Live Blog: Kwame Kilpatrick Trial Day 18 - FOX 29 News Philadelphia | WTXF-TV

Live Blog: Kwame Kilpatrick Trial Day 18


A lot of contract talk today.  And lots of evidence from the defense that change orders are common.  The big difference as far as I could see was that the other contractors totaled out around 5 or 6 million dollars and the Lakeshore contracts rose to $55 millions.  Don't know what the jury will make of that.  But tonight at 5 and 6 we'll find out what M.L. Elrick makes of it, he'll have a complete wrap up of today's court house drama.  If you can call 4 hours of contract details and jargon drama.  M.L. with also give us his take on look for his Takeaway tonight.


Rataj asks if the subcontractors supplied their own bonds and carried all the risk and Edwards says yes.  Rataj has no further questions.  And we're done for the day.


RAtaj now showing d'agostini original price $1.3 mill which expanded to $5.4. 


RAtaj now asking about change orders for other companies, running through a list.

RAtaj now showing one of last two exhibits, says he's almost done, "mercifully I imagine."

Judge says it's 1pm.  RAtaj says implores he's almost done.

Shows a contract for Lanzo for $1.4 million now shows change order number 12 for a total of $6 million dollars.  Edwards says it not unusual.  THe only difference being that Ferguson's total was $55 million as I recall.


RAtaj now showing a list of all the contractors that DID get work out of the bid even though they weren't low bidders.  Most of the contractor on the bid list got work.  One company not even on the list got work because they were already doing a job at CompuWare that dovetailed with one of DSWD's projects.


RAtaj asks if other high bidders got work on this contract and Edwards says yes.  Asks if the 2 contractors on the list that didn't get work, didn't get it because of another problem.  Edwards says yes it was because of an error on one of their unit prices.


RAtaj now looking at another memo showing the list of contractors.  Asking if this list is for whole contract or just the Washington Blvd.  Edwards says correct.  Rataj asks if the fact that Ferguson was not low bidder meant anything at this point. Edward says it didn't.

Looking at a DZ letter to Mercado regarding the contracts under contention here.  Another change order.  This shows a change order for $180,000 so Lanzo Construction can put in another 350 linear feet of water main.

Rataj shows price difference between Lanzo's original contract showing $274 per linear foot and the change order for $500.


Edwards now reading from a letter from Mercado saying two contracts would go to Hayes, two to Ferguson.  Says they have done good work in past.

Now a memo to Edwards,  he reads to date we've gotten proof of bonding and insurance but they hadn't signed the contracts yet.  Rataj asks if it was because they hadn't been able to review the drawing yet because they weren't available.  Edwards say he couldn't say about the drawings.


Rataj asking about how contracts were held.  Edwards says because DLZ didn't have a bond the contracts were held by a another company.  Edwards says the DLZ negotiated directly with Ferguson, Hayes, and 2 other contractors for their contracts.


Edwards says because they couldn't come up with the bond they gave DLZ a construction management contract instead of a design and build contract.  Plan "B"


Rataj now introducing a email that Edwards sent to his boss dealing with DZ=LZ's bond issue.  Reads that there's a state law requiring a performance and payment bond and that City could be on the hook if the contractor defaults or a worker is injured, that city might have to pay twice.

Says they burred us once and they're trying to burn us again.  SAys the law department won't sign off on the contract without the bond.


Court is back in session.  Judge is saying after a brief consultation with lawyers during the break this is a confusing area.  She says she'll try to keep is as clear as possible and tells the jurors if they're confused or even a little confused just raise your hand.  From the laughter in the room is appears that several hand went up right away.

Edwards explains that a Surety company is like an insurance company. It insures the bonds companies must post, like performance bonds, and will have to pay out if a prime contractor doesn't get the job down or doesn't pay it's subcontractors. defaults.


Judge asks since they didn't have bond and this was a design build did you have to  go to a different format.  Edwards says yes.  and we're on a 10 minute break.


Edwards now explaining that this was a design and build contract and DLZ would have been responsible for the sub-contractors and that all the work was going to be done by the subs.  Says bottom line was they  had a problem with DLZ because it didn't have a bond.


Edwards is a tall, thin guy with graying hair.  Professorial looking with a patient and precise way of answering questions.  He's very easy to understand even though the contract jargon is daunting.  He's personable and has a self deprecating sense of humor. 

