Detroit chose demolition firms with history of disciplinary violations, report shows

Detroit — Four of seven companies that won bids to raze homes as part of a $250 million blight bond have been disciplined by the city in the past 18 months for demolition missteps, an investigation by Detroit's ombudsman found.

Another company, S.C. Environmental, switched its registered address this month from Lansing to Detroit, Ombudsman Bruce Simpson said, raising questions over whether it was in fact "city-based."

Simpson shared his findings with the City Council from his inquiries into the voter-approved initiative Proposal N, as in neighborhoods. The measure was approved by a majority of city voters in November with the goal of tearing down about 8,000 blighted houses and rehabilitating 8,000 more. 

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"I cannot support this program as it's currently constructed," Simpson told the City Council Tuesday as council members debated whether to approve the contracts. "They (Mayor Mike Duggan's administration) need to do a better job of holding these contractors accountable."

Duggan announced in January that seven companies — five of which are Black-owned, he said — were selected to take on the first wave of 1,380 demolitions. The companies were selected from 180 competitive bids for $30 million in contracts for residential properties being targeted under the plan. Duggan promised that more than 51% of the contracts awarded under Proposal N would go to Detroit companies. 

Council members Tuesday afternoon voted down 12 of the 23 demolition contracts, deadlocking 4-4. Councilwoman Raquel Castaneda-Lopez was absent.

The Duggan administration has given conflicting statements on whether demolitions could proceed without City Council's full support. 

Detroit's Chief Procurement Officer Boysie Jackson told the City Council last week the contracts are tied together based on the capacity of each firm. If one is voted down, he said, "it affects all of the contracts."

Detroit Demolition Director LaJuan Counts said in a statement to The News that the department was going to immediately move forward with the 680 properties that the council approved on Tuesday. 

"We will issue a notice to proceed to those contractors in the next two weeks and neighbors in those areas should start to see work begin in early spring," she said. "I plan to go back to City Council soon with the other properties and in the meantime will take whatever time necessary to answer all of their questions and concerns. We have residents living next to dangerous vacant homes that have been waiting years for relief, and we're not going to stop until we deliver that relief."

City spokesman John Roach said Tuesday said the administration has since decided to focus on moving forward with the contracts that did gain council approval, rather than trying to award the rejected contracts to the next lowest bidder, a process that could be complicated by a contractor's capacity to do the work.

The city had hoped to begin abatement in February and to have demolitions begin in the spring, but the contracts have spent several weeks under review by the council.

Councilman Roy McCalister pressed the administration about the grace period for allowing contractors with violations "to come back in."

"We see them doing something and we turn around and give them (contracts)," McCalister said. "Please help me out with that, because I can't understand that."

Counts said the violations for one firm, Detroit Next, were "operationally, poor management," but there was "not malicious intent."

Simpson noted that Detroit Next Inc. employees were ordered to stop work on Oct. 14, 2020, for illegally dumping "potential asbestos containing material" from a property on Beniteau Street and that state environmental regulators issued violations for the offenses on Nov. 9, 2020. 

The problems, Simpson wrote, were blamed on workers hired to work for the day. Subsequently, he added, the company was allowed to bid on and be awarded contracts being considered by the council on Tuesday.  

Counts acknowledged some of the other firms also have been cited, but stressed there are a range of violations from a basic letter of discipline, meant to redirect a company that certain actions are "not acceptable," all the way up to removal from the program.

"Violations have been issued to various contractors throughout the program as a whole," she said. "It's not just limited to this particular group."

Jim Glavin, an official within the city's contracting and procurement office, said S.C. Environmental's LARA registration serves as the resident agent address and "has nothing to do with certification or the physical location of the business." 

S.C. Environmental's owner, John Sears, died last week, but city officials said the company remains prepared to do the work. As a result of Sears' death, the company filed paperwork with the state to change the builder's license and with the city to change its wrecking licensing, city procurement officials said. 

The filing changed the listed address from 701 E. South St. in Lansing to 1234 Washington Boulevard in Detroit, according to public records. 

Simpson recommended Counts provide City Council with a breakdown of violations associated with hazardous materials, stop-work orders, suspensions and "any other action taken by a contractor that could potentially harm our communities."

Detroit has boosted its efforts to contract with city-based and minority-owned firms under the bond proposal. 

Boysie Jackson on Tuesday defended the administration's selection of the companies and noted all seven have committed to hiring Detroiters. All have a workforce that's more than 51%, one has 100% city workers, he said. 

"We are doing our best to make sure that this program is as transparent as any other program that we've ever done. We will continue doing that," he said. "We are OK with anyone seeing the books ... we have nothing to hide."

Citations spark transparency debate

The council voted down all Proposal N funded contracts for S.C. Environmental, Juniors Jr and RDC Construction and one of six contracts for Inner City. Contracts for Detroit Next and Rickman enterprises were approved. S.C. Environmental, Juniors Jr and Inner City could not be immediately reached Tuesday. A representative for RDC Construction declined to comment. 

Juniors Jr. was cited twice late last year for failing to enter data into the demolition reporting system. The firm received three other violations in January for "failure to complete demolitions in a timely manner," the memo notes. 

Moss Company, Counts' memo adds, received a letter of discipline last spring for failing to notify the state of asbestos-related activity.

RDC Construction, it adds, failed to remove asbestos-containing material from a site on Oct. 25, 2019, and it failed to notify the state's Department of Environment, Great Lakes, and Energy of asbestos-related activity last March and April. A representative of RDC told The News Tuesday that the company presented evidence countering the alleged violations and was never was given any suspensions. In each instance, RDC claims, the violations weren't substantiated. 

Most of the companies selected for the first round of work addressed council members ahead of the vote during public comment, including Detroit Next President Mark Green.

Green did not delve into his company's past violations, stressing instead that he's "humbled and appreciative" to be selected for a role in the city's demolition work. 

"We know Detroiters have been disenfranchised for a very long time. We are Detroiters and we do know our citizens need help. We're here to help, we're here to serve and we're here to complete this mission," he said. "We're just excited that we actually get the opportunity to give back as well as employ and educate our citizens."

Roderick Rickman, CEO of Rickman Enterprises, said his firm has its own training facility and equipment in Detroit and "we continue to hire Detroiters and continue developing Detroiters throughout the community in this program."

The contracts already had sparked transparency concerns and a dispute between Duggan and Council President Brenda Jones.

The council had put off a vote on the contracts amid objections from Jones, who has argued the city's procurement office failed to disclose figures on the hiring and recruitment of residents.

Detroit Corporation Counsel Lawrence Garcia has denied Jones' allegations that responses weren't provided and noted the issue was centered on efforts to impose additional conditions after bids have been awarded, which isn't permitted.

Demands made by councilmembers included requiring the procurement office to provide a target business and employment link on its website, a plan for hiring Detroiters for all contractors that do not have a 51% or higher Detroit resident workforce and details on how the procurement office plans to inform Detroit businesses of bidding opportunities and recruit them for all services awarded to non-Detroit based businesses, Garcia's legal opinion noted. 

Jones has long been a vocal critic over the city's contracting processes, expressing concerns over minority contractors being left out. She also declined to sign off on city-funded demolition contracts amid the federal investigation into Detroit demolition work.

A handful of residents called in Tuesday, urging the council to approve the contracts.

"I'm grateful for all of the demolition happening in my neighborhood," resident Sherrie Smith said. "We want to see Detroit residents trained to be able to get jobs where they can make a living wage."

cferretti@detroitnews.com