Denial of Access to Access Denied: Part V

Collage of young child and sections of a CHA contract for securing vacant units.

In Part III of this series, The View erroneously reported that the CHA had received no responses to the request for proposals issued on June 14, 2002. In fact, it received two responses: from Vacant Property Security (VPS) and Kar-Anne’s Board-up Inc.

On August 20, 2002, the Board of Commissioners authorized the CHA to enter into contracts with VPS and Kar-Anne’s Board-up Inc. for a cumulative amount of $1,500,000. The terms of the contracts are for two years with an option for a third year. Under the contracts, VPS will secure vacant units by means of metal panels, while Kar-Anne’s Board-up Inc. will do so by means of plywood boards.

Several resident leaders were frustrated to learn that Access Denied had formally withdrawn from the bid process. “I wish they’d bid,” one of them remarked. “How can we support them, if they don’t bid?”

After the board meeting, I spoke with Duwain Bailey, CHA’s director of operations. He explained that the contracts just approved were intended for the CHA to use for emergencies and special needs. The CHA, according to Mr. Bailey, expects property managers to allocate sufficient funds for securing vacant units and will leave them free to use the contractor of their choice. This approach, he said, would allow VPS and Access Denied to compete for business at the development level.

On August 21, 2002, the day after the board meeting, Peter Bately and Andrea Brooks of Access Denied went to the offices of IRM Interstate Realty Management Company, which had recently been installed as the manager of the Robert Taylor Homes, to pick up a purchase order number and list of units to be secured under a scope of work they had verbally agreed on. According to Mr. Bately, while they were there, Kevin Collins, the CHA asset manager responsible for the Robert Taylor Homes, appeared and took Sarah Buckner, the property manager, aside. After speaking with Mr. Collins, Ms. Buckner told Mr. Bately and Ms. Brooks that Interstate was not going to use Access Denied. She did not, she said, have to pay for the securing of vacant units, because the CHA has a standing contract with VPS to perform that function.

When I heard about the episode at the Robert Taylor Homes, I contacted Kathyrn Greenberg, who handles “external communications” for the CHA, and requested a written statement outlining the housing authority’s policy on the securing of vacant units. Several days later, after consulting with Mr. Bailey, Ms. Greenberg provided the following statement:

The CHA’s contract for securing vacant properties was competitively awarded on August 20, 2002 by the CHA Board of Commissioners to Vacant Property Security and Kar-Anne’s Board Up. The CHA also requires that the private managers managing CHA properties determine the needs of their properties for the board up of vacant units and buildings and include in their budgets funding for those services. Pursuant to HUD and CHA procurement requirements, the property managers are to independently procure vendors for board-up services. The CHA will use the board up contracts just approved by the Board of Commissioners only if services are needed beyond what was expected and budgeted by the private managers.

It may or may not be relevant that Kevin Collins, until recently the CHA’s asset manager at the Robert Taylor Homes, has a brother, Michael Collins, who works for VPS. The essential point is that the policy articulated by the CHA can only work if it is understood and enforced by CHA field staff.

On December 2, Access Denied returned to the Robert Taylor Homes. IRM Interstate Realty Management had given them a purchase order number for work at 4429 S. Federal, and they had fabricated the materials—31 door panels and 46 window panels—required to do the job. When they arrived at the site, they found that 30 of the 31 units they had come to secure already had VPS panels in place. According to Mr. Bately, Ms. Buckner of Interstate told Access Denied that this was a mistake, that VPS was not supposed to secure those units. She asked for time to clear up the confusion. Two weeks later, she informed Access Denied that she was going to use VPS because the CHA would pay the bill.

This is hardly the fair, open competition that Mr. Bailey promised. When he learned of the situation at Robert Taylor, Mr. Bailey assured Mr. Bately that “Interstate will honor your purchase order.”

Mr. Bailey’s active interest in VPS’s performance under its CHA contracts is welcome. Several questions demand his attention. How is it that work for which the property manager at Robert Taylor had engaged Access Denied was done by VPS? Was this a mistake on the part of VPS? Was it a deliberate effort by VPS to deny business to Access Denied? And if so, how did VPS learn precisely which units Access Denied had been hired to secure?

In either case, it is striking that VPS, whether by accident or design, mobilized to secure those particular units at Robert Taylor, while elsewhere in the neighborhood a building it is contractually obligated to keep secure, 2822 S. Calumet, stood wide open.

Denial of Access to Access Denied: Part IV

Collage of young child and sections of a CHA contract for securing vacant units.

This inquiry into the CHA’s management of contracts for securing vacant units has demanded close attention of the reader. The story resides in the details. In order to understand this corruption of the contracting process, one must enter into its molecular structure; the alternative is assertion and counter-assertion in a medium of generality where nothing can be resolved. Also, in view of the gravity of the issues we raise, we have felt obligated to make available our underlying evidence, in the hope that others will scrutinize, correct, and extend our inquiry.

As we emerge from this maze of documents, several questions stand forth in bold relief:

Has VPS fulfilled its scope of work under contract #9351 and its modifications? The CHA presented to the Board contract modifications of $450,000.00 (approved on October 16, 2000) and $300,000.00 (approved on November 20, 2001). In both instances, there is reason to question whether the additional funds covered additional work or cost overruns. HUD initially withheld approval of the $450,000.00 modification “because the scope of the contract was unchanged.” (More than a year after its request for approval of the modification, the CHA returned to HUD with information about specific work covered by the $450,000.00.) In the case of the $300,000.00 modification, the CHA told the Board that the additional funds were necessary to secure some “280 new units needing immediate and near-term security this winter,” and it told HUD that the funds were “for a one-year extension of rental fees for the security screens installed under the basic contract.”

