AGENDA #5j

 

MEMORANDUM

 

 

TO:                  Mayor and Town Council

 

FROM:            W. Calvin Horton, Town Manager

Ralph D. Karpinos, Town Attorney

 

SUBJECT:       Airport Gardens Rehabilitation Project

 

DATE:             May 10, 2004

 

The purpose of this report is to provide further information in response to questions from the April 26, 2004, Council meeting pertaining to the Airport Gardens Rehabilitation Project.

 

BACKGROUND AND CHRONOLOGY

 

The following is a brief chronology of events and correspondence related to the Town’s efforts to enter into a construction contract for the renovation of the Airport Gardens Public Housing Development:

 

  1. On December 17, 2003, bids were opened.  Pursuant to the bid form, bids submitted are good for 90 days and cannot be withdrawn during this time period.

 

  1. On January 28, 2004, the Council accepted a bid and awarded a contract to Carl Garris & Son, Inc., (Garris) for rehabilitation work for 18 apartments at Airport Gardens.

 

  1. Following this action, on or about February 4, 2004, the Town Attorney was visited by Walter Ricks, an attorney, on behalf of Hairston Enterprise (Hairston), regarding the Council’s action.  Mr. Ricks raised concerns regarding how the bids and alternates were evaluated and selected.

 

  1. Shortly after that meeting, Mr. Ricks filed a Letter of Protest with the Town, dated February 6, 2004, raising issues regarding the Town’s handling of the bidding for this construction project. A copy of the letter was also mailed to officials at the U.S. Department of Housing and Urban Development (HUD).

 

  1. On February 13, 2004, the Town’s architect notified Garris that the Town intended to award the bid to them.

 

  1. On February 18, 2004, the Town Manager wrote to Mr. Ricks and advised him that the Manager and Attorney were recommending that the Council, on February 23, 2004, modify the bid award, in response to the issues he had raised.  The recommendation was to eliminate the language pertaining to possible change orders. 
  2. On February 23, the Council modified the bid award resolution to eliminate the possibility that future alternates would be treated as change orders. Mr. Ricks and his client attended the February 23 meeting and elaborated on their concerns.  The Council requested additional information from the Town staff. The Council requested that they be informed of HUD’s decision prior to the contract with Garris being signed.

 

  1. On February 24, 2004, the Attorney wrote to Mr. Ricks informing him of the action taken by the Council on February 23, and inviting him to provide additional information.  We did not receive any information in response.

 

  1. O n February 26, 2004, the Attorney wrote to Sandra James at HUD.  The letter reported the action taken by the Town to address issues raised pertaining to State bid law and requested guidance as to applicable federal regulations.

 

  1. On February 27, 2004, Tina Vaughn, Town Director of Housing, received a letter from HUD notifying the Town of a bid protest having been filed, citing violations of Federal regulations and standards. 

 

  1. On March 2, 2004, Ms. Vaughn responded and sent the documents to HUD pertaining to the Airport Gardens rehabilitation contract.

 

  1. On March 10, 2004, Mr. Amoes H. Sheppard at HUD responded to the Town Attorney’s letter and said that the Town would be notified of HUD’s decision.

 

  1.  On March 22, the Council received the requested further report from the Manager and Attorney.  That report stated that the administration would defer execution of the contract until a response was received from HUD confirming that the Town could proceed with the project and stating that if HUD directs an alternative course, the matter would be brought back to the Council.

 

  1. On March 31, the Town’s Housing Department forwarded the construction contracts for this work, which had been executed by Garris, to the Finance Department.  On April 6, the contracts were received in the Town Attorney’s office and were held there pending resolution of the protest by HUD. The Attorney spoke with the Town’s architect regarding the possibility that Garris could withdraw its bid since the 90 day period had expired.  The Architect reported that Garris was still interested in the project and was making plans and preparing to do the work.

