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Beachwood repeatedly hands lucrative contracts to single company without bidding process; city says there’s no need

BEACHWOOD, Ohio – The city of Beachwood has paid invoices on 11 jobs to a single company without any type of bidding process in the past year, and officials say they don’t have to obey laws prohibiting that practice, partly because they claim laws passed by previous administrations do not apply to them.

The 11 jobs have netted engineering firm GPD Group north of $720,000, according to city records.

They each cost more than $25,000 a piece, the threshold at which city law calls for an informal bidding process. Five were in excess of $50,000, the threshold at which state law requires a formal bidding process.

The projects that exceeded $50,000 did not always receive a city council vote before approval, but were instead approved by the mayor’s administration, something a separate city ordinance is supposed to prevent.

The mayor admitted in an interview with cleveland.com and The Plain Dealer that the city uses no type of bidding process before selecting GPD for the work.

Beachwood says it does not need to vote on the specific projects nor follow its local bidding law because it used a public vote to approve GPD’s annual contract to serve as city engineer. City officials say that contract essentially overrides the city’s bidding law because a legislative body is unable to bind its successors.

City Councilman Mike Burkons, who voted for GPD Group’s most recent contract renewal, told cleveland.com that awarding the work without any kind of bidding process was “completely illegal.”

“There was supposed to be a process and there was no process,” Burkons told cleveland.com.

Criticism of how Beachwood hires GPD Group for engineering services is not new. Burkons has been raising concerns in emails and council meetings since at least 2020, when Beachwood awarded a $111,000 contract to GPD to install traffic signal boxes on Richmond Road.

City officials have accused Burkons of spreading “misinformation.”

“There is no controversy surrounding GPD contracts,” Beachwood Mayor Justin Berns said. “We have unanimous support on this topic from a range of legal sources, and we fully understand how to legally manage our engineering projects. “

What does GPD do for Beachwood?

Beachwood has contracted with GPD since 1999 for some civil engineering work. In 2013, Beachwood’s city engineer left and GPD stepped in to fill the gap. Since then, GPD has served as the city’s engineer. Beachwood pays the company a monthly retainer for those general services, plus hourly rates for architects, surveyors, inspectors and other specialty staff.

Beachwood also contracts with GPD for design and administrative work for individual projects, such as road, intersection and sewer upgrades.

The city spends roughly a half-million dollars per year on GPD’s services, documents show.

It’s not uncommon for local governments to contract with engineering firms to serve as city engineer. University Heights, Bedford, Euclid, Mayfield Heights, Cleveland Heights and Shaker Heights do the same, and some also rely on GPD Group.

But unlike Shaker Heights, for example, Beachwood’s annual contract — and the individual projects later awarded directly to GPD – are not subject to a bidding process, which is intended to ensure taxpayer money is spent judiciously and the best contractors are picked for the job.

What’s the issue?

In 1998, Beachwood passed a local law that says the city must seek informal bids for any professional design or construction management contracts that exceed $25,000. The winning bid must be selected based on both quality and price, according to the ordinance.

“These procedures are not intended to be formal bidding requirements, but rather an informal procedure to determine the best contractor to whom a contract should be awarded,” the ordinance reads.

A state law requires local governments to seek formal competitive bids from companies for professional design contracts in excess of $50,000.

Beachwood conducts no competitive process — neither informal bidding nor formal bidding — before granting contracts to GPD. Rather, when Beachwood needs a road, intersection or sewer project designed, the mayor asks GPD for a proposal that outlines the scope of the project and an estimated cost, according to GPD’s contract.

The mayor’s administration reviews the proposal and then approves it, Berns said.

In some cases, Beachwood City Council has voted to approve such contracts with GPD for individual projects in excess of $25,000 – which is usually the spending limit that requires the mayor to seek approval from council . For example, in December 2019, council unanimously voted to approve a $36,000 contract to GPD for traffic engineering services. However, other projects never receive a council vote, even when they cost far more than $25,000. A recent sewer project on Green Road, estimated to cost up to $300,000, did not receive a vote from council.

Beachwood’s contracts with GPD Group have no annual spending cap. In contrast, Beachwood caps other professional services, including its architect and special counsel contracts at $25,000 per year.

Beachwood defends process

The city maintains it is legally allowed to skip a bidding process — and hand $25,000-plus projects to GPD without council approval — because council also approves the annual city-engineering contract with GPD.

“Once city council approved (GPD Group’s annual contract), there is no need to return to council for a vote on any further approvals, and the Mayor is authorized to sign off on subsequent engineering projects in that calendar year, irrespective of their cost,” Beachwood law director Stewart Hastings said in an email.

Hastings said the city’s law, which calls for an informal bidding process, ultimately trumps the state’s competitive bidding law because the Ohio Constitution’s home-rule provision grants local governments limited ability to make their own rules.

But Hastings said the city is also allowed to then ignore its own city law because of the legal doctrine that says a previous legislature cannot bind a future legislature. Because of that doctrine, city officials say the annual contract with GPD, once it is approved by council, essentially overrides the city ordinance requiring informal bidding.

