Shut Out: New Jersey Strikes Down Suspicious Bidding
Proprietary specs — the dream of any manufacturer. In a competitive industry like roofing, it can be a relief to snag a job without having to sharpen your pencil too much, but at what point do such efforts cross the line? Shutting out legitimate competition on a consistent basis can present a number of ethical, legal and practical problems, but in New Jersey, there's a call to arms.
After numerous complaints from contractors, manufacturers, consultants and private citizens, the State of New Jersey Commission of Investigation looked into the matter. Last September, it released a scathing 118-page report entitled Waste and Abuse: Public School Roofing Projects. The investigation began in 1997 and eventually looked at 115 roofing projects costing $37.8 million in 39 school districts throughout New Jersey. Irregularities were found in 59 percent of the school districts examined. The report concluded that $6 to $10 million dollars of "waste and abuse" were uncovered in a persistent and pervasive enterprise that continues to this day. Costly repairs, unnecessary replacements, safety concerns, payroll irregularities, subversion of the bidding process, and incompetent oversight by school officials are some of the charges leveled by the report, which includes a 68-page appendix containing rebuttals from those criticized.
"[T]he Commission's findings in this investigation should serve as a wake-up call to legislators, school administrators, taxpayers and parents alike," commission chair Leslie Z. Celentano wrote months before the final report was issued. "We have identified a host of systemic problems that are costing millions of dollars every year and possibly placing the safety of our children in jeopardy."
Close UpThe concern about proprietary specs in public school roofing projects is nothing new (see Roofer Magazine, June 1989, page 31) and other areas of the country have experienced similar issues. However, the level of abuse outlined in the New Jersey Commission report raises serious questions about the ability of school districts and other public entities to benefit from fair and open competition. One great irony in all this is that such public projects are supposed to be fundamentally equitable so that taxpayer dollars are properly invested and building are adequately protected.
Over 40 pages of the report were dedicated to Edison School District in Middlesex County, which had 17 roofing projects worth $6.7 million that were examined by the board. By early 1997, the district’s voters defeated measures to fund renovations, so it was in a difficult position and anxious to get some of its worst roofs repaired. "Thus began a chain of events that would enmesh the Edison School District in a web of deceit and manipulation costing hundreds of thousands of unnecessary tax dollars and raising doubts about whether the district, even at an excessive premium, ultimately got what it thought it had paid for," the report said.
According to the report, a principal from Roof Spec/Design Inc., a roofing consultant firm in Mount Holly, N.J., approached the district after hearing of its roofing woes. He gave a demonstration on different roofing products and offered to review some of the district’s roofs for free. Soon after, an unsolicited proposal was received from Roof Spec, which eventually won the contract for $254,000 to oversee the district's roofing projects. However, the report unearthed information showing significant financial ties between principals of Roof Spec and W.P. Hickman Systems Inc. of Solon, Ohio, including payments of $361,000 between 1995 and 1998 to "various phony or paper companies" maintained by Roof Spec principals. In all, the report alleges that principals of Roof Spec and the Hickman sales representative received $764,000 for the Edison School District projects, over 11 percent of the total project.
Other concerns expressed by the report include lack of an involved registered architect on the Roof Spec staff as required by New Jersey law for firms overseeing roofing projects; restrictive pre-bid meetings such as publishing the announcements the day of the 8 a.m. meeting; unauthorized substitution of materials; unauthorized use of subcontractors; and lack of inspection reports that were called for in the contracts. Principals of Roof Spec and area sales representatives from Hickman declined to testify before the commission, citing their constitutional right against self-incrimination. Attempts to seek comment from W.P. Hickman's company headquarters by Roofing Contractor for this article were unsuccessful.
David Clover, EdD, business administrator for Lincoln Park School district, responded in a letter to a draft of the New Jersey report, writing, "Ms. (Charlotte K.) Gaal (counsel for the New Jersey report) makes the quantum leap to a pre-determined conclusion that because I knew the Hickman representative, that was more important than seeking value for my Board ... I had no problem introducing venders (sic) to my Board members of other professionals, but their goods and services had to stand on their own merit under competition."
While the Edison School District was being courted by Hickman and its representatives, Doug Wicks contacted district officials in 1997 about his concerns "as an interested taxpayer and citizen." In reality, Wicks was working for a roof consultant firm at the time; he currently works for the State of New Jersey Department of Corrections and oversees roofing projects statewide. Wicks also prides himself in being a whistle blower and had extensive contacts in the government, including New Jersey Governor Christine Whitman. Wicks had come across closed bids in his roofing career, including efforts in the early 1980s when architects were locking out the new EPDM membranes by requiring five years of in-state service. He saw the abuses identified in the New Jersey Commission report as the most egregious. "The law isn't being enforced," says Hicks. "When you get $3,000 a ton for asphalt, do you think that's competitive? Or $75 for a roll of felt? And (they) don't even make it. What's happening is you're driving the good contractors out."