 

  1. On April 8, 2004, HUD notified Ms. Vaughn regarding the results of their evaluation of the protest filed by Hairston. The letter was sent to Ms. Vaughn by facsimile transmission.  Upon receipt of that letter, the Town staff determined the appropriate course of action would be to recommend to the Council that the project be rebid.  Because we understood that Garris was preparing to proceed and had been expecting to receive a signed contract and a notice to proceed, we immediately notified him of the letter and of the Town staff’s intent, based on the determination by HUD that the Instructions to Bidders had violated Federal Regulations, to recommend that the project be rebid.  (This was the first formal communication from the Town to Garris about the protest.)  We also sent a copy of that letter to HUD.

 

  1. On April 8, Housing Director Tina Vaughn sent an email to Christopher Boozer, a Procurement Liaison at HUD.  That e-mail stated: 

“In the closing paragraph of the April 8, 2004 letter from Mr. Amoes Sheppard, he “strongly suggest that CHHA reject all bids for this project and re-bid the procurement.”  Is this truly a suggestion, or is it a directive from HUD?”

 

  1. On April 13, 2004, Mr. Boozer responded:

“HUD is giving the HA an opportunity to make their own decision based on HUD regulations and HA Procurement Policy.  If the HA is sued, HUD will not provide funds for litigation or settlement; and the HA will have to pay for it out of Non-Federal funds.”

 

  1. On April 14, 2004, the Council adopted a resolution directing the Manager to not execute the pending contract with Garris, and to re-advertise the project for new bids.  The Town did not send notice of this meeting to Hairston.

 

  1. On April 15, 2004, the Town Purchasing Coordinator returned bid bonds to all bidders and informed them that no contract would be signed.  She advised them that the Town would be re-bidding the project in the next several weeks.

 

  1. On April 15, 2004, the Town Attorney notified Garris that the Town would not be executing the contract Garris had signed several weeks earlier. 

 

  1. On April 26, 2004, Mr. Ricks and Vincent Brown from Hairston presented a petition to the Town Council.  The petition was referred to the Town Staff to come back at this meeting. 

 

  1. The Housing Director, Assistant Town Manager, Purchasing Coordinator and Town Attorney, upon receipt of the April 8 letter began considering the next steps.  Following the Council’s action on April 14, the Town communicated with the Town’s architect.  Based on the issues raised by Mr. Ricks and the decision by HUD in response to the protest, and expected available funding, adjustments were made to the Notice to Bidders and Instructions to Bidders.   (The changes are more fully discussed below.)  An invitation to bid was mailed to those on the Town’s bid list, including those persons who submitted bids in December, 2003, for this project. 

 

  1. The advertisement for bids has been published on May 2, 2004 and May 6, 2004.  A pre-bid conference is scheduled for May 18, 2004.  The bid opening is scheduled for May 25, 2004. 

 

(Copies of the referenced correspondence are attached in chronological order.)  (Previous memoranda to the Council on this matter, dated January 26, February 23, March 22, and April 14, 2004, are available on the Town’s website, http://townhall.townofchapelhill.org/.)

DISCUSSION

 

Hairston Enterprise initially raised issues pertaining to the Town’s award of the bid for Airport Gardens under both state bid law and under Federal regulations. 

 

As far as State bid laws are concerned, the Town staff recommended changes and the Town Council took steps to modify the initial bid award to address the concerns raised related to state bid law.  These were explained in the February 23, 2004, report from the Manager and Attorney to the Town Council.  The Council, on that date, modified the January 28, award of bids to make it clear that the additional parts of the project would be handled through further bidding and not by change order. 

 

Hairston Enterprise’s protest filed with the U.S. Department of Housing and Urban Development raised issues about the Town’s procedures being in conflict with Federal procurement regulations. In response to HUD’s request, the Town sent HUD the documentation related to this project. HUD considered the protest filed by Hairston and on April 8, notified the Town of its decision.  The Town does not have information from HUD pertaining to when or how HUD notified the protesting party of its decision.

 

Upon receipt of HUD’s decision, the Town staff immediately began taking the steps necessary to rectify the problems identified by HUD.  As that letter indicates, the problem found by HUD was the Town’s violation of “procurement standards at Title 24 Code of Federal Regulations (CFR) 85.36(c)(3)(1) which states: ‘Grantees will have written selection procedures for procurement transactions.  These procedures will ensure that all solicitations incorporate a clear and accurate description of the technical requirement for the material, product or service to be procured.’”

