High cost of low bids: Environmental, safety violators get stimulus contracts
PORTLAND — Federal stimulus funds funneled into Maine may have resulted in a reported 1,600 jobs and improvements to infrastructure all over the state.
Since 2009, the federal government has awarded $1.4 billion in American Recovery and Reinvestment Act funds to public, private and nonprofit organizations throughout Maine. The largest awards went to projects for roads and water main replacements.
The money was awarded to state agencies, which then hired contractors to carry out the projects. Some of the largest awards were to the Maine Department of Transportation and the Portland Water District.
Both PWD and DOT pick contractors based on the lowest bids. This process saves money, but can also result in companies cutting corners to achieve the lowest bids.
Many contractors have few or no violations of federal Occupational Safety and Health Administration or state Department of Environmental Protection laws. But in some cases, the agencies awarded contracts to construction companies with histories of violating state and federal laws.
The Portland Water District utilized the Maine Drinking Water Project’s State Revolving Loan Fund for 14 projects totaling $4.5 million in southern Maine.
All but $1.3 million of the award was an interest-free loan and will be paid back to the state.
Dearborn Construction of Buxton had the lowest bid on two PWD projects: water main replacements on Elizabeth Street in Portland and Wards Hill Road in Gorham, totaling $825,000.
“We go with the lowest bidder,” Chris Crovo, a PWD engineer, said of the district's selection process.
In this case, that meant awarding bids to a company with several recent OSHA violations, as well as a recent violation of Maine’s environmental laws.
On Sept. 29, 2009, an OSHA inspector fined Dearborn $28,500 for three serious violations, two of which were repeats, meaning the company was cited for the same offense, or one very similar, in the previous three years.
The largest of the fines, $21,000, was a repeat violation for failing to protect employees during excavations. Another repeat violation, for failing to have daily inspections to avoid trench cave-ins, resulted in a $6,000 fine.
About a year earlier, in November 2008, Dearborn was fined $21,000 for the same class of violations: excavation and protective system requirements.
OSHA Area Director William Coffin said that based on the company's violation history, either Dearborn has "complete disregard for employee safety or they just feel they can get away with it."
He said if the side of a trench caves in the outcome would be very serious and potentially life-threatening for workers.
Dearborn’s pattern of repeat violations for excavation safety continues back to 2002. In the past nine years, OSHA inspected Dearborn nine times and levied more than $60,000 in fines, six for repeat violations.
Dearborn also violated Department of Environmental Protection regulations in 2004 for improperly building parking lots and storage buildings on its Buxton property. The company was fined nearly $4,000 for not first obtaining DEP permits for the new construction, but was not formally cited for the violation until three years later.
"Dearborn is a fairly sophisticated company. They constructed on 6.73 acres, more than double over the three-acre threshold without a permit. That's something we'd expect them to know," DEP manager Peter Carney said.
According to the notice of violation, the amount of the penalty is based on the cause and circumstance of the violation, the fact that minimal environmental impact resulted, and the company's cooperation with DEP.
Despite the company’s history of violations, PWD gave Dearborn two federally funded contracts.
PWD's Crovo said he was not previously aware of the company’s record, but expressed concern when it was presented to him.
"We don't think that's very good," he said. "But on the other hand, without getting into details about what has happened, I don't know how bad they are. My understanding is that Dearborn does pretty good work and they are a pretty clean contractor. But let the record speak for itself, too."
He explained that PWD has an internal inspection process, and has the ability to approach contractors about safety or environmental concerns. However, he said this rarely happens, and never occurred with Dearborn.
Ronald Dearborn, the company's president, did not respond to repeated requests for comment.
Dearborn is not the only company with a history of violations that received federal stimulus money.
Shaw Bros. Construction of Gorham was awarded an $800,000 contract for MDOT's Bayside Trail project in Portland, plus a paving overlay project in Saco, and two PWD projects in Portland. The work totaled $1.5 million, even though the company had violated DEP regulations while working on a PWD project in Gorham in 2007.
According to PWD officials and the DEP notice of violation, the company planted the wrong wetland species while working on the $7.5 million Little Falls Wastewater Conveyance project, and had to remove the plants and reseed the area with native plants to comply with state regulations.
"The clean-up work was less than desirable," Crovo said of the contractor's work replanting the construction area. However, he said that PWD may have given Shaw Bros. the wrong seed mix, so the two entities ended up splitting the cost of replanting.
The year before it violated environmental regulations working for PWD, Shaw Bros. violated erosion control laws while working on the new Mercy Hospital building on the Fore River Parkway. Shaw Bros. received a notice of violation, but was not fined.
