Fix the pumps

Saturday, July 28, 2012

Birth of a no bid contract

[This post includes links to hundreds of pages of internal Corps emails. See note at end of post.]

I'd like to drill into some of the behind the scenes activity (or inactivity, as we'll see) surrounding the corrosion of the Corps' lakefront hydraulic pumps, in an attempt to explain why a problem identified as affecting 54 pumps back in 2006 has taken over 6 years to be completely addressed. Let's go back to fall, 2009. Here's the facts regarding what was happening with the rusty pumps at that time:

Total hydraulic pumps installed: 40 large (60") and 14 smaller (42") across three sites
Pumps pulled for corrosion repairs to date at that time: 6 large and at least 2 smaller
Pumps remaining to be pulled at that time: 34 large and at most 12 smaller
Basic scope of 2009 repairs to pumps: replace rusting carbon steel parts with carbon steel and some stainless steel parts (wholly inadequate, which would be proven when some of the 2009 repairs would spring more leaks in 2011, forcing 2nd pulls)
Average cost per pump pull: Approximately $100,000 (based on work performed on four large pumps under task order 3, mods 0 and 1, of first Healtheon/Conhagen contract), which was also wholly inadequate because not all carbon steel parts were getting replaced with stainless steel
Information known to Corps regarding corrosion on the pumps: All pumps severely affected since installation in Lake Pontchartrain's salt water in 2006; numerous oil spills since installation in 2006; repair vendor said in October, 2009, "The severe corrosion seen on the piping internal of the pump should be cause for concern in the remaining pumps at this site. Leaks that were imminent on these pumps are sure to be imminent on the remaining."
Contracting methodology: fractured, with different contracts for repairs, crane work, spare parts.

A unified repair contract with enough funding to support the complete corrosion-related overhaul of all hydraulic pumps was needed. Ideally, it should have had provisions for multiple repair subcontractors to speed the work to ensure that pumps meant to drain the city during a major tropical event could do so without springing oil leaks through rusty holes. That's not the way things went.

Instead this is what happened (these are actual internal Corps emails obtained through FOIA, see note at end of post). First, they limited the number of pumps they were looking to repair:

November 12, 2009:
"From: Schneider, Donald C MVN
To: Marshall, Jim L MVN-Contractor
Cc: Accardo, Christopher J MVN; Newman, Raymond C MVN; Constantine, Donald A MVN; Robinson, Carl W MVN; Nguyen, Bac T MVN
Subject: Interim Canal Structures
Date: Thursday, November 12, 2009 1:52:20 PM
Importance: High


We're scheduling preventative maintenance on 18 ICS pumps before the start of the 2010 tropical season. The frequency of corrosion-induced failures requires that we take this action.

We currently have approximately $3.2M available. Based upon our average annual expenditure ($1.8M) and the estimated cost of each pump rehab. (approx. $130,000), we require an additional $1M in the project to perform this necessary work.

Do we have the additional funds to complete this PM program?

Donald Schneider
Operations Manager, OD-G"

Already they were limited in their thinking, somehow believing only 18 pumps needed to be overhauled. Next they looked at a way to fund this too-limited work:
December 3, 2009:
"From: Cataldo, Ione M MVN
Sent: Thursday, December 03, 2009 12:45 PM
To: Nguyen, Bac T MVN; Newman, Raymond C MVN, Schneider, Donald C MVN
Subject: Overhaul of 16 Outfall Canal Pumps
Importance: High


I have done a little research into the MATOCs that I mentioned in our meeting yesterday that might be an alternative means of processing the subject requirement in the short term. After reviewing it appears that we will not be able to use the MATOCs because they are for construction type work; to do construction actions over $100,000 even under the MATOCs would require a BCOE certification, LD memo, legal sufficiency, and ROE if applicable. Historically the pump contracts seem to all be commercial service direct 8(a) contracts.

Which brings me to this suggestion:

It is possible we may be able to do the IDIQ contract as needed as a direct 8(a) Commercial Service Contract similar to W912P8-08-D-0090, give the 8(a) 15 days to submit a proposal, review for price reasonableness, and if all goes well award sometime in January-Feb 2010.

NOTE: The catch to whether I can go out direct 8(a) or not is 1) Actions $3 mil and under can go direct 8(a); anything over $3 mil would have to be competed, 2) I have to get SBA and OC's blessing for setting this aside as a commercial service under $3 mil (which shouldn't be hard to do since that's how the others have gone out), and 3) the service contract act forms would need to be prepared and submitted for approval in EX.

If you want to try putting the IDIQ in place now using the direct 8(a), I will need to know how much money you are planning on making the contract for ($3 mil; $5 mil; ...), how many years (3 years, 5 years,...), and if money is available to cover a minimum guarantee. I'll also need a brief description of the work to pass through SBA and OC to make sure they are not going to give me any roadblocks.

In reference to the two pots of funds to be used, I just wanted to clarify that the funds would need to be all of the same color money - can't mix monies.

Discuss among yourselves and let me know what you think. DONT WAIT TOO LONG TO GET BACK TO ME PLEASE!

Ione M. Cataldo
Contracting Officer/Team Leader
Project East Branch
Contracting Division
National Contracting Organization
USACE, New Orleans District"

"Direct 8(a)" refers to a no bid award to a SBA-certified small business. That is, Contracting told Operations: here's how to do this without putting the job out to public bid. (Note this is completely legal.) Theoretically that would make things go faster, but it still looks a little hinky to be given the choice to do half the job as a sole source rather than doing the whole job as a publicly bid job.

