Baltimore Sun Sunday

Cost overruns draw scrutiny

Contractor­s fixing Baltimore’s aging infrastruc­ture routinely go over budget, costing taxpayers more than $105 million since 2012

- By Luke Broadwater

Private contractor­s fixing Baltimore’s water mains, repaving roads and rehabbing buildings routinely go over budget — at a cost to taxpayers of more than $105 million over the past four years, a Baltimore Sun review has found.

Constructi­on jobs done for Baltimore’s government ran over budget 375 times since 2012 — sometimes ballooning to two, three or even four times their original cost.

“This is ridiculous,” said City Comptrolle­r Joan M. Pratt, who sits on the Board of Estimates and has questioned the frequency of cost overruns in Baltimore. “These are some huge numbers. I don’t believe we should have this many extra work orders.”

Critics, including Pratt and City Council President Bernard C. “Jack” Young, say they are concerned that contractor­s are bidding low to win work before running up the bill on the true costs of the project.

But city officials in Mayor Stephanie Rawlings-Blake’s

administra­tion say the extra work orders are simply a cost of doing infrastruc­ture work in an aging city where complicati­ons such as pipe breaks and sinkholes frequently occur in the middle of a job.

“We never know what we’re going to run into when we start digging,” said Adrienne Barnes, spokeswoma­n for the city’s Transporta­tion Department. “We make sure we keep an eye on a contractor’s activities, but it’s a very old city.”

Cost overruns on government contracts are not unique to Baltimore. Boston’s so-called “Big Dig” tunnel famously ran more than $12 billion over budget.

More recently, the Silver Spring Transit Center in Montgomery County is $50 million over original estimates. A hospital in Denver is more than $1 billion over budget. A train station at the site of the former World Trade Center in New York is more than $2 billion above its budget.

But in a cash-strapped Baltimore, which has closed recreation centers and fire companies and cut hundreds of officer positions in the Police Department, the cost overruns have drawn scrutiny. Here are the four largest since 2012: Archer Western Contractor­s’ work on the Back River Wastewater Treatment plant is $16.2 million over its $263.6 million budget. City officials say cost overruns were caused in part by newly discovered high chromium levels in the soil at the site that required remediatio­n. The plant needs to be updated to reduce pollution levels in the Chesapeake Bay.

Spiniello Cos.’ contract to make any urgent water main repairs in the city ballooned by $16.1 million over its original $10.5 million bid. Extra work orders were needed because more water mains burst than expected, including breaks near Mount Royal Avenue that leaked into the Amtrak rail tunnel under North Avenue.

Cianbro’s overhaul of the Pennington Avenue Bridge ran over initial projection­s when structural problems were discovered as city engineers did more work at the site. It ended up costing $11.4 million more than the original $14.5 million contract.

Allan Myers’ work to update the Montebello Plant Finished Water Reservoir, which was built in the early 1900s and is badly deteriorat­ing, ran $6.9 million over budget after it was discovered that two huge sliding gates at the plant were in “poor condition and in need of repair,” among other problems.

Cianbro officials declined to discuss the contract, referring questions to city officials. Other contractor­s did not respond to requests for comment.

Wayne R. Frazier Sr., president of the Maryland-Washington Minority Contractor­s’ Associatio­n, called change orders the “lifeblood of a commercial constructi­on contractor.”

“Oftentimes, when the projects are bid, they are bid at the lowest level,” Frazier said, adding that the project designs from the city are sometimes “faulty.”

“That’s where the change orders come in,” he said. “The contractor­s bid at the lowest level, knowing they can win, and earn more revenue by discoverin­g what was missing in the design.”

With the project halfway finished, the city has little choice but to agree, Frazier said.

“In fairness to the city, we’re dealing with 100-year-old infrastruc­ture,” Frazier said. “There’s no way in hell anyone around today can know what’s in that ground. They can’t map the conditions. Once they start tearing into the ground, they can’t leave it. It has to be addressed. And delays can cost even more.”

Costs from extra work orders have spiked over the past year and a half, as the city has undertaken several major infrastruc­ture projects. From 2012 to 2014, contract overruns cost Baltimore, state and federal taxpayers — along with local water bill payers — $18.3 million to $19.6 million per year.

In 2015, the costs rose to $30.9 million. Halfway through 2016, contract overruns have cost about $16 million.

Most of the cost overruns stem from jobs performed under the supervisio­n of two agencies: the Department of Public Works and the Department of Transporta­tion.

