On
December 7, 2015, Ric-Man Construction submitted the low bid for
the
project known as "36-Inch Water Main in Telegraph Road, Cherry Hill
Avenue to Warren Avenue," DWSD Contract WS-684A. This was a rebid of a project originally bid on May 5, 2015 as WS-684.
L. D'Agostini & Sons . . . . . . . . . .$9,711,728
Dunigan Bros. . . . . . . . . . . . . $10,935,855
Lawrence M. Clarke, Inc. . . . $10,957,438
The
Scope of Work for Contract WS-684A includes furnishing and installing
10,526 lineal feet of 36" water main, approximately 2 miles, together
about 300 feet of 24" and 164 feet of 12" water main.
Update (12/9): This post was updated to correct the name of the low bidder, and to correct the as-read bid amount for Dunigan Bros.
On November 30, 2015, the City of Detroit began filing claims against contractors and other vendors who were received payments in the 90 days leading up to the City's July 18, 2013 bankruptcy filing. Crain's first reported this story here.
When the dust settled last Friday, the filing deadline was December 5th, over 185 preference claims had been filed, including almost 40 against DWSD contractors, vendors, and professional service providers:
Alexander Chemical Corp.
Applied Science, Inc.
Bankston Construction
Bill Johnson Group
Camp Dresser & McKee
Carmeuse Lime, Inc.
CDM Michigan, Inc.
Clow Water Systems Company
Colasanti Corporation
DA Central, Inc.
DeMaria Building Company
Detroit Advanced Technology Application Network (DataNET)
Detroit Radio Team
EJ USA, Inc.
Federal Pipe & Supply Inc.
Hercules & Hercules, Inc.
Hesco Hamlett Engineering Sales Company
Hinshon Environmental Consulting, Inc.
Imperial Construction Co.
Inland Waters Pollution Control Inc.
L. D'Agostini & Sons, Inc.
Lakeshore Engineering Services, Inc.
Macomb Pipe & Supply
Metco Services, Inc.
Motor City Electric Technologies, Inc.
Motor City Pipe & Supply Co.
New England Fertilizer Company (NEFCO)
North-West Trading Co.
Project Innovations
PVS Technologies, Inc.
Tetra Tech MPS
Tooles Contracting Group, LLC
Trinity Environmental Solutions, LLC
Tucker Young Jackson Tull
Wade Trim Associates, Inc.
Waste Management of Michigan, Inc.
Z Contractors, Inc.
Many of these contractors and vendors are quite surprised, outraged actually, at having been sued to return payments when DWSD explicitly assured many of them in 2013 when it issued so-called "essential vendor" letters which represented in part:
"DWSD intends to pay all amounts owed to you, even if such amounts relate to your supply of goods or services to DWSD prior to the City of Detroit's bankruptcy filing."
The City's actions, however, are common to many bankruptcy proceedings where the trustee of a debtor, asserts its power under Section 547(b) of the Bankruptcy Code to recapture or claw back payments made by the debtor during the 90 days prior to filing of the bankruptcy petition.
The burden of establishing that a payment is a preference, and subject to repayment, initially falls on the trustee. The trustee must show that the payment was: (1) to or for the benefit of a creditor; (2) for or on account of an antecedent debt owed by the debtor before such transfer was made; (3) made while the debtor was insolvent; (4) made on or within 90 days before the date of the filing of the petition; (5) that enables such creditor to receive more than such creditor would receive if— (A) there was a liquidation of the of the debtor's estate under Chapter 7.
Comment: What's unclear about the City's actions against DWSD contractors and vendors is what affect, if any, the City's post-bankruptcy assurances ("essential vendor" letters) will have, together with other representations that DWSD has made over the years that it operated as "an enterprise fund department" and did not receive funds from the City's general fund. If projects were funded by bonds sold and earmarked for specific projects, can the City claim payments made were "preferences"?
In addition, many of the projects were undertaken by DWSD in order tocomply with federal regulations and its own federal (NDPES) discharge permit.
What is clear, however, is that many DWSD contractors now feel betrayed by the City's actions. There are more than a few multi-million dollar preference claims on the list above, and I fully expect that these claims will be litigated, and appealed if necessary. We'll keep monitoring developments in the City's bankruptcy proceeding.
On November 5, 2015, Lakeshore Global Corporation
submitted a low bid of $7,383,786 for the project known as "Water Main Replacement, Various Locations in the City of Detroit," DWSD Contract WS-693.
There were only three (3) bidders on this project. The as-read bids received by DWSD are as follows:
Lakeshore Global Corporation . . . . $ 7,383,786
Major Cement Company . . . . . . . . . $10,908,851
Inland Waters Pollution Control . . $11,220,902
All three of these contractors are Detroit Based Businesses.
On November 4, 2015, the Detroit Water and Sewerage Department filed a Class Action Complaint in U.S. District Court in New Jersey against General Chemical Corporation and Frank Reichl, a former vice president of sales and marketing alleging price-fixing for aluminum sulfate (alum), a key chemical used in the water treatment process.
