A two-month Washington Post investigation of the Washington Suburban Sanitary Commission has found that the agency is beset with flawed management and irregularities that range from apparent price arranging to bid manipulation to minority contract abuses to payoffs between some developers and contractors.
The only clear beneficiaries of this system, the investigation found, were some local construction firms that receive millions of dollars in contracts from the WSSC each year.
The losers have been the taxpayers and home buyers in Prince George's and Montgomery counties who have had to pay higher water and sewer bills and increased assessments.
In a three-part series beginning today, the Post examines how this government controlled system has worked to the advantage of some private contractors.
Many construction companies that build water and sewer lines in suburban Maryland have followed an informal but well-defined "turf" system to arrange prices and sway competitive bidding on some government contracts, according to contractors and public records.
This apparent territorial cooperation among a small circle of contractors has cost the taxpayers of Prince George's and Montgomery counties higher rates on water and sewer bills and increased assessments on homes.
The contracts allegedly abused by these companies are awarded or supervised by the Washington Suburban Sanitary Commission, a regional agency that has the sole responsibility for building water and sewer lines in the Maryland suburbs. Last year alone, the WSSC awarded more than $100 million in construction contracts, the bulk of it going to about 30 local companies.
One of the contractors, Roy Ennis, whose Camp Springs firm has installed pipelines for the WSSC for two decades, described the group of local companies as a "clan" bound together by close personal and professional ties and a powerful old-boy sense of turf."
"I don't know that there were any actual rules set down for [control of contracts]," Ennis said in a tape-recorded interview. "It was just a matter of this kind of contract belongs to such-and-such, and this contract belongs to somebody else. And that still follows through."
Ennis and dozens of other contractors said that competitive bidding had been open, unprejudiced and even "cutthroat" in recent years on most WSSC contracts. But a two-month investigation by The Washington Post produced evidence that, in the last two years at least, some local contractors have cooperated to arrange prices or sway the outcome of competitive bidding on three types of contracts offered or supervised by the WSSC.
Each of five construction companies has held one of five separate but similar contracts awarded by the WSSC the last two years for "house connections" -- the pipes that connect individual homes to existing water and sewer lines. One year, the five firms were the only ones to bid on the contracts, which in two years have been worth a total of $5 million. According to two contractors, the five companies have each kept one of the contracts through an "unstated understanding." Meanwhile, other contractors have felt discouraged from competing against them.
Three of the firms denied the charges and offered different explanations for the contract awards. But the chief of contract bidding at the WSSC, Julie Soucy, said: "I think some contractors have a hold on these contracts."
On contracts that were offered a second time for competitive bidding because the WSSC ruled that all bids were unacceptably high on the first round, some construction companies have allowed the firm that was low bidder the first time to be low biddr again -- often at the same price, according to several contractors.
In the last two years, there have been four instances in which contracts have been rebid by the WSSC and won by the low bidder of the first round, in three cases at the original price. The total value of these contracts was $203,000.
Some local contractors have discussed and arranged their prices before bidding on water and sewer jobs offered by developers on private property, according to two contractors who say they have participated in such arrangements. These contracts are supposed to be supervised and monitored by the WSSC.
The contractors implicated in the apparent bidding irregularities -- other than those who made the charges -- either denied they had tried to control contracts or refused to be interviewed by The Washington Post. Several said the prices they offered for jobs at the WSSC were competitive and fair, and that contractors who repeatedly won certain types of contracts did so because of their expertise, the technical difficulties of the jobs, or a legitimate lack of competition.
The contractors who described the alleged bidding irregularities said they were rooted in old-boy traditions that extended back decades. Said Ennis, president of the Ennis and Son firm: "The contractors pretty much stick together and it's a little bit of a clan and it hurts to be outside of the clan. You're either one of the boys or you're not."
Most regular WSCC contractors would not argue with this assertion by Ennis. Of the 30 local firms who regularly win contracts at the WSSC, eight are related by family ties, and many more were started by men who first worked for decades with a more established member of the local group.
Almost all the local contractors are members of the Public Works Contractors Association, which meets in an Adelphi restaurant to discuss policy and strategy and throws occasional picnics for the local firms.