Operations jumped at the chance to sole source the contract, choosing to do half the job with a preferred vendor. Donald Schneider with the Operations group wrote back the same afternoon:
December 3, 2009:
"From Schneider, Donald C MVN
Sent: Thursday, December 03, 2009 4:27 PM
To: Cataldo, Ione M MVN
Cc: Nguyen, Bac T MVN; Newman, Raymond C MVN; Constantine Donald A MVN; Robinson, Carl W MVN; Brown, Jane L MVN
Subject: RE: Overhaul of 16+ Outfall Canal Pumps
Importance: High

Let's move forward w/ the direct 8(a) Commercial Service Contract @ $2.875M for a 2-year duration. Bac will be the P.O.C. to provide you with any information you need.

Thanks for your help.

Don S."

The banality in the award of nearly 3 million taxpayer dollars via an afternoon exchange of emails is remarkable, though I doubt it is atypical with billions of dollars flowing through the New Orleans District since 2005.

Anyhow, as we can see, Operations decided to do a sole source, no-bid contract with their existing contractor - Healtheon/Conhagen - just under the threshold for public bidding, but much further under the funding required for overhauling ALL the pumps, something that same contractor told them was required to avoid imminent failures. The contract value should have been about $150,000 x 40 - or $6 million - assuming only the big pumps would be handled by the new contract, with the smaller pumps being repaired in the Corps' own shop. Once again, public safety lost out to making things easier on the Corps and their vendors.

On December 28, 2009, Direct 8(a) Service Contract solicitation W912P8-10-T-0048 was issued solely to Healtheon, Inc. Terms were a maximum value of $2.875 million and a maximum duration of 3 years. This was a year longer than initially asked for by Operations, meaning they were planning on slowing the already-too-few repairs down even further, giving the pumps even longer to rust out.

On March 8, 2010, Direct 8(a) Service Contract W912P8-10-D-0054 was awarded to Healtheon. The maximum award amount was $2.875 million and the maximum duration was 3 years. This was nearly four months after the initial heads up saying the repairs were necessary.

This strategy would unsurprisingly prove wrong. While 17 of the large pumps would ultimately be overhauled under contract 10-D-0054 from March, 2010 through late 2011 (a ridiculously slow rate) before they ran out of money on the contract, that would still leave 23 others unattended with five years of rust built up on them. Six of those 23 did receive partial repairs under earlier work, but that doesn't count because the repairs didn't replace all the critical carbon steel parts with stainless.

So just six months after the no-bid contract was awarded - in October, 2010 - the Corps ended up going out for public bid anyway on a third repair contract (bid documents here, original FedBizOpps webpage here). That contract, potentially worth $6.75 million and notably also awarded to Healtheon, actually had enough money set aside to do the rest of the pumps, work which is still underway as of this summer. They could have done that in the first place if they hadn't insisted on the stupid inadequately funded no bid second contract.

Now one might be willing to give the Corps a pass on some of this, a "at least they're trying" sentiment. But, again, here's the facts:

1) They knew as soon as they put the pumps in the water back in 2006 they would corrode very, very quickly. Within one month they were already seeing corrosion on the hose connections that were outside the brackish water (via SCPR Flickr):

Here's a detail of one of those rusty hose connections taken at the same time as the picture above (via SCPR Flickr):

What did they think was going on beneath the water's surface to their completely carbon steel equipment? Repairs did not even start until three years later, and a dedicated contract was not in place until March of 2010, nearly four years later.

2) One could also argue, "in going out as a no bid contract, they were trying to accelerate things. It would have taken too long to publicly bid it." From the bid issuance to contract issuance for the second contract was over two months, while the time from bid to contract award for the third, publicly bid repair contract a year later was about four months, so there was some time saved. However, the only reason they could go out as a sole source was because they decided to only fund repairs for fewer than half the pumps! If they had bothered to say to themselves, "the pumps at 17th Street are rusting like crazy, I bet all of them are doing the same thing, so we should look to repair all of them," they would have never gotten a sole source contract because even the most optimistic estimates would have been for more than the $3 million cutoff for public bidding. And then they wouldn't have lost the four months in the fall and winter of 2010-11 spent putting the third contract out for bid. This gang just can't shoot straight.

3) Maybe they were limited on their funding in the fall of 2009? Well, they were able to find nearly $7 million more just a few months later when they went out for bid on the third contract.

The bottom line is this: once again the Corps cheaped out and slowed down on vital life safety equipment meant to keep New Orleans dry. They went for a no bid contract with an existing, preferred vendor which was underfunded and not geared toward getting the job done as fast as possible. For goodness sakes, these pumps are meant to save people's lives, and the Corps couldn't be bothered to spend the money to fix their own stupid mistakes that had been festering for three years. Instead, they just puttered along in their same old insulated way, secure in the knowledge there will never be consequences for their decisions.

Special note regarding internal Corps emails
I placed a FOIA request a while back asking for all emails dealing with pumps from a select group of upper and mid-level Corps personnel. I confined the date ranges to a few days around storm events in late 2009 when the London Avenue canal gates were closed (in November) and when water got very high in the same canal and the gates were not closed (in December). I wanted to see how the Corps and their contractors - especially the controls repair contractor, Prime Controls - dealt with those events in real time. It took forever to get them, but it was worth it, because they included a lot of bonus material.

In asking for anything dealing with the pumps, I also got emails talking about contracts, repairs, and status updates. By pure luck, my net captured the emails I used above. If anyone wishes to see everything I got, all the emails are available here.



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