DWSD's lawsuit alleges that between January 1, 1997 through at least July 31, 2010, Defendants General Chemical Corporation and General Chemical Performance Products, LLC (Genchem) and Frank Reichl participated in a price-fixing and bid-rigging conspiracy involving the supply of alum.
Alum is used in the water treatment process to remove fine particles from raw water. Alum causes fine particles to stick together (coagulate), which allows for settlement and removal as alum sludge.
Comment: One stark example of how General Chemical's actions impacted DWSD can be seen in the Minutes of the April 27, 2011 Water Board Meeting, during which the Board approved a new three year alum contract with PVS Nolwood Chemical for $13,440,000. DWSD had previously contracted with General Chemical to supply liquid alum.
DWSD requested bids from three alum suppliers. And although PVS was the only supplier to submit a bid, usually not a good sign, its quoted price to supply alum was $280 per ton. Under the previous contract with General Chemical, DWSD had been paying $404 per ton! PVS Nolwood Chemical's price was 30% less than General Chemical's price.
And in April, 2015, when the alum supply contract came up for bids again, DWSD received 4 bids. Chemtrade, a Canadian company which acquired General Chemical in December, 2013, submitted the low bid of $184 per ton! That's less than half what General Chemical had charged the Department in 2011.
At its April 22, 2015 Regular Meeting, the Board of Water Commissioners approved a two-year contract with Chemtrade for $3,668,960 (9,970 tons x $184) with two, one (1) year renewal options at the same unit price. See Minutes, Item 15-1019.
The only opposition to Ms. McCormick among the Board members was from Robert Daddow, who is the Oakland County representative on the GLWA. Mr. Daddow favored Randy Moore, an executive from American Water. Under the GLWA By-Laws, a minimum of 5 affirmative votes was required to approve the resolution approving Ms. McCormick's selection. The Board still must approve an employment agreement with Ms. McCormick.
The Great Lakes Water Authority Board of Directors met this afternoon at 4:00 p.m. to select a new CEO, but decided instead to cut the list of candidates down to two - Sue McCormick and Randy Moore - and postpone a final vote until Monday, October 19th at 1:30 p.m.
Ms. McCormick and Mr. Moore reportedly garnered the highest rankings among the four candidates, following a lengthy interview process on October 12th that ran more than 4 hours. So, the decision was made to cut the short list in half.
The decision to delay a final vote until next Monday was to give the Board enough time to receive and review complete background checks on the two finalists.
The GLWA Board meets in the 5th Floor Board Room in the Water Board Building at 735 Randolph.
The problems the Flint encountered with drawing water from the Flint River have ranged from taste, foul odor, and most recently, high levels of lead. The increase in lead levels is thought to be caused by corrosive elements in the Flint River. The finding of elevated lead levels in the blood of Flint children was the last straw, and compelled local and state leaders to support a return to DWSD. The issues concerning Flint's water problems are well documented in the FlintWaterStudy.org, which is a website published and maintained by Virginia Tech researchers who are involved in studying Flint's drinking water. The Flint Journal has also followed this issue very closely.
Flint's return to DWSD is expected to take 2 weeks to complete. However, this will only be a temporary measure as Flint is committed to joining the Karegnondi Water Authroty (KWA), which is still constructing its new 63 mile raw water intake pipe. KWA's pipeline project is slated for completion in mid-2016. Once completed, Flint will receive raw water from Lake Huron, which it still must process through its own water treatment plant. Water from DWSD is already purified potable (drinking) water.
Update (10/14): A copy of the water licensing agreement between the City of Flint and Genesee County Drain Commissioner can be found here. This agreement was required because after Flint terminated its contract with DWSD, it sold off a segment of water main to Genesee County.
On October 7, 2015, shortly after the Detroit Board of Water Commissioners approved a new Director and Deputy Director, the Board of Directors of the Great Lakes Water Authority (GLWA) held a public meeting and approved a short list of 4 candidates to fill the top position with the new Authority.
The GLWA Board will interview the 4 candidates in an open session on Monday, October 12, 2015 at 3:00 p.m. (Update: According the GLWA's Calendar - http://glwater.org/event/glwa-special-meeting-ceo-selection/ - the CEO interviews are scheduled for Tuesday, October 13th at 4:00 p.m.) The GLWA Board meets in the 5th Floor Board Room in the Water Board Building at 735 Randolph.
The GLWA Board is also expected to deliberate in open session and select a CEO candidate with whom it will engage in contract negotiations.
Comment: Other than Sue McCormick, who is currently serving as Interim-CEO, and served as Director of DWSD for the past 4 years, I don't know any of the other candidates. I have linked each candidate to their LinkedIn profile. If any of you have insights about the other three candidates, now is the time to speak up!
Earlier this morning, the Board of Water Commissioners approved the appointment of Gary Brown to serve as Director of the Detroit Water and Sewerage Department. Mr. Brown will replace Sue McCormick, who was appointed in November, 2011 to lead the Department.
