Duggan defends housing demolition costs, bids

Christine Ferretti
The Detroit News

Detroit — The Duggan administration on Friday defended the bidding process for its large-scale demolition program as the city’s anti-blight efforts continue to draw scrutiny over spiraling costs.

The latest questions came after a WJBK-TV report on Thursday maintained that city building officials improperly met with contractors last year to set prices for bulk demolitions — before requests for bids were official.

The report noted that high-ranking members of the Detroit Building Authority met with local and national contractors to negotiate the pricing model. The building officials used personal email to communicate with each other about the bid process.

The demolition program is the centerpiece of Mayor Mike Duggan’s plan to deal with an estimated 40,000 blighted properties throughout Detroit. The City Council last week called for an independent audit of the program over cost concerns.

Duggan told The News there was nothing unusual or improper about bidding for the bulk demolition initiative, which was a pilot program and discontinued last year when it failed to lower costs. The state signed off on the plan, which meant to attract firms able to handle big bundles of demolitions in a short period of time

“It was a set-price contract. If we were bidding a low-bid contract, it would be inappropriate,” Duggan said Friday. “When it’s a set price, they all end up with the set price anyway. There’s no competition.”

Three of the four local contractors participating in the negotiations — Adamo Group and Homrich, both of Detroit, and MCM of Bloomfield Hills — were the sole bidders after the project was publicly offered, city officials said. They were awarded the work.

The pilot effort last year paid Homrich about $8.4 million; Adamo, $8.1 million; and MCM, $4.4 million. There were also unspecified costs tied to change orders for additional project costs.

The contractors did not respond to requests for comment Friday.

Officials say the set-price contract was based on the city’s average pricing of all of its competitive demolition bids and sought contractors with the capacity to raze 800 houses in two months.

Brian Farkas, special projects manager for the Building Authority, said the pilot’s pricing for bulk demolitions — 52 cents per cubic square foot — was crafted to increase production and attract large national contractors. The price translated to an average target price of about $12,000 per house, he said.

Duggan said the project accounted for nearly 1,400 of the homes knocked down in Detroit in 2014. That means the bulk demolition program cost at least $16.8 million, although city officials say there were unspecified cost overruns.

“This was a pilot project to bring in substantial players to the Detroit market and get a lot of houses down in a short period of time,” Farkas told The News on Friday. “The state approved every step of it.”

Under the qualification request, bidders could either accept the price for the work, or decline to bid on it. The mechanism, officials said, differs from requests for proposals in which companies compete by providing a dollar figure for the work.

Overall, the city has knocked down nearly 7,000 houses since last spring.

Duggan acknowledged that as the pace continues to climb, so do the costs as the post-bankrupt city has implemented new environmental safeguards that his administration has touted as a model for the nation.

Officials say that the costs have ballooned from $13,600 per house last year to $16,400 in 2015.

The average price per home is nearly 65 percent higher than it was under former Mayor Dave Bing, who had pegged the cost of tearing down vacant homes at a rate of about $10,000 apiece. Under Bing, the city demolished about 5,430 homes in a four-year period, averaging about 26 houses per week. The weekly average under Duggan is about 100.

At the request of City Council, the auditor general’s office is now reviewing the city’s demolition activities. City Council President Brenda Jones said demolition costs have almost doubled over the last decade.

“To see it increase to the amount that it has increased to, of course there’s going to be some questions,” Jones said. “I want to know exactly what’s going on.”

Farkas said a team is working to bring costs down.

Eradicating blight by 2020 is one of the city’s main goals, but it remains a massive undertaking.

An extensive survey conducted last year by the Detroit Blight Removal Task Force counted 40,077 blighted structures, with another 38,429 were in danger of becoming vacant and run down in the near future.

Danielle Lewinski, vice president and director of Michigan Initiatives for the Center for Community Progress, a Flint-based national nonprofit focused on blight solutions, said demolition cost comparisons should be made carefully.

“It’s not like going to the market and buying an apple that’s going to be the same regardless of which market you buy it at,” she said, noting that varying methods and protocols carry different costs.

When examining Michigan, she said, the average for demolition costs is just above $10,000 and Detroit’s are on the higher end.