Project manager's decision to award $21.4 million concrete bid to itself causes controversy
A $21.4 million contract has been awarded for the structural concrete portion of the South Fifth Avenue underground parking deck project in downtown Ann Arbor.
It's the largest sum of money any contractor will be paid as part of the publicly funded project being undertaken by the Ann Arbor Downtown Development Authority.
A passerby peers through a viewing hole overlooking the underground parking deck being built on South Fifth Avenue in downtown Ann Arbor. The Christman Co.'s decision to award a $21.4 million bid for the concrete work to its own subsidiary has caused controversy.
Steve Pepple | AnnArbor.com
Who's getting the work? The Christman Co., the construction manager hired by the DDA last fall, has awarded the bid to its own subsidiary company — even though it wasn't the lowest bidder.
Controversy over the decision erupted in the form of public outcry at a DDA board meeting last week. Representatives of Granger Construction Co. of Lansing spoke out against the Christman Co.'s decision to give the job to Christman Constructors Inc.
David Olson, vice president of Granger, said the process by which Christman overlooked Granger — which bid $526,000 less than Christman — and then jumped past the second-lowest bidder to itself was a convoluted "shell game" that raises questions about integrity.
"We've got a proven record of accomplishment of delivering these types of projects," Olson said, speaking publicly before the DDA's governing board. "This isn't about sour grapes. This is about making a public statement about doing the right thing."
DDA officials backed Christman and said they have no problem with the way the bids were handled.
Christman gave the DDA a guaranteed maximum price of $44.38 million for the project last November when it was hired. With that, the company assumed all financial risk in case the project came in at a higher cost. It also assumed the right to pick which subcontractors would work on the project, regardless of price.
By assuming the risk for any cost overruns, Christman naturally has an incentive to keep project costs down. Patrick Podges, the company's vice president, said Wednesday that bid prices have been favorable, and Christman expects to be able to return a $1 million contingency to the DDA to use however it sees fit.
Podges said he believes the integrity of the process by which Christman sought bids for the concrete package has not been compromised. He said Christman last month received six bids ranging from $21.5 to $25.5 million.
When the Christman Co. publicly opened bid packages for concrete work, the following results were reported.
Christman's bid was the third lowest at $22.025 million, beat by Colasanti Construction with $21.98 million and Granger with $21.499 million. All three companies were brought in for post-bid reviews, and Granger was ruled out for inexperience, Podges said.
"We disqualified the low-bidding contractor for nonconformance with bid documents relative to schedule and work plan and also their ability to demonstrate to us their understanding of the operational execution of the work," Podges said.
That left Christman and Colasanti. Podges said further analysis of the two bids — when taking into consideration "bid alternates" — revealed the price differential between the two firms was two-tenths of 1 percent, and Christman went with its own company. In the end, Podges said, Christman's price actually came down to $21.438 million, which was less than the original low bid.
In a letter to DDA Executive Director Susan Pollay last week, Glenn Granger, president of Granger Construction, called for a thorough investigation of the bidding process. He claimed Christman was able to "selectively choose a series of bid alternates" that cleverly resulted in its team being selected for the project.
"Surprisingly, the Christman Company ultimately awarded the work to their own subsidiary after cloistering themselves for three weeks and attempting to close off communications between the DDA and the other bidders," Granger wrote.
"Clearly, they coveted this work for their subsidiary. After being pressured to include an open bid involving the contractors listed above, Christman lost in an open, fair, transparent competitive process. Somewhere the process went astray as Christman proceeded to navigate an extremely questionable path in order to recommend their subsidiary to complete the work."
Pollay said the DDA lost any right to interfere with Christman's bid process when it accepted the firm's guaranteed maximum price. She noted it was only because one of the DDA board members asked for the concrete bids to be opened publicly that Christman even did that.
"I feel that the DDA, which is to say the public interests, are being met with this process," Pollay said. "I don't have concerns about it because I feel like the bids were examined and the proposals were reviewed in great detail. And I think it's actually a good thing that Christman is handling its own concrete."
Adrian Iraola, the DDA's project management consultant, also said he didn't fault Christman for going with its own subsidiary.
"If you were to award based on price, you may be not doing your job which is to ensure that the low bidder is able to perform," he said. "They're commissioned with ensuring the project can be built within the guaranteed maximum price and that the contractors are qualified to do the work, and they understand the scope of the work and they have the logistics to pull it together."
Glenn Granger said it took extraordinary effort for his company to prepare what should have been a winning bid. He said Granger has a strong record of delivering similar projects on time and under budget and that wasn't considered.Â
"None of Granger's references were consulted, and there was absolutely no indication that Granger's bid lacked a single project scope requirement," he said.
