Baltimore's Housing Authority violated federal rules by awarding a $4.6 million contract last year to the highest bidder, the Nation of Islam Security Agency, the federal government lTC says, and could be forced to repay $1 million.
The ruling marks the second time in the past month that the federal government has ordered Baltimore's beleaguered housing agency to refund tax money that was either misspent or improperly used. The Housing Authority is prohibited from using federal funds to repay the money.
NOI Security was chosen last May over nine other companies to provide security at 16 publicly owned high-rise apartment buildings in Baltimore -- even though it was the highest bidder. The low bidder, Wells Fargo Guard Services, offered to do the job for $3.5 million -- about $1.1 million less.
NOI Security is associated with the Nation of Islam, led by Louis Farrakhan. NOI affiliates, which also have security contracts in Pittsburgh, Cleveland, Chicago and Los Angeles, have received high marks from city officials around the nation for lowering violent crime rates in public housing projects.
But Baltimore's "arbitrary" decision to hire NOI resulted in higher costs to taxpayers, the federal government notified city Housing Commissioner Daniel P. Henson III in a March 2 letter, according to a copy obtained by The Sun.
"The government should not be expected to pay the additional costs," wrote William F. Tamburrino, director of public housing in Baltimore for the U.S. Department of Housing and Urban Development (HUD).
Mr. Tamburrino told the Housing Authority it has three options: refund $1 million, give the contract to Wells Fargo or scrap the NOI Security contract and reopen bidding.
Mr. Tamburrino declined to comment on the letter yesterday. NOI Security Vice President Allen Ackerman also declined to comment. Mr. Henson did not respond to requests for an interview yesterday.
Housing Authority spokesman Zack Germroth said the decision to hire NOI Security was not arbitrary.
"The specifics of what they're saying we did wrong have not been made clear to us," he said. "We're exploring the possibility that there are options available beyond those outlined in the letter."
The ruling comes two weeks after HUD demanded that the Housing Authority refund $752,759 because of inflated costs and overcharges in a no-bid program that wound up costing more than $25.6 million to renovate rundown houses and apartments for the poor.
That demand came after a critical federal audit and a series of Sun articles showing that work was performed poorly and that more than a quarter of the no-bid budget went to friends and relatives of Mr. Henson, Mayor Kurt L. Schmoke, a housing board member and an agency analyst.
When Baltimore's housing managers selected NOI Security last May, they said that understanding security problems in high-rise communities was a more important consideration than money. They also said serious crime dropped 50 percent at one high-rise that the firm had been patrolling under a no-bid contract.
After criticism of the no-bid arrangement, the Housing Authority solicited proposals for the one-year job. Ten firms submitted bids, and NOI Security was selected from four finalists. Wells Fargo's bid was the lowest at $3.5 million; the two other finalists bid $4.1 million.
The prices reflect the differences in hourly rates the firms charge for security officers: $11 for NOI Security; $8.23 for Wells Fargo; and $9.76 and $9.68 for two other finalists.
HUD reviewed the NOI Security contract after complaints by Wells Fargo, which last year sued the Housing Authority. The suit, pending in Baltimore Circuit Court, accuses the authority of violating federal procurement rules, which try to ensure that public contracts go to companies with the highest qualifications and lowest prices.
An attorney for Wells Fargo said yesterday that the HUD ruling "is not good enough."
"NOI acquired that contract inappropriately," lawyer Laurence A. Marder said. "They don't have any business deriving any benefit from that contract."
Since NOI Security began patrolling the Baltimore housing projects, serious crime has dropped an average of 35 percent, Mr. Germroth said. Mr. Tamburrino, the HUD manager, told Mr. Henson that the agency could keep NOI Security, but that it would have to pay the price. Should it retain NOI Security, the Housing Authority not only would have to pay the $1 million, but it also would be required to cover legal costs and damages resulting from the suit filed by Wells Fargo.
The authority's two other options also would cost taxpayers.
Should the agency award the contract to Wells Fargo, it would have to reimburse HUD for the extra money paid to NOI Security.
Should the Housing Authority decide to scrap the contract and reopen bidding, the agency would still have to refund the difference in price.
In any case, the Housing Authority would not be permitted to use federal funds to reimburse the government. "It's up to the Housing Authority to decide where those funds come from," said HUD spokeswoman Vivian Potter.
Although NOI affiliates have similar security contracts in other cities, Baltimore is the only city where questions were raised about how a contract was won, HUD says.
In recent months, Congress has been examining the affiliates, after accusations that they were using security patrols as a recruiting tool for the Muslim sect.