The High Cost of Low Bids
Wayman Adkins, a black businessman, is quite popular these days. As president and owner of Consolidated Techniques, Inc., a small construction firm in Hialeah, Adkins has been wooed by some white-owned firms eager to have him join them in their bids for county government contracts. Rivalry over his services, though, grew so intense recently that it sparked bitter feuding among contractors -- and ultimately led the county to award an extra two million dollars to the firm that secured the lucky Adkins's participation. Unfortunately, the biggest loser in the saga of the Courtship of Wayman Adkins may turn out to be taxpayers themselves.
Like many black contractors, Adkins has won contracts from a county-run program that earmarks an average of ten percent of all construction spending for black-owned firms. County officials are convinced that racial discrimination in Dade's construction industry is so pervasive and far- reaching that black firms need preferential treatment -- a "head start," as one county official puts it -- to help them win county funding. Those funds, in turn, can promote the growth of black-owned businesses.
Proponents say the program enables black firms to compete for a fair share of public construction dollars. Critics say the program is plagued by the use of minority "front" companies, is inadequately monitored, and wastes taxpayer money. But for Adkins, the program has proved to be a boon: His involvement in the Miami-Dade Water and Sewer Department's contract S-403 A awarded for the building of the "grit chamber" and odor-control building at the South Dade Waste Water Treatment Plant A is turning into a million-dollar bonanza. (The grit chamber catches the solid effluent -- grit -- from raw sewage; the material is then treated in the odor-control building to reduce the foul smell.)
The story of contract S-403 began like any of the hundreds of county-funded construction projects launched in Dade each year. County officials appropriated funds for a project and solicited bids from private construction firms. But as with some cases involving minority contractors, something seemed to go wrong, and veteran (white) contractors complained that the contracting process had been abused and that Dade taxpayers now have to spend millions of dollars in unnecessary construction costs.
Adkins's Consolidated Techniques is a twelve-person general construction firm that participates in Metro-Dade County's Black Business Enterprise (BBE) Program. (As a "general" construction firm, the company is capable of anything from laying a concrete foundation to raising a roof.) The program that has helped Consolidated began in 1982, in the aftermath of the 1980 Miami race riots, as a way to provide a carrot to black entrepreneurs. In 1992 a new county ordinance strengthened the initiative by providing incentives to white firms to hire black firms as subcontractors. As one of 200 or so firms (the number fluctuates) certified by the county as "black owned and operated," Consolidated is a valuable commodity. It is important not only because of its experience and expertise, but also because its employment as a subcontractor in publicly funded projects can satisfy black participation requirements set by the county as part of the Black Business Enterprise Program. That program requires almost all county construction projects to include black businesses. Without black subcontractors, white-owned firms would stand little chance of winning large contracts.
The stakes are high. In 1991 the county authorized $85 million in construction spending to certified black firms, or an average of about ten percent of total construction funding. (Each separate project can have varying percentage requirements.) The Dade County School Board set spending targets of another $137 million, representing 37 percent of overall construction outlays. But county officials say these figures are only "goals." Amazingly enough, they don't know the actual payouts to black-owned firms.
Since virtually every county construction project now includes a mandated goal for black participation, the large, predominantly white-owned construction firms often create alliances with smaller black-owned firms that can be hired as subcontractors. It was this mandate that brought Adkins together last July with Bill Shendell, president of Pro-Built Construction, a white-owned general contracting firm based in West Palm Beach. Shendell, who was introduced to Adkins by a mutual acquaintance, said he was interested in working with Consolidated on upcoming Dade County projects that required participation from black subcontractors. For example, if Pro-Built were to bid on a one-million-dollar county project that specified ten percent black participation, Shendell might hire Adkins's firm to perform at least $100,000 of the work. It was the perfect match: Shendell had the manpower and could provide "bonding," the insurance guarantee that a job would be completed. Adkins, for his part, could help Shendell's firm meet county goals for black participation. Adkins agreed in principle to the arrangement, but the two did not work out plans for bidding on specific projects during their preliminary meetings. Because there is little written documentation of what Shendell and Adkins discussed, the two men's stories about what happened before, during, and after the controversial grit-chamber bid recall the classic Japanese film Rashomon, in which each character offers a conflicting version of the same incident.