Steve Frederickson, president and chief operating officer of Christman, told DDA officials on Wednesday that a lot of discussion over the past few weeks about the award of the concrete package was based on assumptions and conjecture.
"The facts are that, in the bid documents, we described the complexity of this project," he said. "It's underground. It's cast-in-place concrete. You all know how hard this project is and the level of experience that's required to accomplish a feat such as that."
Frederickson went on to say Christman was clear in the bid documents about how it was going to award the project.
"It says throughout the bid documents ... that it was not based exclusively on price because we needed to know that we have a partner that was capable and qualified to do the job and put us in a position to be able to succeed as a partnership," he said.
Frederickson said Granger was disqualified unanimously at the post-bid review by the project's architect, the engineer, the Christman Co., and the DDA's project management consultant.
"They didn't comply with the requirements of the project," he said. "They did not display an understanding of the project to get us to the level of comfort we felt was necessary to be able to serve you and serve the project. Those are the facts."
Ryan J. Stanton covers government for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529.
Comments
Lokalisierung
Thu, Apr 15, 2010 : 5:50 p.m.
I don't know how this CANNOT be a conflict of interest. It's pretty much the definition.
abcdefg
Thu, Apr 15, 2010 : 1:04 p.m.
Seems like Christman needed a home for some of their concrete workers to avoid losing them in a lay off. I used to work for Granger and they have quite a history of success in cast-in-place concrete parking ramps all over the state. I'd be surprised if they didn't understand the project or weren't qualified. It certainly makes me think twice about spending any time or resources bidding on a Christman project. Certainly sounds shady to me. I wish I could have sat in on that post bid interview. What goes around, comes around. This isn't the first time a CM has done this and it won't be the last.
Matt
Wed, Apr 14, 2010 : 8:45 a.m.
Second-This bid had many "alternates". This allows the CM to play "well, can I get low, or closer, by shoosing the alternates in my favor". THIS WAS DONE, although it still did not get the CM company low. Third-They threw out the low bidder as not qualified. Strange it was only let out to a slelect list of only a few of "Pre-qualifed bidders". Fourth-There was no representive from the owner at the "pre-bid meeting". That never happens for a job this size or complex. I can go on and on, but you get the picture of what was done....Has a real bad smell!!!
Matt
Wed, Apr 14, 2010 : 8:32 a.m.
First-A Construction Manager responsibility is SUPPOSE to be to the OWNER, NOT for him to maximize his and his sister's company's profit at the cost of the owner!!! HAVING A CM BIDDING HIS OWN WORK IS A CONFLICT OF INTEREST!!! Most "at risk GMP's", (gaurenteed maxium price) the Construction Manager is ONLY at risk if it goes over the GMP. If the cost comes in under the GMP, than the savings is usally split with the owner and the CM (75% to the owner 25% to the CM, typicallY). Therefore, if the CM can shift a higher cost to their sister company in the form of a higher lump sum cost, then the CM pocketed the owners money (again, if it comes in under the GMP). If it goes over then the sister company still made $$ so it is just a shift of left pocket to right pocket in the same paor of pants. So the object here, is for the CM to perform as much as work himself at a highest price possible, and still stay just below the GMP, overall. This came also be done by approve changes, etc at a higher cost.
Domey
Tue, Apr 13, 2010 : 9:56 a.m.
Did any of you actually think that ethics still exist in our government? I mean, aside from "Pollyanna". Well it's gone, rotted away like worm-riddled wood.
Ryan J. Stanton
Mon, Apr 12, 2010 : 4:28 p.m.
I'm told now that the decision to have the concrete bids opened publicly was a consensus of the DDA's Capital Improvements Committee, and that included John Splitt (chair), Roger Hewitt and Leah Gunn. They all attended the opening, which was held at the DDA office.
leaguebus
Mon, Apr 12, 2010 : 9:27 a.m.
You put it up for bids in case someone can do it cheaper than your subsidiary. But again, by taking the guaranteed price, all the construction details are a black box. The DDA does not need to know or worry about this as the contractor shoulders all the responsibility for performance and costs.
Gill
Mon, Apr 12, 2010 : 6:51 a.m.
Why did they put out bids, then? Just to makes others do some work toward something they do not have shot at? I guess it's like having a meeting and then saying everyone at the meeting supported whatever the topic was, as they were in attendance.
Mike D.
Mon, Apr 12, 2010 : 6:37 a.m.
