There’s a Whitewater Community Development Authority and Tech Park Board meeting today. Before the CDA meets again, one should consider how principal players in Whitewater’s multi-million dollar Innovation Center project have rationalized explained violations of federal competition in bidding requirements.

Explanations offered at the October 13th Tech Park Board meeting and the October 25th Community Development Authority meeting don’t reduce skepticism about the project and its incompetent handling.

These explanations only reveal how ill-conceived and poorly executed this project really is. It’s not better than one thought; it’s much worse than one thought.

I’ve written about violations of common-sense federal bidding requirements before. (Construction management firms that recommend bids shouldn’t be in a position to recommend themselves!)

See, Whitewater’s Innovation Center: Economic Development Administration Sends ‘Cease and Desist’ Letter Over Alleged Violation of Competition in Construction Requirements, Wisconsin State Journal: Work was stopped on Whitewater technology park due to federal rules violations, and The City Manager’s Dodgy Tale About Violations of a Federal Grant for the Whitewater Innovation Center.

(For the State Journal story, see Work was stopped on Whitewater technology park due to federal rules violations.)

In the draft minutes of the CDA meeting of October 25th, a CDA member read a letter explaining the federal violations.

The text of the letter appears on pages 3 to 4 of the linked document.

Here’s the text of the prepared statement:

Jeff Knight stated that he was present at EDA meeting on Oct. 6, 2010. Mr. Knight read out loud this prepared statement for the record.

“On September 28, 2010, a letter from the Chicago Regional Office of the Economic Development Administration (EDA) was received by representatives of the Whitewater Community Development Authority, the City of Whitewater, and the University of Wisconsin-Whitewater. This letter advised the cogrant recipients to cease and desist all construction activities associated with the grant.

Upon receipt of the letter, City Manager Kevin Brunner advised the contractors of the letter and put them on notice that construction may need to be stopped. On Wednesday, September 29th, he sent an e-mail to members of the Common Council, the Community Development Authority, and the University Technology Park Board, explaining the situation and including a copy of the September 28th EDA letter.

A meeting with the EDA in Chicago was scheduled for the morning of October 6th. Kevin Brunner, Mary Nimm, Denise Ehlen, Jeff Knight, Richard Telfer, and Cliff Goodhart attended this meeting. During the meeting the EDA’s concerns were discussed and elements of a possible resolution were considered.

On October 7th, a letter was sent to C. Robert Sawyer, Regional Director of the EDA explaining what had happened and why and proposing a resolution going forward. Also on October 7th, in response to this letter, a letter from the EDA was received accepting the proposed solution and lifting the stop advisory. These letters were shared with members of the Common Council, the Community Development Authority, and the University Technology Park Board.

The area of non-compliance indicated by the EDA concerned the use of J.P. Cullen as the construction manager and as the general contractor. While a number of safeguards were in place to ensure a bid process in compliance with federal regulations regarding competition, the EDA determined that awarding this contract did not satisfy the requirements of the code. The agreed-upon resolution to the situation involves EDA providing support for labor and materials associated with construction management and the general contract. The Whitewater partners must fund all overhead costs incurred by J.P. Cullen to ensure compliance.

It is clear that the EDA understands the importance of this project for Whitewater and for southern Wisconsin. They continue to be strongly in support of this project and recognize its importance for job growth and economic development in the region. The partners in the project are committed to moving this project forward. We are taking additional steps to ensure compliance, including conducting regular telephone conferences with our EDA Construction Project Manager. We appreciate the EDA’s cooperation and support for this project.”

A few remarks:

1. These violations are rare.

Violations of the most basic principles of competitive bidding are rare. Projects don’t typically receive cease-and-desist letters from a federal agency. Then again, most people who submit grants for millions in federal money understand that construction service firms who recommend bids should not be recommending themselves for contracting work.

2. Did Whitewater City Manager Kevin Brunner know about EDA violations before September 28th?

The prepared remarks of the letter contend that the City of Whitewater, among others, received a cease-and-desist letter from the EDA on September 28th. Does this mean that Brunner first knew of these violations only on Tuesday, September 28th?

That’s highly implausible, for three reasons.

First, it assumes that a federal agency’s regional director simply sent a letter out-of-the-blue, with no prior warning or discussion about violations. No prior email, no prior calls, nothing — just a cease-and-desist letter with no warning. That’s unlikely.

