopted a formal Suspension and Debarment Policy.

DWSD's new Suspension and Debarment Policy starts by declaring that the Department will only do business with responsible vendors (contractors). The policy then spells out the criteria for determining who is a responsible contractor and establishes notice and hearing procedures (due process) for the Water Board to follow before it suspends or debars a contractor.

The new Suspension and Debarment Policy(*) addresses criticism of the Board's earlier actions, which suspended contractors without prior notice and without providing the affected contractors with an opportunity to review and respond to charges against them. (Comment: These are due process requirements that should have been followed in the first instance. The Board took the right steps today by stopping, backing up, and putting things in the right order.)  

With the new policy in hand, Chairperson James Fausone announced: (1) that the Board would conduct "Responsible Bidder Hearings" for (some of) the previously suspended contractors (I'll update this post when I confirm the exact list of names), (2) that the Ad Hoc Hearing Committee would consist of Commissioners Thrower, Kenoyer and Williams), and (3) that "Responsible Bidder Hearings" would be conducted on the following dates: 

• Friday, February 10, 2012 (p.m.)
• Wednesday, February 15, 2012 (a.m.)

Hearings will be subject to the Open Meetings Act.

Then, there will be a Special Water Board Meeting on February 15, 2012 at 2:00 p.m. to consider the Hearing Committee's findings and recommendations. Some of the same contractors named in the previous resolutions could find themselves suspended again.

Due perhaps to the planned consideration and adoption of the Suspension and Debarment Policy(**), the Chairperson announced at the start of today's Board Meeting that resolutions to approve 3 design-build and construction contracts were being pulled from the Agenda -- PC-787 (Belt Filter Presses), PC-783 (Underground Electrical Ductbank Repair), and DWS-862A (Department-Wide Security Upgrades).  

The Board did approve a contract with Metco Services for CS-1498 (Aeration System Improvements) and a one-year contract with Onyx Enterprises, Inc. (Tarolyn Buckles) to provide technical advisory services to the Water Board. Ms. Buckles replaces Jim Ridgway, who apparently could not come to terms with the Board on a contract.

* Copies of the new DWSD Suspension and Debarment Policy have been posted here. were not immediately available, pending the addition of a small change requested by one of the Commissioners, but it should be posted on the Department's home page within a few days.

** There was no reason given publicly for pulling these contracts from the Agenda, and only 1 of the 3 contractors, Lakeshore Engineering Services, is caught up in the on-again, off-again suspension saga. The Chairperson gave some indication at the end of today's meeting, however, that these 3 contracts would return to the Agenda at the Regular Water Board Meeting on February 22, 2012. 

For more information about DWSD Update, click here.

Lakeshore Engineering Submits Low Bid on City of Ann Arbor WWTP Project (UPDATED)

Last Wednesday, January 11, 2012, Lakeshore Engineering Services submitted the low bid to the City of Ann Arbor for a project known as “WWTP Facilities (Renovations) Phase II.”

1. Lakeshore Engineering - - - $83,302,048
2. Granger Construction - - - - $89,990,000
3. Walsh Construction - - - - - $92,929,000*
4. Walbridge Aldinger - - - - - -$95,380,441
5. Colasanti Construction - - - $99,990,000
6. Barton Malow - - - - - - - -  $102,884,000

Renovations to the Ann Arbor WWTP include demolition and reconstruction of the existing West Plant structures and facilities and the rehabilitation of the East Plant.

Construction includes, but is not limited to: primary clarifiers, primary building, aeration tanks, blower building, central electrical building, ferric buildings, secondary clarifiers, new administration building, renovation of existing maintenance building, environmental abatement, new storm water system, removal of the existing 4800 V electrical distribution system and replacement with a new 13.2 KV electrical distribution system, and the rehabilitation of the east primary clarifiers, east aeration tanks, east blower building (including new blowers) and east secondary clarifiers.

Work also includes depressurizing an artesian groundwater condition, groundwater dewatering, geotechnical instrumentation, construction sequencing, earth retention systems, concrete pier foundations, concrete and gate repairs, earthen embankment improvements, and utility relocation and replacement.
 
