Fixing Baltimore's aging infrastructure goes $105 million over budget since 2012

Price tag for fixing Baltimore's aging infrastructure: $105 million over budget since 2012.

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.

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 several breaks near Mount Royal Avenue that leaked into the Amtrak railroad 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 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," Young 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," he 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 and Green Party candidate Joshua Harris 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 Rawlings-Blake 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."

lbroadwater@baltsun.com

twitter.com/lukebroadwater

Copyright © 2017, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
46°