Later in July two large white-owned general contractors A Baltimore-based Poole and Kent (P&K) Co. and Jacksonville's Harry Pepper & Associates A were preparing to bid on a project that could involve both Pro-Built and Consolidated. It was the Miami-Dade Water and Sewer Department (WASD) "grit chamber" and odor-control building located in South Dade. Both firms asked Pro-Built to submit a bid to work as a subcontractor on the project. There was nothing unusual about that: Smaller firms commonly put in bids to larger firms to do portions of the overall work. The large firm then submits a total bid to the county. And it is neither uncommon nor unethical for smaller companies to submit bids to more than one firm for the same job.
On Thursday, July 29, the date all bids were due and scheduled to be opened, Pro-Built faxed a letter to Poole and Kent offering to do a large portion of the exterior construction work for $1.05 million. Shendell later explained that in a follow-up phone call the same day, he told Poole and Kent officials that Pro-Built would be working with Adkins's Consolidated Techniques to satisfy black-participation requirements. Consolidated's costs were to be $825,000. The alliance with Consolidated made Pro-Built's bid an attractive offer because Poole and Kent needed to find black subcontractors who could complete thirteen percent of the total project A and Consolidated was making it easy for P&K by bringing along its own black contractor. (Indeed, Poole and Kent's bid documents showed that it had originally planned to hire four separate black subcontractors to meet the thirteen percent obligation.)
For the same amount of work, Pro-Built's bid to Harry Pepper & Associates was $1.23 million. The faxed bid included the promise that Consolidated Techniques would be available to complete work amounting to $1.03 million -- or 84 percent of Pro-Built's share of the contract. Shendell later testified at a county investigative hearing that his price to Poole and Kent -- which, according to Dade records, has done more than $300 million in county work in the past five years alone -- was lower because the two firms have worked together for years. Because of their familiarity and because Poole and Kent has offices and other facilities in Miami, Shendell explained to county officials, the work could be done more quickly and cheaply. Shendell said Pro-Built had never worked with Pepper & Associates, which, county officials say, rarely bids on jobs in Dade.
With Adkins's company included, both P&K and the Pepper firm accepted Pro-Built's bid. And in their submissions to the county they both listed Adkins's Consolidated Techniques as a certified black subcontractor. In Poole and Kent's bid documents, Consolidated Techniques was scheduled to receive $825,000 for its share. In Pepper's documents, Consolidated was slated to be paid $1.03 million. The disparity in the proposed fees for Adkins's company, of course, was due to the two different bids offered by Pro-Built, which would oversee work performed by Consolidated.
When the bids were unsealed on Thursday afternoon, July 29, Poole and Kent was the low bidder, and it appeared the firm would be awarded the contract. Company officials were thrilled, and so was the county: Poole and Kent's bid of $6.25 million was almost $2.3 million lower than the next lowest bidder, Harry Pepper & Associates -- and almost three million dollars lower than the Metro-Dade Water and Sewer Department's own cost estimate. But to meet the requirements of the Black Business Enterprise Program, Poole and Kent needed to secure a "letter of intent" from its black subcontractor -- Wayman Adkins at Consolidated Techniques -- verifying his willingness and ability to complete the work. It was a formality they had done countless of times before; in a few days, it seemed, the multi-million dollar contract would be virtually in their grasp. For now, the only missing ingredient was the signature of Wayman Adkins.
Letters of intent must be submitted to county officials within two business days following a bid opening. In this case, the critical letter was due by Monday, August 2 at 4:30 p.m.