RAtaj is showing him a reporting log sheet showing DLZ's cut to act as construction manager for this contract.

Rataj asks if they're going to manage multiple contracts.  Edwards says yes.

Edwards reads I spoke to D"LZ and that DLZ would not have to post a bond but this is not the preferred way and that the design and build contract says they should have to provide the bond.


Rataj introducing another exhibit, showing it to prosecutors.


Edwards say prime contractor should have all these bonds.  RAtaj asks about umbrella contract held by DLZ and asks if there was an issue with their bond.  Edwards says, "yah, they didn't have one."


Rataj asks about performance bond.  Edwards says this is for construction contracts and guarantees that work will be done.  If work is done DSWD can file a claim.

Edwards says a payment bond is for protection of sub-contractors and suppliers (helps DSWD as well) in case prime contractor doesn't pay.


Rataj is asking if prior to Kilpatrick that DWSD engineers and contractors was too close.  Edwards say yes.  Rataj asks if one engineer had an improper relationship with Lakeshore... Blackwell objects...judge sustains.  Rataj moves on.


Rataj asks if Kilpatrick tried to get rid of this problem.  Edwards says that's true.


Edwards now explaining "Minority Front."  Says it's when a minority company is used as a front to help a contractor get a contract.  They don't do the work, just make the bid for the prime contractor, no equipment, now expertise, may just bill for materials.


Edwards say 2002-2008 that RFP's you're talking about local econ development and not equalization.  Local econ is established as 35% of the weight, equalization is where bids come in, then they look at what company is certified as.

So bottom line is that lowest bidder doesn't always get the contract.


Rataj asks if Prime contractors use sub contractors profiles to increase likelihood of getting a contract.  Edwards says that true.

Judge is now asking him to clear up flipping back and forth between consultant and construction.

Edwards says it's advantageous for contractors to use sub's profiles for RFP's.


Edwards says a Detroit based business would also be a Detroit HQ'd business but a HQ'd business may not be Detroit based.

Rataj asks if you get a certificate from Human Rights Dept.  Asks if site managers might check drivers licenses of workers to see if they live in city.  Edwards says that's right.

Rataj asks is when a general contractor submits a bid and adds sub-contractors minority contract profiles to their minority contract profiles.  Edwards says it's the prime contractors' cert that' originally is considered.


Rataj asks if Edwards remembers a special admin order from Mayor Archer from 2004,  Edwards say that was a long time ago but he remembers the document.

Rataj asks him what it is.  Edwards say it outlines utilization of local businesses.

Edwards says at this time if a constructing contract was done as an RFP the utilization would not apply.


Rataj is introducing another document.  This is the purchasing ordinance for the City of Detroit.  Rataj asks what it does.  Edwards says it defines how the city is supposed to procure stuff.  Also defines Detroit based, Detroit HQ, and percentages of equalization.  From construction services to cars. Whatever the city is going to buy.


Rataj asks if lowest bidder doesn't always get the contract.  Edwards says with RFP that's true but generally on the construction side it goes to the lowest bidder unless there's something wrong with the bid or if it's determined the low bidder can't do the work.


Rataj wants to know if RFP's are bid out as lump sum bids.  Edwards says sometimes they can be.  Says bidders are asked for a bottom line, how much is it going to cost.  Says a unit price contract breaks down costs to unit items.  Like work for a particular job of the cost if an item, or installation of an item.


Edwards not explaining the difference between a consulting and a construction contract.  Says it's an internal process that determines how the project is going to be bid out.  Edwards says they're advertised the same way but there's a clear distinction  after that.  Construction is low bidder, Consulting is Request for Proposal, the scored and weighted process.

Edwards says the internally before it's put out to bid it goes through an approval process, like the engineering, legal, contracts and grants manager, then to Director of his deputy, sometimes to law department before advertising.


Rataj now asking him to describe "consulting contract."  Edwards says it's supposed to be for designing a project, or could  be for lining sewer, or a financial service like in large projects that have lots of change orders.  A variety of different work.

Now explaining "construction contract."  Replace sewer line, water lines, now facility construction, facility improvement, the actual hard labor of doing the work.


Now talking about a water main replacement contract awarded under ARcher administration.

Edwards explaining that a Design and Build contract is for both designing the project and doing the work.

