As per the NJ State audit of the CRDA, in reference to Boardwalk Hall roof projects. The continuous and inconsistent application of emergency procurement resulted in additional costs.
Boardwalk Hall is a multi-purpose facility located on the Atlantic City Boardwalk. It was constructed in 1929 as the country’s original convention center, underwent a major restoration in 2001, and was transferred to the CRDA in 2013 through S11. Boardwalk Hall is comprised of East Hall and West Hall. East Hall houses the main event hall, ballroom hall, and various ancillary spaces. West Hall is a two-story warehouse primarily used for parking of support vehicles for events at East Hall. The CRDA contracts with a facilities manager to serve as the authority’s agent to manage and operate Boardwalk Hall. In October 2014, a five-year maintenance plan was prepared, identifying the need for repairs and replacement of the East Hall and West Hall roofs. Our review noted that the lapse in time between identifying the need for roof repair and replacement, and the questionable application of multiple emergency procurement, resulted in all roof work being awarded to one vendor at an additional cost to the authority of up to $2.1 million.
November 2014 – RFP for East and West Hall Roofs
A Request for Proposal (RFP) was released in November 2014 for the repair and replacement of the East and West Hall roofs. A contract was awarded but was cancelled. At that time, the authority evaluated the use of and costs associated with repurposing and/or demolishing West Hall and determined that the associated costs would be prohibitive compared to the budgeted costs to repair and/or replace the roofing system.
March 2015 – As-Needed Roofing Contract
In March 2015, the authority issued an RFP and subsequently awarded a two-year contract, not to exceed $500,000, for an as-needed roofing contractor to the sole respondent of the RFP and immediately identified three projects, totaling $455,000 to be completed under this contract. This vendor would eventually receive all additional Boardwalk Hall roof-related work over the next three years.
June 2015 – West Hall Emergency
In June 2015, a water leak was identified at West Hall. The authority determined that emergency work was required and sought a competitive process by releasing roof designs to replace a portion of the West Hall roof to four contractors who had participated in the original 2014 public bid. Two of the contractors responded at the July bid opening. A $1.4 million contract was awarded in August to the vendor who was recently awarded the as-needed roofing contract and was the lower of the two bids.
June to September 2016 – RFP for the East Hall Roof and Remainder of the West Hall Roof; Rejection of Bids; Increase As-Needed Contract.
It was not until June 2016, when the CRDA released an RFP to repair and replace the East Hall roof areas and the remainder of the West Hall roof. There were six respondents, four of whom submitted a bid for both projects. The highest and lowest combined bids were approximately $5.4 million and $3.46 million, respectively. The architect evaluated all submitted bids and concluded that the lowest bid proposal contained all prerequisites required by the RFP and the respondent was prepared to contract.
The CRDA’s management and the facilities manager recommended the board award a contract for both projects to the lowest combined bid. A draft resolution was prepared for the September 2016 board meeting to reflect these recommendations; however, the board chose to reject all bids on the basis of examining the scope of work for the proposed construction and, once again, to further examine potential options related to the repair and/or replacement of the roofing system. At that same board meeting, the board immediately presented and approved a resolution to increase the as-needed roofing contract by $2 million (from $500,000 to $2.5 million), to effectuate certain limited emergency repairs to a portion of the East Hall roofing system, even though the vendor holding the as-needed contract had just submitted the highest bid for the East Hall and West Hall roof projects.
November 2016 – East Hall Roof Emergency
Less than two months after the board’s rejection of the competitive bids, the authority requested a proposal for an emergency roof replacement at East Hall. The as-needed contract vendor submitted a proposal for $1.4 million to replace specific East Hall roof areas “as per original bid documents” that mirrored its previous bid, which was the highest bid.
The CRDA issued a purchase order for the work under the as-needed roofing contract with no consideration of a competitive process, even though the specifications used were those from the very recent June 2016 bid solicitation and could have been re-released, as in past practice. The vendor was paid based on percentage of completion, and the project was for roof replacement, not repair, which was not in accordance with the as-needed roofing contract.
January 2017 – West Hall Roof Emergency
Over a year and a half after the first West Hall roof emergency, and two months after the East Hall roof emergency, another emergency was identified at West Hall. On January 24, 2017 there was a power outage caused by the electrical switchgear being “flashed over due to water intrusion from a leaking roof.” The power was restored to the hall, the affected area was fenced off, and the room was locked making it inaccessible to unauthorized personnel. A proposal was requested from only the as-needed contractor to complete the roof repair and replacement of the remaining roof areas of West Hall as identified in the June 2016 RFP.
