July 2, 2009 – City Controller Alan Butkovitz Released an Audit Reviewing City Contracts and Found C


Audit Date: July 2, 2009

Audit Categories

  • Investigation
Controller: Alan Butkovitz

Executive Summary


P R E S S R E L E A S E

For Immediate Release:
July 02, 2009

Contact: Harvey M. Rice
(215) 686-6696

Butkovitz Questions City’s Contract Bidding Practices
Audit found companies under bidding to receive contracts,
including NTI projects, then increased costs

Click Here to View the Report

PHILADELPHIA – City Controller Alan Butkovitz today released an audit reviewing City contracts and found contractors were awarded bids by offering lower rates and then raising costs after the projects began.

In 2008, the City awarded a contract to Nicholas Della Vecchia, Inc. for stucco work that was 24 percent lower than the company’s contract price for the fourth year of its 2004 extended contract. Vecchia’s bid price was $4.95 per square foot compared to $6.51 it charged in 2007.

Vecchia’s 2004 contract prices for NTI construction services remained the same for the first two years. In years three and four, the rates increased by eight percent and 10 percent, respectively.

Under the City’s current policy, there is no standard clause limiting the annual price increase, according to Butkovitz.

“All contracts should include a maximum percentage increase that is allowable annually,” said Butkovitz. “A four percent limit would prevent a contractor from low-balling the original bid, with the intent of excessive increases in the following years.”

The review of the 2008 bidding practices and procedures is in response to allegations there were violations with the FY 2004 bids. A 2004 Stucco contract for NTI construction services was awarded to LP Group Inc., who did not provide work-experience documents during the bidding process.

“Without knowing a company’s work experience, the City is just handing over money for jobs that may-or-may not get completed,” said Butkovitz. “This type of practice only reduces the integrity of the City’s procurement process.”

Within one year of receiving the award, LP Group Inc. was having problems paying the prevailing wages as well as numerous problems with billings and the quality of work. Attempts by Licenses & Inspections to re-bid the contract were abolished and the company received increased payments each year of the four-year contract.

“Insufficient contract work should not be rewarded with receiving more money for the job,” said Butkovitz.

The following charts represent the bid prices for stucco work for the two contractors:

The Controller’s audit provided the following recommendations:

  • All contracts need to contain a specified maximum allowable annual percentage increase (Consumer Price Index or four percent)

  • reasonable measures need to be taken to exclude outside influences from the procurement process,

  • pre-qualification/pre-bid procedures should be separated into two distinct processes, and

  • approval path for all contract extensions need to be changed to include the Office of the City Controller and the Office of Economic Opportunity

Click Here to View the Report