Contract they're talking about is not a design and build.  Rataj asks payment process was same for this contract and would be true for every contract under Kilpatrick admin.  Edwards say yes.


Edwards says it's the same process for change orders.

Rataj asks if he knows Ferguson,  Edwards says that's true. Ferguson was a real company, had a history of fulfilling contracts before Kilpatrick was Mayor, both water mains and did demolition work.


Edwards says once he gets it it's reviewed again, conforms to the contract, that there's money left in the contract, once approved money is drawn down in computer system saving payment is approved, then a check is cut to prime contractor and then will pay the sub.

Rataj asks is sometimes Prime won't pay sub,  Edwards say that's a common problem.


Rata asks if field engineers then inspect work.  Edwards says yes.  asks if there's push back sometimes when engineers say more work needs to be done.  Edwards say correct.

Rataj asks Edwards to describe process that happens before the info gets to him.  Says engineers produce and estimate for payment, give it to supervisor, goes up the line again for approval, then goes to assistant director for signature, then goes to Edwards' contract and grant section.

Rataj asks if there are checks and balances.  Edwards says yes, not paid until work is done.


Now Rataj is up.  Wants to know if main thing Edwards does is approve the checks.  Asking about hypothetical sub contractor and how they get paid.  asks if first thing is to gather invoices, total costs, labor, equipment, take those documents and submit them to the field engineers.  Edwards says correct and they fill out a certain form.

Edwards says the form delineates how much the sub thinks they are entitled to at time, how much work they've done, and how much they believe they should be paid by the contractor.  It's submitted to the prime contractor then given to the field engineers.


Thomas now asking about rushing to get projects finished before Super Bowl.  Referring to Judge's order again which refers to specific contracts and shows Judge agreed to continue these contracts.

Edwards reads Judge's reason for continuing contracts.  basically the court is commenting that delays create difficulty keeping competent contractors and keeping the ball rolling despite discontinuing the special administratorship.

previous order said request to discontinue SA was moot because judge had determined already that it wasn't needed.


Thomas asks if court felt Special Administrator had been effective.  Edwards says yes.

Edwards remembers that at one point a special administrator was not needed because the water department had met it's goals, not because of any criticism of Kilpatrick.


Edwards reads that Mercado promptly reported problems to judge and that compliance was done in timely fashion.

Edwards also reads that Mercado has cut budget without impact on compliance and that increases have been small and price of water is among the lowest in nation.  This despite increased costs of compliance.


Thomas asks about attempts to take over the water department by Oakland County officials, Edwards says the allegation was mis-management.

Thomas asking about Judge's opinion and long term compliance.  Edward's explains that the department was in compliance with the EPA's directives and reads that Kilpatrick ordered the hiring of Mercado and the Consultant and that there were no violations of the clean water act.

The order shows that the Judge is basically praising Kilpatrick, Mercado, and the work done by the Dept.


Thomas asking about 2006 and showing the Federal Consent Decree.  Asks if the Judge was in charge above and beyond any state or municipal control.  Edwards says yes.

Asks if Judge had one of the longest tenures in history and did Edwards talk to him.  Edwards says even in his 90's the Judge was capable and functioning.


I was wrong,  Jim Thomas is cross examining Edwards now.


Court is back in session and the jury is filing in.  No mention of health issues today.  Everybody must be feeling better.


Speaking of Ferguson, it appears that Mike Rataj will be up to cross examine next.  He hasn't left the court room.  usually during the longer breaks he comes down to the first floor and gabs a granola bar from the snack bar.  This is not a chips and soda pop bunch by any means.  M.L. tells me Rataj still plays hockey so he's not just keeping sharp for the court room.


This "sample" bid Minnock brought up is pretty interesting.  It sounds like the water department used it as a comparison tool to judge the bidders.  That would mean the original contract bid would only be a starting point.  It's also interesting to note that more work would be given to contractors that did a good job.  It appears that the department expected contractors to keep working.  And,  the change orders were not just for the original work bid or the original job but for additional work on top of the original contracted work.  That would seem to work in Bobby Ferguson's favor as well as Mercado's.  We're still in a break.


Minnock says no further questions and the Judge calls for a 20 minute break.


Minnock asks if Edwards worked with the outside consultant brought in by Mercado to oversee efficiency (which the judge kept on)  Edwards says yes.

