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Cost Overruns Halt Construction of Massive Michigan Jail

by David M. Reutter

Cost overruns of $91 million pushed Michigan’s Wayne County to end development of its partially finished new 2,000- bed jail.

Wayne County Commissioners decided in 2010 to build a new jail. Its contract with AECOM Services of Michigan, Inc. provided costs of the project would remain under $220 million. In December 2010, the County issued $200 million in bonds to pay for the jail. The Commission approved the sale of up to $300 million.

Following the August 2013 decision to end the jail project, the County sued AECOM. It alleged a failed design and construct led to the cost increase, that AECOM failed to “perform their contractual obligations in a timely manner and without errors and omissions,” and it proceeded without County approval on “design and construction activities” that “increased the projects construction costs by almost $50 million.”

Because the County “had no ability to exceed the $220 million in initial construction costs,” it was forced to “terminate the project.” When construction was halted, the County had already spent $154 million on the project. The lawsuit seeks to recover those loses.

In the wake of the decision to end construction, the County was left with a construction site that contained 20,000 to 40,000 pound cells. The 111 cells were, ultimately, destroyed.

“We really looked at all the options,” said June Lee, Chief of Staff for Wayne County Executive Robert Ficano. “It’s unfortunate having to destroy them, but it’s the best business decision we can make at this time.”

“At first blush, I think it’s crazy,” said Wayne County Commissioner Ray Basham. It would have cost $270,000 to store the cells, $463,000 to transport them to a new construction site, and $315,000 to destroy them after a recycling credit is applied. As the County mulls its options, the FBI, Wayne County Prosecutor, and a one-man grand jury are investigating whether criminal activity was involved in the over-budget project.

An option the County is pushing is to move its jail and courts to the two-building, 56,544 square-foot Mound Correctional Facility, which closed in January 2012. A new courthouse would have to be built on the 44-acre site. That would be partially financed by the $50 million that Quicken Loans CEO has offered to buy the old jail and court facilities in downtown Detroit.

Meanwhile, two developers have cost offers to re-develop the partially developed jail site. One plan proposes to invest $1 billion for a 25,000 seat stadium for a Major League Soccer team, a 275,000 square-foot retail complex, 1 million square-feet of residential space, and 1.3 million square-feet of office space and parking. A competing $500 million project proposes 1.7 million square feet of space for residential and hotel units, and retail and parking.

PLN will report future developments.

Sources: wxyz.com; crainsdetroit.com; Associated Press; my9nj.com


 

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