I always find amusing comments from people who clearly have no clue about how business actually runs. The DDA demanded a fixed price, and to guarantee it could meet that, Christman negotiated the right to choose any contractors it saw fit. Now, Christman is exercising that contractual right. End of story.
DaRyan
Mon, Apr 12, 2010 : 12:41 a.m.
I'm not sure why some people think this is a big deal. The DDA bid out the job of general contractor and Christman gave the DDA a guaranteed price. So it's on the hook to make the project on time and on budget. GC's generally bid out the subcontracts -- and manage the construction, that's why they're hired -- and there's always somebody who doesn't get the work who's upset. Such a bid protest on a subcontract doesn't mean there's a "rigged game," as one commenter suggests. Next hissy-fit, please.
nowayjose
Sun, Apr 11, 2010 : 11:45 p.m.
I blame it on the police and fire unions
voiceofreason
Sun, Apr 11, 2010 : 10:59 p.m.
I agree about this being a non-story. Leave it to the local "Wannabe Big Shots" to start throwing out phrases like, "Conflict of Interest" and suggesting they "Bring all interested parties to the table and sing Kumbaya during a concrete bidding process." Let's be reasonable here, folks. Christman is responsible for the quality of the work as well as the project coming in on/under budget. The city has no say in which bids Christman accepts, but is guaranteed a maximum price. If the company believes it would be easier to coordinate with itself than another contractor and has a reputation for quality on the line, who are we to command otherwise when they will ultimately bear any additional cost burden? In addition, Granger shouldn't be rewarded for kicking and screaming when they have been awarded every school construction contract within a 50 mile radius.
Basic Bob
Sun, Apr 11, 2010 : 10:56 p.m.
I disagree that the best bid is the low bid. The lowest bidder in any construction project typically does not understand the requirements; that is why they have the lowest price. Granger had a chance to prove that they understood the requirements, and did not satisfy the project manager. Between Colasanti and Christman was a difference of $45k or 0.2%. The purpose of competitive bidding was served - the DDA got a fair price for the concrete work. Regardless of which company gets the contract, the same union labor is used.
Mick52
Sun, Apr 11, 2010 : 2:26 p.m.
This is a non story but because of what Susan Pollay states: Pollay said the DDA lost any right to interfere with Christman's bid process when it accepted the firm's guaranteed maximum price. She noted it was only because one of the DDA board members asked for the concrete bids to be opened publicly that Christman even did that. I would like to know who the DDA board member was who is responsible to this "scandal."
aareader
Sun, Apr 11, 2010 : 2:05 p.m.
To shepard145 Some of us do have an idea of the bidding process involving public money. mkm17 said it best - "Perception is often as important as reality. The general contractor had an unfair advantage in the bidding process." If there was a need for the contract to be awarded to this company then the person awarding the bid (that has an interest in that company) should NOT have been involved with the process. Even honorable judges recuse themselves if it "appears" they have an interest in a case they may need to decide.
Cendra Lynn
Sun, Apr 11, 2010 : 1:36 p.m.
Lower the volume, indeed! Don't you just wish, JL? No public outcry? Listen. Or do we need a bullhorn? Adrian Iraola has worked with the city for so long that this behavior is normative. Nonetheless, it is wrong. Public servants must go the extra length to show honesty and responsibility. Many of us can remember when that was how people in the public eye tried to behave. Thank you, RS, for actually doing investigative reporting.
Craig Lounsbury
Sun, Apr 11, 2010 : 1:24 p.m.
"Christman gave the DDA a guaranteed maximum price of $44.38 million for the project last November when it was hired. With that, the company assumed all financial risk in case the project came in at a higher cost. It also assumed the right to pick which subcontractors would work on the project, regardless of price." To me that pretty much puts an end to the "controversy". Now if Christman goes bankrupt and leaves the project undone and it costs more than $44.38 million to complete I would revisit "controversy".
a2grateful
Sun, Apr 11, 2010 : 12:52 p.m.
"Lower the volume, please, aa.com" (A typical statement of what is expected from a voice of folly.) Actually, raise the volume as loud as you possibly can!
Ryan J. Stanton
Sun, Apr 11, 2010 : 12:23 p.m.
@Joan Lowenstein Four people spoke on the issue at Wednesday's meeting, including two voices of protest from Granger and two voices of defense from Christman.
shepard145
Sun, Apr 11, 2010 : 12:16 p.m.