Edwards also says Mercado was a very good boss to work with and he never had a problem.  Very good boss.


Minnock asks if Mercado moved contract process out of the engineering department and made it independent, eliminated "juried" process and said evaluators had to work independently.  Edwards says yes.

Minnock asks if Mercado made people tow the line.  Edwards says that's correct.


Minnock says wasn't it true that at one time the engineering department had major control over who got contracts, had favorites, had too close a relationship with some contractors.  Edwards say unfortunate but true.

Minnock asks if a contractor who found out a contract was going to another company could call a "friend" in the department to find out why he didn't get the bid, might be told something that may or may not be true because that "friend" might not be privy to the facts.  Edwards says that's true.


Minnock asks if previous Directors were engineers,  Edwards list the names backgrounds of the previous directors and says they were lawyers and politicians.  He's like a taking history book of the DSWD.


Minnock asks if Edwards recalls that Mercado was hired in 2002 after judge ordered a nationwide search.  Edwards says yes.

Asks if Mercado made changes after consulting Judge and hired an outside consulting firm.  Edwards says he did.

asks if Mercado wasn't a water engineer.  Edwards says yes.


Minnock asking if there were plans by Governor Engler to take over the water department and Judge in charge of the case said any attempt to re-organize the department would be against his orders.  Edwards says yes.

Minnock asks if reorganization could be detrimental to getting things done, and Edwards says that could be an interpretation of it.


Minnock showing section that shows new ruling gives Mayors/SA's even broader powers.

Also shows an Oakland County motion to replace the SA but was denied.


Minnock now asking about "special administrative powers."  Introducing a document from a lawsuit about violations of the clean water act.  This goes back to the consent decree where the city agreed to be over-seen by a Federal Judge.

summary is that Special Administrators have "extraordinary power to Perform any act necessary to achieve expeditious compliance with the consent judgment."

Coleman Young and Dennis Archer were also special administrators.

A later court order uphold's the special administrator clause and says the Director is supposed to follow the Mayor's directives.  In this case the SA was ARcher going out and Kilpatrick coming in.


Minnock asking if Edwards was familiar with the cost averaging policy change.  Edwards says he hadn't used it before and wasn't familiar with it.

Minnock now asking Edwards to read explanation for cost averaging.  Since there was large difference is prices bid it would unjustly benefit low bidders who didn't understand project.  Minnock asks if this was an attempt to avoid being "low balled."  Edwards says it's possible.


Minnock now asking what the "pilot Project" was.  Edwards says it was to bring in an outside project manager, which in this case turned out to be DLZ.  Edwards says he didn't find out about it until there were "issues."  Says Ferguson and another company were involved but didn't say what the issues were.


Minnock asking if contracts were bid by street and Edwards says no, the concept was all contractors bid a sample bid for same stuff, then they were ranked, then decided who got contracts, then DSWD would tell contractor which street they'd be working on.

Minnock asks if the contractors didn't know how complex the job would be.  Edwards says the contractors would be told about the location then a price would be agreed upon.  That the contractor would then give a price for that location.

Minnock asks if when it came time to do one project that trolley tracks would have to be torn up.  Edwards says that was the case on Broadway.

Edwards says the contractors how did good work would be given additional change orders for more work.


Edwards reads  that 3100 feet replacement... is crucial to central business district.  Now reads from a DLZ Memo that reflects another price reduction negotiation and justification for it.  Edwards says correct.

Minnock asks if it was important to do  on an emergency basis because the Super Bowl was coming to time.  Asks if it saves time and Edwards affirms, "It saves time."


Edwards reads from memo saying that original contract was for a little over a million and DSWD negotiated a lower price for the original contractor.  Minnock asks can't DSWD say your competitors are coming in lower can't you?  Edwards says, "that could happen."


Minnock now showing a list of change orders and asking if other contractors weren't getting 2 and 3 change orders and Edwards says yes.

Minnock says so we have 5 other contractors getting change orders.  Edwards says yes.


Minnock now showing a $6 mill change order for about 4 miles of water mains.  Says he wants to focus on something different than the government focused on yesterday.  Blackwell objects as argumentative.  The Judge sustains and tells Minnock to keep the editorial comments to himself.