It is difficult for a contractor to enter this tight circle. "You have to prove yourself in the area, said John Ventresca of Ventresca and Sons, the current president."We want somebody who's been around here for a year. If one of my foremen quit [and started his own sewer firm] he is known by everyone and he's acceptable." Ventresca estimates he has about seven such foremen.
In fact, the WSSC group tends to be downright hostile to firms viewed as "foreigners" -- or any firms based outside of the suburban Maryland area. "Even animals have their boundaries," said one contractor who asked not to be named but who holds one of the house connection contracts. "I'd rather have someone from here lose money than have someone from the outside come in and take the business." 'He Owns It'
Ennis said that the cooperation among contractors on bidding nearly died out in the early 1970s when hard economic conditions forced companies such as his to be "cutthroat competitive" on the bidding of most WSSC pipeline jobs. But the old ways still prevail, he charged, on the five lucrative house connection contracts.
These jobs give one contractor the authority to make all the house-to-mainline connections necessary in a geographical area for a one-year or six-month period.
"The first year those contracts come up, it's open season," Ennis alleged. "After that, the guy who gets it, he owns it. That's the way they refer to it -- it's 'Larry's contracts' -- and you're not supposed to mess with it. Tradition, it's the way it works. Either you don't bid or you better be higher."
Ennis said -- and the records show -- that several contractors have won the same house connection contracts in a particular area year after year. The strongest evidence to support the claims concerns the 1979 and 1980 awards of house connection jobs.
In 1978, the WSSC received so little competition -- and such high prices -- on the house connection contracts that its six commissioners and the elected officials in suburban Maryland demanded changes to increase competition.
That year, WSSC General Manager Robert S. McGarry reported that prices for the contracts had increased an average of 129 percent in Montgomery County and 73 percent in Prince George's County, and were 40 percent higher than they should have been. So high were the prices, in fact, that the WSSC had to impose a substantial increase in the home assessments that pay for the work.
The agency's response, beginning the next time the contracts were offered in June 1979, was to increase the number of house connection areas from four to five, dividing the work and size of the contracts, thus hoping for increased competition and lower prices. The result, however, was apparently quite the opposite.
After the change, regular house connection contracts were offered for three zones: a western zone comprising most of Montgomery County, a southern zone of the middle and southern half of Prince George's County, and a central zone of everything in between. In addition, two house connection renewal contracts -- to replace such pipes that were worn or broken -- were offered, one in each county.
The result was that the five WSSC contractors who had actively competed for and won area house connection contracts in the six years before 1979 -- Surburban Utility of Beltsville, Tri-County Utilities of Beltsville, DiMeglio Construction of Hyattsville. City Contractors of Forestville and Calcon of Rockville -- suddenly had five zones in which to operate.
In 1979 and 1980, each of the five contractors won one of the five house connection contracts, and each firm won the same contract both years. In the case of four of the contractors, the zone where each now works corresponds to the area where it held house connection contracts in 1978 and earlier years.
The bidding process was essentially the same in both years. The contractors came to public bidding sessions where, one by one, the contracts were announced, sealed bids were submitted, and a WSSC official immediately opened them and read them aloud. After each contract was awarded to the low bidder, the contractors were allowed to change their bids on the next one during a 15-minute intermission.
Both years, each of the five contractors submitted a winning low bid on one of the contracts and lost with higher prices on their other bids. This pattern developed despite the fact that the three zone contracts had identical work lists to be bid on, as did the two renewal contracts.
The maneuvering was accomplished on the spot, with bids varying by thousands of dollars being submitted for the same items in a matter of minutes, bid records show.
For example, when the contracts for the western and central zones were put up for bids on June 5, 1979, City Contractors submitted prices of $115 for every bored water pipe and $134 for every bored sewer pipe in each house connection in those regions. The firm lost both bids.
Then, only 15 minutes later, the bidding started for the southern zone. This vast stretch of Prince George's was in essence City Contractor's home turf. It had been working that area for the WSSC for many years. In its bid for this zone, the firm said that the water pipes that only minutes before had cost $115 now would cost $110, and the sewer pipes would drop from $134 to $114.
City Contractors won the southern zone contract.
Similarly, when Calcon bid on -- and lost to City -- the southern zone contract for 1980 last May 6, an estimate of $7,000 was submitted for constructing a one-foot vault in each house connection that needed such an underground support. However, when the bidding started for the central zone contract, which Calcon had held for two years, the firm estimated it would cost $3,100 -- or $3,900 less -- for the same item. It won the contract. Then when the western zone contract -- won by DiMeglio -- came up for bidding minutes later, Calcon's prices had gone up again.