(Comment: We're taking a slight detour by reporting on this project, but the Ann Arbor WWTP is a significant project and most of the bidders are regulars on DWSD projects. The Project is scheduled to take 5 years to complete. Sharp-eyed observers will also note the photo used in the title block for DWSD Update is in fact a photo of the Ann Arbor WWTP. (Hat-tip: NS) I tried using several photos of DWSD's wastewater treatment plant, but all of them ended up obscuring the title text. So, I confess to taking a bit of editorial license. If you have a good photo from 9300 W. Jefferson, please send it along and I'll give it another try.)

Additional Information:

• “Ann Arbor City Council gives initial approval to utility rate increases, budgets for wastewater upgrades,” AnnArbor.com, June 8, 2011.

*Update (2/6): AnnArbor.com is reporting (here) that WWTP Staff and the City's Consulting Engineer, Malcolm Pirnie, will recommend tonight to the City Council that Walsh Construction be awarded the contract for this project for $92,929,000. A copy of the Resolution is here. 

For more about DWSD Update, click here.

Detroit Biosolids Contract to be Re-Opened to allow Changes, New Proposers

During the Director's Oral Report at the January 11, 2012 Special Water Board Meeting, DWSD Director Sue McCormick reported that the Department has decided to reopen the submittal process for the biosolids contract (PC-781) for a period of 45 days, beginning January 18, 2012. 

The Director indicated that DWSD would allow new proposals, corrections to existing proposals, and permit teams to change or substitute their lineup based on recent decisions of the Water Board.

The Department will receive new and revised proposals by March 5, 2012. Existing teams will be contacted by the Department.  Look for additional details on DWSD's procurement page (here).

The Director also reported that DWSD will expand the evaluation committee to include representative from Wayne, Oakland and Macomb Counties. These representatives, who were not disclosed, will be required to sign confidentiality agreements and not have any connection to any of the proposing teams.  

For more about DWSD Update, click here.     

Water Board Lifts Contractor Suspensions, then Authorizes Lawsuit Against Most of the Contractors (UPDATED)

At a Special Board Meeting on January 11, 2012, the Detroit Board of Water Commissioners voted to lift the suspension resolution it passed just three weeks ago on 5 of the 13 cited contractors. The following contractors are no longer suspended, but the resolution included the caveat -- "pending further action of the Board": 

• Lakeshore Engineering Services, Inc.
• Inland Waters Pollution Control, Inc.
• DLZ Laboratories, Inc., 
• D'Agostini & Sons, Inc.,  and 
• Walbridge Aldinger Company, Inc. 

The Water Board then (a) approved an extension of its attorney's legal services contract, and (b) authorized Miller Canfield to intervene in the federal lawsuit initiated by the Macomb Interceptor Drain Drainage District in July, 2011 (the "15 Mile Sewer Repair" case)  and  file a lawsuit against approximately 17 Defendants, including 4 of the 5 contractors whose suspensions were just lifted (D'Agostini & Sons, Inc. is excluded).  

The Board also directed its Legal Committee to work with Miller Canfield to draft a (new) suspension policy for presentation to the Board at its next regular meeting on January 25, 2012.

Then the Board voted to accept (for consideration) a bid protest filed by Walbridge Aldinger, on Contract PC-786, which the Board had approved for award to Walsh Construction on December 21, 2011. The Board voted to conduct a public hearing to determine whether Walbridge Aldinger is a "responsible bidder."  

(Does this mean the Board might rescind its award to Walsh if it finds Walbridge to be a responsible bidder? And what about the policy of not contracting with persons you're suing? Why conduct such a hearing if you've already directed your legal counsel to sue Walbridge and the other contractors for racketeering and civil conspiracy?) 

(Confused? You're not alone!)

Additional Resources:

• Detroit water department seeks $60 million in suit tied to 'Kilpatrick enterprise' contractors, Crain's Detroit Business, January 11, 2012.

For more about DWSD Update, click here. 

 

Water Board Schedules Special Meeting - January 11, 2012 at 1:00 p.m.

The Detroit Board of Water Commissioners has scheduled a Special Meeting for Wednesday, January 11, 2012 at 1:00 p.m.  There is no published Agenda yet for this meeting, but* Given the significant decisions taken at the last Special Meeting on December 21, 2011, attendance on Wednesday is highly recommended.