These inconsistencies could be resolved by full disclosure of VPS’s performance in fulfilling its scope of work as of the dates the CHA sought Board approval for the contract modifications. A full assessment of VPS’s performance would address the following questions:

  • Have there been any other add-ons to contract #9351 that have not been brought before the Board of Commissioners? If so, what were the dollar amounts and when were they granted?
  • Has VPS invoiced properly under contract #9351? As noted earlier in this series, VPS has two fee structures–long-term and short-term. (According to its prices as of 1999 when contract #9351 was awarded, the cost of renting a front door panel for 12 months on the long-term basis was $395.00. The cost of renting the same panel on the short-term basis was $126 for four weeks. Allowing for a 20% discount for rentals of 36 weeks or more, the cost of renting the panel for 12 months on the short-term basis comes to $1,360.80.) Have these alternative fees structures been used appropriately? Are there instances in which the CHA is making long-term use of VPS products and paying for them on a short-term basis?
  • Most important, is VPS adequately securing vacant units? At Stateway Gardens there have been numerous instances of VPS panels being breached. Unauthorized residents have been found living behind seemingly intact VPS door panels. I have heard similar reports from elsewhere–notably, Ida B. Wells and Madden Park where the resident leadership and management company have had extensive experience working with both VPS and Access Denied. According to Sandra Young, president of the Wells resident council and a CHA Commissioner, units secured by VPS have been repeatedly broken into, while “Access Denied panels have never once been breached at Wells.” I don’t want to generalize on the basis of anecdotal evidence, but clearly there is sufficient reason for the CHA to investigate whether VPS is adequately securing vacant units.
  • Has VPS conformed to the specifications in its contracts with the CHA? Have they met the requirement that panels be secured “with braces and threaded bolts”? If not, does this help explain the frequency with which VPS panels are breached?
  • Apart from contract #9351 and its modifications, what contracts has VPS entered into with private management firms hired by the CHA to manage its developments? What role, if any, have CHA staff played in VPS’s pursuit of such contracts? There is evidence that CHA personnel may have advanced the interests of VPS in relation to private management firms while frustrating the interests of Access Denied. It appears that someone at the CHA deleted Access Denied from the list of vendors invited to present at the vendors fair held in December, 2000. And someone at the CHA is reported to have coerced the property manager of the Robert Taylor Homes to withdraw from an agreement with Access Denied. The CHA could clarify matters by disclosing the extent of VPS contracts with private management firms and the role CHA staff played in the process by which VPS acquired those contracts.

    Assuming that other independent investigations corroborate The View’s account, what should be done to rectify the situation? Access Denied argues that it has suffered significant loss of business it would have had a reasonable expectation of securing, were it not for contracting improprieties at the CHA. I asked Mr. Bately what he intends to do. “My attorneys are preparing to seek a legal remedy to this situation,” he said. “I haven’t yet decided to proceed, but currently it seems all but inevitable.” I pressed him on what he would regard as an acceptable outcome. “If Access Denied was adequately compensated and a sensible system was put in place,” he replied, “I would be satisfied. All I ask is to be treated fairly.”

    Mr. Bately, Ms. Washington, Commissioner Young, and several property managers I spoke with agree on what “a sensible system” would look like: instead of a single, centralized contract for the securing of vacant units, the CHA should make funds available to the property management companies, and they should be free to select the contractor they want in a competitive context free from interference by CHA staff. Over the last few months, in informal conversations, senior CHA officials have indicated that they incline toward such a system. Why, then, in view of the urgency of securing vacant units and the failure of two bid solicitations over the last sixteen months, isn’t such a system in place now? What will it take to establish it?

    What are the larger implications of this inquiry into the CHA’s handling of a single contract over time? What does it disclose about the contracting process? What can be learned from it? An essential element of the Plan for Transformation has been the transformation of the CHA itself. It no longer directly manages public housing developments but rather has contracted with private management firms for the purpose. It no longer provides services to residents but has contracted out those functions to various agencies. And now it is entering into agreements with developers to rebuild whole neighborhoods. (For example, at its July meeting, the Board of Commissioners committed $57.7 million to the redevelopment of Stateway Gardens by the Stateway Associates development team.) The CHA has, in effect, become an agency the central function of which is negotiating and managing contracts. Questions about its capacity to solicit, manage, and monitor contracts thus bear on its essential mission. Among the questions that need to be addressed:

    What mechanisms of internal monitoring are required in order to provide the Board with the information it needs to perform its oversight function? At the July 10 meeting of the Operations & Facilities Committee of the Board of Commissioners, the first six items on the agenda involved modifications of various contracts. The total of the six modifications came to $5,359,866.40. In each instance, members of the Committee questioned the CHA staff and contractors presenting the proposed contract modification. In each instance, Commissioners voiced their determination to break with the patterns by which funds allocated for providing affordable housing to those in need are siphoned off by contractors. And in each instance the Committee approved the modification. Perhaps each of these modifications was warranted. But what sorts of information does the Board need in order to perform the role it aspires to play in this area? What mechanisms of Board oversight might be created to enable it to identify the sorts of improprieties described in this series of articles?

    How might the bid process be reformed in order to avoid deterring quality contractors and inviting improprieties facilitated by the absence of competition? Twice in the last sixteen months the CHA has solicited bids for the securing of vacant units. In both instances, the bid solicitations were unsuccessful. In private conversations, CHA officials have expressed frustration with Access Denied. “How can we give Bately work,” one asked, “if he won’t bid?” It might be fruitful to turn the question around: why would a contractor eager for work make a considered business decision not to bid on contracts offered by the CHA? Do the problems perhaps reside in the substance of the bid requirements and in the manner in which the bid process is conducted?

    * * *

    The View began its coverage of the problem of unsecured vacant units on June 17, 2001 with a story titled “In Memory of Eric Morse: Part I.” At the time, the CHA was contending with a civil suit brought by the family of Eric Morse, the five-year-old child dropped by two other children from the fourteenth floor window of an unsecured vacant apartment at the Darrow Homes on October 13, 1994. The suit charged that the CHA and a private management firm were liable in Eric’s death due to their failure adequately to secure vacant units. On November 7, 2001, on the eve of jury selection, a settlement was reached under which the CHA and the management firm agreed to pay the Morse family $2.75 million. The settlement came ten days after a deposition from former CHA director Vince Lane in which he said that the housing authority had failed to follow its own policies with respect to the securing of vacant units.

