The Maryland attorney general's office has asked a Montgomery County grand jury to enter an investigation of government contracting for water and sewer line construction in Washington's Maryland suburbs.
The grand jury, which was selected last week and will also handle routine Montgomery County criminal work, is expected to spend three to 18 months studying possible state law violations in connection with some construction contracts of the Washington Suburban Sanitary Commission, which holds exclusive control of the water and sewer lines necessary for new development in Montgomery and Prince George's counties.
Grand jury investigations can result in criminal indictments.
The WSSC is also conducting its own review of some of its construction contracting procedures and is cooperating with the grand jury investigation, WSSC General Manager Robert S. McGarry said yesterday.
State Attorney General Stephen H. Sachs ordered an investigation of the WSSC contracts last month to determine if several WSSC contractors violated state antitrust laws by allegedly cooperating to arrange prices or sway the outcome of competitive bidding on some WSSC water and sewer projects.
Investigators have issued subpoenas for records from five local construction firms, the WSSC, and a local trade association that represents many regular WSSC contractors. Records obtained through the subpoenas will not be turned over to the grand jury as the investigation gets underway.
The Washington Post reported charges that some local contractors had cooperated in the award of two varieties of WSSC contracts, including those for hours connections -- the pipes that connect individual homes to existing water and sewer lines in developed areas.
The Post also reported in a three-part series that some local developers pay WSSC contractors up to $25,000 as an inducement to work faster than the WSSC requires or to build water and sewer lines in a particular sequence. Yesterday, WSSC General Manager McGarry confirmed that he was conducting a review to find ways of stopping that practice.
McGarry outlined the review in a memo on The Post series that he delivered to the six WSSC commissioners last month, and called the payments "a serious matter that must be stopped." The four-page statement, which was adopted by the commissioners as their position on the stories, states that with the exception of the review of payments by developers to contractors, the commission should take no other action to change WSSC construction contracting procedures.
The statement says that the WSSC staff "believe that the bidding (on contracts) is competitive. Neither the Post article nor our review of the bidding offers any evidence of collusion."
"We have tried to encourage more firms to bid, but have not been very successful," McGarry wrote in the statement. McGarry said the WSSC was "very aware" of "the problem of lack of competition" on house connection contracts, but added, "I am not confident that an improvement is possible because of the very nature of the work."
McGarry said he had reviewed the bids for one year's house connection contracts and had independent estimates on the jobs drawn up by WSSC staff. "After reviewing the documents for several hours," McGarry's statement said, "I could find no evidence of collusion."
McGarry said the WSSC has taken various steps to increase competition on house connection contracts, and said that those measures had succeeded in holding down increases in the prices of the contracts. His statement said that competition on house connection contracts was limited because the specialized nature of the jobs required a large start-up investment by local firms and so many were discouraged from taking the work.
The Post reported that each of five local contractors has held one of five separate but similar WSSC contracts awarded in the last two years for house connections, and that one year, the five firms were the only ones to bid on the jobs. Two contractors said that an "unstated understanding" among several firms had helped each company hold one of the contracts, while other contractors had felt discouraged from competing.
In addition, several contractors said that some local firms followed a tradition that swayed the award of some contracts that were offered for bidding by the WSSC a second time because of unacceptably high prices in the first bidding round.
According to this tradition, the contractors sadi, the firm that was low bidder the first time was sometimes allowed to be low bidder again -- often at the same price.
Other contractors denied the charges. They agreed with McGarry that the specialized work in house connection contracts limited competition, and added that firms that held house connection contracts in a particular area had a competitive advantage in rewinning the job because of their familiarity with the area.