Comment: If I were to speculate, I think the Board might use this occasion to adopt the administrative rules to be followed in the suspension appeals. The Board's suspension resolution adopted on December 21, 2011 mentions an ad hoc committee to review appeals, but did not set forth any procedure or rules to be followed. At least one contractor has already filed a lawsuit contesting the Board's decision. If the Board plans to argue that the suspended contractors have to first exhaust their administrative remedies before contesting the matter in court, a standard defense under these circumstances, they'd better articulate those remedies soon. The Hearing on L. D'Agostini & Son's Motion for Temporary Restraining Order and Preliminary Injunction has been scheduled for Wednesday, January 11, 2012 at 2:45 p.m. before the Hon. John Corbett O'Meara.  

*Update (1/10): The Agenda for the January 11, 2012 Special Meeting was published earlier today (here). 

For more about DWSD Update, click here.

Suspended Contractor Files Lawsuit Challenging Detroit Water Board's Suspension Policy (UPDATED)

Earlier today, L. D'Agostini & Sons, one of the 13 contractors suspended for 3 years by the Detroit Water Board on December 21, 2011, filed a federal lawsuit contesting the Board's decision. 

The lawsuit alleges that the Water Board's actions violated the contractor's due process rights and violated its rights under 42 USC 1983, a federal civil rights statute.  

In addition, L. D'Agostini & Sons (LDS) has also filed a Motion for a Temporary Restraining Order (TRO) and Preliminary Injunction. The contractor requests that the Court (1) enjoin the City of Detroit from enforcing the debarment order; and (2) order that the debarment as to LDS be expunged. No hearing date has been set on this motion.*

2012-01-05.L D'Agostini v City of Detroit - Complaint

Additional Related Articles:

• Water Board to Review Suspensions, Crain's Detroit Business, January 1, 2012
• Macomb contractor sues Detroit over bidding ban, Detroit News, January 5, 2012
• Construction firm sues over ban, Detroit Free Press, January 5, 2012
• D'Agostini & Sons opts for "Damned if you do. . .", Crain's Detroit Business, January 6, 2012
• Contractor's Decry Suspensions by Detroit Water and Sewerage Dept., Engineering News-Record (ENR), January 16, 2012  

For more about DWSD Update, click here. 

*Update (1/9) (1/10) (1/19): The Hearing on L. D'Agostini & Son's Motion for Temporary Restraining Order and Preliminary Injunction has been re-scheduled scheduled for Wednesday, January 11, 2012 at 2:45 p.m. January 18, 2012 at 2:00 p.m. February 2, 2012 at 1:45 p.m. before the Hon. John Corbett O'Meara.   

CORRECTION to List of Suspended Contractors

DWSD Update confirmed earlier this morning that one of the contractors we originally included in the list of contractors affected by the Water Board's December 21, 2011  suspension resolution -- D'Alessandro Contracting Group -- was NOT included in the final resolution that was voted upon by the Water Board.  D'Alessandro Contracting Group is NOT suspended  and NOT barred from being awarded contracts with the Detroit Water and Sewerage Department. Crain's Detroit Business has also noted this correction (here).

Detroit Water Board Declares 13 Bidders Non-Responsible, Suspends them from Bidding DWSD Work for 3 Years (UPDATED)

Earlier this afternoon, the City of Detroit, Board of Water Commissioners conducted a Special Meeting  and adopted a resolution declaring 14 13* contractors to be non-responsible bidders and suspended them from bidding DWSD work for a period of 3 years. 

The contractors suspended from bidding on DWSD contracts until December 31, 2014 are among the contractors cited in the federal indictments unsealed last December against disgraced-former Mayor Kwame Kilpatrick, his father, Bernard Kilpatrick, contractor Bobby Ferguson, and former DWSD Director Victor Mercado.  

The contractors affected by the Water Board's action today include the following: 

• A&F Environmental
• A&H Contracting, Inc.
• D'Agostini & Sons, Inc. 
• *
• DLZ Laboratories, Inc.
• E&T Trucking
• Ferguson Enterprises, Inc.
• Inland Waters Pollution Control, Inc.
• Inland Management and Inland Rehabilitation Pipe Co.
• Johnson Construction Services a/k/a Johnson Consulting Services
• Lakeshore Engineering Services, Inc.
• Maestro Associates, LLC
• Walbridge Aldinger Company, Inc.
• Xcel Construction Services, Inc.