    A dead child named Eric Morse has come to symbolize the human costs of not adequately securing vacant units. Those costs take various forms: criminal activity, unauthorized residents, and, in general, exposure of CHA residents to avoidable dangers. In light of the Morse case, I do not doubt that the CHA is acutely sensitive to the potential human and legal consequences of inadequately secured vacant units. It seems clear that its substantial investment in contract #9351 and its decisions to extend that contract, in the face of protests from other contractors and calls for investigations by resident leaders, have been motivated by these concerns. But has corruption of the contracting process defeated its efforts to protect residents from harm and to reduce its liability?

    A property manager at a CHA development who has made use of both VPS and Access Denied shared with me a cost comparison he had done of the two companies. Even if Access Denied was not substantially less expensive, he told me, his firm would still use them over VPS because of the frequency with which VPS panels have been breached. “From the standpoint of reducing our liability,” he said, “it’s a much better product.”

    In view of the apparent mismanagement of contract #9351, the pattern of VPS panels being breached, and the failure of the CHA to correct the situation once it was brought to the attention of senior staff, what sort of defense will it be able to offer in the next Eric Morse case?

    Denial of Access to Access Denied: Part III

    Collage of young child and sections of CHA contract for securing vacant units.

    On October 16, 2000, the Board of Commissioners approved a modification of the CHA’s contract with VPS (contract #9351) in the amount of $450,000.00, bringing the total value of the contract to $1,814,300.00 The presentation to the Board by the CHA provides the following justification for the modification of the original contract

    Because of several factors, including underestimating CHA’s needs under the original procurement, higher relocation rates than anticipated for the remaining family high rise buildings, the recently enacted City ordinance that requires improved security levels for vacant properties and concerns related to the heating of partially vacated properties over the coming heating season, it is recommended that the contract amount with VPS be increased by $450,000.

    The presentation to the Board does not say anything about VPS’s performance under contract #9351. Was VPS fulfilling the terms of its scope of work in a cost-effective manner? The Board presentation says of the $450,000.00:

    This amount should provide CHA with an adequate reserve to secure those units needing immediate and near-term security and to pay for second year rental costs associated with the use of the VPS product.

    Does this $450,000.00 “reserve” represent additional work or does it represent cost overruns? If both, in what proportions? There is no way to tell from the CHA’s presentation to its Board.

    Precisely for this reason, HUD did not initially approve the contract modification. A letter dated December 7, 2001 from Terry Peterson, the CEO of the CHA, to Linford Coleman of HUD, seeking approval of yet another contract modification for VPS, contains the following passage:

    The CHA originally wrote HUD in October 2000 requesting approval to increase the above referenced contract by $450,000. This correspondence was apparently lost and CHA did not find record of a response to it. On August 3, 2001, the CHA forwarded a facsimile submission of this October 2000 letter to your office again requesting approval of a contract modification. Your response correspondence dated August 16, 2001 indicated that you could not approve this contract modification, as prepared, because the scope of the contract was unchanged. [emphasis added]

    Mr. Peterson went on to explain that the scope of the contract had in fact changed:

    Perhaps our original request was deficient in explaining that, in fact, the scope did change. The CHA originally bid out requirements for 1,100 units and was proposing the modification to secure 400 additional units, the rental cost of which totals approximately $450,000.

    The letter then itemizes the door panels and window screens of various sorts covered by the original contract and the modification. It does not indicate whether the terms of the original contract were fulfilled. We do not know what the CHA got for its money.

    In a letter to Terry Peterson dated March 22, 2002 Mr. Coleman ultimately approved the contract modification for $450,000.00.

    * * *

    From his base of operations in California, Mr. Bately repeatedly called Mr. Anderson to inquire about CHA work. Mr. Andersen would tell him that “nothing was going on.” Mr. Bately recalls him saying, “Any further work is up to upper management.” In early December of 2000, Mr. Bately called from California and spoke with Deborah O’Donnell of the purchasing department. She told him that there was lots of work available—with private firms that had taken over the management of CHA developments. There was, she informed him, a vendors fair to be held within a few days at the South Shore Cultural Center. “You were supposed to be on the vendors list, but a lot of names I put on the list have been deleted,” he recalls her as saying. “You must get here right away.”

    Mr. Bately left immediately for Chicago to attend the vendor’s fair. At the fair and in the days following, he made direct contact with several property management firms which expressed interest in contracting with Access Denied. This led, among other things, to a substantial contract with McCormack Baron, the firm managing the Ida B. Wells and Madden Park developments.

    Among the property management firms that expressed interest in the services of Access Denied was William Moorehead & Associates, the firm managing the Robert Taylor Homes. Access Denied entered into a verbal agreement with Moorehead & Associates to provide its services at Robert Taylor. Its bid for the specific scope of work would have resulted in a savings of $7,732.00 a month relative to VPS’s bid. Within a matter of a few days, Moorehead & Associates was told by someone at the CHA that they were not to do business with Access Denied. They were, in effect, forced to continue using VPS.

    * * *

    On April 11, 2001, the CHA issued an invitation to bid on a contract worth roughly $2,000,000.00 to provide steel door and window board-up. Access Denied sent a letter to Duwain Bailey, the CHA’s director of operations, protesting the fact that the bid package contained VPS’s specifications—on VPS letterhead. Mr. Bailey replied that Access Denied could respond to the bid using its own specifications. The CHA did not, however, correct the process for other bidders.

    The bid opening was on June 1, 2001. There were three responses: two bids and one protest—from Access Denied.

