July 28, 2014 at 1:00 am

Detroit water department to rebid contracts after protest

Detroit — The city’s water department will rebid next month a pair of contracts for sewer line repairs at the direction of Detroit’s City Council, following a protest over how the agreements were awarded.

The three-year deals, with a combined value of $60 million, were awarded in April to Lakeshore Toltest. Along with the deal, the Board of Water Commissioners adopted a resolution allowing the contracts, if approved and executed by the firm, to be assigned to the firm’s affiliate, Lakeshore Global.

Within days, Toltest filed for bankruptcy, invalidating its contacts and the water department’s ability to assign the work to Lakeshore Global.

Toltest, formerly Lakeshore Engineering, factored prominently in the federal bid-rigging case involving former Mayor Kwame Kilpatrick.

The Detroit Water and Sewerage Department then reduced the contract amounts to $15 million apiece and its board awarded them to Detroit-based Lanzo Companies, the second-highest bidder for the sewer line repair projects on the city’s east and west sides.

Inland Waters Pollution Control Inc., also a bidder on the project, filed a protest with the water department over the Lakeshore contracts, claiming that the process of awarding the bids to the financially insolvent company was “flawed” and “unfair.” The protest was rejected.

Also, Inland contends the water department and the water board improperly negotiated and awarded contracts to Lanzo while Inland’s appeal to the City Council of its bid protest was pending.

Rebidding judged best

The issue was debated at various council subcommittee meetings before the full panel ultimately voted to have the deal rebid.

“Based on all the controversy surrounding the contracts in the water department, the council thought it would be better for everybody to just rebid it and have an open, transparent process, Councilwoman Saunteel Jenkins said.

Bill Nowling, a spokesman for Emergency Manager Kevyn Orr, said Orr doesn’t oppose the decision.

“We don’t see any harm that can be done by rebidding it, and certainly, the council was probably erring on the side of caution to make sure everything was done on the up-and-up,” he said.

Lakeshore Engineering was one of two companies involved in a sewer contract from which prosecutors said Kilpatrick and contractor Bobby Ferguson extorted more than $1.7 million.

The engineering firm was not charged and cooperated with federal investigators after receiving subpoenas from a federal grand jury.

Process defended

Water department Director Sue McCormick, in a June letter to the council, defended the process and maintained it was handled appropriately.

McCormick contended that new contracts with Lanzo did not require the council’s approval since they did not exceed the threshold indicated in the procurement policy ordered by U.S. District Court, which oversaw the water department until March. The court’s regulations indicate the council’s approval is required for contracts above $5 million per fiscal year.

The contract value reduction was to “accommodate our current fiscal constraints,” the department indicated on a May agenda for its Board of Water Commissioners.

The City Council’s legislative policy staff argued the new contracts needed council approval. But in a separate evaluation, the city law department sided with DWSD, officials have said. While DWSD agreed to rebid the Lanzo contract, the council has asked the law department to reconsider its opinion for future contracts.

DWSD officials said the board voted last week for Lanzo to maintain a temporary agreement for the work while the project is rebid.

Fred Tingberg Jr., business development manager for Lanzo, called the objection and its outcome political. Lanzo spent considerable time putting together a quality and competitive package, he said.

“The real issue, which hasn’t gotten a word of coverage, is public safety,” he added. “The city of Detroit is suffering from an incremental sinkhole forming each and every day!”

In the meantime, the water department issued a work order in March on a unrelated, $21.8 million contract with Lakeshore Global for maintenance of its facilities. The council unanimously approved the the contract in February, but Orr has not yet acted.

Bill Johnson, a spokesman for DWSD, said the department directed work to begin on the contract under the premise that the council’s approval, and lack of action from Orr, gave the department the authority to proceed.

CFerretti@detroitnews.com
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