"We didn't agree with that fine. We fought that," Shaw Bros. Vice President and Controller Tom Biegel said.
The company won its fight, and Mercy paid the fines: $12,000 for discharging silt-laden, untreated storm water into wetlands and failing to install adequate erosion control measures.
Biegel said he was not sure about the violation with the PWD in Gorham, but that the company was very careful about environmental regulations.
"We have 40 employees that are erosion-control trained," he said.
PWD awarded the company two more projects in 2009 because the district was ultimately satisfied with Shaw Bros.' work and level of cooperation.
"They actually worked very well with us on (the 2007) project," Crovo said.
OSHA issued Shaw Bros. five violations over the past five years. None were repeat violations, and the largest fine the company paid was $6,300 for a March 2011 citation involving protection of employees in excavations.
Maine DOT projects
The PWD projects pale in scope compared with the nearly $33 million in area stimulus projects MDOT hired Pike Industries to complete.
Pike was the lowest bidder for several MDOT road, interstate and bridge construction projects, and was awarded the jobs despite a history of DEP and Environmental Protection Agency violations.
The Belmont, N.H., company violated the federal Clean Air Act by using more fuel than its 12-month allowance at several asphalt plants in 2006, 2007 and 2008. DEP sent the company a formal letter of warning in September 2009.
As punishment, the company was assessed a $7,500 fine, although it paid less than $2,600 because it agreed to teach a class on erosion control and air emissions at the University of Maine at Presque Isle.
"We knew we'd get the exact question: 'Hey, why are the violators going to go out and train people?' We thought the benefit outweighed the negative," the DEP's Carney said.
One Pike employee and two Pike-hired consultants taught the class May 10, 2010, writing off $381 in hotel rooms, $80 for printing and other costs against the balance of the DEP fine.
On Aug. 17, 2010, the company violated the very laws it's representatives supposedly taught attendees at the UMPI class to obey.
"I wasn't aware of that violation," said Jonathan Olson, regional manager and vice president of sales and paving at Pike.
During construction on Interstate 295 in Yarmouth, according to the DEP’s notice of violation, Pike replaced a culvert under the highway and failed to prevent significant erosion.
The result was the loss of an entire bank of the Royal River, removal of nearby vegetation, the rerouting of portions of the river, and sedimentation downstream, including eventual discharge of sediment to a coastal wetland adjacent to the Yarmouth Boat Yard.
Neither Pike nor MDOT had a permit for the work.
Olson said the company typically relies on its project managers to make sure projects comply with safety and environmental regulations. He said the company did not have a formal process for dealing with reported environmental issues, but that project managers are supposed to report issues to the company's environmental manager, who is responsible for all Maine projects.
"If we're working with DOT, we figure the state has an eye on the job. If they see a problem, they can call their sister agency," Olson said.
Pike was ordered to submit a restoration plan to the DEP detailing how the Yarmouth site would be restored. No fees have been assessed for the damage.
OSHA cited Pike for two violations in the past five years. None were repeat violations, and the largest fine was for $4,000 in April 2009 for failure to ascertain that employees and their equipment were safe from an electric power circuit.
Like PWD, MDOT also awards contracts to the lowest bidder. In order to bid on a MDOT project, a contractor must first submit a prequalification application.
The application includes sections on its safety record and history of environmental violations, both of which are self-reported. A standard prequalification period lasts one year, but can be increased to three if the company is in good standing.
Once companies are prequalified, MDOT can award projects without re-examining credentials.
In December 2009, Pike indicated that it had not violated any federal, state or local environmental laws when it filled out a MDOT prequalification application – even though the company received the notice of violation from DEP in September 2009 for its three years of Clean Air Act violations.
"Based on my experience, contractors are only required to disclose environmental violations which are related to construction projects on their prequalification statements," Olson said. "The (September 2009 notice of violation) was related to the operation of a plant at a fixed facility, so Pike Industries does not believe that it was required to disclose it in the MDOT Contractor Prequalification Questionnaire."
MDOT has its own safety and environmental inspectors who are empowered to work directly with contractors to remedy any problems they find. While the agency has the power to boot companies off the prequalified list for bad behavior or violations, Scott Bickford, contracts and specifications engineer, said it rarely does.
"Our goal is to have as many prequalified contractors bidding on our work as we can," he said, because it results in lower prices.
Because DOT's prequalified list is used by organizations and municipalities around the state, Bickford said most contractors choose to work with MDOT to correct their problems.