While the five winning contractors were thus shifting their prices up and down, there were few other contractors around to notice. In 1979, the five contractors were the only ones to compete for the five house connection contracts. This year, only four others bid on any of the five jobs -- and only one came within $30,000 of a winning bid.
That one remotely competitive interloper was Ennis, who submitted bids on four of the five contracts, with uniform prices throughout for the various bid items. His bids finished second in three of the four contracts he tried to win.
Ennis maintains that he was attempting to butt in on a closed system for the first time, and may have lost because the regular house connection contractors, aware that he was intruding on their turf, cut their prices substantially when "their contracts" came up.
"For years I played along with the system, partly because I didn't want it (house connection work )," Ennis said. "This year I needed work and I wanted it. So I didn't play the game and I tried to cut under them. Why didn't I win? Because they (may have ) lowered their prices considerably."
The bid documents submitted to the WSSC by the five winning house connection contractors show that at least two of the companies, Calcon and Suburban Utility, lowered prices by scratching out and changing figures on their bid sheets before submitting them.
The documents show that one company, DiMeglio, apparently raised prices after completing its bid sheet. Ennis said he believed that DiMeglio may have raised its prices after learning that Ennis was not bidding on the western zone contract DiMeglio won.
The bid documents for City Contractors show that prices may have been changed both up and down prior to the submission deadline for the southern zone contract City holds, and that most prices were changed upward, even though Ennis was competing. 'Don't Cut My Throat'
Company officials at two of the five firms that have won the house connection contracts -- DiMeglio and Tri-County -- repeatedly refused to comment on the charges for publication. Two others, O.D. Upchurch of Suburban and Larry Weatherholtz of City, denied all of Ennis' charges and offered other explanations for what the bid records show.
But Tom Callahan, the president of Calcon, a firm based in Rockville, acknowledged that he cut his prices by 5 percent on the house connection bidding when he learned that Ennis intended to bid on the jobs.
Callahan, whose firm has had the central zone house connection contract, said that there was an "understanding" among the house connection contractors that each one would bid seriously for only one of the jobs. He maintained, however, that officials of the five firms had never met in one place to discuss the contracts or made any formal arrangements.
Callahan said that he was really only interested in winning one of the house connection contracts each year. He said he believed that most of the other house connection contractors felt the same way. This knowledge of their feelings and of the particular zone each preferred, was the basis of the "understanding," he said.
The two other house connection contractors who agreed to comment for publication, Weatherholtz of City and Upchurch of Suburban, agreed that they were primarily interested in rewinning the contract they already held. "I bid all of them, one at a time," said Upchurch. "If I get mine (the Montgomery County renewal contract ), I raise my prices. If I don't, I go after the others."
Callahan described the dynamics of the bidding among the five contractors as the result of an "unstated understanding" in which "you don't cut my throat and I don't cut your zone and I don't go after yours."
If he were to seriously compete for all five zones and the other contractors did the same, Callahan said, "it would be a free-for-all." Thus, Callahan said, he would not make an all-out effort to win other house connection contracts unless he were undercut on the central zone he prefers. I know what I've got to do to beat out City and DiMeglio" on the central zone, Callahan said.But this year, "when I saw Ennis I cut my prices. I didn't think I was going to get it -- thought Ennis was going to take it from me."
But Callahan said the understanding "has never been said. As far as they're laying off on the central zone contract, I appreciate it.
"But I don't trust those guys. I don't want to talk to them about it because I'm afraid of what they would do. I don't want to sit down and talk about it with these guys because that would be collusion."
Callahan said he remembered talking to the other contractors about the house connection contracts only twice. In 1979, he said, Larry Weatherholtz, who manages City, approached him to ask why Calcon never bid on the southern zone contract which City has held.
Callahan said he replied that he was not interested in the southern zone jobs because he did not like the ground in the area, which he said was often rough or swampy. Callahan said Weatherholtz then said he was not seriously interested in Callahan's centeral zone "because it was too much work for him." As a result, Callahan said, "I don't have to worry about him [City].
