MJ Construction Inc. owner Michael Tomasini on Wednesday won a third sewer contract under Milwaukee’s local preference law but spent the morning defending his bids.
“This is the cheapest we have ever bid,” said Tomasini, whose company is based in Milwaukee.
MJ’s operating costs are higher than those for some other construction companies because it is more expensive to own a business in Milwaukee than in other communities, said James Finn, the attorney representing MJ. The sales tax is higher in Milwaukee County than in the surrounding counties, he said, and MJ pays the city an annual registration fee of $20 for each of MJ’s 25 vehicles.
But the two contractors that underbid MJ for the sewer contract argued — unsuccessfully — the extra money the city is paying MJ will end up as pure profit for the builder.
“You know the profits are reasonable if the low bidder gets it because everyone is challenging the low bidder,” said Dennis Biondich, president of American Sewer Services Inc., Rubicon. “But now you are giving it to the second or third or fourth.”
The city’s local preference law requires Milwaukee-based builders win contracts if their bids are within 5 percent — with a limit of up to $25,000 — of the low bid.
American Sewer and United Sewer and Water Inc., Menomonee Falls, challenged the city’s decision to follow the local preference law and award the contract to MJ. The contractors argued Milwaukee’s bidder preference law does not measure up to state laws preventing contractors from turning unreasonable profits on jobs.
“You are driving up the cost of the bid that you are going to ultimately award,” said Charles Palmer, attorney representing American Sewer and United Sewer. “And you are providing a skewed marketplace.”
Tomasini said the local preference is not letting his company corner the Milwaukee sewer market. If anything, he said, MJ’s bids are lower now because the company is trying to keep pace with other contractors that are lowering bids to beat the 5 percent margin.
He said the $800,000 estimated cost of the sewer project, compared with his bid of $547,633, proves his bids are lean.
The city’s Public Works Contract Appeals Committee, which comprises Sharon Robinson, director of the Milwaukee Department of Administration and aldermen Joe Davis and Tony Zielinski, unanimously rejected the arguments from American Sewer and United Sewer. Palmer said the companies will not file a lawsuit challenging the decision.
There is no point, he said, because American Sewer and Underground Pipeline Construction Inc., New Berlin, already filed a lawsuit challenging the city law.
The law’s 5 percent cushion for city-based companies is too wide for sewer projects, Biondich said, and gives MJ an unfair advantage and higher profits at the city’s expense. The majority of project costs, such as worker wages and materials, are the same among all bidders, he said.
Yet MJ’s bid, Biondich said, was $22,000 higher than American Sewer’s offer.
“Where is that money going if it’s not excess profit?” he said.
Tomasini said he is making less money than ever. Furthermore, he said, the company had to swallow the $30,000 bill of fixing the security fences around its Milwaukee equipment yard after the property was broken into Nov. 20.
That money has to come from somewhere, Finn said.
“I bet insurance costs are higher in the city of Milwaukee,” he said, “because of the higher theft rate.”
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