Oakland Too Loose With Contracts, Bidders Say

     OAKLAND, Calif. (CN) — The city of Oakland is handing out lucrative construction contracts in what some say is a violation of its own laws and a waste of taxpayer dollars.
     Emboldened by high-ranking officials willing to look the other way when councilmembers break the law, the Oakland City Council routinely waives its legally mandated competitive bid requirement for awarding construction contracts worth more than $50,000 and negotiates the contracts directly with firms of its choice, according to a report by the city auditor.
     The council simply relies on a statute allowing it to reject bids it deems invalid — or “nonresponsive.” And at a City Council meeting on Tuesday, it blessed another competitive bid waiver, this time for the $400,000 renovation of the Dimond Branch library in East Oakland. Instead, the city will approach construction firms and negotiate with them one-on-one in a process known as sole-source contracting.
     In asking the City Council to discard the bids, Public Works Department director Brooke Levin told the council that Greentech Industry failed to meet Oakland’s small and local business hiring goals and Wickman Development & Construction’s bid was too high.
     But falling short of small business goals and bidding over the project price don’t render a bid nonresponsive. If a bidder fulfills all of the requirements for submitting the bid, they are by definition responsive and both Greentech and Wickman satisfied those requirements.
     Jonathan Wickman says the city violated its own laws in deeming his firm’s proposal nonresponsive so it could justify moving to direct negotiations.
     “That doesn’t seem legal to me,” Wickman said. “They should rebid it or find more money and rebid with more money in the budget. It’s not like they’re left with no avenue.”
     At-large City Councilmember and Public Works Committee chair Rebecca Kaplan did not return a call for comment. The committee passed the resolution to waive competitive bidding for Dimond without discussing it, and the council finally slid it through by lumping it with a group of uncontroversial proposals voted on as a package.
     Competitive bidding is meant to secure the lowest price for a project by creating competition and ensuring contracts don’t go to pre-selected firms. So when an agency wants to sole-source a contract, it must justify the move internally and get it approved. If that doesn’t happen, officials can use sole-sourcing to steer contracts to favored firms and exclude cheaper bidders — raising project costs that taxpayers ultimately pay.
     “They’re trying to convert the process from a shield-bidding process to a negotiation process and at the federal level, it’s not appropriate,” said Steve Sorret, an attorney with Kutak Rock in Washington and a former curriculum director for The George Washington University Law School’s government contracts program. “What they’re doing here certainly goes against the grain of a typical public contracting process.”
     In a city known for awarding fraudulent contracts, routinely sole-sourcing its projects signals entrenched problems in the way Oakland does business, and in how that affects residents.
     The City Council currently faces findings by the Alameda County Grand Jury that it improperly awarded a $1.5 billion trash collection contract to an unqualified recycler. The 2014 deal sent garbage collection fees skyrocketing, prompting a group of Oakland landlords to sue the city earlier this year.
     And in a 2013 report, the city auditor blasted councilmembers Desley Brooks and Larry Reid for breaking the law by steering part of a $2 million contract for demolition work at the former Oakland Army Base to a friend’s company after the city had already begun negotiating with another contractor. Those initial negotiations, too, were illegitimate since municipal law requires the contract to go up for competitive bids first. Brooks also negotiated three separate contracts for a teen center in East Oakland, something only the city administrator can do.
     “For many years there have been signs that problems exist with councilmember interference,” Oakland’s city auditor Courtney Ruby wrote in the 2013 report. “There is a general culture of interference within the city that appears to be felt across many city departments and is perceived to come from multiple councilmembers.”
     Yet neither the Alameda County District Attorney nor the FBI – to whom Ruby sent her findings – have censured Brooks or Reid. Turner Group Construction, the firm with whom the councilmembers illegally negotiated, got a deal at the army base. And no one on the City Council will be disciplined for bilking residents out of millions of dollars in ballooning garbage fees.
     Although the council went on record Tuesday as waiving competitive bidding for Dimond because it received only nonresponsive bids, Contracts and Compliance Division director Deborah Barnes said the council actually waived it due to the “extreme difference between the lowest and highest bidders,” which, she added, “happens across the board” when there’s a large gap in the proposals.
     But waiving bids for large price gaps isn’t permitted by Oakland municipal code either. What is more, Barnes said the city plans to approach Greentech during direct negotiations. If Greentech’s new offer passes muster, the city could waive the small and local business hiring requirement for which it was dinged and award it the contract anyway.
     “If I were the higher bidder, I’d be waiting in the wings to file a bid protest,” Sorret said. Firms often lodge bid protests when they believe an agency skirted the law in awarding a contract and Wickman has a strong case, he said.
     Sorret said a city can’t justify sole-sourcing when it receives two bids and is considering relaxing one of the project specifications. Instead, it should strip out the small business specification and rebid the project to give everyone who initially bid a “fair chance.” That would allow Wickman to offer the city a competitive price and help close the gap between his bid and Greentech’s that Barnes cited as the reason for rejecting both proposals.
     Wickman, whose firm painted another Oakland branch library and has completed solar and park projects for the city, called Greentech’s bid “outrageously low” and that the Dimond library can’t be renovated for the amount Greentech proposed.
     He said his bid was higher because unlike Greentech, his firm complied with the small business requirements. Compliance typically raises the price of a project because small contractors often charge higher rates and, according to Wickman, can double them on a public project.
     Oakland’s small and local business goals require prime contractors like Greentech and Wickman to hire 50 percent small and local subcontractors to help them do the work.
     Many cities and public agencies mandate contractors to hire small subcontractors as a means of growing the local economy, and the Obama administration passed legislation in 2013 to help small firms compete for federal contracts.
     “Most public entities have the responsibility to their constituents to attempt to assure that local businesses in their area are able to realize contracting opportunities,” Barnes said.
     However, Greentech’s executive manager Mark Josling said the requirements are impossible to fulfill.
     “You’re not going to get a 50 percent workforce,” he said. “We’ve been trying, we’ve been calling everybody. We can’t get those people because they don’t exist.”
     In yet another sign city officials are playing fast and loose with their contracting process, Public Works administrative manager Tom Morgan cited in an email a third reason why his department recommended waiving the competitive bid requirement for Dimond: reopening the library as soon as possible.
     In its report to the council, Morgan’s department said construction must be completed before summer to ensure the library opens for the summer recess and the beginning of the school year in the fall, “when students need the educational support, resources and after school programs.” Rebidding the contract would take too long and risk keeping the library closed during the two busy periods.
     Sorret, however, said administrative convenience isn’t a valid reason for sole-sourcing at either the municipal or federal levels.
     “Unless you’ve got an absolute crisis going on, an earthquake, for example, and you need water. That’s a legitimate need for speed,” he said.
     Wickman nonetheless says he doesn’t believe Oakland rigged the Dimond project. He says he hasn’t seen indicators of fraud in contracting with the city in the past and blames its contracting problems on poor management.
     “It could just be Oakland being Oakland,” he said.
     

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