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‘Very huge oversight’ to cost Baltimore $3.5 million — instead of $36 — to run parking garages

A “very huge oversight” will cost Baltimore $3.5 million to operate several parking garages in the city based on an agreement approved unanimously Wednesday by the city’s spending board.

The oversight, dubbed as such by the city’s procurement agent Keasha Brown, stems from a contract signed in 2019 with SP Plus Corp. to operate several parking garages used by city employees. When the Board of Estimates approved the award in June 2019, members were told the contract was for only $36 — the total amount of the company’s management fee.

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That figure, in fact, was a “clerical error” by the city’s former procurement officer Erin Sher-Smyth, explained Peter Little, executive director of the Baltimore City Parking Authority, to the board Wednesday. The contract also included operating expenses which have totaled $3.5 million from June 2019 to present.

“It wasn’t so much of a miscalculation as it was an oversight,” Brown said. “A very huge oversight.”

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Little said SP Plus is responsible under the contract for collecting all revenue from the city garages it operates. The contract in question includes Lexington Street and Baltimore Street garages as well as the Arena Garage. The contractor must pay all operating expenses such as maintenance and payroll upfront, and can then bill the city for those costs on monthly basis. Based on the error with the contract, that reimbursement has been on hold for at least eight months, Little said.

Comptroller Bill Henry, one of five members of the spending board, questioned whether SP Plus, which is based in Chicago, beat out any competing bidders for the contract based on the error.

Bolu Oluwasuji, a procurement manager for the city, said the solicitation only asked for management fees because operating fees cannot be predicted.

Little contradicted that statement, however. He said operating fees can be anticipated, and are budgeted by the parking authority. The bidding process also ranked vendors’ technical abilities and local presence.

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Henry said there appeared to be little opportunity to make money on such a contract.

“It sounds like a big national firm came in and underbid all the local firms to take a contract they could afford to not make a lot of money on with the potential side effect, if not intention, of taking away work from local firms to reduce competition in the future,” Henry said.

Little said that was not the case. Smaller local firms with minority and women ownership have secured other contracts for parking under the same procurement process, he said.

When the contract was awarded in 2019, a protest was filed by Danas Enterprises, a Maryland firm that argued the price of the bid was so low it constituted predatory pricing.

“Look at the entire circumstances of this proposal and this award, and we think that it can only be viewed as an intent to — to force competition out of the market,” attorney Maggie Witherup, who represented Danas Enterprises said at the time.

An official with SP Plus appeared before the board in 2019 arguing there was a profit to be made with the liability insurance portion of the contract, according to minutes from the meeting. Baltimore pays the company an allocation for insurance, but the company is self-insured and does not pay a premium. If insurance costs are low, the money is kept by the company.

Danas Enterprises argued it was “completely unfeasible” to operate a parking garage for the $36 bid from SP Plus. The group pointed to management fees for the three garages that ranged from $41,269 to $93,074 in the three years prior.

“Clearly, the contract, the solicitation, said anything under a dollar would be unreasonable,” then purchasing agent Sher-Smyth said in 2019 of the group’s argument. “Therefore, the opposite is true, a dollar and up is considered reasonable, and the evaluation committee found it so.”

Tiffany James, the parking authority’s communications manager, said Wednesday that the authority budgeted for the full operating expenses for the three garages and the cost is not unexpected. The mistake was made in the memo presented to the Board of Estimates, she said.

On Wednesday, the board approved not only the $3.5 million in operating costs but an additional $4 million in such expenses for the company from June 3, 2021 through May 31, 2022. The vote was unanimous. City administrator Chris Shorter appeared in place of Mayor Brandon Scott.

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