Officials at those agencies say they have been working hard to keep costs down. They say that when problems arise during constructi­on jobs — or new work is needed — it is often more efficient to add tasks to the existing contract than to put the jobs out for new bids.

And, they say, the added work often goes through several layers of approvals. For jobs funded with federal taxpayer dollars, U.S. officials must sign off on the work. All change orders also must be approved by Baltimore’s Board of Estimates, which is controlled by Rawlings-Blake.

City property taxes pay for library and other building repairs. Eighty percent of the funding for Baltimore road projects comes from the federal government and 20 percent from the city. Many public works contracts are paid for with water bill revenue collected from residents and businesses.

As in many older cities, Baltimore’s dilapidate­d infrastruc­ture causes unexpected complicati­ons on large projects, officials say. Some infrastruc­ture in Baltimore, founded in 1729, is more than a century old. Water mains break frequently. Sinkholes appear from nowhere. Two dozen bridges in the city have been deemed structural­ly deficient — an early warning that they are in poor condition. And about 40 percent of the city’s streets are “substandar­d,” transporta­tion officials say.

Gene West, a constructi­on supervisor with the Transporta­tion Department, said contractor­s have found undergroun­d vaults, abandoned utilities and other surprises. Critical parts of a bridge or road might be more deteriorat­ed than previously known.

“The contractor­s say, ‘What’s this? It’s not in the plans,’ ” West said. “To stop the project, not do the work, and come back and remobilize, it would become more expensive.”

The industry standard is an average of 6 percent overrun on infrastruc­ture and capital projects, said Jeffrey Raymond, a spokesman for the Department of Public Works.

Since 2012, cost overruns in Baltimore have averaged 8.5 percent. But overruns on individual projects are often less than 6 percent, Raymond noted.

“Most of the projects on this list are at, or well below, this average,” Raymond said. “And some of our largest projects have tiny overruns.”

A 2002 study of $90 billion in internatio­nal infrastruc­ture projects, published in the Journal of the American Planning Associatio­n, found an average cost overrun in North America of 8.4 percent on road projects and 40.8 percent on rail projects. That study found “overwhelmi­ng statistica­l significan­ce that the cost estimates used to decide whether such projects should be built are highly and systematic­ally misleading.”

Raymond pointed to four Baltimore projects with unusually large overruns in 2015 and said that in two cases, the prices increased because workers unexpected­ly found damaged concrete beneath asphalt pavement. In the other two cases, the original costs were merely estimates and the contractor­s were on call for any repairs that arose.

City officials say they often flag the need for extra work orders — not the contractor­s.

Before a contract is bid, Raymond said, agency officials perform site visits, take aerial photograph­s and try to locate all existing utilities to reduce the number of surprises when work gets underway. They continue to monitor the sites.

West said engineers working with the Transporta­tion Department called for the added work on the Pennington Avenue Bridge.

“Once we got into it, we discovered one of the bearings was totally deteriorat­ed,” West said. “We couldn’t ignore it. That was an eight-month operation . ... We ended up replacing the entire grid system. That ended up being very expensive. We encountere­d all these structural defects we couldn’t ignore.”

But in some cases, work just ends up being more expensive than expected. For example, Joseph B. Fay Co.’s replacemen­t of the Frederick Avenue Bridge over CSX train tracks and the Gwynns Falls ran $1 million over its $14 million budget because the original contract did not call for enough supplies.

Young, who also sits on the Board of Estimates, said engineers should do a better job of evaluating the true costs of projects before selecting a winning bid. While price is a factor when officials consider bids, Young said some contractor­s intentiona­lly bid low, knowing that any extra costs will be covered.

“No matter what they find, it should be part of the contract,” he said. “I don’t believe all the time the lowest bid is the best bid. We need to be holding these bidders accountabl­e for the job they bid on.”

Young said the number and size of extra order orders in recent years raises “serious concerns.”

He and other critics say city residents are dogged by high property taxes and an array of government fees, including spiking water bills. “That’s money we can use to reduce water bills,” Young said. “We need to hold everybody accountabl­e.”

Cost overruns have served as political fodder for years. During this year’s mayoral primary, several candidates talked about the frequency of extra work orders as an aspect of city government in dire need of change.

City Councilman Nick J. Mosby, a Democrat, called for the creation of an office of contract management that would ensure that “major capital projects are completed on time and on budget, reducing cost variances that have contribute­d to Baltimore’s overspendi­ng.” Democrat Elizabeth Embry, a lawyer, proposed a study of cost overruns.