On March 1, 2017, the as-needed contractor submitted a proposal with a base cost of $2,350,000. In this emergency, the CRDA management recommended the Executive Director waive the authority’s public bidding process based on exigencies requiring the immediate delivery of the services and award a contract to this vendor. Management drafted a memo citing public exigencies existed which required immediate delivery of services under N.J.S.A. 52:34- 10(b) (statute) as justification to waive the public bidding process. This statute, however, is not specific to state authorities. The authority’s procurement protocol was developed in accordance with a 2006 executive order (EO 37), which specifically addresses the procurement process for state authorities, includes limited circumstances in which exception to public advertising and a competitive process shall apply, and additionally requires specific documentation and procedures when an exception is invoked. The CRDA opted to rely on the statutory provision which appears to have circumvented the additional requirements of the executive order process.
Similar to the statute, EO 37 removes the requirement of a competitive process in the case of unforeseen life or safety emergencies where the public exigency requires that the services be purchased immediately, however, EO 37 requires this to be demonstrated by the memorialized concurrence of three authority officials. We were not provided with this required memorialized concurrence of three authority officials.
Based on the lapse in time between the emergency and authorization to commence work and documentation presented, we question whether a public exigency existed. We calculated that 77 calendar days lapsed from the incident date to April 11, 2017, when the Executive Director authorized the commencement of work, which is not an immediate response. Since roof designs were already prepared from the 2016 RFP it appears there was ample time for a competitive bidding process.
The electrical contractor, who restored power, did not state a public exigency existed, but that repair and/or replacement of the roof must be completed prior to any additional electrical work performed and recommended that the roof be addressed as soon as possible to eliminate further additional problems and unsafe conditions. Additionally, our walkthrough of the West Hall area identified that the affected switchgear room was out of public view and only accessible by authorized personnel.
When an exception to competitive purchasing is invoked under EO 37, a proposed resolution concerning the contract shall set forth the justification for invoking the exception, and the authority’s Executive Director shall certify the circumstances that warrant application of the exception.
The CRDA did not prepare a resolution or formally receive board approval, nor did the Executive Director certify that circumstances warranted application of the exception. The Executive Director simply sent an email to authorize emergency work in an amount not to exceed $3,052,500, including a 25% contingency.
Per EO 37, the emergency contract must be limited to purchasing those services or products necessary to mitigate the emergency situation. The as-needed contractor was authorized to complete the replacement of all West Hall roof areas, as identified in the June 2016 RFP, which appears more than necessary to mitigate an emergency.
The lowest base bid submitted and rejected in 2016 for these West Hall roof areas was $1,381,500. The authority ultimately paid the $2,350,000 base bid plus a contingency for this project; $968,500 more than the lowest base bid.
August 2017 – RFP for remaining East Hall Roof Areas
By the summer of 2017, repair and replacement of all of West Hall and a portion of East Hall roof areas had been procured through some form of an emergency process. In August 2017, the CRDA issued an RFP to repair and replace the remaining roof areas of the East Hall, as outlined in the June 2016 RFP, along with the addition of gutter work. The only bid submitted was from the as-needed contract vendor that was granted all work on the Boardwalk Hall roofs, mostly through non-competitive processes.
The CRDA management could have authorized a re-bid prior to opening the one bid, to ensure a competitive process, but chose not to do so and instead awarded a base contract for $1.8 million plus a contingency. The architect’s recommendation stated that the bid was within the expected range for said work, however the authority could not provide support of any such range dated prior to the bid opening. This base contract, in addition to the November 2016 East Hall roof emergency base contract, totaled approximately $3.2 million and exceeded the lowest bid that was submitted and rejected in the 2016 East Hall RFP by approximately $1.1 million.
At the conclusion of all Boardwalk Hall roof repair and replacement projects, the vendor with the highest base bid of $5.4 million in the 2016 competitive process received base contracts totaling $5.53 million plus contingencies. Upon completion of all work, we estimate the authority will expend approximately $2.1 million more than if the board had awarded the projects to the contractor with the lowest base bid of $3.46 million in 2016.
We recommend the authority ensure compliance with its own procurement guidelines and EO 37. The authority should follow its maintenance plan to minimize emergency situations. When applying emergency procurement procedures, the authority should limit the purchase to those services or products necessary to mitigate the emergency and ensure proper application and approval of the exception to competitive procurement. The authority should consider a rebid when there is only one response to an RFP. Finally, the deficiencies identified in the procurement of the Boardwalk Hall roof projects should be examined and the appropriate controls implemented to ensure a proper procurement process and commitment to efficient fiscal management and transparency.