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A Million Dollars and Counting

Jan 22, 2023 | City Council

In November 2021, Ann Arbor voters considered multiple ballot questions to amend the City Charter. All were approved, in an election that engaged 16.7% of registered voters. One amendment tripled the dollar amount of City spending that could happen without a vote of City Council. At the time, a majority of Council praised the initiative as one that would greatly reduce Council agendas and increase “efficiency.” Prior to the charter amendment, any City contract for spending over $25,000 would appear on a public agenda of City Council. Since the charter amendment, only contracts exceeding $75,000 appear on a public agenda for a vote of City Council.

This week, MLive published an analysis from Ryan Stanton that enumerates the consequences of that 2021 Council initiative to reduce oversight and public review.
https://www.mlive.com/news/ann-arbor/2023/01/millions-of-dollars-in-purchases-contracts-no-longer-go-through-ann-arbor-council.html

From that article:

“In several instances, staff has avoided going to council and avoided competitive bidding with purchase orders totaling $74,999 — a dollar under the limit, records show.”
…
“City Council Member Erica Briggs, D-5th Ward, agreed it probably is more efficient that way and she suspects there used to be a number of $24,999 purchase orders when the limit was $25,000. [City unit manager] Kulhanek said that is true.”

I strongly believe in community engagement in City policy and opportunities for residents to participate in local decision making. However, I opposed the ballot question to raise the City’s internal spending limit. It was the only ballot question I ever opposed in the four years I served on City Council. Framed as a simple matter of “efficiency,” that charter amendment primarily reduced Council accountability and public transparency. I did not believe that either of those values were worth compromising, even if a majority of the community could be persuaded to vote in support of the change.

TRANSPARENCY & ACCOUNTABILITY

In the past, City Council has understood the need for oversight when it comes to public spending. In my first month on City Council, I co-sponsored a resolution for the explicit purpose of promoting transparency and accountability in contracting: Resolution to Provide Support for Best-Value/Negotiated Agreements.
https://a2gov.legistar.com/LegislationDetail.aspx?ID=3764612&GUID=8ED8962F-282B-4027-8848-B507F812863A

That December 2018 resolution was summarized with the explanation that “the public is best served when Council can review the criteria used to select a firm when the selection is not based solely on lowest price, and be able to confirm that best value for the expenditure of public funds is obtained.” The operative language of the resolution asked specifically that:

in support of contract award recommendations, staff will provide as part of the Council resolution a discussion of method by which the best value determination was made, including the criteria that support of the recommendation, a summary of any numeric scoring used in the evaluation, the resulting rank-ordering of qualified offerors, and the reasons any offerors were deemed to be non-responsive and/or non-responsible.

The resolution passed unanimously and is presumably still in force. However, compliance has been inconsistent, at best. In Legistar, not all contracting resolutions include the numerical scoring, though some do list a ranking of bids received.

EVALUATING CONTRACTS

Prior to 2021, City contract bids were assessed and scored by staff in relevant categories such as:

  • Professional Qualifications
  • Past Involvement with Similar Projects
  • Proposed Work Plan
  • Fee proposal

Scores in each of these categories were weighted, depending on the type of contract. Bids that failed to meet minimum requirements could be rejected by staff and then, in compliance with the City Charter, contracts were to be awarded to the “lowest responsible bidder.”

Since a 2021 City charter amendment, the City is no longer obligated to award contracts to the “lowest responsible bidder.” A new policy – ironically called “Best Value” contracting – has resulted in five new scoring categories all weighed equally:

  • Qualifications, Experience & Accountability (20%)
  • Workplace Safety (20%)
  • Workforce Development (20%)
  • Social Equity & Sustainability (20%)
  • Schedule of Pricing/Cost (20%)

Since the 2021 charter amendment, some recommended contracts are acknowledged by staff as “not the lowest bidder.”

TALLYING THE COST

I scanned Legistar and quickly found multiple examples of how “Best Value” contracting policy has been implemented, at a cost to taxpayers. In just a preliminary search, I identified where this new scoring criteria – combined with Council discretion, rejecting staff recommendations – has cost the City over a million dollars. (The list below includes links to the scoring criteria used to justify more expensive contracts.)

Additionally, a majority of City Council has intervened twice, rejecting Staff assessment of contracts and applying its own interpretation of “Best Value” policy. (See more on that below.)

There is a financial cost to favoring contractors with higher bid prices. However, the new policy has cost the City much more in terms of discouraging bidders and precluding options that previously existed. In June 2022, the owner of Fonson – a contracting company with a long history of working with the City – made this public comment:

At what point does the City decide enough is enough as far as not awarding to the low bidder?
The City at this point plans to spend $437,000 or almost 12% more than my bid, and I’ve done lots of projects in the City of Ann Arbor… For example, today I’m doing a job on South State Street for $6.7 million. I didn’t know it, but I happened to be the only bidder on the project. Had I not bid it, you wouldn’t have had any bidders. If I’m not going to have the opportunity to be awarded a job that I’m low on, I say to myself, what’s the sense in spending time and engineering to bid these projects?

That comment was prompted by this scoring evaluation result:
http://a2gov.legistar.com/View.ashx?M=F&ID=10967447&GUID=CF5A729F-B58C-4212-BB6D-E4E7C278FC5B

Geddes Ave & HPW/Tuebingen Pkwy Resurfacing Project Ann Arbor dated May 9, 2022

As the commenter mentioned, his company (Fonson) had been awarded multiple City contracts. Even under the new criteria, Fonson was evaluated by staff and deemed to provide “value.”
https://a2gov.legistar.com/LegislationDetail.aspx?ID=5641158&GUID=EAFAD464-6EB6-44D0-88B4-CEB42934FADF

THE FIX IS IN

This week’s Council agenda suggests that the new standard for review of contract bids has indeed discouraged competition and precluded options that previously existed.

Agenda item CA-3 is a construction contract for water main and resurfacing work on S. Main. It will almost certainly be approved – unanimously – at a cost of nearly $6 million.

CA-3 (22-2119) Resolution to Approve a Construction Contract with Bailey Excavating, Inc. for the South Main Street Water Main Replacement and Resurfacing Project ($5,742,710.73) and to Appropriate $2,811,000.00 from the Street, Bridge, Sidewalk Millage Fund, $436,000.00 from the Stormwater Fund, $46,000.00 from the Sewage Disposal Fund, $44,000.00 in AAHC Funding, and $119,000.00 of Funding from the Downtown Development Authority (8 Votes Required)

In recent years, a “request for proposal” (RFP) for this kind of work has resulted in multiple bids. 

The RFP for the contract in CA-3 on this week’s agenda solicited a single bid, from Bailey Excavating. This particular contractor has reason to expect favoritism from the City of Ann Arbor. Since 2021, a majority of City Council has twice rejected staff-recommended contractors in order to award work to Bailey Excavating:

For more about these contracts, you can watch a video I made titled: A2Council Update: “This is Corruption”
https://youtu.be/rTHRda2fu6U

ASKING THE RIGHT QUESTIONS

I encourage everyone to explore the RFP page on the City’s website and click on the links for “proposal tab” — there, you can see how multiple bids offer a range of options and price points:
https://www.a2gov.org/departments/finance-admin-services/purchasing/Pages/Proposals.aspx

Sometimes, a City contract is so specialized that very few companies are even in a position to bid. That is not the case for agenda item CA-3. When an RFP for this type of contract results in only one bid, our community should wonder why. Our elected leaders should be concerned and asking questions. Council member questions to the agenda this week did include some inquiries about CA-3 – Council asked for confirmation that street parking could eventually be removed from South Main (William to Huron) in order to add bike paths.