Abell Opacity 1015

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Abell Foundation www.abell.org @abellfoundation P: 410-547-1300 October 2015

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The Opacity Problem: An Examination of Baltimore

City Infrastructure ContractsBy Cristie F. Cole

The

Abell ReportPublished by the Abell Foundation

October 2015

Volume 28, Number 4

The health of a city is dependent on a stronginfrastructure of transportation, water,

power, and waste systems. Municipalities mustinvest millions of dollars each year into projectsthat improve and enhance those systems.Infrastructure projects, like any type of project,sometimes run over their allotted time framesand budget amounts. Often those overruns arethe result of unforeseen conditions and are anormal part of business, but how a city monitorsand handles overruns is an important part ofmunicipal stewardship.

For this report, we set out to conduct an analysisof Baltimore City infrastructure contract overrunsusing publicly available data from city recordsto determine the extent to which contracts wereover-extended, and, if possible, to determine theextent to which the city is collecting damagesfrom contractors for missing nal projectdeadlines. However, we were never able toobtain data that was complete enough or robustenough to answer our basic research questions.So, instead of being an analysis of city contractoverruns, this report chronicles our unsuccessfulefforts to access information from city entitiesand proposes practices for greater transparencyin city agencies going forward.

Background

In scal year 2012, the Baltimore City Boardof Estimates (BOE) approved more than $212million for infrastructure contracts. These 68contracts provided for both new constructionand major repairs and maintenance onBaltimore’s transportation network, waterand waste systems, and city-owned buildings.All city contracts are governed by standardlegal specications that direct the timelyexecution of contractual projects. Each projecthas a specied number of days in which itmust be completed. The contractor gives thesponsoring agency a detailed timetable, and ifthe contractor falls behind or anticipates fallingbehind schedule, the contractor must notify thesponsoring agency. The agency works closelywith the contractor to resolve issues as theyarise in order to stay on schedule.

If the contractor falls behind enough thatthe nal deadline (the expiration date of the

project) is likely to be missed, the contractorcan be granted an extension on the totalnumber of working days, thereby pushing theexpiration date back. In order to be grantedsuch an extension, an extra work order (EWO)must be brought before the Board of Estimatesand approved. An EWO must also be approvedif the contractor is requesting more than$25,000 in additional funding for a specic



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project. These BOE approved time and budgetextensions are not considered overruns.

Each contract also species damages that thecity can collect if contractors fail to executea project by the expiration date. Damagesare specied for each project as an amountper day past the expiration date. That dailyamount, referred to as liquidated damages,differs from project to project. Liquidateddamages is a way for the city to recoup costswhen a contractor doesn’t nish a project

on schedule. Actually assessing liquidateddamages to the contractor, however, isunusual. Infrastructure contracts rely onrms that have highly specialized skillsets.Signicant public funds are invested intoeach infrastructure project, particularly thoserequiring close oversight by engineers, soeven when a contractor is falling far short ofexpectations, city agencies almost never rea contractor mid-project. In the vast majorityof cases, it is cheaper and faster to have theexisting rm nish slow, bloated projects than to

terminate the contract and rebid.

When we embarked on this project, our aimwas to describe the extent of contractualoverrun using publicly available data.However, what we found after we pulled datafrom three different types of records (detailedbelow) was that the overrun question isunanswerable to the average Baltimore citizen

because of the diculty in obtaining andunderstanding information about the status ofcity contracts. The contracting process is longand complex. If we had been able to obtaindata and complete an analysis, we would haveincluded lengthy explanations about differenttypes of contracts, the prequalication and bidprocesses, and other key concepts. However,since this report instead became an accountof the problems we encountered in obtainingand deciphering data, those detailed technicaldescriptions are out of scope. Below is a

detailed description of the project’s originalintent and design, the publicly availabledata we obtained, and suggestions for cityleaders to hold contractors and agencies moreaccountable through transparency.

Population Description

The contracts we chose to study comprise allof the city infrastructure contracts from scalyear 2012. We chose FY ‘12 because we wanteda group of contracts that spanned an entire

year in order to account for seasonal buildinguctuations, and we wanted the projects tobe old enough that the vast majority of themwould be completed. The contracts originatedfrom four city agencies: the Departmentof Transportation (DOT), the Departmentof Public Works (DPW), the Department ofRecreation and Parks, and the Departmentof General Services (DGS). They ranged from

GeneralServices,

$4,012,192Recreationand Parks,$11,500,854

PublicWorks,

$76,422,879

Transportation,

$120,195,793

Total Infrastructure Contract

Awards for Fiscal Year 2012

Number of Contracts from Each

Agency and Average Award Amount

$668,699 $821,490

$5,878,683

$3,434,166

6

1413

35

0

5

10

15

20

25

30

35

40

General Services Recreation and

Parks

Public Works Transportation

Number of Contracts




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$68,000 to $38.6 million, averaging $3.1 millionoverall. We constructed the population frameusing Board of Estimates minutes from July 2011

to June 2012.