Wicks had difficulty in even getting copies of public bids for school roofing projects, but when he did, he found some projects costing $12 per square foot for three-ply BURs with no tear-off. This is the same price he is currently charged for "bomb-proof" systems on prisons, which had tear-offs, extensive security requirements and redundant roofing membranes. Hicks even took his local school board to court over a closed spec, but lost. The project went ahead as planned, except for the elimination of 550 squares of tapered insulation, for which the school district received only a $5,000 deduction from the project.
Wicks pointed out that roofing is not the only area in which New Jersey's 565 school districts have been short-changed. Recently, a school bus contractor was found to have cheated school districts out of $2.2 million, so it paid a $7,500 fine and continues to be a vendor for school districts without ever having to pay restitution.
Going Public?The potential for abuse may lie in the fact that there are scores of separate school districts in each of New Jersey's 31 counties, each with their own board, staff and infrastructure. Resources are limited and expertise is spread out so that it can be difficult to effectively manage the many complications that come with running a district. Sill, with public bids, oversight by facility maintenance people, and extensive laws governing public projects in New Jersey, how can school districts get into this situation?
"Because they are governed by school boards who are lay people and are really led down the primrose path by extremely talented salesmen who confuse salesmanship with fraud," says Tim Barrett, president of Barrett Co., N.J., a provider of built-up roofing systems. "I guess that's capitalism in action, but when you unfairly exclude competition ... that's when it becomes objectionable."
Barrett, who's also a registered roof consultant, has come across numerous closed specs throughout the country in his career. He's even gone to court over a closed spec for a school board in 1991, when his bid was thrown out because the spec said that 22 percent of the asphalt used must contain an SEBS modifier. In reality, such a high percentage would not result in a high-performing system and the defendant's chemist — when pressed during testimony —admitted the spec really meant that the 22 percent referred to the polymer, which made up about 10 percent of the finished asphalt. He won the case, the specs were thrown out and the following year the now open bid project went to another BUR manufacturer. It was a $30,000 exercise that Barrett has not repeated since then.
Still, Barrett says the experience illustrates the subterfuge perpetrated by a few roofing manufacturers and their accomplices. Even more troubling is one instance several years ago when Barrett says he tried to break into a school district that had had all of its roofing materials supplied by one manufacturer for 11 years. He submitted samples to a facility manager to prove his product's performance, but it didn't quite measure up to the competition. Within a month, he found out that his sample was either altered or switched, a matter he declined to pursue. Barrett acknowledges that the essence of architectural sales is to get a leg up on the competition.
"We have our successes. We have quite a few of them. There's a number of jobs that we help specify and work with the architects on," Barrett says. "But we also acknowledge that we have generic competition ... They refuse to acknowledge that and will hold onto it."
Around AgainThe issue of closed specs has cropped up in other parts of the country. The Dayton Daily News published an article in 1996 about how officials at Wright State University in Ohio saved nearly $150,000 on a single roofing project after an independent consultant exposed the proprietary specs. When L.B. Morris of Sellers & Marquis Roofing Co., Kansas City, Mo., was president of the Midwest Roofing Contractors Association in 1998, he used his president's message page in the association's monthly publication to express his concerns over proprietary specs. The series of articles created an intense debate among roofing contractors, consultants and manufacturers.
Janet Campbell was a staff architect for the University of California-San Francisco from 1991 to 1999, before she says she was wrongfully terminated for exposing excessive roofing costs at her campus. Since 1982, she said the 110 buildings could only be reroofed with products from one manufacturer, but when she looked into the costs, they ranged from $1,200 to $5,500 per square. When she pointed out that nearby roofs were being successfully installed for a fraction of those amounts, she ran into a dead end. "My boss didn't want me to research other roofing products," says Campbell. "I could tell that something was terribly wrong."
For the 10 roofing projects she looked at, Campbell estimates that there was nearly a million dollars in unnecessary expenses. After continually pressing for changes, she was demoted to archives, then went on disability and then lost her job. She is suing the University Board of Regents and her boss in a whistle-blower lawsuit that she says promises to expose collusion on numerous roofing projects.
The public bidding process on government jobs can be cumbersome and confusing, but the intent is to ensure quality installations at a competitive price. Even with numerous safeguards in place, there are still opportunities for abuse when officials aren't diligent. With a projected slowdown in the economy, public jobs will be like red meat to companies wanting to stay well fed and this may resolve or exacerbate the problem.
Perhaps much of this controversy would disappear if the roofing industry had done a better job at servicing the client's true needs and school districts weren't so desperate for solutions. On one end of the spectrum, there is a race to the bottom in order to win the project at any cost because of budget constraints or simply because the client is too cheap to pay for quality. On the other, there are proprietary specs where prices are excessive and quality is questionable. Ask any roofing manufacturer and he'll tell you that his products are the best in the industry, but how far is it acceptable for him to go? Wicks recommends unyielding diligence when it comes to taxpayer money. "You don't quit, number one and the other things is having contacts," he says about his philosophy. "I like to raise hell."