Protest filed over jail project bids
Wisconsin firm claims flawed process would cost taxpayers extra $173,000
Marshall Helmberger
courtesy of Arrowhead Regional Corrections
The Northeast Range Correctional Center, north of Duluth, is undergoing a $10 million renovation project. One company is protesting the bid process for part of the project.

REGIONAL—Did a flawed bidding process for a renovation at the Northeast Regional Correctional Center, north of Duluth, possibly violate state law and cost taxpayers in the region an extra $173,000 for just one component of the $10 million project?

That’s the claim of at least one of the companies that sought the contract for supplying and installing 18 new detention cells at the correctional facility, located in Saginaw, which is operated by Arrowhead Regional Corrections, a multi-county entity.

Andrea Ward, the owner of WDSI Inc., a small, Wisconsin-based firm that specializes in jail projects, has filed a formal protest with officials from ARC and with St. Louis County, which is handling the bid process for ARC.

On March 18, St. Louis County awarded the contract for steel detention cells to Indiana-based Pauly Jail, Inc., even though its bid of $1.15 million was substantially higher than WDSI’s quote of $976,900. WDSI was also substantially cheaper on each of four bid alternates. Both companies have been in the business for many years and are staunch competitors.

While Pauly Jail frequently underbids WDSI on jail projects elsewhere, the company had reason to believe it had the inside track this time around. That’s because the bid specifications established by the project’s architect, Duluth-based Scalzo Architects, were written, nearly verbatim, for a manufacturer that works closely with Pauly Jail, and that won’t sell to some of its competitors, including WDSI.

Ward said she became concerned about the process when the architect first released the bid specifications earlier this year. Ward noticed that the specifications seemed remarkably specific, as if designed intentionally to exclude all but one manufacturer. In fact, acknowledges Scalzo Architects principal Bill Scalzo, the bid specifications were essentially taken from a single manufacturer, Georgia-based Steel Cell of North America.

Large portions of the architect’s specifications appear to have been simply cut and pasted from the company’s website, which posts sample specifications that are written exactly to its manufacturing process.

While there are a number of jail cell manufacturers around the U.S., each uses slightly different methods, designs, and finishes, but most generally meet various industry standards

Ward, and others in the industry contacted by the Timberjay, note that by selecting one manufacturer’s specifications, the architect in this case all but guaranteed the job to Steel Cell of North America. In fact, barely two weeks before the bids were due, the architect issued an addendum to the specifications that listed Steel Cell as the only manufacturer qualified for the project.

That addendum allowed for other manufacturers to pre-qualify as well, but it indicated that their documentation had to be submitted “ten business days” prior to the bid opening, which at that time was schedule for March 14. The addendum was issued on Feb. 28, exactly ten business days prior to the planned bid opening. The bid opening was later pushed back to March 18, but that decision came too late for any other manufacturer to meet the ten-day pre-qualification window— leaving Steel Cell as the sole qualified supplier on the project.

Such “sole-sourcing” on public projects is considered illegal in Minnesota except in very rare instances, and it has prompted the shutdown of jail projects in other states, at least when federal dollars were involved. In 2011, bidding on a jail project in northwestern Missouri was halted when WDSI, Inc. alerted federal officials with the USDA’s Rural Development program that bid specifications were too closely tied to one company. “It became what we would call ‘overly-restrictive,’” said Sara Loe, Rural Development’s state architect in Missouri, who intervened in that case. “Generally speaking, our funding does require free and open competition.”

The specifications on that project were eventually rewritten to allow for open competition, which is required on most federal projects.

Scalzo, in an interview, said it was not his intention to limit the supplier to Steel Cell of North America, but he acknowledged that his actions could be perceived that way.

ARC Executive Director Kay Arola said a team that included the architect, representatives from the Department of Corrections, and ARC staff made many of the decisions together. She said DOC representatives had advised them that some steel cell manufacturers had experienced quality control problems, which had led to premature deterioration. “We knew we absolutely had to have something that would hold up over time,” said Arola, noting the difficulty of obtaining facility improvement dollars under the current ARC structure. “It takes all five county boards to come to the same place at the same time to make this come about,” she said. “We didn’t want products that wouldn’t hold up. And we had to trust what our experts were telling us.”

Scalzo argues that the bidding process did allow other manufacturers to qualify, but none chose to make the effort. In some cases, said Arola, it was apparent that certain manufacturers did not meet all the requirements, including that they be in the steel cell manufacturing business for at least ten years.

Yet interviews with principals from three other jail cell manufacturers, Maximum Security Systems, Sweeper Industries, and Chief Industries, reveals why Steel Cell ended up with this project to itself.

Representatives from all three companies told the Timberjay that when an architect designs specifications solely for one company, it’s rarely worth the considerable effort to obtain qualification on such a job. “Sometimes an architect gets in bed with one manufacturer and there’s nothing you can do,” said a sales representative for one of the rival manufacturers, who asked that his name not be used. He said he contacted Scalzo about the job, but in the end, he said the company felt it was not worth the fight. He said his company has made the effort more than once, spending a month putting together all the documentation required to be qualified, only to be told “no “in the end for no apparent reason. “We’d be happy to work on the NERCC project if they want to rebid the project using an open spec,” he added.