Mr. Brown currently serves as Group Executive of Operations for the City of Detroit. He previously served on the Detroit City Council and was a member of the "Root Cause" Committee created by Judge Sean Cox in 2011.
The Board of Water Commissioners also confirmed the appointment of Palencia Mobley, P.E. to serve as Deputy Director and Chief Engineer. Ms. Mobley currently serves as Transition Manager for DWSD, a position she's held since December, 2014.
Prior to entering government service, Ms. Mobley worked as a Project Engineer for two private engineering firms -- Malcom Pirnie (now part of Arcadis) and Tetra Tech. Ms. Mobely has a B.S. in Chemical Engineering (Univ of Michigan, 2001), and a M.S. in Civil Engineering (Wayne State Univ, 2004). She is also a licensed professional engineer in the state of Michigan since 2006. Click here for Ms. Mobely's complete professional profile.
On September 29, 2015, Tooles Contracting Group submitted the low bid for the project known as "Miscellaneous Concrete Crack Repairs and Restoration at Lake Huron Water Treatment Plant," DWSD Contract LH-397.
The as-read bids are as follows:
Tooles Contracting Group, LLC . . . . $ 922,264
Detroit Contracting, Inc. . . . . . . . . . . $ 942,510
Comment: It may be due to the nature of the work for this project, but there are a number of new faces in the bid tab. That's good. Competition is a good thing. And in the case of Elgin Builders, a blast from the past. For more about DWSD Update, click here.
Update (6/8): At 8:37 a.m. this morning, the order entered on Friday extending Judge Cox's role as mediator was vacated by the Clerk of the Court. The order indicates that Friday's order was entered in error.
Without an extension, Judge Cox's appointment would have expired on June 14, 2015, which is the deadline for DWSD and the Great Lakes Water Authority to finalize and execute the terms of a long-term lease.
Under the contemplated lease agreements, the GLWA would operate and maintain DWSD's water and wastewater treatment facilities for 40 years in consideration of annual lease payments to the City of $50 million.
Under the terms of the Amended Plan of Adjustment submitted in the City's Chapter 9 bankruptcy, which created the Great Lakes Water Authority effective November 26, 2014, the new authority and the City of Detroit have 200 days to completion negotiations and execute the contemplated lease agreements. That deadline is June 14, 2015.
Comment: I have no inside information (which I couldn't share with you anyhow), but entry of last Friday's order, extending Judge Cox's tenure as mediator to the end of 2015, strongly suggests to me that the June 14, 2015 deadline to complete a deal on a long-term lease agreement is going to be extended. I don't know how you can finalize a deal if Macomb County is not part of the process. That makes no sense to me. If I were to guess, I would say the parties will ask (or have already asked) for a new deadline that goes to mid-October or early November. What do you think?
The money was donated by Miller Buckfire, a New York investment firm that help shepherd Detroit through its historic bankruptcy in 2013-14 and earned $22 million in fees.
According to CEO, Saunteel Jenkins, the donation will be used for THAW's Water Assistance Program, which will launch on June 1, 2015. The program will pay up to $2,500 per household for families that are subject to shut-off and have incomes at 200% of the federal poverty level. The new program will help about 1,000 families. News reports here indicate that Miller Buckfire's donation was part of a settlement it reached in December, 2014 with the City of Detroit, which had disputed its fees as part of the City's Chapter 9 bankruptcy proceeding. During mediation ordered by Judge Rhodes, Miller Buckfire reduced its fees from $28 to $22 million. Comment: I don't mean to diminish this significant contribution, but helping 1,000 families accounts for less than 5% of the households facing shut-off. There is nearly $49 million owed on delinquent accounts. There simply has to be a better long-term solution to the City's residential water needs.
On May 5, 2015, L. D'Agostini & Sons, Inc. submitted the low bid for the
project known as "36-Inch Water Main in Telegraph Road, Cherry Hill Avenue to Warren Avenue," DWSD Contract WS-684. LDS' bid was about 8.7% lower than the second
bidder.
The as-read bids are as follows:
L. D'Agostini & Sons . . . . . . $9,173,049
Tooles Contracting . . . . . . $10,046,819
Lawrence M. Clarke, Inc. . .$10,234,748
Ric-Man Construction. . . .$10,620,821
The
Scope of Work for Contract WS-684 includes furnishing and installing 10,526 lineal feet of 36" water main, approximately 2 miles, together about 300 feet of 24" and 164 feet of 12" water main.
Update (11/17): This project is being rebid on November 30, 2015 as Contract WS-684A.
On February 26, 2015, Imperial Construction submitted the low bid
for the project known as "Water System Improvements, Various Streets"
DWSD Contract WS-686. The as-read bids are as follows:
Imperial Construction . . . . . . .$7,547,121
Major Cement Company . . . . .
$7,894,134
Lakeshore Global
Corp. . . . . . $10,463,330
The scope of this project includes replacement of approximately 30,626 lineal feet of ductile iron water main and related fittings. Imperial Construction was low bidder in 2012 on a similar project, WS-682A.
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