REO Town: The reality behind appearances
'It's a great project and it's great people doing it' - Pete Kramer

On July 13, 2010, J. Peter Lark, general manager of Lansing’s Board of Water & Light, ended 26 months of community suspense by revealing a plan to build a $182 million gas-fired power plant to produce electricity and steam.

If approved, the plant would be built in Lansing’s REO Town neighborhood and would address future demands for power and growing concerns about BWL’s carbon emissions. As a proposal, it replaced the $1 billion coal plant Lark had announced in 2009 and then quietly abandoned in response to community concerns.

Lark’s audience consisted of BWL commissioners, who, Lark says, had not been consulted about the new project, and senior staffers, who had spent the past year vetting the proposal behind closed doors.

Pete Kramer was among the board members who listened. An engineer and construction professional since graduating from West Point and fulfilling his military obligation, Kramer had worked for more than a decade helping The Christman Company build big projects such as the $120 million Accident Fund headquarters in downtown Lansing.

After leaving Christman in 2009, Kramer incorporated a construction consulting firm in March 2010. To casual observers of Lansing’s construction community, the transition might have seemed typical of executives who cash in their corporate chips to launch their own firms.

As life often reminds us, appearances can be deceiving.

Creating criteria

Two weeks after Lark’s disclosure, Kramer resigned from the BWL board. Four weeks later, he applied to represent BWL in its relationships with major contractors on the power plant project. In November, he was awarded the job in a competitive bid process and signed a $1.74 million contract.

His first responsibility was creating criteria for BWL to use in identifying and hiring an engineering and architectural firm to design the power plant and a construction firm to build it.

Burns & Roe, of Oradell, N.J., won the design contract with a bid of $6.99 million.

Christman, of Lansing, won the lucrative construction manager (general contractor) job with a bid of $5.5 million, subsequently negotiated to $6.6 million — its professional fee for completing about $71.5 million in work.

Once those firms were selected, Kramer was responsible for holding them accountable.

To anyone who might question whether Kramer’s service as a BWL commissioner provided him with inside information about Lark’s plans or an advantage in seeking the owner’s rep contract, both men respond with detailed denials.

Kramer said he did not decide to pursue the project until he had resigned from the board on July 27, 2010, and BWL had issued a request for proposals (RFP) on Aug. 6.

“Once I reviewed the RFP, I decided that the qualifications of my company were well suited for the needs of the BWL,” he said.

Five BWL executives evaluated the bids for owner’s rep, Lark said, “and they made a determination that he was the most qualified and he also happened to be the lowest-cost bidder, so I think that the selection of Mr. Kramer was absolutely appropriate.”

Additionally, “Mr. Kramer had no role in vetting the bidders … for the construction manager job” won by Christman, Lark said. “He was not the decision maker.”

For his part, Lark said he “had no vision as to who would build” the plant and played no role in the decision. He admits hoping some local firm would come out on top.

Asked to leave

The question for Kramer seemed obvious: Did his 12 years as a Christman executive who held an ownership stake in the company conflict with his new responsibility to hold the firm accountable in its work for BWL?

He pondered the question in a dimly lit room at the mostly idle Lansing Country Club, which was closed on the first Monday of autumn.

The appearance of a “fox watching the henhouse” was a “totally responsible conclusion” for people to reach, he said, but also completely false.

“My departure from The Christman Company was not voluntary,” he said. “For reasons that I’m not at liberty to discuss, I was asked to leave The Christman Company by my partners.

“I’ve only had two employers in my life prior to this, the United States Army and The Christman Company, and I loved them both. Being asked to leave that company was one of the most difficult experiences I ever had. I did not see it coming.

“I was very proud of the work I did there as a partner … and felt very confident in my abilities within that company. However, my partners chose to go in a different direction and I was asked to leave.”

He was forced out in June 2009. The construction industry in Michigan was in a shambles. Kramer had obligations, a wife and three kids. A non-compete agreement he says he was forced to sign temporarily prevented him from participating in the construction industry.

“I wasn’t sure where I was going to make my living or how I was going to make my living,” he said. “It was a very difficult time. I can tell you without getting into confidential information that my affinity toward my partners at the Christman Company was not very high.”

Considering himself to be “damned good at construction,” he formed a construction consulting firm. Initially, the firm could exist but it could not function because of the non-compete agreement.

Hungry for work

By the time Lark announced the REO Town project in July 2010, Kramer was free of his shackles and hungry for work.

“I’ve never been given anything in my life,” he said. “Having to compete on a public, fair and open process on my own personal credentials as a new small business owner in Michigan at the worst economic times that we’ve ever had and to be able to compete and win that job is one of the most proud actions I’ve ever had.

“You put on top of that my personal affinity towards the Board of Water & Light and it was a dream come true.”

The son of a 42-year employee of BWL, Kramer had grown up hearing his father’s accounts of the utility’s activities.

When he was selected to be owner’s rep for BWL’s biggest project in two generations, Kramer says he is certain his former partners at Christman “were extremely worried that they would have no shot at the project.”

He said he believes employees of Christman’s competitors probably were “high-fiving.”

He told BWL’s management team every player in the Lansing construction market would seek a piece of the action. He had seen how political the selection process could be. REO Town contractors should be chosen on solely on merit, he said, in “the most transparent and fair and open procurement process” possible.

Ultimately, five BWL executives, but not Kramer or Lark, determined Christman had the lowest and best bid, Lark said.

Christman has been on the job since June 2011.

“It is not uncommon in our industry to encounter past employees hired by clients, competitors or others, and to us, Kramer Management Group is simply another owner representative firm with whom we work,” a Christman spokesperson told the LSJ.

The project is on track to become operational next July — on time and on budget, according to Lark.

BWL says Kramer’s procurement skills saved the utility $7 million in major equipment purchases.