Rigged Bidding is Ruining NYC Construction
Cheating non-union contractors graduate from bending the rules to breaking them.
Several of the 23 allegedly bid-rigging contractors are perp-walked into the First Precinct in Manhattan to face charges. -- Hiroko Masuike/The New York Times.
Recently 26 different construction companies — all of them non-union entities — were accused by the Manhattan District Attorney Alvin Bragg of running a contract bid rigging scheme that illegally brought them millions of dollars in orchestrated kickbacks.
DA Bragg said, “These companies work on some of New York’s most significant high-rise projects in recent memory.” The accused reportedly won bids to work on high-profile projects, including 11 Stone Street (the FiDi Hotel), 12 East 48th Street (Hilton Club The Central at 5th New York), 101 West 28th Street (the Remy), and 189 Bowery (the citizenM New York Bowery Hotel).
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An Estimator’s POV
“This illegal bid activity is no surprise at all,” said one construction company estimator who spoke to Union-Built Matters and who wants to remain anonymous because he has business with developers and contractors and he fears his speaking out could harm his standing with them.
“The biggest problem we have in New York City construction is the bidding process,” he said. “We have developers who are demanding lower and lower bids for their projects. Hey, there’s nothing wrong with that. We all want to make more money. But some contractors go around the rules to meet those demands and they win those bids as a result. They’re emboldened. They pushed the limits and won. So they get even braver about how to make even more money on projects. And sure enough, a bunch of them figure out how to get rich by creating a huge embezzlement scheme.”
"They pushed the limits and won. So they get even braver about how to make even more money on projects. And sure enough, a bunch of them figure out how to get rich by creating a huge embezzlement scheme.”
– Anonymous Construction Estimator
According to prosecutors, the kickback plan was created by Robert Baselice, an executive at the Firm, a construction management company, who directed subcontractors to pad bids that allowed them to take kickbacks. -- Hiroko Masuike/The New York Times
The Scheme
According to the indictment, a large number of non-union contractors participated in a kickback ring led by Robert Baselice, an executive of the Firm, a construction management company. The indictment claims the cabal would obtain “bids for work from complicit subcontractors who would increase their bid prices to generate funds to pay kickbacks to Baselice and his co-defendants.”
In the process, the allegedly criminal group of non-union contractors took at least $7 million from duped developers. But “the developers were not the only victims here,” according to Department of Investigations (DOI) Commissioner Jocelyn Stauber. “…these criminal schemes,” she said, “deprive law-abiding subcontractors and their employees of a fair opportunity to participate in the bidding process and be awarded contracts.”
Manhattan District Attorney Alvin Bragg and Commissioner of the Department of Investigations Jocelyn Stauber represent the people of New York against the allegedly bid-rigging contractors.
The cover page of the indictment.
The Bigger Cost
The anonymous estimator told us that even though some wealthy developers were schemed out of millions of dollars, “there’s a much bigger cost to the city and people of New York that results from the current bidding process.” He said, “too many contractors come in and meet developers’ low costs by cheating. They under-estimate on personnel, they plan to dodge safety requirements, they opt for cheap construction materials. But this is cheating. It’s dishonest. Still, it all brings their bids down. And that kind of cheating isn’t really checked by anyone.”
“Listen,” he continued, “this city has safety rules that require a certain number of workers per task. That require certain certifications for particular jobs. And we have a whole slew of safety standards that keep workers alive. All these requirements cost contractors money, and that cost gets passed on to the developer. But when you get a contractor who says, ‘I can save a [expletive] ton of money if I just ignore all that stuff, I can lower my bid and win this project,’ and they win the project — well, the workers get stretched over too many tasks, they get fleeced on payday, and the sites they work on are a lot more dangerous than the sites where the company actually follows the rules. In other words, a lot more of the workers on these low-bid jobs actually die.”
The alleged bid-riggers won contracts to work on some iconic projects, including (from left) 11 Stone Street (the FiDi Hotel), 12 East 48th Street (Hilton Club The Central at 5th New York), 101 West 28th Street (the Remy), and 189 Bowery (the citizenM New York Bowery Hotel). One NYC construction estimator theorized that "When a cheating contractor wins a job, you have to assume the workmanship on that job is less than optimal.”
The report by the New York Committee for Occupational Safety and Health (NYCOSH) entitled “The Deadly Skyline,” claims that 83% of construction workers in New York City who have died on the job since 2015 have died on non-union work sites.
“The wrong guys are winning the bids and it’s been going on for years, and it’s getting worse, not better,” the estimator said. “The big squeeze that happens on bidding results in a lot of new projects being awarded to companies that cheat. And when a company cheats, they cheat their workers more than anyone. And a stressed out, under-paid, less-trained, unsafe worker is not going to be able to do the kind of skilled trade work this great city demands. When a cheating contractor wins a job, you have to assume the workmanship on that job is less than optimal.”
He concluded, “The problem with the bid process is that the bids aren’t really apples to apples. You got a bunch of contractors who follow the rules because doing that benefits everyone. And you have the other guys who bend and break the rules because doing that benefits them. We need a better way.”
If you’re looking for property in New York City, do the right thing and ask to see real estate that was built by unions. Unions don’t cheat.
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