The Maryland attorney general's office yesterday began an investigation of government contracting for water-and sewer-line construction in suburban Maryland by issuing subpoenas for records from five local contracting firms.
Subpoenas also were issued to the Washington Suburban Sanitary Commission, which controls water and sewer lines in Prince George's and Montgomery counties, and to a local association of construction companies that includes many firms that regularly win WSSC contracts.
Attorney General Stephen H. Sachs said he had ordered the investigation following a series of articles in The Washington Post this week on WSSC contracts and some of local firms that win them.
Sachs said the purpose of the probe was to determine whether any WSSC contractors had violated state anti-trust laws in bidding on WSSC contracts for house connections, the pipes that connect individual homes to existing water and sewer lines in developed areas.
The attorney general's office also is interested in some contracts that were rebid by the WSSC because of high prices, only to be won by the low bidder of the first round at the same price, Sachs said.
The state investigation of follows charges that some local contruction companies had followed an informal "turf" system to arrange prices or sway the outcome of competitive bidding on three types of contracts offered or supervised by the WSSC, including the house connection and rebid contracts.
Maryland's antitrust law says that "a person may . . unreasonably restrain trade or commerce" by "contract, combination or conspiracy." Violations of the law are midemeanors punishable by jail terms of up to six months of fines of up to $500,000.
The companies asked to turn over records are Calcon Co. of Rockville; Suburban Utility Co. of Beltsville; DiMeglio Construction Co. of Hyattsville; City Contractors of Forestville; and Tri-County Utilities of Beltsville.
None of the firms' principals could br reached for comment yesterday. Officials of the Public Works Contractors' Association, the trade association that includes many WSSC contractors, also could not be reached.
WSSC general manager Robert S. McGarry said in an interview that his office would cooperate with any investigation by the state attorney general.
McGarry said the WSSC had no official comment on the charges. However, he said he personally felt the Post's stories were "trivial."
"Most of the [charges] were well known facts that have been discussed many many times," McGarry said.
The Post reported that each of five firms now receiving subpoenas has held one of five separate but similar WSSC contracts the last two years for house connections.
One contractor who holds one of the house connection contracts, Thomas Callahan of the Calcon firm, said there was an "unstated understanding" among several companies that helped each of the house connection contractors keep one of the five contracts. In two years, those contracts have been worth a total of $5 million. Another contractor, Roy Ennis, agreed with that assessment and said he had felt pressured not to complete for house connection work.
Several other contractors said there was a tradition among some firms that swayed the award of some of the contracts that were offered for competitive bidding by the WSSC a second time because of unacceptably high prices.
According to this tradition, the contractors said, the firm that was low bidder the first time was sometimes allowed to be low bidder again -- often at the same price.
In the last two years, there have been four instances when the WSSC has rebid contracts because of high prices and the low bidder of the first round has won again, in three instances at the same price. The total value of these contracts was $203,000. There also were several cases, however, when the low bidder of the first round was undercut on the second round.
Several contractors who were implicated in the alleged "understanding" on house connection contracts denied the charges.
They said that only a few firms bid on and won house connection jobs because the work was specialized and difficult and required costly equipment. They also said that firms that had held house connection contracts in a particular area had a competitive advantage when bidding to keep the contracts another year because they were familiar with the jobs and knew how to cut their costs to a minimum.
Several of the firms said that because of the difficulties of house connection work, they were not especially interested in holding more than one of the contracts at a time, even though all of the five firms have bid on more than one of the contracts each year.