Detroit Water Department Questioned for Contracts, Avoiding Council Scrutiny

The procurement policy says that city council is required to approve professional services contracts more than $2 million

Detroit Free Press

Aug. 29--After the Detroit City Council refused to support a $48-million no-bid contract with a water consultant that was proposing massive job cuts to the water department, the Detroit Water and Sewerage Department forged ahead with the consultant anyway and approved a series of less valuable contracts small enough to avoid the council's scrutiny.

Each of the four contracts the Board of Water Commissioners approved since November 2012 with consultant EMA was worth $2 million or less -- just below a threshold requiring the additional approval of the city council.

A union official representing about 730 water department workers said the maneuver to avoid transparency is troubling.

"There's a reason the City Council chose not to go along with the EMA project. Whatever that was, it was circumvented," said Michael Mulholland, acting president of AFSCME Local 207. "If they're not in bed together, why are they closing the curtains?"

Although the EMA contracts have slipped under the council's radar, members recently questioned water officials about whether the department sliced up another contract for sewer repairs in order to avoid a vote by city council. That deal that is now under investigation by the city's inspector general.

Concerns about the water department's contracting practices come at a unpredictable time. Emergency manager Kevyn Orr shook up the department's management late last month -- amid criticism of the department's shutoff policy -- when he handed over operational control to Mayor Mike Duggan. Meanwhile, confidential negotiations supervised by the bankruptcy court continue over whether to restructure the water system by establishing a regional authority.

The contracts with EMA, based in St. Paul, Minn., are designed to help the water department undergo its own internal restructuring by evaluating job descriptions, the department's information technology network and assets of the water system.

But rather than lump those contracts into one deal, the water department over eight months approved contracts of $2 million, $1.99 million, $1.99 million and $1.55 million. It approved its first $2-million contract with EMA a week before the council's refusal to approve the $48-million deal. The most recent two contracts were approved at the July 2013 meeting of the Board of Water Commissioners.

The DWSD's procurement policy, guided by a 2011 federal court order, says the city council is required to approve professional services contracts more than $2 million. Construction contracts worth more than $5 million also require council approval.

Cheryl Porter, the water department's chief operations officer, said the department did not break up the EMA contracts to avoid the extra layer of approval. Water department director Sue McCormick was not available for an interview.

"It's unfortunate that the perception is what it is," Porter said. "These were unique, separate scope items, all enabling us to get to a sustainable, supportable organization."

Porter said she is not aware of any forthcoming contracts with EMA.

Councilman Scott Benson, who chairs the committee that studied the sewer repair contract now under investigation, said the water department might need a culture change.

"I've also got an issue with contracts that come in just at the threshold," Benson said. "Even if there's no nefarious motive, there's a perception that you're trying to skirt the law."

John Roach, a spokesman for Duggan, said the mayor has not reviewed the EMA contract issue.

"The Board of Water Commissioners still makes the day-to-day operational decisions for the water department, although there is significant cooperation and coordination with the mayor's office now," Roach said. "What the mayor has now is the ability to remove BOWC members for cause, which is something he has not felt the need to do at this time."

In the summer of 2012, EMA issued a report for the Detroit water department recommending an 81% reduction in workers, from 1,978 employees to about 374 over five years. An additional 361 outside employees would work for the department on contracts, bringing the total workforce to 735.

Then-mayor Dave Bing and the Board of Water Commissioners embraced the 2012 report. The board approved a multiyear contract with EMA, hoping to save the department money and slow increasing water rates.

The water department has not implemented widespread staffing cuts since hiring EMA, union president Mulholland said. He said EMA has helped set up a process for reducing the workforce in the near future by drawing up new job descriptions. Mulholland said he expects some workers who don't fit the new job titles to be given temporary jobs.

But as the report recommended hiring employees on contracts, on Aug. 14, the water department hired a former EMA consultant to be the department's interim waste water operations director.

Butler Benton, a former Wayne County environmental official who retired in 2011 with an $80,000 annual pension, will make $151,100 under his short-term contract with the water department. Benton worked for EMA during its engagement with the water department.

Mulholland said the department's message seemed oblivious to the stress EMA's project was putting on workers.

"How could you be so tone deaf and blind that you wouldn't see people afraid for their jobs and then tell them to embrace the chaos?" he said. "What planet do you live on?"

Veolia Water, another consultant, is now on the way to evaluate the water department's operations and its optimization plan.

Although water officials have avoided connecting Veolia's work to the city's bankruptcy case, Orr's spokesman said last week that Veolia's review is in fact tied to the negotiations for a regional authority.

The water department is not paying Veolia; the state is picking up the tab. A spokeswoman for Gov. Rick Snyder said she could not discuss the Veolia contract due to a court order that water negotiations remain confidential.

Veolia Water will spend two months reviewing the Detroit water department, McCormick announced to her staff Aug. 19.

"As with the EMA engagement, we are committed to full transparency and communication," McCormick wrote to staff. "We look forward to the results as another milestone on our path of continuous improvement."

Contact Joe Guillen: 313-222-6678 or [email protected].

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