The Water Board included the following administrative appeal procedures as part of its resolution:

The Board shall reconsider the parties and suspension period upon receiving additional information from the U.S. Attorney's office. A company may appeal the application of this policy to an ad hoc committee of the BOWC, appointed by the Chair, which shall receive evidence and information and report to the entire Board. The suspension can only be modified by motion of the Board. 

Following adoption of the suspension resolution, the Board proceeded to approve a $13,117,000 contract for the Rouge River Outfall No. (RRO-2), Contract PC-786, with the third bidder, Walsh Construction, bypassing Walbridge Aldinger, who was second in line for the contract after the low bidder, Lakeshore Engineering, retracted their low bid.

Comment: The Water Board's actions today have enormous implications for the affected companies, many of which perform federal contracts, and a huge impact on the local contracting community.  The Board's actions, which the Chair reported were supported by Oakland, Macomb and Wayne Counties, will be felt well beyond DWSD. Two of the named contractors are among teams who proposed on the bio-solids contract (PC-781). If their suspensions are upheld, it would surely jeopardize their proposals.

Update (12/22): Crain's Detroit Business has an article (here), which quotes several of the Water Board Commissioners and adds further insight into the reasons for yesterday's suspension resolution.  

Update (12/23): DWSD Update confirmed earlier this morning that D'Alessandro Contracting Group was NOT among the contractors included in the final suspension resolution adopted by the Board of Water Commissioners on Wednesday. They were included in the proposed resolution, outlined in the Board Agenda, but NOT included in the actual resolution, as read into the record by Commissioner Fred Barnes, and NOT included in the final vote. To be clear: D'Alessandro Contracting Group has NOT been suspended nor barred from receiving DWSD contracts.  

For more about DWSD Update, click here.

PC-783, Detroit Contracting (DCI) Submits Low Bid on Electrical Ductbank Repair Project

Detroit Contracting, Inc. (DCI) submitted the low bid earlier this afternoon on the project known as DWSD Contract PC-783, "Underground Electrical Ductbank Repair and EB-1, EB-2 and EB-10 Primary Service Improvements at WWTP and Replacement of Selected Roads at WWTP."

1.   Detroit Contracting - - - - - - $26,921,543

2.  Lakeshore Engineering - - -  $27,107,427

3.  Weiss Construction - - - - - $27,620,000*

4.  Walbridge - - - - - - - - - - - - $28,488,000

5.  Motor City Electric - - - - - - $29,839,970

The electrical portion of the project consists of installation of a new 120KV electrical feeder from DTE, replacement and addition of transformers, switchgears, MCC's and motor starter line ups. In addition, other electrical work including lighting, ground and lightning protection for buildings EB-1, EB-2 and EB-10.

For more about DWSD Update, click here. 

*Update (2/22): Weiss Construction was awarded this contract by the Water Board on February 22, 2012 (here). 

Second Verse, Same as the First: Judge Cox Denies Second AFSCME Motion to Intervene

For the second time in less than a month, Judge Sean Cox has denied a local union's motion to intervene in the 34 year old lawsuit against the City of Detroit, Water and Sewerage Department. 

This time, Judge Cox considered and denied a Motion to Intervene by AFSCME Local 207 and the Senior Accountants, Analysts and Appraisers Association (SAAA). The reasons cited by the Court were virtually the same ones Judge Cox cited when he denied AFSCME Council 25's motion on November 18, 2011: Local 207's motion was untimely.

2011-12-13.Opinion and Order Denying AFSCME Local 207 Motion to Intervene

For more about DWSD Update, click here.

40th Anniversary of Tunnel Explosion Marked in Fort Gratiot

On Sunday, December 11, 2011, some 80 people gathered at the Fort Gratiot County Park to mark the 40th Anniversary of the Port Huron (Detroit) "water tunnel explosion," an accident that claimed the lives of 22 tunnel workers who died in a methane gas explosion.

The men were working at the time on a intake tunnel for the Port Huron Water Treatment Plant, then being constructed by the Detroit Water and Sewerage Department. The accident still ranks as one of Michigan's worst industrial accidents.

Additional resources:

• Daisy, Michael. “Disaster under Lake Huron.” Michigan History Magazine 89.2 (2005): 46+. [Gale Document No. GALE A163097965]

For more about DWSD Update, click here.