Weatherholtz said in an interview that he did not remember this conversation or any other he had had with contractors about house connections.
Callahan said that he also talked this year to Carl Miller, the president of Concrete General of Rockville, when he learned that Miller was planning to bid for the first time on the house connection contracts.
Callhan said he asked Miller, a good friend, whether he planned to bid on the central zone, and Miller said that he did. But according to Callahan, Miller added: "I don't know how you can bid such low prices" on the central zone contract.
From this statement, Callahan said, he concluded that Concrete General would not offer his company serious competition. And records show that Concrete General, indeed, bid 24 percent higher than Calcon on the central zone contract at the June bidding session.
Miller said he remembered the conversation, and added that he had learned from his bidding this year and hoped to be more competitive on the house connection contracts in the future.
Ennis said that he did not know of any specific arrangements among the five contractors who hold house connection contracts. What he does know, he said, was the way contractors were said to "own" the contracts -- and the pressure he said often bore upon some other regular WSSC contractors not to compete against them.
"If you do undercut then you get all the others saying you didn't play the game," Ennis said.
Ennis said his colleagues now consider him a turncoat because he competed with them. "Now I'm a no-good son of a bitch," he said. "Everyone's coming around saying I'm a no-good bastard. I've heard it from other contractors, I've heard from inspectors, I've heard from people at the sanitary commission, I've heard from everybody."
"Contractors would like to get me some way," Ennis said. "It's me on one side of the table now and all of them on the other side . . . I'm what you call a thorn in their side. If I were to get in trouble and need help I won't be able to get anything from them."
On one occasion after the bidding session, Ennis said, Frank Shema, a WSSC inspector who helps manage the house connection contract for the southern zone approached him and asked "whether I was trying to upset the applecart. They heard I was in there trying to get the contracts."
Shema says he does not remember if he made the remark to Ennis. "I think Roy picked a hornet out of a hornet's nest," he added.
Weatherholtz and Upchurch said there were a number of circumstances, all of them entirely proper, that led to the five contractors appearing to control the five house connection contracts. They denied that other contractors were pressured not to compete.
Few WSSC contractors were interested in house connection work because it was difficult and required special equipment, like a "tapper" machine to connect pipes from houses to the existing sewer lines, they said. Callahan estimated it cost $60,000 per crew to prepare for house connection work, and that at least two crews had to be devoted to the job full time.
Upchurch and Weatherholtz said that it required several years for a contractor to recover the investment it took to prepare for house connection contracts. Thus, they said, while many contractors shied away from bidding because of the start-up costs those that had contracts were motivated to turn in low bids so they could keep house connection work for several years and make money.
The two contractors also pointed out that once a company held a contract in a certain area, it was easier -- and cheaper -- for it to continue to hold the contract because its workers were familiar with the area and knew exactly what to expect. This explained why contractors admitted lower bids when the contracts they held were called, they said.
"You are at a competitive disadvantage," when bidding for contracts other than the one already held, said Weatherholtz. "You feel [the other contractors] will be more competitive in their area. But [the bidding] is a wide open thing. Anyone who wants to take a chance can." Rebid Contracts
According to several WSSC contractors, some regular bidders at the WSSC are not at all timid about asserting their exclusive right to a competitively bid contract after they have finished first in a bidding session and the WSSC rebid the contract because of unacceptably high prices.
The WSSC's policy requires the agency's six commissioners to take special action to approve any construction contract in which the low bidder offers a price 10 percent or more higher than the "fair price" estimated by WSSC officials. The WSSC also has the option to throw out the bids on such contracts and hold another bidding.
In instances where contracts have been rebid, however, the contractor who won on the second round of competitive bidding at the same price offered the first time. According to the contractors, this result is determined by an understanding among some regular WSSC contractors that they will not undercut the first round finisher if the contract is rebid.
"That is a stated understanding," said Ennis. "And if I'm the low bidder, I'm going to be the one that says it. I'll say: 'I was low bidder before and why don't you guys lay off the contract and let me have it.' That's pretty much how it worked. I've said it myself before."
"It's sort of an unwritten law," said Ken Vinton, the estimator and bidder for Nazario Construction. "You don't cut the other guy's throat."
In the last two years there have been four instances where contracts have been rebid and the lower bidder of the first round has finished first again. In three of those four cases, the winning contractor bid the same price both times, and was not undercut even though all of the contractors knew what the first-round price was.