Minnock asks if the discovery of equipment installed in the 1930's is something that they wouldn't have known about until they got the shovels in the ground and Edwards says yes.


Backing up now to $5mill change order for "service leads."  Minnock asks what are service leads, Edwards replies you'll have to ask a field engineer.

Minnock asks if service leads were put in anticipation of a development, Edwards says yes.  Minnock asks if the water has to go in first before new homes are built.  Edwards says yes, that's what the service leads are for.

Edwards reads from document where it say contractor discovered sewer lines that were not on the drawings.  Edwards agrees that it was something unexpected.  Not contemplated when original contract was let.


Minnock asks if Edwards needs to rely on the engineers to report on the project before he writes the checks.  Edwards says that's right.

Now looking at a previous order that increased the contract by $15 mill.  Minnock says this change order is for another nine miles of pipe, a substantial increase over the original job.  Edward's says correct.

Edwards reads from document where engineers says it makes sense to have the current contractor stay because he got the work done quickly. 


Reads more, that work is to replace water mains that have a history of leaks and breaks.  Minnock says didn't engineering say it would be more efficient to leave the current contractor in place rather than have them pull out their equipment and go through another year long bidding process.

Edwards says that's what the engineers said and we'd need the input from the engineer to find out why.


Minnock now showing a change order on one of the water contracts they talked about yesterday.

This increases the contract from $40 to $50 million dollars.  It was signed by Anthony Adams, Mercado's predecessor.  It also asks to increase the contract to a full year.

Minnock asks if it was a Lakeshore contract.  Edwards says he's not sure, then looks at the screen and says there it is right there on the document, Lakeshore, duh.  Then chuckles. 

Reads from the change order that the work should be bid out on a new contract.


Edwards now explaining "low balling" a contract. Says that some contractors will deliberately under bid the contract in order to  get it then use change orders to get the price up to what it should have been.


Edwards says sometimes contractors find things in the ground after digging a hole that are unexpected.

Minnock asks if before getting down to the pipes you're working on one has no idea what one may find.  Edwards says "correct."  Says it's true that pipes get thinner as they age.


Mercado's attorney John Minnock is  now cross examining Daniel Edwards from the Water Dept.  He's asking who authorizes change orders.  Edwards says the engineers in the field do that.


"All rise"  court is in session.  The Judge taking up evidentiary hearings first thing this morning.  Assistant Prosecutor Blackwell is asking to  introduce testimony from a Mrs. Phillips about her recollection of events in lieu of testimony from her now deceased husband.

Thomas is arguing that her testimony about a meeting between her husband and the Mayor at the Manoogian about DLZ is hearsay. 

The Judge is siding with the defense on this one.

From what Thomas just said it sounds like The topic was the Detroit based headquarters designation for the contract management company that was pulled during the bid process, clearing the way for Ferguson's company to get the water construction contracts.


This could be the first morning that we hear testimony from people who will say their contracts were held hostage by Kilpatrick's crew.  This would be the first testimony directly related to the extortion charge.  Hardiman's companies, according to Edward's testimony yesterday, benefited from  unusual changes in the bid procedure to get contracts for water construction projects, then benefited again from huge cost over runs.  As we heard yesterday one $13 million contract ballooned to more than $5 million.


Good Morning from the Theodore Levin Federal Court House in a slightly damp downtown Detroit.  I expect that Daniel Edwards from the Detroit Water and Sewerage Department will be on the stand first thing this morning so the defense team can finish cross examination. 

We may also see Tom Hardiman from A&H Contractors and Lakeshore Engineering, companies that came up a lot yesterday during Edwards testimony.

Here's an excerpt from Hardiman's bio:

"Tom graduated from Detroit's Northern High School. Shortly after graduating, he married his high school sweetheart, Gloria. Four years and three children later, in 1974 he joined the city's Fire Department. One year afterward, Tom was laid off. Finding himself with a wife and three sons to take care of, Tom set out on a mission to re-invent himself. He enrolled at Wayne State University where it took him 12 years to earn a Bachelor of Science degree in Business Administration. Ironically, it was the same institution where his future business partner was attending graduate school. Their paths later crossed, leading to Hardiman's partnership with Avinash Rachmale, founder and CEO of Lakeshore Engineering Services, Inc."


-Ken Martinek is Senior Producer -Investigations for Fox 2 News

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