 

As HUD’s letter of April 8, 2004, further states, “It is the decision of this office that CHHA was not clear on how the alternates would be applied to the selection process for the comprehensive rehabilitation work at the Airport Gardens public housing neighborhood.”  The letter’s concluding paragraph stated:  “We strongly suggest that CHHA reject all bids for this project and re-bid the procurement.”

 

We considered the letter from HUD and the subsequent response by Mr. Boozer to Ms. Vaughn’s email message.  Because the flaw in the Town’s proceedings found by HUD related to the failure to provide a clear and accurate description of the work to be procured, we concluded that the proper recommendation would be to ask the Council to reject all bids and re-bid this project.  We did not see any basis, in the April 8 letter, Mr. Boozer’s message, or in State bid law, to support a decision at this time to award the bid for any part or all of this project to Hairston Enterprise.  Our goal has been to seek to comply with State bid law and federal regulations.  We do not believe that under the combined set of regulations from these two sources, in light of the steps that have occurred thus far, HUD’s determination, and the available funding, that we can recommend that the Council award a bid for some part of this rehabilitation project to Hairston Enterprise.

 

In preparing this project for rebidding, we were mindful of the concerns raised by Mr. Ricks in his initial comments to the Town Attorney and in his letter to the Town.  We were also mindful of the determination made by HUD in its April 8, letter.  In addition, the Assistant Manager, Housing Director, Purchasing Coordinator and Town Attorney met to review this matter and discuss the funds realistically available.  We concluded that the Department would not have funds available to pay for the rehabilitation of all of the site work in addition the rehabilitation of the dwelling units themselves. Funds now available for this project total $919,328.  We are not able to obligate funds not available or to commit to a contractual relationship based on possible future funding. Accordingly, we have modified the invitation to bid to reflect that we are only seeking bids this time for the rehabilitation of the 26 dwelling units.  We have eliminated the site work as an alternate add-on to the bid and, as stated above, it would not be considered for a change order to this contract.

 

With respect to the dwelling units themselves, we have established a base bid for the dwelling units in one of the buildings and included two alternates to add the dwellings in the other two buildings.  The base bid is for 8 dwellings in one building.  There are 10 dwellings in one of the other buildings and 8 dwelling units in the third.  Because these are in separate buildings, we believe that this potential division of the work is reasonable, although depending on the bids we receive, it is possible that we will be able to award a bid for all of the rehabilitation work on all of the dwelling units.  We have included in the instruction to bidders additional language to address the concerns raised by HUD and explain how the alternates would be applied to the selection process.  As stated in the new Instructions to Bidders, the Town’s objective is “to do the rehabilitation of as many of the dwelling units it can based on the bids and the funds available.”  The site work will not be treated as a possible change order but will be subject to a separate contract procedure if and when the Department of Housing has funds available to pursue that work. 

 

CONCLUSION

 

We are ready to respond to any further questions the Council may have regarding this matter.

 

ATTACHMENTS

 

  1. Walter Ricks letter of February 6, 2004 (p. 6).
  2. Letter from LDA Architecture dated February 13, 2004 (p. 9).
  3. February 18, 2004 correspondence from Town Manager to Mr. Walter Ricks (p. 10).
  4. February 24, 2004 correspondence from Town Attorney to Mr. Walter Ricks (p. 11).
  5. February 26, 2004 letter to HUD from Town Manager (p.12).
  6. Correspondence from HUD dated February 25, 2004 (p. 14).
  7. Letter to Asset Management Division, HUD dated March 2, 2004 (16).
  8. March 10, 2004 letter from Amos H. Sheppard, HUD (p. 18).
  9. Correspondence from HUD dated April 8, 2004 (p. 19).
  10. April 8, 2004 correspondence to Mr. Steve Garris (p. 21).
  11. April 8, 2004 correspondence to Amos Shepard, HUD (p. 23).
  12. E-mails (p. 24).
  13. Correspondence to Steve Garris dated April 15, 2004 (p. 26).
  14. Correspondence to bidders (p. 27).
  15. Petition dated April 23, 2004 (p. 29).