    The bid opening was set for 10:00 am. According to Mr. Bately, he and his son Nathan arrived at 10:02. Another contractor, having delivered his bid, was leaving the room as they entered it. Thomas Serafini of the purchasing department told them, “You’re late. We can’t accept your bid.” He refused to take the envelope proffered by Nathan. Nathan then opened the envelope. “Now you have to take it,” he said and handed Mr. Serafini what proved to be not a bid but a letter of protest. “I have to take it,” replied Mr. Serafini, “but I don’t have to read it.”

    VPS, it turned out, had bid on only part of the contract. The CHA determined that its bid was “non-responsive” because it had added “additional terms and conditions.” The other bidder was determined to be “non-responsible for being incapable of performing the volume of services in the time required.”

    * * *

    On November 20, 2001, the Board of Commissioners approved another modification of contract #9351 in the amount of $300,000.00, bringing the total value of the contract to $2,114,300.00. The presentation to the Board referred to the unsuccessful bid solicitation in June:

    Until a new procurement can yield responsive and responsible bidders, the CHA must still be able to secure vacant properties from trespass and inclement weather in order to prevent further damage to the properties and to prevent the creation of dangerous and hazardous conditions to the residents.

    I know from conversations with CHA executives during this period that they fully appreciated the urgency of securing vacant units and that they were uneasy about the VPS “monopoly.” Because of the CHA’s inability to put out a successful bid, however, VPS nevertheless emerged with more work on an exclusive basis.

    The presentation to the Board also stated:

    While VPS performs the additional services pursuant to the latest amendment to the existing contract, the CHA will proceed with a competitive procurement in the form of a Request For Proposal (RFP) to encourage more competitions for this service and encourage more vendors to submit proposals.

    In the December 7, 2001 letter from Mr. Peterson to Mr. Coleman, the CHA says of the RFP: “The timeframe for issuance is early January 2002.” In fact, the bid solicitation would not be issued until mid-June.

    The Board presentation describes the scope of work under the modification:

    The $300,000.00 amendment would provide CHA with an adequate reserve to secure approximately 280 new units needing immediate and near-term security this winter, consisting of approximately 280 security doors, 300 large screens and 250 small screens.

    A March 22, 2002 letter from Mr. Coleman to Mr. Peterson makes reference to a letter sent by Mr. Peterson on February 22, 2002—this letter was not among the materials released to Access Denied—and includes the statement that the $300,000 contract modification “is for a one-year extension of rental fees for the security screens installed under the basic contract.” So it appears that the $300,000 was not used to secure new units as had been represented to the Board but to pay rental fees on security screens already in place.

    Again, the presentation to the Board of Commissioners did not include any assessment of VPS’s performance under the original contract or the $450,000.00 modification.

    No change in the term of the contract was requested by the CHA in the draft resolution presented to the Board—the contract was to end on March 30, 2002—but in subsequent communications with HUD the CHA requested and received an extension of the contract until March 30, 2003. It is not clear from the documents secured thus far under the Freedom of Information Act whether the Board was aware of the contract extension.

    * * *

    On January 15, 2002 at the monthly meeting of the Board of Commissioners, Francine Washington, president of the Stateway Gardens resident council, asked the Board to investigate the CHA’s handling of contracts for securing vacant units. Board Chair Sharon Gist Gilliam told Ms. Washington that the Board would look into the matter. Two months later, at the March 19 Board meeting, Ms. Washington inquired about the results of the investigation. The Commissioners did not respond to her question. Ms. Washington is, she says, “still waiting for a response from the Board.”

    On April 22, The View published an article titled “Denial of Access to Access Denied.” The article elicited no response from the CHA, but it brought a swift response from VPS. The View received an e-mail from Frank Cureau, president of VPS, protesting the article and characterizing it as “entirely deflamatory [sic] and without substance.”

    Mr. Bately received a letter from VPS’s attorney accusing him of “making false statements about my client in an effort to interfere with Vacant Property Security, Inc.’s business relationship with the Chicago Housing Authority.” The attorney wrote:

    Please be advised that if the conduct of you and your company results in any loss of business, existing or prospective, to my client, then I will advise my client of its litigation options against you and your company. These false accusations must cease immediately.

    I asked Peter Bately about the legal threat from VPS. “My issues are with the CHA,” he told me, “not with VPS. As far as I’m concerned, VPS saw a business opportunity and pursued it. I can’t fault them for that.”

    VPS also appears to have responded to the article in other ways. I had quoted Sandra Young, president of the Ida B. Wells resident council and a CHA commissioner, on VPS’s record in hiring residents, “We never placed a single resident with VPS. We forwarded names to them but never got a resident hired.” Within 24 hours of the posting of the article, VPS had hired three residents at Stateway Gardens.

    There were also reports from Madden Park that VPS was retrofitting panels it had installed there, although demolition was to begin within a matter of days. Were they trying belatedly to conform to the specifications in the contract for the work at Madden Park?

    * * *

    The long-promised “request for proposals” (RFP) that the CHA told HUD would be issued in “early January 2002” was finally issued on June 14, 2002. It was sent to Access Denied via regular mail. Postmarked June 19, it was delivered on Saturday, June 22. They opened it on Monday, June 24 and found that the pre-bid meeting was scheduled to be held that day. The deadline for responding to the RFP was July 9.

    Access Denied, which has entered into rental contracts with a number of housing authorities across the country, found the RFP unacceptable. “They ask for trade secrets,” said Nathan Bately. “For a proprietary product, it’s unheard of.” Specifically, the RFP asked for a breakdown of all costs and profits, for shop drawings showing details of design and installation, and for the right to commercially exploit any copyright or patent developed in the performance of the contract. It also explicitly exempted the CHA from being required to pay in a timely manner: “The CHA’s obligation under the contract is contingent upon the availability of appropriated funds from which payment for contract purposes can be made.” In effect, the contract commits the vendor to provide its product and services, but does not commit the CHA to pay for those products and services in a timely manner.

    The CHA received no responses to the RFP. Thus, over the last 16 months, it has made two unsuccessful solicitations for bids. The result has been more business for VPS: operating under the extension of contract #9351 to March, 2003, the CHA continues to give VPS work on an exclusive basis.