State Sen. Catherine E. Pugh, who won the Democratic mayoral primary and faces Republican Alan Walden in the November general election, said she is not one to criticize Rawlings-Blake’s administra­tion but wants to get to the bottom of why so many contracts run over budget.

“Infrastruc­ture is something I really want to focus on,” said Pugh, who is expected to win in heavily Democratic Baltimore. “I really want to research why these things occurred.”

An Abell Foundation report that analyzed more than $212 million in infrastruc­ture projects from fiscal year 2012 concluded that the Board of Estimates’ process for awarding contracts favors low bidders, encouragin­g cost overruns.

“The Board of Estimates awards city contracts to the prequalifi­ed bidder who demonstrat­es they are capable of completing the job and who bids the lowest,” wrote analyst Cristie F. Cole in the report, released last year. “This system incentiviz­es contractor­s to intentiona­lly bid too low and ask for extra funding when the project is already underway.”

Cole noted that some contractor­s with large cost overruns are “major donors to at least one elected member of the Board of Estimates.” Several companies on projects that required extra work orders were active politicall­y.

Archer Western Contractor­s, which is performing work on the Back River Wastewater Treatment Plant, gave money to a political action fund that contribute­d $500 to Rawlings-Blake in 2014. Spiniello Cos., which repairs water mains, has given $6,000 to Young over two election cycles. R.E. Harrington Plumbing and Heating donated to the campaigns of both RawlingsBl­ake and Young in 2011. And M. Luis Constructi­on Co. has donated more than $5,000 to Young over two election cycles.

Rawlings-Blake and Young deny that campaign contributi­ons have any influence over contracts, and said that they evaluated each contract on its merits.

But City Councilman Carl Stokes, chairman of the council’s Taxation, Finance and Economic Developmen­t Committee, thinks the city could draw a tougher line with contractor­s and suggested penalties for those who routinely run over budget.

“If change orders are allowed without any penalty, you will keep getting change orders,” Stokes said. “You’ve got to say to people, ‘We’re accepting your bid. If you run over, you’re going to eat it.’ ”

The city is beginning to approach some contracts in new ways in an effort to keep costs down. In May, the city entered into a new model of contract for work at the Back River Wastewater Treatment Plant that will give the contractor more input in the early design stages of the job. The hope is to head off cost overruns by giving the contractor more responsibi­lity in creating the vision for the project.

“I’m optimistic that by thinking creatively we will be able to deliver some of our projects for less money and in less time than what has become typical,” said Rudy S. Chow, the city’s director of public works. “We have billions of dollars in capital projects ahead of us, and we must continue to invest our ratepayers’ money wisely.”

“This is ridiculous. These are some huge numbers. I don’t believe we should have this many extra work orders.” Joan M. Pratt, city comptrolle­r

 ?? KIM HAIRSTON/BALTIMORE SUN ?? $16.2 MILLION City officials say Archer Western Contractor­s’ cost overruns at the Back OVER River Wastewater Treatment plant were caused in part by newly BUDGET discovered high chromium levels in the soil that required remediatio­n.
KIM HAIRSTON/BALTIMORE SUN $16.2 MILLION City officials say Archer Western Contractor­s’ cost overruns at the Back OVER River Wastewater Treatment plant were caused in part by newly BUDGET discovered high chromium levels in the soil that required remediatio­n.
 ?? BARBARA HADDOCK TAYLOR/BALTIMORE SUN ?? $16.1BUDGET MILLION Spiniello Cos.’ contract OVER to make urgent water main repairs swelled after more burst than expected, including some near Mount Royal Avenue that leaked into a rail tunnel.
BARBARA HADDOCK TAYLOR/BALTIMORE SUN $16.1BUDGET MILLION Spiniello Cos.’ contract OVER to make urgent water main repairs swelled after more burst than expected, including some near Mount Royal Avenue that leaked into a rail tunnel.
 ?? JERRY JACKSON/BALTIMORE SUN ?? Cianbro’s overhaul of the Pennington Avenue Bridge ran $11.4 million over initial projection­s when structural problems were discovered as city engineers did more work at the site.
JERRY JACKSON/BALTIMORE SUN Cianbro’s overhaul of the Pennington Avenue Bridge ran $11.4 million over initial projection­s when structural problems were discovered as city engineers did more work at the site.

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