The Gazette covers City Hall, now a flood-damaged icon on May's Island in the Cedar River

‘Staggering’ disaster costs are like a Twilight Zone; City Hall bidding on two costly contracts should help cut through one piece of the mystery

In City Hall, Floods, Monica Vernon on September 22, 2008 at 1:24 am

It’s as if the value of money loses its understandability when it comes to funding wars, Wall Street bailouts and national disasters.

The talk now is $700 billion for the latest rescue of Wall Street firms. Hasn’t the war in Iraq exceeded a trillion dollars? And locally, City Hall says June’s historic flood has caused a half-billion dollars in damage just to city-owned buildings and facilities.

Cedar Rapids City Manager Jim Prosser used the word “staggering” last week to describe the costs facing City Hall, not to mention that building a system of flood protection for the city is apt to cost $1 billion here. Most of that would be paid by Uncle Sam.

Frankly, the eyes glaze over. So fantastic are the numbers that it’s easy to simply ignore them. It’s like a Twilight Zone.

Last week, council member Monica Vernon said the City Council shouldn’t just build any flood-protection system. She wanted to see what she called “cool” features built into a system, which would attract people and employers and keep the ones who are here already. What’s another $50 million, she suggested, when the plan is talking about $1 billion in protection.

It is into this fiscal fantasyland that the news media last week landed on a number that seemed to be one that, finally, someone could get hands around.

City Hall, it turns out, is paying Globe Midwest Risk Management, of Southfield, Mich., $475 an hour for its top manager, John Levy, to help the city oversee cleanup and the hiring of flood-recovery contractors. Working under Levy, other Globe Midwest staffers are being paid $385 an hour, $325 an hour and $275 an hour.

In the first three months after the June flood, the city has paid Globe Midwest about $691,000.

A second company, Adjusters International, has been working in tandem with Globe Midwest. The city, though, is paying Adjusters International only $285 an hour for its top staff member, not the $475 that Globe Midwest gets.

At the three-month date since the June flood, the city has paid Adjusters International an estimated $645,000, the city reported.

Late last week, City Manager Prosser defended the hiring of Globe Midwest and Adjusters International, saying the companies have saved the city several million dollars by cutting pork out of contractors’ contracts and by extracting more from FEMA than FEMA was readying to pay for certain damage.

Prosser, who had been a financial consultant for a number of years before taking the Cedar Rapids city manager’s post in August 2006, also said that the pickings are kind of slim when it comes to disaster services. There aren’t that many firms that provide the services, he said. He called it the law of “supply and demand:” You pay when demand outstrips supply.

But like the numbers related to the Iraq war and the current Wall Street bailout, it’s hard to really know what is happening.

One thing does seem clear. Globe Midwest and Adjusters International showed up in the very first days after flood waters pounded Cedar Rapids in June. There does not appear to have been any bidding procedure at a time when the city declared a state of emergency. Prosser said other firms were reviewed.

In contrast, a different thing is happening now.

Prosser said the city now is moving into a second phase of post-flood recovery, and as a result, the city is seeking bids for the work Globe Midwest and Adjusters International have been doing for the city.

Five companies are competing for the contract Adjusters International has, and bids on the contract that Globe Midwest has had must be submitted by Monday, Sept. 22.

This bidding is for professional services, so more is involved in awarding a contract than just cost.

A short review of the bids of Adjusters and the five companies bidding against it show that City Hall is going to get a better idea of just what the marketplace considers to be a reasonable cost for the service.

One bidder is an Iowa consulting company from West Des Moines. Its bid looks significantly less costly than the others. For starters, they don’t factor in airfare costs for staff to fly home periodically during the six months of the contract. Adjusters International says the airfare cost along could be $50,000, and another bidder estimated it would be in the $40,000 range.

What will be interesting, too, is to see if the City Council actually has a public discussion about the award of the contract, and if the discussion raises the question of whether the city would be further ahead by hiring a few employees to do the work.

Last week, Prosser said there were no sufficiently trained people in Cedar Rapids to do the work, and if there were, they’d be working for the consultants bidding for the work.

Both Prosser and Casey Drew, the city’s finance director, both noted in The Gazette last week that Globe Midwest and Adjusters International might cost some money but they were saving the city money.

This prompted a call from retired businessman Vern Dostal, who wanted to share an old story.

Dostal talked about the guy whose wife pleaded to buy a diamond necklace because the price had been dropped by $5,000. Then she begged for a fur coat because its price had been reduced by $10,000. And the same was true for a new Mercedes Benz. Finally, the guy says, “Honey, I don’t think I can afford to save any more money.”

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