    Denial of Access to Access Denied: Part II

    Collage of young child and sections of a CHA contract for securing units.

    In view of the urgent need to secure vacant units at CHA developments across the city, and in view of the CHA’s responsibility to make prudent use of limited resources in order to improve the quality of life for residents, how is it that a vendor offering a competitive, if not superior, product for securing vacant units at a significantly lower price has been consistently put at a disadvantage by the CHA while another vendor has been favored? Why has this situation been allowed to persist? How will it be corrected?

    The View raised these questions at the end of an inquiry, posted April 22, 2002, into allegations that the CHA had over several years allowed Vacant Property Security, Inc. (VPS) a de facto monopoly, while systematically excluding Access Denied, a company offering a comparable product. (See “Denial of Access to Access Denied.”) Recent events have helped answer some of these questions, and they have sharpen others.

    ignificant development is the release by the CHA of documents requested by Access Denied under the Freedom of Information Act. Although the documents are incomplete, they support allegations of misconduct in the contracting process. By allowing us a glimpse into the molecular structure of this process, they raise questions, extending beyond this set of contracts, about the CHA’s capacity to make cost effective use of its resources and to reform longstanding patterns by which funds allocated for housing those in need are siphoned off by contractors.

    In order to grasp the issues, it is necessary to bring close attention to a series of documents and to hold in mind the pattern they form. Bear with me, for this is a paper trail that has immediate implications for the safety and well-being of public housing residents.

    The story begins in December of 1998 when Peter Bately, the owner of Access Denied, came to Chicago in response to an invitation from the CHA. David Anderson, manager of technical services, arranged for a demonstration by Access Denied of its product. Mr. Anderson sent the following e-mail to six senior colleagues:

    I am planning to schedule a presentation of a security door and window product called Access Denied, which appears to be conceptually similar to the product marketed by Vacant Property Security. I would like to schedule the demonstration for Tuesday, December 15 at 4700 at 1:00 pm. Please plan to attend if at all possible.

    At this point, VPS and Access Denied were on an equal footing: two vendors with “conceptually similar” products that address an essential operations need of the CHA: the securing of vacant units. (On the critical nature of the need, see “In Memory of Eric Morse” – Part I and Part II.)

    * * *

    In May of 1999, VPS and Access Denied had their first opportunity to bid on a CHA contract. On the advice of Mr. Anderson, Access Denied set its price at $135,600.00. VPS won the contract with a bid of $105,875.00. According to Mr. Bately, had Access Denied based the bid on its own price structure, its bid would have come in at $93,600.00.

    The contract was awarded to VPS, although they did not meet the specifications. On the bid document, signed by Frank Cureau, the president of VPS, there is a handwritten note:

    We could start immediate installation using our standard range of equipment and change to the purpose [sic] made product (free of charge) as they become available.

    In other words, VPS acknowledged that they did not meet the specifications and indicated that they would do so when they began manufacturing (as opposed to using existing inventory) for the purpose of fulfilling the contract.

    The matter of the specifications is not a technicality. It is fundamental. VPS did not satisfy the specification that panels must be “secured . . . with braces and threaded bolts.” Instead, it used cable. Property managers who have used both VPS and Access Denied report that it is this feature that makes VPS panels relatively easy to breach.

    Was it legitimate for the CHA to award the contract to VPS under these circumstances? Arguably, VPS, despite coming in at a lower price, should not have received the contract, because they didn’t meet the specifications. In a sense, there was no real basis of comparison on price between the two bids, in view of the fact that one met the specifications and the other didn’t.

    Did VPS subsequently conform to the specifications? Did those managing the contract at the CHA demand that they do so? If VPS did not conform to the specifications and hence was in violation of the terms of the contract, was it legal for the CHA to award the company subsequent contracts?

    * * *

    On September 20, 1999, the CHA issued “Specifications for Bid” #29855—a sizeable contract to secure vacant units at CHA developments throughout the city. The bid document lists two “acceptable manufacturers“: Vacant Property Security Inc. and Access Denied.

    Access Denied was concerned about bond requirements stipulated by the contract. They ultimately decided not to bid, because they were unable to resolve this point with the CHA.

    VPS, too, was concerned about the bond requirements. David White of VPS wrote Deborah O’Donnell of the purchasing department:

    We have today had a series of meetings with our insurance company regarding the issuing of a performance bond and having duly considered all aspects have decided that we would regretfully have to withdraw from bidding on this contract if it remains a condition. . .

    These conditions have never been demanded from us any previous contract in over 20 years of trading on both sides of the Atlantic and we therefore consider them inappropriate and unacceptable for this type of rental contract.

    Trusting you will be able to suitably amend the current document, we assure you of our continued attention.

    In the end, VPS did bid on the contract, while Access Denied did not. On October 14, 1999, the bids were opened. There were two. VPS was the lowest bidder and was awarded contract #9351 in the amount of $1,364,300.00. The contract period was March 30, 2000 through March 30, 2002.

    The documents secured thus far under the Freedom of Information Act do not include the CHA’s response to the letter from VPS quoted above. Was the bid document amended? Were the bond requirements waived for VPS? Were they ignored?

    * * *

    Among the documents released under the Freedom of Information Act is a purchase order, dated January 21, 2000, issued to VPS in the amount of $98,500.00. A note on the purchase order reads: “Sole Source approved by Mr. Jackson.” This is presumably a reference to Phillip Jackson, who was at the time the chief executive officer of the CHA.

    Sole source is a procedure under which a contract is granted without going out to bid, because there is only one source for the service or product being sought. In light of the provision in the bid document quoted above to the effect that there are two “acceptable manufacturers”—VPS and Access Denied—how could a sole source contract be justified in this instance?