Data Sources

We drew upon three data sources in order toanswer our research questions. Specically,we were looking for each project’s beginningand actual end dates, the original number ofdays for which the contract specied projectcompletion, the nal expiration date, the dailyliquidated damages amount, and the nal cost

of the project. The merits and drawbacks of eachinformation source are discussed on the next page.

When we compiled data from the BOE minutes,we believed that, although it had limitations, ourdata was robust enough to begin to answer ourquestions about contract overruns. Then, wereceived the engineer’s certicates. There wereonly 11 contracts for which we had both datasources, and in those few projects there were somany points of incongruence between the twodata sources that we suspended analysis because

we had no way of knowing which was accurate. Ofthe 11 projects, seven had disparities between thetwo data sets in the amount of additional fundsgranted and two had disparities in the number ofadditional days granted.

There are several perception problems thatarise when the public doesn’t have access toinformation about overruns on city infrastructure

contracts. This information is systematicallyexamined and reported internally by at leastDPW, but not in a format that is accessible

to the public. When projects aren’t auditedfor years after they were awarded, or thecomptroller is reporting different numbersthan the sponsoring agency, engaged citizensmight be inclined to wonder: 1. Are projects being underbid? The Board of

Estimates awards city contracts to the pre-qualied bidder who demonstrates he/sheis capable of completing the job and whobids the lowest. This system incentivizescontractors to intentionally bid too low andask for extra funding when the project isalready underway. We would be in a betterposition to tell if that isn’t happening orwhether it warranted further investigationif we knew how often contractors askedfor more money, and if we knew whichcontractors were doing so habitually.

2. Are city agencies producing bad requests for

proposal (RFPs)? Are they awarding contractsto companies who aren’t up for the job?

A good indicator of the strength of RFPs isthe ability of a contractor to nish in thespecied time frame. If we had reliable dataon how often (and extensively) overrunswere occurring, and in which agencies, wewould have a better idea about whetherthere was a problem with either the RFPs ornegligent contractors.

The Board of Estimates awards city contracts to the

pre-qualified bidder who demonstrates they are capable

of completing the job and who bids the lowest. This

system incentivizes contractors to intentionally bid too

low and ask for extra funding when the project is

already underway.



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BOE Minutes Signed ContractEngineer’s Certicate of

Completion

Description

Accessibility

Merits

Drawbacks

The Board of Estimates approvesall major city contracts and mostchanges in those contracts. Itconsists of the city comptroller, themayor, the city council president,the city solicitor, and the head ofDPW. The city solicitor and the headof DPW are both appointed by themayor. BOE minutes are the recordsof their weekly meetings.

BOE minutes contain all timeextensions and monetary extensionsgreater than $25,000 for every citycontract. With this information wewere able to construct a dataset thatcontained several of the data points

we were looking for.

1. Understanding BOE proceedingscan be almost impossible for anyonenot intimately familiar with theworkings of city government.

2. Constructing a dataset fromthousands of pages of BOE minutesis very time-intensive.

3. While we could see how manydays the project had been extended,

there is no way of knowing whetherthe project was ever actuallycompleted.

High: Available on the comptroller’swebsite in PDF form.

Low: Available through a MarylandPublic Information Act (PIA) requestand subject to the city’s $1 per pagecopy fee. Contracts are generallyseveral hundred pages in length, andone must be able to navigate the citybureaucracy well enough to gureout which oce within an agencyhandles PIA requests.

Medium: Available through aMaryland Public InformationAct (PIA) request and subject tothe city’s $1 per page copy fee;

however, each certicate is onlyone page long. One must be ableto navigate the city bureaucracywell enough to gure out whichoce within an agency handlesPIA requests.

This is the copy of the actualcontract that was signed by thecity and the contractor. It containsall of the project specicationsand legal agreements, includingpenalties for failure to perform.

This contract contains the originalnumber of days allotted forcompletion. This was also the onlydata source that specied the dailyliquidated damages amount.

1. The cost of obtaining contracts isprohibitive for the vast majority ofpeople and organizations.

2. There is no outcome data in thecontract.

Engineer’s certicates arecompleted after the project auditis completed, which takes placeafter the project’s warranty period(generally a year) expires. Werequested a total of 48 certicatesfrom DPW and DOT, and onlyreceived 11 back. Two DPWcerticates were archived. Three tofour years have passed since thesecontracts were approved, and35 of 48 engineer’s completioncerticates are still unavailable.