But to the surprise of Poole and Kent, Adkins refused to sign -- and ultimately joined up with Pepper. According to sworn testimony by Adkins at a subsequent county hearing, he had never agreed before the bid day to do the work for Poole and Kent. But Adkins offered wildly contradictory testimony about when he learned that his name had been entered into the bidding process -- or if he even had any knowledge about the county's project at all.
On the one hand, Adkins insisted he never even heard about the project until he received a fax from Shendell on Monday, August 2 -- two business days after the bids were unsealed and the day the letter of intent was due. "That's the first time I was advised of this particular job," Adkins testified. He said the first time he heard directly from Poole and Kent, the prime contractor, was roughly 3:30 p.m. that same day. Yet in other testimony at the county hearing in August, he said he had been aware of the county's request for bids on the grit-chamber project A but decided not to bid on it himself. And in still further testimony, he claimed to have first spoken with Shendell about the job on the bid day, Thursday, July 29, when Shendell asked him to go to Poole and Kent's offices to sign the letter of intent. Adkins also stated that before the bids were opened on that Thursday, he had no idea that a bid had been given in his name to the county by Harry Pepper & Associates.
Adkins had a noble rationale for why he refused to sign P&K's letter of intent. He said that he resented being "prostituted around" by Pro-Built, ostensibly to meet black participation requirements. Such moral concerns seemed to evaporate, though, when he signed a letter of intent for Pepper and Associates, which had also received his name from Pro-Built.
At the investigative hearing, Pro-Built's Shendell told a starkly different version of what happened. Shendell said that in mid-July he and Adkins had reached a "tentative arrangement" to work together on future projects. And by the July 29 bid date, Shendell insisted, they had reached a firm agreement on the exact price and terms of this particular project. Shendell also testified that on July 30 he faxed to Adkins a detailed explanation of the proposed work and fees that had been submitted to Poole and Kent, and to Harry Pepper & Associates, on behalf of Consolidated Techniques. And when he called Adkins later that same day, Shendell recalled, Adkins assured him he would go to Poole and Kent's offices before the end of the day to sign their letter of intent. He never did.
At the hearing, Shendell questioned Adkins's claim that he knew nothing about the bid to Poole and Kent until Monday, August 2. Adkins testified that he received the fax from Shendell detailing the bid terms and price to P&K, but he insisted it arrived not on July 30, as Shendell said, but on August 2 -- only hours before the deadline. He said he felt pressured by Poole and Kent to sign without having adequate time to review the document. But the Shendell fax, it turns out, raises serious questions about Adkins's credibility. The actual document in question -- the three-page outline of exact bid terms and price faxed to Adkins and submitted as evidence at the hearing -- reveals the time and date it was transmitted from Pro-Built's offices to Adkins: July 30, 1993, at 2:15 p.m. "That's my paperwork that was sent to Mr. Adkins so he would know what our arrangement was," Shendell testified.
On that same day, Friday, July 30, the flurry of phone calls between Adkins, Shendell, and various officials from Poole and Kent may have been matched only by the sudden peripatetics of executives from the seeming second-place finisher, Harry Pepper & Associates. According to testimony at the August investigative hearing by Cuy Broome, executive vice president of Harry Pepper & Associates, he and David Pepper, the company's president, flew to Miami the day after the bid opening A Friday, July 30. The reason, he said, was "to get copies of various documents" pertaining to the project bidding. Strange behavior, implied Shendell at the hearing, for a firm whose bid was $2.3 million higher than the low bidder's and who therefore stood little chance of winning the contract. On Monday morning, Pepper executive Broome testified, he and David Pepper again flew to Miami, this time to meet with Adkins. Why the travel itch? To convince Adkins to sign their letter of intent in hopes that their firm would be awarded the contract despite Poole and Kent's lower bid. It worked: Adkins signed -- and Pepper and Associates eventually won the contract.