    The purchase order describes the work for which the CHA contracted:

    120 units @ $600 – Robert Taylor =
    72,000
    20,000
      92,000 TOTAL
    10% for extras
     
      Final Cost 98,500

    There are a couple of things to note here. First, the addition of 10% of $92,000.00 does not yield a total of $98,500.00. Second, it appears that the rationale for sole source was that the contract called for relocation of existing VPS doors at Madden Park. That makes sense: VPS could plausibly be said to be the sole source for the purpose of removing and reinstalling its own product. But what is the justification for treating the bulk of the contract for new doors at the Robert Taylor Homes—$72,000.00 of the $98,500.00 contract—as sole source? If this is permissible, then restrictions on the use of sole source can easily be evaded by treating contracts which contain some sole source services as sole source in their entirety.

    * * *

    On June 1, 2000, Bridget Reidy, Chief Operating Officer of the CHA, sent a letter to Linford Coleman, Director of the Operations Division of the Department of Public Housing in the Illinois office of HUD, seeking approval of a sole source contract with VPS. I will quote this remarkable document in its entirety:

    Dear Mr. Coleman:

    The Chicago Housing Authority (CHA) seeks the approval of your office to enter into a sole source agreement with Vacant Property Security, Inc. (VPS) to provide CHA with products and installation services defined as “Short Term System” (STS).

    CHA entered into contract #9351 with VPS for the use of products and services defined as “Long Term System” (LTS), which were specifically designed for use at properties that CHA is in the process of vacating. What we have found, however, is that by using combinations of the LTS and STS systems CHA can reduce its costs associated with securing entire floors or buildings. For example, CHA priced the cost of securing 230 entrance doors at 3615-17 S. Federal under both LTS and combination of LTS and STS products. Using the LTS system exclusively, the cost would have been $95,450. However, by using a combination of LTS and STS products, CHA’s cost is only $23,540, because by using the products in combination, it was only necessary to secure each entry door in the building.

    Given CHA’s need to vacate and secure large high rise buildings, this appears to be the best use of available funding. Since VPS provides a proprietary product designed to be used only with other products that it manufactures, it is necessary to award this contract on a sole source basis. To our knowledge, no other manufacturer offers a product that can be used in combination with VPS’s LTS product line.

    Should you have questions or require additional information, please contact David Anderson, Manager of Technical Services at 312.567.7720, extension 179.

    Sincerely,

    M. Bridget Reidy, Chief Operating Officer

    On July 17, 2000, Terry Peterson, chief executive officer of the CHA, received a response to Ms. Reidy’s letter from Mr. Coleman. It reads in relevant part:

    We have reviewed the subject documents requesting HUD approval and determined that a sole source agreement with Vacant Property Security, Inc. would be cost-effective. Approval is granted to award the contract to Vacant Property Security, Inc.

    Now let’s return to Ms. Reidy’s letter and examine it more closely. She explains that VPS has two products—the “LTS and STS products.” By combining “the LTS and STS systems,” she writes, “CHA can reduce its costs associated with securing entire floors or buildings.

    The strong impression left by the letter is that the LTS and STS systems are two different product lines and that the most cost-effective approach requires the meshing of the two systems. In fact, they are two different pricing systems for the same product—long-term (i.e., rental on a yearly basis) and short-term (i.e., rental on a monthly basis).

    Ms. Reidy provides an example of the savings achieved by using the LTS and STS systems in combination: the securing of 3615-17 S. Federal, the first building closed at Stateway Gardens:

    Using the LTS system exclusively, the cost would have been $95,450. However, by using a combination of LTS and STS products, CHA’s cost is only $23,540, because by using the products in combination, it was only necessary to secure each entry door in the building.

    As advisor to the Stateway Gardens resident council, I was deeply involved in the process of securing and ultimately closing 3615-17 S. Federal. I was in the building daily over a period of months. The savings described by Ms. Reidy were achieved by securing entrances to entire floors rather than securing individual units on those floors. This is a sensible, cost-effective approach. It has nothing to do with “using a combination of LTS and STS products.” And it has nothing to do with any unique quality of VPS products. It is simply a strategic decision as to how best to deploy the housing authority’s resources for securing buildings—whether it is using VPS, Access Denied, or some other vendor.

    Ms. Reidy asserts that it is only through coordinated use of VPS’s LTS and STS products that the CHA can achieve these substantial savings. Here is the crux of her argument:

    Since VPS provides a proprietary product designed to be used only with other products that it manufactures, it is necessary to award this contract on a sole source basis.

    She adds:

    To our knowledge, no other manufacturer offers a product that can be used in combination with VPS’s LTS product line.

    This is asserted, despite the documented fact that the CHA was aware of Access Denied and had in the bid document issued on September 20, 1999 named VPS and Access Denied as “acceptable manufacturers.”

    I do not know who wrote this letter. It is possible, perhaps likely, that it was not written by Ms. Reidy but rather was prepared for her signature by another member of the CHA staff. I do know—on the basis of its wording and design—that the person who wrote it intended to misrepresent the realities and to mislead the reader. It is a fiction that can have had only one purpose: to secure more CHA business for VPS on an exclusive basis, while excluding its competition.

    There is a final mystery left unanswered by this document: what contract is Ms. Reidy seeking to have approved as a sole source contract? So far as can be discerned from the documents, there is no pending or forthcoming contract being put out to bid at the time. VPS is working under contract #9351 in the amount of $1,364,300.00. Does Ms. Reidy’s letter to HUD reflect an effort to convert #9351 into a sole source contract, so that it can thereafter be extended and supplemented indefinitely without going out to bid? Is the CHA, in effect, asking HUD to approve a blank check made out to VPS?

    Denial of Access to Access Denied: Part I

    Two employees of Access Denied installing a door.Curtis McComdichie and Sam Williams of Access Denied, residents of the Ida B. Wells development, secure a vacant unit at Stateway Gardens.

