When Mayor Catherine Pugh and the Board of Estimates approved a $24 million expansion of a conduit contract last December, the project was in “non-compliance status” and its contractors under threat of substantial penalties, The Brew has learned.
During the first phase of the contract, Commercial Construction and KCI Technologies had failed to perform key tasks, such as providing field supervision and laborers, and had missed minority and women’s hiring goals by a long shot.
Now the companies were facing forfeiture for “material breaches” of the contract as well as the prospect of having to pay liquidating damages and suffer a two-year suspension from performing city work.
But instead of penalizing the joint venture – as recommended by the city official in charge of the project – the Pugh administration doubled the price of the contract (from $26 million to $50 million) and gave the contractors a green light to start phase 2.
The Money Nexus
What smoothed the path forward for TR-16020, one of the biggest infrastructure projects currently underway in Baltimore?
A major factor was the connection between Mayor Pugh and the two businessmen behind Commercial Construction. Their personal and financial bonds swept aside the MBE and WBE rules enshrined in the City Code and made a mockery of administrative process.
The mayor swept aside MBE and WBE rules as she doubled the price of the conduit award.
The two businessmen are Kevin Johnson, CEO of Commercial Construction and Commercial Group, and J.P. Grant, founder and president of Grant Capital Management. Last week, The Brew identified Grant as a secret investor in Commercial.
Unknown during the first months of Pugh’s mayorship in 2016 and early 2017, Johnson had arranged for his companies to renovate – at a steeply discounted price – her new home in Ashburton.
In roughly the same period, Grant had paid Pugh $114,000 ($100,000 through his finance company and $14,000 through Associated Black Charities) to help her print her “Healthy Holly” children’s books.
Two years later, Commercial found itself in trouble with the conduit contract it shared with KCI, a politically-wired engineering firm based in Sparks.
Michael E. Thomas, conduit supervisor at Baltimore’s Department of Transportation, was threatening to terminate the contract because of multiple infractions.
His concerns were detailed in a December 13, 2018 letter to Khalil Zaied (Baltimore’s former deputy mayor under Mayor Stephanie Rawlings-Blake), who had been recruited by the joint venture to head the project.
In the letter, obtained by The Brew, Thomas told Zaied that the two companies lacked the bonding capacity to continue the project. He noted that Commercial was pre-qualified at only $8 million and KCI at $24.87 million.
That amount had been sufficient when the contract was initially let in August 2016.
But the Pugh administration’s plan to increase the contract price to $50 million “far exceeds the money limit of the Tri-Venture,” Thomas wrote. He asked KCI and Commercial to “please advise” how they will address this shortcoming, which could expose the city to millions of dollars of losses if the contractors defaulted.
What’s more, Thomas said, KCI and Commercial (Tri-Venture) weren’t supervising the rebuilding of conduit tunnels that carry electric, fiber optic, telephone and other cables under city streets.
Thomas believed Commercial was sending invoices to the city with a 10% mark-up.
The contractors had provided “no substantiation for office support staff or field supervision as per contract line items or certified payrolls for laborers,” Thomas wrote, adding:
“We have seen no indication of KCI/Commercial trucks and/or equipment performing construction tasks.”
At the same time, Thomas believed Commercial Construction had created “an additional organizational level” that resulted in a 10% mark-up in invoices sent to the city.
Spiniello Does the Work
In fact, sources tell The Brew, the majority of the work was performed by Spiniello Companies because Commercial Construction had no prior experience in the conduit business.
Thomas also questioned invoices submitted by KCI/Commercial in the letter.
“It raises an eyebrow,” he wrote, “when observed that Washington Stair and Iron, originally contracted to perform steel fabrication to secure manholes, was replaced by Priority Construction, Paniagua Enterprises and Bryant Concrete, which are contracted to perform concrete, split-duct and concrete, respectively, for exactly the same contract amount.”
Minority and women’s participation goals were woefully below the goals mandated by the Board of Estimates in 2016.
This subjected KCI/Commercial to various potential penalties under Article 4, Subtitle 28, of the City Code.
Thomas recited those penalties as “suspension of contract, withholding of funds, recession of contract based on a material breach, disqualification of contractor from eligibility to provide goods and services to the city for a period not to exceed two years, and payment of liquidated damages.”
Pugh was warned by a prominent lawyer not to award more money until there was an internal review.
Thomas rejected Tri-Venture’s subcontracting plan and recommended that his superiors not issue a notice-to-proceed on phase 2 of the project, the reconstruction of conduits under Greenmount Avenue in Waverly.
If the subcontracting plan and the other issues were not resolved within 30 days, “action against the contract should be pursued,” Thomas concluded.
“The mayor blew it off”
Sources tell The Brew that Mayor Pugh was warned by a prominent lawyer not to award more money to the conduit project until there was an internal review.
“The mayor blew it off. She didn’t give a damn,” a source said.
Instead, Pugh approved the $24 million contract bump-up at the December 19, 2018 BOE meeting – or six days after the Thomas letter was sent to Zaied.
So did the other four members of the board – City Council President Bernard C. “Jack” Young, Comptoller Joan Pratt, Public Works Director Rudy Chow and City Solicitor Andre Davis.
About seven weeks ago, the Greenmount Avenue Phase 2 conduit rebuild was approved by DOT.
And on April 3, amid the escalating Healthy Holly scandal, the BOE was notified that KCI’s bonding capacity had been raised from $24.87 million to an eye-popping $61.68 million.
Thanks to this new reported value, the Commercial/KCI group is now within the “money limits” of the expanded conduit contract approved by the BOE.
NOTE: The Brew has queried the offices of DOT Director Michelle Pourciau, Acting Mayor Young and City Solicitor Davis for information on the current status of TR-16020. So far, we have gotten no response. Attempts to reach Kevin Johnson and J.P. Grant have been unsuccessful.
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