Nazario, for example, bid $34,540 for a water and sewer line project on May 22, 1979, and finished in the bidding. The bids were thrown out because the fair price calculated by the WSSC was $26,625.
But when the contract was bid again on June 19, Nazario won again with exactly the same price. The firms competing in the first round of bidding either dropped out of the second round, bid the same price they had entered before, or stayed well above the $34,540 figure.
Vinton said this was an example of "understanding" among the contractors. "The [WSSC] estimate wasn't realistic," Vinton said. "Mine was."
In another instance, Ventresca and Sons, a College Park firm, bid $42,844 for a water and sewer job on Layhill Road in Montgomery County. The low bid was thrown out because the WSSC fair price was only $34,075. But when the contract was bid again on April 17, Ventresca won again with its initial price.
When asked about the contract, John Ventresca said: "I'm not going to change my bid." Ventresca added that the low bidders on such contracts are undercut on the second round only "when contractors are out of work."
The firm that finished second in the first round of bidding on the Layhill Road job, Concrete General, did not lower its price the second time, even though it was less than $800 higher than Ventresca's price. The price was not lowered, said Concrete General president Miller, because "it's an accepted practice that you don't undercut the other guy."
"You can see this is widely accepted," Miller said. "I've been around 15 years, it's always been that way. I'd like to see everybody add $10,000 [to their bids] just to break up the practice of rejecting [the bids] and expecting us to bid the damn job again."
This system of cooperation on rebid contracts does not always work, contractors and WSSC officials said. In at least three other instances in the last two years, the low bidder of the first round was undercut on the second round.
"The people who do it get to be sons of bitches like I've been talking about," said Ennis. Added a WSSC official who watches the weekly bidding sessions: "The ones who have undercut . . . don't play the game." Bidding on Private Contracts
When home builders attempt to get area sewer contractors to bid competitively on water and sewer line work, contractors say, the competition is often a farce.
The WSSC does not build sewer lines onto private property. So, when a developer has a large project with private streets, he must hire a local sewer contractor to build water and sewer lines for him. The WSSC supervises and regulates the work, but the developer bids and awards the contract, often in much the same way the WSSC does.
Several contractors said that when a sewer-building company in the area frequently does such "private jobs" or "on-site" work for the same home building develper either in Maryland or Virginia, the company often comes to be known as "belonging" to the developer.The result is another standing tradition among some area firms: when the developer offers the sewer project for bidding by local companies, some contractors will consult with the company that "belongs" to the developer before bidding -- and then will submit higher bids to make sure the favored company wins the bidding at the price it wants.
The effect, of course, is that developers pay more for their water and sewer lines, and pass those costs along to home buyers.
Two regular WSSC contractors -- Ennis and Robert Taylor of Taylor Construction in Montgomery County -- said they had been the beneficiaries of such arrangements among contractors. "It's a form of collusion," said Taylor.
Ennis recalled an instance in the last year when a developer he has worked for offered a water and sewer job for bids from various contractors. One contractor who decided to bid against him, S.O. Jennings of Virginia, called first, Ennis said.
"We've been asked to give a price on the contract, and we know it's your contract," was the way Ennis reconstructed the call from Bruce Jennings. "What are the problems?"
"None," Ennis remembered saying.
"Are you expecting to get it?" Ennis said Jennings asked.
"Yes," Ennis said.
"I have $100,000 on the job. Do you have me beat?" Jennings asked, Ennis said.
"No," said Ennis.
Yet, Ennis later got the job. He said that he did not remember his own price but it was well above what Jennings quoted.
Jennings said in an interview that he did not deliberately bid higher than Ennis and would have liked to have had the job. Although he did not dispute Ennis' version of the conversation, Jennings said, "Mister, I don't price fix. I gave him my best shot at it. I may have been lower than Ennis and he still might have gotten the job. I [called him] because I had just heard he did work for [that builder] and I wanted to make sure [the builder's] credit was good."
Taylor said some regular WSSC contractors call him before bidding on private work they know he wants because "a lot of contractors don't like private work, and they know that if I'm doing it, I won't be down at the [WSSC] bidding against them. They don't trust builders. They like the steady paycheck at the Sanitary Commission."