City officials justify that argument by pointing to a clause in GPD’s contract — and in council’s ordinance approving the contract — that lays out how the city awards engineering work to GPD without using a bidding process.

A different argument for why Beachwood did not need to competitively bid the GPD contract was made in 2020 by then-law director Diane Calta. Calta had argued Beachwood’s statute never defined what constituted a “professional design firm,” and council never adopted the type of specific requirements found in state law, so council had “broad” discretion to act as it pleased, according to a May 2020 memo to city council.

Legal questions

Subodh Chandra, a former federal prosecutor who previously worked as the City of Cleveland’s law director, said Beachwood ignoring a law it previously passed could present legal issues.

“By ignoring its own ordinance requiring informal competitive bidding for contracts of $25,000 or more, and state law requiring competitive bidding for contracts of $50,000 or more, Beachwood and its chosen contractor risk a taxpayer lawsuit alleging—and a court finding—that the contracts were improperly awarded,” Chandra said. “Was that risk really worth it?”

Chandra noted that a competitive process in line with Beachwood’s 1998 ordinance could still have the same result of GPD receiving the city’s engineering projects.

“But at least the process would have been transparent,” Chandra said.

Jason Mercier, the director of the Center for Government Reform at the Washington Policy Center in Washington state, points out that governments can’t just ignore old laws because they were passed by their predecessors. Council members are free change laws or write new ones – but Beachwood has done neither, and its bidding law is still on the books.

As for whether Beachwood’s law trumps the state law that governs bidding processes, it’s unclear, said Jonathan Entin, a professor at Case Western University School of Law who teaches constitutional law and administrative and regulatory law. An Ohio court has never been asked specifically to rule on whether a city can use Home Rule to exempt itself from the state’s competitive bidding requirements, he said.

“Those who believe that the city has not acted lawfully by awarding a no-bid contract might have to go to court to get a definitive answer,” Entin said. But, he noted in an email, a “local government cannot simply claim home rule authority whenever it chooses to do so. The devil is in the details.”

The Ohio Attorney General, which is sometimes asked to provide official, yet nonbinding legal opinions on the limits of local government power, has never been asked to weigh in on whether a local government can ignore a law passed by the government’s predecessors, spokeswoman Hannah Hundley said in an email.

Is GPD the best option for the city?

Part of the reason why Beachwood did not seek competitive bids for its engineering services contract is because the city is happy with GPD Group and Joe Ciuni, the GPD employee who essentially functions as the city’s engineer, Berns said.

“Joe Ciuni has worked for the city for over 20 years. He knows the city really well. It’s invaluable,” Berns said. “I’m confident there is an engineering firm that can probably work for Beachwood for less money, but I don’t know that that work is the same quality GPD is bringing to the table. There’s a lot to be said for over 20 years experience in the city of Beachwood.”

Salary.com places the median city engineer salary at $71,000 and ZipRecruiter places the average salary at $96,000. Even if Beachwood were to exceed that amount – for example, the much-larger city of Dayton plans to spend no more than $132,330 on a full-time city engineer – the roughly $500,000 Beachwood pays GPD each year could fund a small department.

“Having GPD with nearly 600 engineers, with varying specialties at our disposal, is an advantage over having one in-house engineer,” Berns said.

The mayor is promising to review the city’s contracted professional services, including engineering services, for 2023. However, even if Beachwood were to hire an in-house engineer, it would still need to contract with GPD or a company like it for some supplementary engineering services, Berns said in an interview.

Despite the lack of bidding, Berns said Beachwood is getting a good deal with GPD.

In 2020, the city hired a different firm to compare the city’s engineering services to nine nearby cities, including Euclid, Shaker Heights, Rocky River and Lyndhurst. The analysis found the hourly rates GPD charged Beachwood and the total construction costs between 2017 and 2019 were roughly the same or less than the other cities.

GPD initially estimated a total cost of $35,500 for the city’s 2021 roadwork. The cost would be split between $11,500 to prepare bid documents and $24,000 to inspect the project, according to a March 25, 2021 letter from Ciuni. Though the project cost exceeded $25,000, no bids were sought. As of January 2022, GPD billed for more than $48,000, exceeding the original estimate, according to city documents. When GPD exceeds its cost estimates, the company has to submit a letter to the mayor justifying why a cost increase is needed, which the mayor has the authority to approve, Berns said.

The city’s 2022 roadwork is expected to cost more than 2021, documents show. GPD estimated it would charge the city roughly $110,000 to prepare bid documents, inspect and administer the projects, which included repaving 10 roads, upgrading wheelchair-accessible curb ramps and repaving the police parking lot.

For Burkons, Beachwood’s actions are cause for concern.

“Whether it’s legal or not, it’s bad business,” Burkons said.

By having GPD Group serve as both the city’s engineer and the city’s go-to design and construction management firm for various projects, Beachwood is failing to protect against overspending, Burkons said.

“Why in the world would you want to let the same person you pay to advise us what projects we do have such a vested interest in their recommendations?” Burkons said. “They have a clear incentive to recommend bigger and more expensive projects.”