Lawmakers concerned over millions in cost overruns on Baltimore contracts

Lawmakers are calling for changes to Baltimore's government contracting practices after a review by The Baltimore Sun found infrastructure jobs went $105 million over budget in the past four years.

State Sen. Bill Ferguson, a Baltimore Democrat, suggested in a Facebook post that a contractor who goes over budget be disqualified from bidding on a city job for 10 years. Two City Council members said contractors' track records should be scrutinized more carefully. And Baltimore's comptroller wants the city to hire and train its own staff to do the construction jobs.


Ferguson said in an interview Tuesday that his online post was meant to spark discussion, not to propose legislation. But he has "real concerns about the incentives built into the procurement process" — which typically reward the lowest bidder — and called on the city to investigate instances of cost overruns and develop case studies on how to limit them.

"Now is the time to be looking at this issue in depth with a changing administration and an ever-tighter budget," Ferguson said.


Democrat Catherine E. Pugh, Republican Alan Walden and Green Party member Joshua Harris face each other in the November general election for mayor.

On Wednesday, the city's spending panel is expected to agree to pay $2.5 million on top of a $3.7 million contract for small water main repairs at various locations. It's the most recent of nearly 400 projects to go over budget since 2012.

City officials said they, not the contractor, requested the increase for "additional urgent work that addresses broken water mains, damaged hydrants, and inoperable or leaking valves."

In some cases, project costs ballooned to two, three or even four times the original estimate, The Sun's review found.

Officials in Mayor Stephanie Rawlings-Blake's administration say the extra work orders are 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. It would take longer to finish a project — and be more costly — to put the additional work out for new bids, they argue.

But others have said contractors bid low knowing they can win a job, then submit extra work orders later.

City Councilman Brandon Scott, a member of the council's Budget and Appropriations Committee, said city officials should check how companies perform in other jurisdictions to make sure they aren't taking advantage of city government. But he agreed with administration officials, saying extra work orders are evidence of the crumbling infrastructure today's political leaders must tackle.

"It speaks to the decades of ignoring infrastructure by city administrations long past," Scott said. "The federal government needs to get serious about helping with local infrastructure. We've helped rebuild whole countries around the world but we can't help rebuild cities in this country?"

Costs from extra work orders have spiked over the past year and a half, as the city has undertaken several major infrastructure projects.

Some infrastructure in Baltimore, founded in 1729, is more than a century old. Water mains break frequently. Sinkholes suddenly appear in roads. 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.

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 overruns rose to $30.9 million. Halfway through 2016, they've have cost about $18.5 million.

City Comptroller Joan M. Pratt, who sits on the Board of Estimates and has been critical of the frequency of cost overruns in Baltimore, said she believes the city needs to come up with a plan to rely less on outside contractors and more on salaried employees.


"I believe it's been caused by the city's policy on staffing," Pratt said of the frequency of extra work orders. "The city doesn't have sufficient expertise when these plans are being made. I've even advocating for years that the city hire and train and get qualified staff to do these tasks rather than them being outsourced. It would cut down on extra work orders and save money.

"I believe the city needs a plan with annual goals to fill positions and produce quality staffing."

City Councilman Robert W. Curran said he wants to research whether any company has a history of submitting "artificially low bids" to win contracts.

"Where I would be concerned is if there's a pattern of certain companies requesting change orders," Curran said.

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.

City officials say they often flag the need for extra work orders — not the contractors. Before a contract is bid, city officials perform site visits, take aerial photographs and try to locate all existing utilities to reduce the number of surprises when work gets underway, then continue to monitor the sites.

The industry standard is an average of 6 percent overrun on infrastructure and capital projects, according to officials from the Department of Public Works. Since 2012, cost overruns in Baltimore have averaged 8.5 percent.

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."

All extra work orders in Baltimore must go through several layers of approval. For jobs funded with federal taxpayer dollars, U.S. officials must sign off on the work. All change orders also must be approved by the Board of Estimates, which is controlled by Rawlings-Blake.


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