Under county rules, all contract bidders may submit signed letters of intent after bids are opened, thereby keeping themselves in the running should a lower bidder be disqualified. But in practice, say veteran contractors, this is done only occasionally. Said Shendell at the August hearing: "I find it kind of interesting that Harry Pepper's representatives flew down here, called my office at 8:00 Monday morning, tracking down my minority subcontractor... when they [Pepper] were [second bidders]."
Interesting, indeed. When Broome of Harry Pepper & Associates called Shendell Monday morning to discuss the project, Shendell told him not to waste his time because Poole and Kent was already declared the low bidder, and Adkins was going to sign with P&K A if, Shendell said, he hadn't already. Shendell testified that even up to early Monday afternoon he was unaware that Adkins was unhappy with the bid to Poole and Kent.
Broome and Pepper seized on that unhappiness. Rather than return to Jacksonville, Broome and Pepper testified, they met "for several hours" with Adkins on Monday, the deadline day. And by the end of the day Adkins had signed a letter of intent -- not with Poole and Kent, but with Harry Pepper & Associates.
Officials at Poole and Kent admitted later at the county-led hearing that they were infuriated by Adkins's refusal to sign and they realized they were in big trouble. Without a signed letter of intent, they would likely be ruled in "noncompliance" with county requirements, and the bid would go to the second bidder A Pepper & Associates, at a price $2.3 million higher than P&K's bid. As the 4:30 p.m. deadline approached on Monday, August 2, Poole and Kent vice president Bob Smith realized that Adkins's refusal jeopardized their entire bid. County records show that Smith faxed a quietly desperate letter that day to Al Duffie, a staff assistant with the Department of Business and Economic Development, the county agency that oversees the Black Business Enterprise Program. Smith's letter explained that Adkins had inexplicably refused to sign P&K's letter of intent. Smith also pleaded for a 48-hour extension to locate another black subcontractor and thus, salvage their bid. A copy of the letter was also faxed to the water and sewer department.
County records show that Duffie never responded to the letter, and no one authorized the two-day extension requested by Poole and Kent. Nevertheless, on Wednesday, August 4, two days after the letter of intent deadline, Poole and Kent finally submitted a signed letter of intent A from M.A.R.S. Plumbing Contractors, a black-owned and certified firm that Poole and Kent had worked with on previous projects.
Poole and Kent's last-ditch efforts were undermined by attacks by its rival, the Pepper firm. On the same day that P&K submitted its letter of intent from M.A.R.S., according to county records, David Pepper sent a letter of his own that aimed to challenge Poole and Kent. In a brief note to water and sewer department director Anthony Clemente, Pepper said he had been "informed" that Poole and Kent had not satisfied the black participation requirements and, therefore, the Pepper company should be immediately declared the "low responsive bidder" and be awarded the contract. On the same day, August 4, the Miami attorney for Harry Pepper & Associates, Wendell Graham, penned a similar letter to Clemente. Graham wrote that since Poole and Kent failed to submit a timely letter of intent from the black subcontractor named in their initial bid documents, Poole and Kent should be disqualified.
On August 9 P&K's Bob Smith sent one last missive. In that letter, addressed to water and sewer department deputy director Jorge Rodriguez, Smith argued that Poole and Kent should be awarded the contract because: one, they had the lowest bid; two, Adkins's refusal to sign was no fault of their own; and three, they ultimately secured a letter of intent A albeit two days late A from a certified black contractor.
The Dade County Department of Business and Economic Development, which oversees the Black Business Enterprise Program, finally delved into the matter on August 23 at an investigative hearing prompted by the conflicts over the contract. Walter Pierce, the agency's assistant director, says hearings are called whenever there is any dispute involving the requirements of the program. No decision on which firm should receive the contract was rendered until after the hearings concluded. Testimony was taken from Adkins, Shendell, and from officials of Poole and Kent and Harry Pepper & Associates. As the complex tale unfolded, Walter Pierce offered little sympathy to Poole and Kent. In fact, Pierce admonished the firm for failing to "negotiate directly" with Adkins before submitting its initial bid.