Notice how careful the prepared statement is — it refers to a letter on September 28th, rather than stating expressly that’s when any of the co-grant recipients of the multi-million dolllar payment actually knew and were told of violations. Why not simply say: “This is when we first knew of violations?”

Second, consider Brunner’s remarks a day earlier, on Monday, September 27th, at a CDA meeting. In those remarks, he talks about ‘compliance’ issues.

Beginning at 1:17:45 into the recording, Whitewater city manager Brunner discusses item 10 b, “Economic Development Administration Update.” I have embedded the video below, with my own transcription of the relevant discussion:

Transcript of conversation:

Brunner: Economic Development Administration update. We continue to work with the EDA on a variety of compliance issues. We have a meeting scheduled with them next week to discuss some concerns the EDA has regarding the Innovation Center and we hope to work out the details of that with them next week.

[Cross talk with Mary Nimm, CDA Coordinator]

And we have a new rep who has brought a new set of eyes and a lot more [laughs] detail, a lot more detail that we have to go through… So, that’s that… I don’t know, Mary, do you want to make any other EDA comments?

Nimm: Just that we have a new rep.

Did Brunner know through prior means before a letter – such as a phone call or email — that there were competition in construction violations?

Third, when Brunner spoke to the Wisconsin State Journal, on October 7th, he said that “he had no idea until a few weeks ago that the arrangement didn’t comply with federal rules.” Until a few weeks ago would place Brunner’s knowledge of EDA violations well before the September 28th letter.

That makes sense — as he admits in a recorded, public meeting on September 27th to questions with federal compliance, and it’s credible that the letter was preceded by prior EDA information. It’s not at all credible that the letter was a bolt-out-of-the-blue.

After all, Brunner wasn’t meeting with the EDA for tea and crumpets.

This suggests lack of candor about violations in the first instance. More significantly, had the EDA cease-and-desist letter not been published, the city might not have learned about such incompetence, ever.

3. Excuse-making at the October 13th Tech Park Board meeting.

If all this seems dodgy, there’s yet more. Consider the minutes of the October 13th Tech Park Board. Item 3 includes these notes:

After Telfer’s statement, there was general discussion regarding the financial impact that the EDA compliance issues might have. In response to a question from Chenoweth, Brunner explained that we don’t know exactly the net financial impact but it could result in additional dollars being paid under the EDA grant for construction management services that previously were thought not to be grant-eligible. The financial impact will be dependent upon how the EDA treats overhead and profit on the general construction contract as well as what construction management costs will be allowable under the grant. Brunner indicated that he would keep the Board informed as the administration of the EDA grant goes forward.

Gayhart questioned whether or not we should have known earlier in the process about the noncompliance issue. Ehlen responded that there was mutual culpability on the compliance issue. Telfer noted that the general construction contract was bid on in an open competitive process with Eppstein Uhen, as project architects, to serve as the overseer of the general construction contract.

City Attorney McDonell stated that the City was never alerted about the non-compliance with the CFR until a new EDA project engineer was assigned to the project a few weeks ago….

Imagine the oddity of a city attorney mentioning that “the City was never alerted about the non-compliance with the CFR [Code of Federal Regulations] until a new EDA project engineer was assigned to the project a few weeks ago….”

The City of Whitewater, the University of Wisconsin-Whitewater, and Whitewater Community Development Authority didn’t (1) understand simple principles of competitive contracts, (2) the city attorney expects someone else to explain a basic principle of a federal code to him, and (3) explain to him the clear terms and conditions of the grant document to which of city officials agreed (so that they would get millions in federal money).

Note also, that looking back ‘a few weeks ago’ from October 13th matches what Brunner and Nimm said on September 27th about having a new rep. City Attorney McDonell identifies this new project engineer as the reason for being alerted to the violation.

Is anyone to believe that the new project engineer was in place before September 28th, by everyone’s account, but that only unexpectedly on September 28th did the city receive notice of clear federal violations of competition regulations?

4. The Changing Story on Financial Impact of the Federal Violations.

In remarks published on October 9th in the Janesville Gazette, Brunner reportedly declared that “he doesn’t expect the violation to have any financial impact on the project.” One sees that just four days later, Brunner acknowledged to the Tech Park Board that he wasn’t really sure about the net financial impact.

The prepared statement doesn’t clear matters up; it suggests how dodgy this whole project, and explanations of it, have become. more >>