    On January 15, 2002, at the monthly meeting of the CHA Board of Commissioners, Francine Washington, president of the Stateway Gardens resident council, asked the Board to investigate the CHA’s handling of contracts for securing vacant units. There is reason to believe, she told the Commissioners, that for the last several years one vendor—Vacant Property Security (VPS)—has enjoyed a monopoly, while another offering a competitive product at a significantly lower price—Access Denied—has been shut out of the bid process. Board Chair Sharon Gist Gilliam told Ms. Washington that the Board would look into the matter. At the March 19 board meeting, Ms. Washington inquired about the results of the investigation. The Board did not respond to her question. Duwain Bailey, chief of operations at the CHA, told me in a private conversation that within two weeks a new contract would be put out to bid that would be neutral in its terms and would not give advantage to any one vendor. At the April 16 board meeting, Montel Gayles, chief of staff to CHA CEO Terry Peterson, told Ms. Washington in a private conversation that the new contract would come out within a few days. To date, the new contract has not been advertised. And the CHA has not responded to Ms. Washington’s request, first made more than three months ago, for an investigation of the contracting process.

    The problem of unsecured vacant units is arguably the critical management issue for the CHA. For a number of years, the CHA has been emptying the high-rise developments in anticipation of their eventual demolition. Now under “The Plan For Transformation” this process is accelerating. Putting aside questions about the wisdom of this approach, it necessarily results in partially occupied buildings with increasing numbers of vacant units.

    In the absence of an effective strategy for securing those units, conditions predictably develop that threaten the health and safety of residents.(See “In Memory of Eric Morse—Part I and Part II.”) Vacant apartments become sites of criminal activity. They are used for hiding drugs and guns. They serve as places for consuming drugs. Garbage accumulates in them, providing habitat for rats, roaches, molds, etc., and creating an increased danger of fire. As we reported in “Off The Lease: Unauthorized Residents in Public Housing,” nonleaseholders seeking shelter move in. Taken together, these conditions—all arising from unsecured vacant units—make CHA buildings all but impossible to manage and deny residents minimally safe, decent living conditions.

    Vacant unit at Stateway.Stateway Gardens

    At The View From The Ground, we have firsthand experience of these patterns. Our office is located in a first floor apartment in 3542-44 South State Street—one of the buildings at Stateway Gardens undergoing relocation. Currently 55 apartments out of 126 are occupied by leaseholders. Until several weeks ago when the building was secured by Access Denied, we daily witnessed the human consequences of open vacant units.

    In January, there was a massive flood in our office. Water poured down from above. Three staff members had to work intensely for an hour to bail out the office in order to protect files, computers, etc. The cause of the flood? Scavengers had gone into unsecured vacant units on the upper floors and torn out plumbing fixtures and pipes. This happened repeatedly in the building, causing substantial damage and diverting janitorial staff from other needs.

    A robust drug trade operates day and night in the corridor outside our office. Some of those engaged in this activity lived in vacant units. One man charged other “squatters” $50 a month to stay in vacant apartments he controlled.

    A significant number of unauthorized residents in the building were simply homeless: families in search of shelter, living in exposed, dangerous conditions.

    Over the Christmas holiday, a woman was found dead in the vacant unit she had been occupying. She had been dead for three days before anyone called the police. It appears that she was murdered.

    The realization that the securing of vacant units may prove a matter of life or death is not a new idea. The single incident in recent years that most powerfully dramatized the conditions under which CHA residents live was the case of Eric Morse—the five-year-old child dropped to his death by two boys, ages 10 and 11, from a window in an unsecured vacant unit at the Darrow Homes. In November of last year, the CHA, together with the property management company involved, settled the civil suit brought by the Morse family for $2.75 million. (In June the private security firm involved had agreed to settle for $800,000.) The CHA was moved to settle the case after former director Vince Lane stated in a deposition that the authority had failed to follow its own policies with respect to the securing of vacant units.

    At the March 19 board meeting, Mr. Bailey told me that he had come to believe that adequately securing vacant units was the single most critical operations issue in implementing the current phase of the Plan for Transformation. And Commander Ernest Brown, until recently the commander of the public housing division of the Chicago Police, told me that he had justsent a letter to CHA chief Terry Peterson on the urgent need to secure vacant units in order to combat crime.

    Against this background, the CHA’s handling of contracts for the securing of vacant units gives rise to troubling questions.

    Traditional board-up methods—attaching plywood to door and windows frames by means of concrete nails—have time and again proved inadequate. The boards can easily be removed and often are. The CHA and the private companies it hires to manage its developments have thus long been interested in finding effective alternative strategies.

    Both VPS and Access Denied offer such strategies. Each has developed its own distinctive method of sealing off door and window openings by means of metal panels attached to a frame. Both methods are far more secure than conventional board-up.

    VPS and Access Denied both originated in Europe. Chicago is the only United States market in which they compete directly with each other.

    Peter Bately, the founder and principal owner of Access Denied, is a British entrepreneur who, among other ventures, was centrally involved in the construction and operation of oil rigs in the North Sea off the coast of England. Access Denied is a family business which he has developed with his two sons. According to Mr. Bately, never in the course of his long, varied career has he encountered business practices by a public entity such as those of the CHA. He gives the following account.

    Vacant unit at Robert Taylor Homes.The Robert Taylor Homes

    In December of 1998, Mr. Bately was invited to Chicago by Joseph Shuldiner, the director of the CHA during the period of HUD receivership, and his chief lieutenant Edward Moses, in order to explore the possibility of providing his product to the CHA. He was referred to David Anderson of the operations division.

    Access Denied and VPS both made presentations to Mr. Anderson and his colleagues. The CHA put out to bid a contract worth roughly $100,000. At the time, VPS was less expensive than Access Denied. They got the contract. Once they had secured this initial contract, VPS’s prices went up sharply.

    Thereafter, whenever Mr. Bately inquired about possible work for the CHA, he was told by Mr. Anderson that nothing was going on, that no contracts were being given out.

    In 1999, VPS received a contract from the CHA worth more than $1 million. When Mr. Bately inquired, he was told it was it was a “sole source” contract. Sole source is a procedure under which a contract is granted without going out to bid, because there is only one source for the service or product being sought. But how could the CHA issue a sole source contract, when it knew about Access Denied?