It wasn't a good omen for Poole and Kent. On September 7 the director of the Dade County Department of Business and Economic Development, Gregory Owens, recommended that P&K's bid be thrown out. In a three-page memo to water and sewer department director Clemente, Owens said P&K shouldn't get the contract largely because it neglected to deal directly with Adkins before submitting its bid. The economic development department "has serious concerns at the manner in which Poole and Kent solicited BBE [Black Business Enterprise] participation," Owens wrote. "Clearly the method utilized in this instance violates the spirit if not the letter of the Black Business Enterprise Program regulations." In his memo, though, Owens failed to mention that Pepper & Associates also didn't bother to contact Adkins's firm before submitting the black subcontractor's name in its bid.
Poole and Kent contended at the hearing that their solicitation methods were perfectly legal. Indeed, Dade's County ordinance 92-45, which sets guide-lines for the BBE Program, spells out no specific requirement that bidders negotiate directly with black subcontractors prior to the bid openings. Nowhere in the ordinance is it forbidden to use, as Pro-Built's Shendell put it, a "go-between" to bring onboard a minority subcontractor. In addition, officials from Poole and Kent asked at the hearing, how can the spirit of the law be broken if black contractors, ultimately, are used for the project? After all, Poole and Kent was quite prepared to use the black-owned M.A.R.S. Plumbing Contractors for the required thirteen percent participation.
And at the very least, adds Ed Smith, a senior vice president at Poole and Kent before he retired in October, P&K's solicitation practices are no different from anyone else's in the industry, including those of its chief competitor on this project, Harry Pepper & Associates. "We didn't do anything differently from Harry Pepper," says Smith. "They put their bid together the same way we did, so why are we the only ones getting screwed?"
Whatever the merits of Smith's complaint, it's clear that Harry Pepper & Associates made efforts to win over Adkins that Poole and Kent did not. The Pepper officials flew in to town to meet with Adkins -- after the bids were submitted and opened -- and they offered more money, $210,000 more, to be exact. They also told Adkins, according to his hearing testimony, "that they would have no problem with going up on my contract, if it was necessary to do more work, if they found they could utilize my services."
But Pierce, the economic development agency official, now says that the purpose of the hearing was to investigate Poole and Kent's bid, not that of Harry Pepper & Associates. And he says the decision to recommend against Poole and Kent was simple: no letter of intent, no compliance. Case closed. There were no extenuating circumstances to justify granting P&K's request for a deadline waiver, he believes. He also says if Poole and Kent had spent more time with Adkins before submitting a final bid, none of these problems would have occurred. As for Harry Pepper & Associates? "They did what they were supposed to do," Pierce insists.
The water and sewer department's Clemente, who had the final say on which bidder to recommend to the county commission, agrees with Pierce. He said in a recent interview that he recommended to the county commission that Harry Pepper & Associates be awarded the contract as the lowest "responsive" bidder because they secured a signed letter of intent within the allotted two days after bid opening -- and Poole and Kent didn't. The M.A.R.S. letter of intent was submitted after the deadline of August 2, and, therefore, didn't count. Clemente also says the threat of a lawsuit by Harry Pepper & Associates was on his mind. Clemente notes, "Pepper was the low responsive bidder, and so we felt that [had it been awarded to Poole and Kent] there would have been the potential for a legal challenge that would have delayed the project."
But according to retired P&K executive Ed Smith, Poole and Kent was considering its own legal challenge to the contract decision. The firm's attorney mentioned the possibility of filing a lawsuit, he says, but no action was taken. Even so, Smith is still angry at the maneuverings of Pepper and Adkins. ''Once the bids were opened and Pepper saw that Consolidated was both our minority sub and theirs, they went and renegotiated behind our backs, and then got us disqualified," charges Smith. "We had a deal [with Adkins] to do the job for a certain price and then the next thing we know he's claiming he's never talked to us before. It's as simple as that -- when he saw he could get more money from the second bidder, he just refused to sign our letter, even though it's going to cost a whole lot more than it should have."