City of Detroit Seeks 10 Percent Cut from Suppliers, Including DWSD Contractors

Detroit Mayor Dave Bing is seeking a 10 percent price reduction from City of Detroit suppliers effective January 1, 2012. Crain's Detroit Business reports today that the Mayor's request extends to companies that do business with the Detroit Water and Sewerage Department.

In a December 2, 2011 letter, which was received by suppliers last week, Mayor Bing writes:

The financial participation of all stakeholders, including suppliers, has been identified as a key component in this overall cost reduction strategy. Given the importance of the supplier community, the City of Detroit will be contacting all suppliers to begin an earnest dialogue around the City's financial position and its implications.

2011-12-02.City of Detroit - Letter to Suppliers Re 10 Percent Price Reduction

Update (12/13): The Detroit Free Press (here) and Crain's Detroit Business (here) are reporting that the City of Detroit has already stopped paying some of its vendors.  I've not heard or read of anything similar happening on DWSD projects, however.  Have you?

Update (12/14): The Chair of the Board of Water Commissioners, James Fausone, indicated at today's regular Water Board Meeting that the 10 percent cut requested by Mayor Bing would be discussed further at a Special Meeting of the Water Board on December 21, 2011. 

For more about DWSD Update, click here. 

Emergency Financial Manager, Appointment Would Trigger "Credit Event" and Hit DWSD Hard

Governor Snyder's announcement last Friday that the State of Michigan was initiating a review of the City of Detroit's finances, the first step in the appointment of an Emergency Financial Manager (EFM), has triggered concerns about the financial impact such an appointment would have on the Detroit Water and Sewerage Department.

Following the Governor's announcement, The Bond Buyer, a national trade publication that covers the municipal bond industry, warned (here) that DWSD could face "huge fees" triggered by the appointment of an EFM, which would be a "credit event" under insurance policies that accompany $1.6 billion worth of water bonds.

[T]he appointment of an emergency manager . . . would trigger termination events on [credit default] swaps that hedge $948 million of pension obligation certificates issued in 2006 and $1.6 billion of water bonds. Detroit in early 2009 narrowly avoided a $400 million termination fee tied to the pension certificates after it was hit with a downgrade that prompted a termination event. Local officials negotiated for months with the two counterparties to achieve an amended agreement that avoided the payment. If the state appoints an emergency manager, Detroit would face the same problem again.

* * * 

Last April, Fitch Ratings downgraded the city's $2.1 billion of water bonds, citing in part an extensive derivative program at the Detroit Water and Sewerage Department that hedges $1.6 billion of the debt. "In recent years the negative fair value of the department's swaps have risen, increasing the termination risk associated with the swaps," Fitch's Doug Scott wrote. "Should the department be required to post collateral, it would negatively affect the department's financial profile to some extent."

The city is planning to come to market with a water bond refunding to shed the swaps and avoid termination payments. The price tag of the termination fees remains uncertain, but it would likely be in the hundreds of millions. At the end of 2010, the negative valuation of the water and sewer bond swaps was $165 million. (emphasis added)

Cite: "Detroit May Face Huge Termination Fees for Swaps." The Bond Buyer 2 Dec. 2011

The issue (and risk) of termination fees is discussed in the financial notes section of DWSD's 2010 Water Fund Financial Statement (here) beginning at p. 25.

Comment: I profess no expertise in this area, but this report seems rather alarming to me. At a minimum, faced with penalties in the "hundreds of millions" range, DWSD would have to delay or defer a number of significant capital improvement projects. If someone with a background in public finance or municipal bonds (or credit default swaps) can shed light on this issue, please comment. Your input would be appreciated.  

Update (12/6): The Detroit News reports this morning (here) that "The [State of Michigan] has yet to approve a deficit elimination plan Detroit submitted in July, a delay that puts a hold on the sale of about $900 million in bonds for capital improvements of the city water-sewer system."

Additional Resources:

• “Moody’s: Detroit Ratings On Review For Cut On Possible State Takeover,” Wall Street Journal, December 7, 2011 (subscription required)
• “Detroit on Review by Moody’s Will Pay $211 Million to Cut Swaps,”  Bloomberg Business Week, December 8, 2011 
• “Moody’s Puts Detroit GO, Water Debt on Negative Watch,” The Bond Buyer, December 8, 2011 
  

For more about DWSD Update, click here.