A scrap metal firm that has failed to pay the City of Chicago a penny for nearly 150,000 abandoned cars and trucks it removed from city streets during a four-year contract has been rejected for a new agreement even though it offered to pay the city the most money, it was learned Monday.
Instead, Mayor Harold Washington`s administration shunned the traditional bid process and negotiated contracts for the removal of abandoned vehicles with three firms that will generate an estimated $2 million in revenue each year. The administration contends that it awarded the contracts to boost small and minority-owned businesses.
”We`re trying to open up the market so there isn`t a monopoly,” said Mary Skipton, acting city purchasing agent. ”If you`re seeking to open up the opportunities that exist within a city, the price cannot be the sole consideration.”
The city`s decision on the new abandoned vehicle contracts was the second in less than 1 1/2 months in which the city has turned down the most favorable proposal on a contract to achieve an administration goal. In the earlier case, the city rejected low bidders to involve a minority contractor in a $5.2 million package to administer free eye examinations and vision care to the city`s 40,000 employees.
The new one-year contracts for removal of the thousands of vehicles abandoned on city streets every year went into effect Monday.
They were awarded under a process that requested bid proposals rather than formal bids. Administration officials said the process gives the city much greater latitude in negotiating with companies and awarding work to more than one firm.
But critics contend that the proposal system has resulted in higher costs and less revenue for the city. They also maintain it has the potential for favoritism and a new form of political patronage.
Skipton said the new contracts weren`t submitted to the city council Finance Committee because the administration feared they would be tied up by opposition aldermen. She said it wasn`t necessary to submit them to the committee because technically there is no guarantee that the contracts will generate more than $50,000 in revenue, the cutoff figure for council oversight of contracts.
City officials said that no matter what process had been used in awarding the new contracts, Illinois Scrap Processing Inc., 9331 S. Ewing Ave., the firm that has had the city`s abandoned vehicle contract since 1981, would have been rejected because of its ”lack of good faith.”
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The company–which has connections to a wide spectrum of public figures, including Ald. Edward Vrdolyak (10th), U.S. Atty. Anton Valukas and, most recently, Thomas Todd, a lawyer and former president of Operation PUSH–was awarded its four-year contract by the Jane Byrne administration.
”By going with the firms we`ve selected, we will probably lose about $150,000 a year,” said Leroy Bannister, first deputy purchasing agent. But he contended that Illinois Scrap has consistently taken advantage of the city under the 1981 contract.
That contract, according to acting Corporation Counsel Judson Miner,
”was a sweetheart deal between Jane Byrne and Illinois Scrap, and the city has lost millions of dollars because of it.”
Nonetheless, Miner said the city would have considered Illinois Scrap for the new contract if a settlement could have been reached on the vehicles the company received over the four-year term. The city was seeking $12 million, but the company offered only $1 million, he said.
Other administration sources said the mayor considered his political options in denying Illinois Scrap the contract. By his decision, the sources said, he was able to cancel a contract let by Byrne, who is a mayoral candidate opposing him, and thereby highlight what he considers to be an example of contract abuse under her administration.
Historically, the city had been paid for each of the thousands of cars and trucks abandoned each year on city streets and then towed away. In effect, the city sold vehicles to scrap dealers. This method will be used in the contracts awarded Monday.
But when Illinois Scrap lobbied the Byrne administration in 1980 and 1981 for the abandoned vehicle contract, it urged the city to employ a different method. Under that scheme, the city would retain ownership of the vehicles, and Illinois Scrap would shred them. The firm would act as the city`s broker and would advise the city on when to sell the scrap at the highest price.
The company, which made large political contributions to Byrne and Ald. Edward Vrdolyak (10th), assured city officials that because scrap prices were expected to double, the city could make as much as $60 million over a five-year period.
The city took the offer, but scrap prices fell, and the opportunity for huge profits never materialized.
Under the contract, Illinois Scrap collected 147,134 vehicles and shredded them into 178,000 tons of city-owned scrap steel at the firm`s South Ewing Avenue yard.
City officials contend that the company has been holding the scrap hostage, has blocked the city from selling it and has sold millions of dollars worth of automobile parts from the city-owned cars.
In 1983, when he was running for mayor, Washington called the Illinois Scrap contract ”stinky” and ”ridiculous.” Yet, his administration made little effort to overturn the contract that is now the subject of a court battle.
Illinois Scrap`s contract ran out at the end of 1985, but the firm won a short-term pact by outbidding its competitors.
That three-month pact returned to the system of payments for each vehicle towed, and under the contract, Illinois Scrap will eventually pay the city $740,000 for vehicles it removed.
Skipton and Bannister said Illinois Scrap was given the short-term contract because of its ability to do the job quickly and because a build-up of 7,800 vehicles in January had forced closure of some city auto pounds.
But both officials acknowledged they took ”a lot of heat” within the administration for granting Illinois Scrap the pact. And, they said, Mayor Washington kept a close watch on the awarding of the new longer-term contracts.
Those new contracts, which run for a year with city options to renew for two more, were awarded to Pielet Brothers Scrap Iron & Metal Inc., 8001 W. 59th St., Summit; Tex`s Truck & Parts, Inc., 2226 S. Archer Ave.; and V&B Auto Parts, 8608 S. Halsted St.
V&B is a minority-owned firm. Tex`s will subcontract part of its work to a minority company, and Pielet will subcontract with a female-owned firm.
Pielet Brothers and Illinois Scrap are the two major scrap dealers in the Chicago area, and both are owned by feuding branches of the Pielet family.
Rather than simply replace Illinois Scrap with Pielet Brothers, which submitted the next best bid, the city negotiated with the two smaller firms to increase competition.
Under the separate contracts, the fees vary from firm to firm and from vehicle category to vehicle category. In general, however, the city will receive $46 to $57 for each abandoned auto and $47 to $67 for each abandoned truck.
Illinois Scrap had bid $56 to $59 for each abandoned auto and $70 for each abandoned truck.