City to rebid big Loop project after Walsh Construction sues
(Crain's) — The Daley administration is throwing out all the bids to rebuild the Wacker Drive and Congress Parkway interchange after the politically powerful Walsh Construction Co. sued to knock out two rivals for the work and have its $85.8-million bid declared the winner.
Chicago-based Walsh submitted the highest of the three base bids for the construction project, according to a tabulation on the city of Chicago's Web site. The other bidders are Chicago-based firms that are no strangers to the sometimes politically charged world of public construction jobs: James McHugh Construction Co., which bid $78.8 million, and a joint venture of F. H. Paschen and minority-owned contractor Cabo Construction Corp., which bid nearly $74 million, according to the city's Web site.
After the bids were opened Feb. 11, the city's Department of Procurement Services intended to award the contract to one of the other bidders, according to a lawsuit Walsh filed Feb. 24 in Cook County Circuit Court. But Walsh alleged the other bids were defective and should have been tossed out.
The administration apparently agreed. On Monday, city officials said they would reject all the bids and ask for new ones, a spokeswoman for the city's Law Department says. By rejecting all of the bids, the city makes moot Walsh's request to be declared the winner.
The city's decision to re-bid the job could backfire if the next round of bids is higher than Walsh's $85.8-million bid, says Chicago lawyer Edward T. Joyce, who represents Walsh.
"There is no guarantee the second bid is going to be lower; sometimes the second bid is higher because they all figure out, 'Oops, we bid too low,'" he says.
All the bids were well below the city's estimated cost, which was at least $100 million, according to the Dec. 23 advertisement for the project.
Walsh alleged that the Paschen/Cabo bid was defective because it did not include the required 5% deposit, or nearly $3.7 million, giving the joint venture the ability to walk away from its bid scot-free.
Meanwhile, McHugh tried to pay a $900 "submittal fee" with a company check rather than a certified check or money order, according to Walsh's complaint. Using a company check also gave McHugh the opportunity to walk away from its bid because the company could stop payment, effectively disqualifying the bid, the complaint says.
Ironically, the city in 2008 rejected a bid from McHugh on another project because it did not meet the submittal-fee requirement, the complaint says.
The gap between the Walsh bid and the others may be closer than it appears, based on how the bids were structured, Mr. Joyce says.
Joseph Scarpelli, an executive vice-president with Paschen, declines to comment on Walsh's complaint but says, "In the best interest of all parties, we think all the bids should be thrown out and the project rebid."
An executive with McHugh did not return a call requesting comment Tuesday morning.
Chicago-based Walsh and its top executives are active contributors to a wide range of politicians and were steady donors to Mayor Richard Daley's campaigns until the mayor stopped accepting contributions from city contractors.
The company is owned by brothers Matthew and Daniel Walsh, who have longstanding ties to the Daley family.
But Mr. Joyce says political influence wasn't involved in the decision to toss out the bids.
"If we had clout we would have won this thing as we should have," he says. "The city should have said to the first two bidders that they have not complied."