    Among the documents Mr. Bately showed me was an e-mail from Mr. Anderson, dated December 1, 1998 and addressed to several colleagues in the operations division, that shows the CHA was aware from the outset that this was not a sole source situation: “I am planning to schedule a presentation of a security door and window product called Access Denied, which appears to be conceptually similar to the product marketed by Vacant Property Security…”

    How much business has VPS received from the CHA? According to Mr. Bately, if you consider both the work the CHA has contracted for directly (including “add-ons”) and the contracts it has urged on private managers, it could be as much as $4 million over the last few years. Presumably, this is a question to which an investigation by the CHA could provide a precise answer.

    In December of 2000, a vendors fair was held by the CHA for the purpose of bringing property managers together with companies offering services. Prior to the fair, Mr. Bately received a phone call from someone in the CHA purchasing department he had come to know who informed him that Access Denied had been deleted from the list of vendors and urged him to attend. He did so.

    At the vendors fair, Access Denied engaged the interest of several property management companies—notably McCormack Baron, the company that manages the Ida B. Wells and Madden Park developments, which soon thereafter contracted with Access Denied to secure vacant units at Wells and Madden Park.

    At the fair, Mr. Bately also met Duwain Bailey, who expressed interest in his product. (I recall having a conversation with Mr. Bailey soon after the fair in which he spoke enthusiastically about an alternative to VPS called Access Denied.) Since then, Mr. Bately has called Mr. Bailey repeatedly but has received no response.

    In June of 2001, the CHA released a bid package for a contract worth roughly $2 million. Mr. Bately attended a prebid meeting conducted by Mr. Anderson. One of the ways in which an apparently open bid process can be skewed toward a particular vendor is by tailoring the specifications set out in the contract to that vendor’s product, so that only they can satisfy the terms of the contract. In this instance, the contract not only contained VPS’s specifications, they were presented in the bid document on VPS letterhead. Under these circumstances, Mr. Bately declined to bid on the contract.

    According to Mr. Bailey, the CHA decided not to award the contract last year, because it was not satisfied with the bids from VPS and the one other vendor who responded. Instead, it extended its existing contract with VPS on a month-to-month basis. The upshot is that almost a year has passed during which no new bid package has been issued, and VPS has continued to enjoy its exclusive relationship with the CHA.

    Several weeks ago, Mr. Anderson left the CHA and took a job with the City Department of Housing. At the end of last week, resident leaders and property managers informed The View that the VPS contract had been extended for another six months. We do not have independent confirmation of this from the CHA. If it is true, then VPS appears to be well on its way to securing via “add-ons” the substance of the contract that the CHA put out to bid and then withdrew last year. What has been the total dollar value of the VPS contract extensions during this period? This is among the questions that a proper investigation would answer.

    Shut out by the CHA, Access Denied has been working at several developments under contracts with private management companies. Its most substantial contract has been at Wells. Both the resident leadership and the management company are enthusiastic about the quality of service they have received.

    Man working on securing the a door.Sam Williams of Access Denied

    Sandra Young, the president of the Wells resident council and a CHA Commissioner, told me, “Access Denied is excellent. Their panels are attractive. They complement the buildings. They don’t stand out. We haven’t had a single instance of someone breaking in. And it’s much less costly than VPS. Also, they let you move the panels without charge.”

    I spoke with three property managers who are now using Access Denied after using VPS. Each echoed the points made by Ms. Young. The Access Denied panels are more secure—VPS panels have repeatedly been breached, while Access Denied panels have not. They are aesthetically pleasing. And Access Denied is committed to hiring residents. “We’ve got several residents employed,” said Ms. Young. “We never placed a single resident with VPS. We forwarded names to them, but we never got a resident hired.”

    Above all, Access Denied is far less expensive than VPS. As of the first of the year, the rental fees for an Access Denied door and window panel adequate in combination to secure a CHA unit were $45/month ($540/year). The least expensive VPS panels were priced at $126/month ($1,512/year). In other words, Access Denied prices are 71% less than VPS prices.

    The price differential becomes still more pronounced when one considers that Access Denied allows clients to move panels from one location to another without charging a fee, while VPS does not. (For example, as one building is closed, panels can be moved to another building on the site without charge—a dramatic savings for developments undergoing relocation, demolition, and redevelopment.) Also, VPS installation techniques do damage to the door frame and threshold, necessitating repairs in those instances in which the unit secured is to be rehabbed. Access Denied installation techniques do not.

    Property managers and resident leaders at two developments now working with Access Denied report that they have been approached by VPS representatives who have said they can match Access Denied prices. An illustration of how competition regulates prices, this also suggests the extent of VPS profits and waste of CHA resources under monopoly conditions. According to Mr. Bately, he makes “a nice profit” at prices 71% lower than those of VPS.

    The point of this comparison is not to promote Access Denied. It is to raise as sharply as possible this question: In view of the urgent need to secure vacant units at CHA developments across the city, and in view of the CHA’s responsibility to make prudent use of limited resources in order to improve the quality of life for residents, how is it that a vendor offering a competitive, if not superior, product for securing vacant units at a significantly lower price has been consistently put at a disadvantage by the CHA while another vendor has been favored? Why has this situation been allowed to persist? How will it be corrected?

    This account is based largely on information provided by Mr. Bately. It is one man’s perspective on a sequence of events on which there are no doubt other perspectives. The current CHA administration inherited the problem of unsecured vacant units and the arrangement with VPS. I know from conversations with Mr. Gayles, Mr. Bailey and other senior CHA staff that they are concerned about the VPS monopoly. They have indicated that they intend to correct the situation by issuing a new contract. But if similar patterns are to be avoided in the future and confidence in the integrity of the contracting process is to be restored, something more is required: a public accounting by the CHA in response to Ms. Washington’s request for an investigation.