Adkins and representatives of Harry Pepper & Associates declined to answer phoned and faxed inquiries from New Times. Broome, Pepper's executive vice president, says company policy forbids him, or any other employee, from speaking with the media. Executives currently at Poole and Kent also refused to answer questions from New Times; president William Thomas said in a faxed letter, "As to your questions, a formal hearing was held, and the depositions of all concerned parties are public record."
That record offers insights into Adkins's perspective. At the hearing, he denied any wrongdoing and says he was merely looking out for his own interests. "We felt the numbers were in place," Adkins testified. "I made a business decision."
Ed Smith also insists Poole and Kent did nothing wrong and should have been granted a 48-hour extension to find a replacement subcontractor. At the very least, he contends, all bids should have been thrown out so the bidders could start over. "How much money does the county have to throw away before we realize how much waste and abuse is going on with this [Black Business Enterprise] program?" Smith asks. Pierce says the county has been improving the program. "It's not perfect yet, and with any program there's the possibility of abuse, but we think we're working out some of the problems."
Smith also says he is surprised by Poole and Kent's silence now on the issue A particularly since the firm's president vowed in a meeting with Clemente to protest the contract at an October 19 county commission meeting that officially awarded the disputed contract to Harry Pepper & Associates. But according to Ed Smith, Poole and Kent decided not to discuss the matter with the media, agreed not to file a protest, and agreed not to sue.
Why the change of heart? Smith says it was a simple matter of money. "Poole and Kent does an awful lot of business with the county and they want to maintain a good relationship. So its really wasn't in their best interest, financially, to push this any further." Smith says the water and sewer department's Clemente and Poole and Kent's Thomas had a "handshake deal not to go public with this." Clemente is adamant in his denial of Smith's charges: "There was no deal of any type made" -- and Thomas declined to answer questions on the contract dispute.
Clemente, however, admits to meeting with Thomas just prior to the October 19 commission meeting. He says Thomas mentioned the possibility of a lawsuit and of a formal protest in front of the commissioners. Clemente says he stood firm with Thomas and defended his decision to recommend Harry Pepper & Associates. On October 19, when the county commission awarded the contract to Harry Pepper & Associates, Poole and Kent did not protest, and no one mentioned anything about the controversy. Clemente says today he does not know why Poole and Kent decided not to pursue the matter.
Smith says he's disgusted with his former associates for "selling out." He says media exposure and a lawsuit would have shed much-needed light on what critics say is a flawed county program.
For years detractors have labeled the Black Business Enterprise Program wasteful, inefficient, and poorly managed. Last year, for instance, the State Attorney's Office began an investigation into a large white-owned construction firm, Balfour Beatty, for allegedly trying to bribe a black subcontractor. Under the alleged scheme, Balfour Beatty would list the black firm as a subcontractor while bidding county projects. Once the job was won, Balfour Beatty would purportedly do much of the work itself -- at a lower cost -- and then funnel money through the black firm's books. And earlier this year, the county denied certification to a black firm after investigators from Owens's economic development agency suspected that the firm was being controlled by a company headed by Cuban exile leader Jorge Mas Canosa.
The strange case of Wayman Adkins and his two contractor suitors is not nearly as controversial, but the costs of the county decision may be steep nonetheless. Meanwhile, Harry Pepper & Associates and Wayman Adkins are gearing up for work on the grit chamber and odor control building. Says Smith: "The bottom line here is real simple. We offered to do a job for a fair price." But because Adkins, he charges, exploited the black enterprise program, "you and me A the taxpayers of Dade County -- are going to be paying $2.3 million more for a project than we should have. And that stinks.
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