Jay Seavy, a principal with Maximum Security Systems, who has worked in the industry for decades, offered a similar view. “Everyone in this industry knew who was getting the job,” said Seavy. “When these projects get set up this way, there’s only one way the bid can come out.”

Seavy said it’s an all-too common practice in the jail construction industry, but it’s one that has occasionally prompted county boards and even law enforcement to take action. “The FBI is investigating an architectural firm for this kind of thing,” Seavy said. That investigation stems from a 2013 jail project in Pascagoula, Miss., where county commissioners fired an architectural firm after it was revealed the company engaged in actions that “call into question the openness and competitiveness of the bids as required by law,” according to a report from the Pascagoula-based Mississippi Press.

According to Ward, the Pascagoula project involved a too-cozy relationship between Pauly Jail, Steel Cell of North America, and the fired architect.

In the case of the NERCC project, manufacturers seeking qualification had to submit a long list of documentation, affidavits, and certification, with no guarantee they would be approved. As for Steel Cell, the company did not have to submit anything at all. “Basically, they were approved because it was based on their spec,“ said Scalzo.

Scalzo said his approach is common practice in his field, and is designed to maintain a “level-playing field” while maintaining the product performance necessary for a project. He said he “always works to create a competitive bidding process for the good of the project and for the benefit of the client,” and he feels his firm met that objective in the current project.

Yet by effectively sole-sourcing the manufacturing work to Steel Cell, the process used in this case all but eliminated real competition in the bidding process, according to Ward. She said Steel Cell and her competitor Pauly Jail have a very close relationship, and that made it all but impossible for her to compete. “I’ve tried to use Steel Cell myself, but they usually won’t even give me a quote. If they’re feeling generous, they’ll give me a quote that’s so high I could never get the job,” she said. “It’s just because they protect Pauly Jail at all costs.”

Seavy agreed the NERCC bidding process lacked competition because the process left everyone else feeling the deck was stacked from the start. “When we run across conditions where it’s being set up for Steel Cell or Pauly Jail, we don’t bother,” he said.

Ward said she eventually felt the same way, after she had made the effort to be qualified as a project subcontractor. But after expending considerable resources to get her own company qualified to bid, Ward said she decided to see it through regardless of the outcome.

In the end, Ward indicated in her bid that she’d be using another manufacturer, Chief Industries, which meant her low bid was immediately disqualified— handing the job to Pauly Jail, the only other company that submitted a bid. She said she still holds out hope that county commissioners will be interested in a competitive process and will seek to rebid that part of the project.

Scalzo notes that Chief Industries acknowledged that they would not qualify to manufacture the cells, since the company has not been in that particular line of manufacturing for the required ten years. A company principal confirmed that, but also stated that Chief— a long-established producer of a wide range of steel products— could have delivered a quality product that met all the other specifications.

Special treatment?

Ward, in a letter from her attorney, also claims that ARC, and St. Louis County purchasing, gave other special treatment to Pauly Jail, by excusing them from attending pre-bid meetings that were mandatory for all bidding companies.

A sign-up sheet from a Feb. 26 pre-bid meeting does show that representatives from WDSI, Pauly Jail, and Sierra Detention were all present, but, in fact, says Mike Jacobi of WDSI, he was the only representative from any of the companies actually present.

Brandon Borgmann, a Sierra industries vice-president, confirms in an email, that no one from his company was present that day, nor at an alternative meeting held March 3, after poor attendance at the first meeting.

When asked about the issue, architect Scalzo indicated that St. Louis County purchasing manager Donna Viskoe had written in the names of the missing companies. He said Pauly Jail had visited the site earlier and had asked to be excused.

The bid specifications clearly indicate that “bids will be accepted only from those attending the mandatory pre-bid meeting.”

“The specification was unambiguous and did not allow any exceptions,” writes attorney Robert J. Huber, of the Stinson Leonard Street law firm, in WDSI’s protest letter. “Having made the mandatory pre-bid a material term of the specifications, the owner did not have any discretion to waive the requirement,” Huber added. “By law,” according to Huber, “the bid by Pauly Jail must be rejected.”

Facility in need of improvement

If there’s one thing that everyone agrees on, it’s that the minimum-security NERCC is in need of improvement. Once known as the county work farm, to this day the sprawling campus remains a working farm, albeit one showing its age. Arola said the main NERCC building, which houses administration, food service, programs, and bunking for the average of 125 residents, dates back to the 1930s and lacks many things that are considered standard in the corrections field in the 21st century. Among them is a way to secure prisoners who become violent, or who flagrantly violate rules of the facility. Currently, the facility has no secure lock-up, which means any time a prisoner becomes a problem, they must be transferred back to county jail. “When we looked at the project, we wanted to make sure we had an area for administrative control [of prisoners],” said Arola. That’s why ARC is adding the steel detention cells now the subject of controversy.

The $10 million NERCC renovation includes $6 million for improvements to the main building, with an additional $4 million for renovation of many of the 42 outbuildings located on the 3,200-acre site.

The five Arrowhead counties that comprise ARC have agreed to fund $6 million for the improvements to the main building. ARC has requested $4 million from the 2014 bonding bill, currently moving through the Legislature. While Gov. Mark Dayton did not include funding for the project in his bonding proposal, the House has included the funding proposal, according to Arola. The Senate has yet to release its own bonding plan.

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