The engineer’s certicatecontained every critical data pointthat we were seeking on onesheet of paper and was, by far, thesimplest document we looked atfor the entire project.

The engineer’s completioncerticate is a simple one-pagereport that details the original costand time specications for thecontract, the nal time and costconsumption, and the amount ofoverrun (or underrun) that theproject consumed.




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City personnel will be spared the onerous task of sorting

through paper files, and, as more city agencies adopt

these practices and the cost of producing public records

decreases, the city’s public record fees will hopefully

follow suit.

3. Is there some sort of political gain to be

had by not making this information public?

Four contractors were awarded half of thecontracts in our population of 68. All four of

those companies were major donors to atleast one elected member of the Board ofEstimates. If we knew that these companieswere being awarded contracts becausethey did great work, their donations areirrelevant. However, if they are consistentlyturning out expensive work while missingdeadlines, their contributions might seemsuspect. But we have no way of knowinganything about the quality of their taxpayer-funded work.

DPW, DOT, and DGS are all in the process ofupgrading their project management systems,including using centralized databases withinagencies and digitizing records. These newmanagement tools will allow data sharingwith unprecedented ease for more recentprojects. City personnel will be spared theonerous task of sorting through paper les,and, as more city agencies adopt thesepractices and the cost of producing publicrecords decreases, the city’s public record

fees will hopefully follow suit. The long termgains of these upgrades will be substantial,but many of them will not be realized for sometime. The type of analysis we proposed here,for example, would have to wait for severalyears before the projects that are now beingprocessed through the upgraded system havematured and closed.

Fortunately, there are simple ways thatcity leaders can increase transparency ininfrastructure projects using existing channelsof communication. These three suggestions

would be simple to implement in the near-term and would provide critical information tothe public.

1. Put the scheduled completion date on the

signs of every construction project across

the city. The current practice is to put theanticipated year and season of completion.This provides a margin of error of months ona contract, and for city residents whose dailylives are disrupted because of construction,ambiguity in the range of months is

unacceptable. The month, day, and year,updated every time an extension is granted,will provide citizens with information theyneed and deserve.

2. Create scorecards for every contractor

who bids on projects, read on record

during bid openings and publish in BOE

minutes. The scorecard would incorporateratings given by agency project managerson past projects, the Oce of Boards andCommissions’ work capacity rating, metricson past performance of contracts, andcampaign contribution information for eachBOE member.



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3. For all extra work orders granted by the

BOE, include the reason for the additional

funding or days and the new completion

deadline in BOE minutes. Currently,most records of extra work orders in BOEminutes do not contain this information,although the information is submittedby the agencies. BOE minutes is the onlyinformation source on contracts that is trulyavailable to the public. As such, it would bethe best medium for detailed informationon changes in projects.

While the information that is made availableto the public on this issue is inadequate to

gain meaningful insight on the performanceof city contracts, therein lies an opportunity.City leaders are poised to make simpleadjustments in the information they present tothe public to demonstrate that the process ofcreating, bidding, overseeing, and executinginfrastructure projects is ethical, responsible,and, above all, accountable to the peopleit benets, and by whom this process isnanced. In doing so, city leaders will makegreat strides in buoying their legitimacy ascompetent city managers, and ultimately gain

the trust of city residents.

About the Author

Cristie Cole is the founder of FirebrandAnalytics, a company that carries outanalytical projects for nonprots andchange organizations working in BaltimoreCity. Prior to starting her own company, Ms.Cole worked at the Baltimore City State’sAttorney’s Oce and the Mayor’s Oceof CitiStat and earned a masters degree insociology with a concentration in appliedresearch and evaluation from the Universityof Indianapolis.




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The

Abell ReportPublished by the Abell Foundation

Volume 28, Number 4

The Opacity Problem: An Examination of

Baltimore City Infrastructure

By Cristie F. Cole

October 2015

A B E L L

F O U N D A T I O N..............................................................

..............................................................

..............................................................

111 South Calvert Street, Suite 2300

Baltimore, Maryland 21202-6174

About the Abell Foundation

The Abell Foundation is dedicated to the enhancement of the quality of lifein Maryland, with a particular focus on Baltimore. The Foundation places astrong emphasis on opening the doors of opportunity to the disenfranchised,believing that no community can thrive if those who live on the margins of it

are not included. Inherent in the working philosophy of the Abell Foundation is the strongbelief that a community faced with complicated, seemingly intractablechallenges is well-served by thought-provoking, research-based information.To that end, the Foundation publishes background studies of selected issueson the public agenda for the benet of government ocials; leaders inbusiness, industry and academia; and the general public. For a complete collection of Abell publications, please visit our website atwww.abell.org/publications

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Abell Opacity 1015