One more construction project in Ann Arbor and once again local reporters try to fan the flames of ignorance. The list is of bids means little without analysis. There is no way of knowing whether anything was missed by the "apparent low bidders" by looking at a column of numbers. Few armchair builders, planners and Joe 12 packs reading/writing here understand that the most important part of the awarding a contract is getting quality work on time and on budget. Concurrently, reporters love to lead with the disgruntled cranks and end with experienced officials (whose job it is to look out for the City's best interest) saying that they are satisfied that the bid and award was appropriate. Pathetic. Implying corruption or bribery with no evidence of such is offensive and irresponsible of the reporter and the newspaper.
Scotsman
Sun, Apr 11, 2010 : 12:02 p.m.
"Christman expects to be able to return a $1 million contingency to the DDA to use however it sees fit." This estimate could have been $1.5 million if the low bidder was used. It will be interesting to see what the actual contingency amount returned to the city is at the end of this project because until that time apparently Christman can spend the contingency any way it sees fit. "Granger was ruled out for inexperience". If Granger was truly unqualified then they should not have been allowed to bid in the first place. Granger recently completed the foundation package at the University's North Quad project. This also was a complex, underground, cast-in-place project.
T Kinks
Sun, Apr 11, 2010 : 11:59 a.m.
Why did Christman waste the time & money putting the project up for bid in the 1st place? something smell here. Terry Heiss Carpentry
Gloriagirl
Sun, Apr 11, 2010 : 11:13 a.m.
Shame! Shame! Shame!- Christman should recuse themselves from bidding with a subsidiary just on principle of integrity. If there REALLY is an issue with Granger, a performance bond would have been in order. Even if it added to the cost, Granger has demonstrated their ability to perform on many projects in Ann Arbor, U of M and Ann Arbor Public Schools. The losers are the DDA.
mkm17
Sun, Apr 11, 2010 : 11:10 a.m.
Well put, aareader. When I worked as a buyer, not only was it important not to do anything wrong or shady, but it was equally important not to *appear* to have done anything wrong or shady. Perception is often as important as reality. The general contractor had an unfair advantage in the bidding process. I still don't understand how such flawed procedures could have been in place.
aareader
Sun, Apr 11, 2010 : 11:02 a.m.
MAJOR CONFLICT OF INTEREST! --(or more???) The bid process for projects involving public money should always be open and transparent. The lowest responsible bid should be the one to do the project. To imply the lower bidders may not be qualified implies the people creating the bid documents do not know how to write them. The bid documents should have financial guarantees the contractor can do the project. The people involved in this process should all be excused from the decision making and then the project rebid. At the least....to make the process appear fair.... put representatives for ALL interested companies in the decision process and let them make the award instead of one of the players. Otherwise why would any taxpayer have faith in this process. Next time there are requests for more tax money I for one will know how to vote in this area. Trust is HARD to gain and EASY to lose.
eyeloveypsi
Sun, Apr 11, 2010 : 10:48 a.m.
And the beat goes on...
mkm17
Sun, Apr 11, 2010 : 9:18 a.m.
Maybe I misunderstood, but I believe the controversy is that one of the bidders actually awarded the contract to himself. This was a clear conflict of interest. Shame not only on the general contractor, but on the procedure that allowed this to happen in the first place.
BenWoodruff
Sun, Apr 11, 2010 : 9:15 a.m.
Joan, When the "construction manager" determines the "lowest responsible bid" is the one their subsidiary made, it sure looks like a rigged game. How about an outside authority review the decision?
Soothslayer
Sun, Apr 11, 2010 : 9:15 a.m.
Sure the DDA itself has mulled over this self serving project umpteen times but is it REALLY necessary to spend these funds on a project like this at this time (all "Damn the torpedoes, full speed ahead!)? Are ALL of the other surrounding lots full or are they projected to be? No they are not/will not. This project is set to bolster the power and presence of the DDA. The DDA should be wholly incorporated into the city and cities budget. It diverts much needed revenue to low value projects that could othewise be used elsewhere (like PD/FD for instance) and hurts our city.
Joan Lowenstein
Sun, Apr 11, 2010 : 9:04 a.m.
This is a non-story. Cities always award jobs to the "lowest responsible bid." The price for the project has not changed and the work will be done responsibly. With many companies bidding, only one gets the job. One public speaker at the DDA meeting is not a "public outcry." Lower the volume, please, aa.com.
Jon Saalberg
Sun, Apr 11, 2010 : 7:55 a.m.
Wow. A parking structure the city doesn't need, followed by a contract not awarded to the lowest bidder, but to a division of the general contractor. Excuses all around. Common sense has left the building. This boondoggle adds an infamous highlight to Ann Arbor's history.