Caltrans Homes South Pasadena | Blow Up Over Inspection Contract: City to Seek New Bid

“The continuous changes are a clear indication of poor planning, lack of knowledge, and a lack of procedure by both City and..."

PHOTO: Eric Fabbro | News | Councilmember Jack Donovan

After an ugly fallout with the company hired to inspect unoccupied houses it wants to buy from Caltrans, South Pasadena in coming weeks is set to seek a new, “direct bid” for the contract, further delaying the city’s long-awaited acquisition of houses once slated for removal to make way for the abandoned SR-710 extension.

The city needs the inspections so it can determine which of the 20 unoccupied residential properties Caltrans offered June 30 are worth purchasing.

Trouble’s been brewing for weeks over the contract with Chino Hills-based HBI Inspections, culminating with the contractor’s Aug. 31 letter to city officials detailing its assertions that the City and its chief project consultant, Chino-based CivicStone LLC, have “made what appears to be an effort to shift responsibility for project problems away from the City and Consultant on to HBI.”

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In the six-page letter, HBI Inspections owner Darrell Holmes itemized multiple complaints over the contracting process, pinning responsibility on South Pasadena Community Development Director Angelica Frausto-Lupo and CivicStone co-founder Adam Eliason. He wrote the two “have attempted to bully HBI into an inaccurate contract, perform work without utilities being turned on, lack of utility schedule, the disregard for safety as it relates to gas companies’ due diligence,” and others.

Holmes alleged HBI was subjected to demands to backdate its contract, failure to include a payment clause, unlawful distribution of its bid documents and the “continuous changing of inspection start dates,” exposing HBI to “unnecessary expense and possible liability.”

“The continuous changes are a clear indication of poor planning, lack of knowledge, and a lack of procedure by both City and Consultant,” the letter stated. It also questioned Eliason’s credentials and repeatedly questions the “performance” of both Eliason and Frausto-Lupo.

“HBI is not here to be run in circles, absorb cost, and be exposed to safety issues and legal liab[ility] simply because of [the] incompetency of these two persons.”

Asked for comment, City Manager Arminé Chaparyan did not address HBI’s allegations or say whether the City has responded to the letter. But she said the City was “unable to finalize” its agreement with HBI and expects to bring a request for a “direct bid” for a new inspector to the council’s Oct. 5 regular meeting. The matter was discussed with the council’s Implementation Committee, and it was decided the contract “would not be re-bid, given the tight timeline.”

On Sept. 7, Council Member Jack Donovan, who serves on the Implementation Committee, announced the failure of negotiations with HBI and the City’s intent to seek a new contractor. Donovan, who told the South Pasadenan News he had not seen Holmes letter, also said the City had sought and received from Caltrans a seven-to-eight week deadline extension to procure a new vendor.

Signing with HBI Inspectors

On April 20, city council authorized a request for proposals for inspection and repair estimates for the 20 unoccupied residential properties in town that Caltrans is offering to sell. But the RFP, written with assistance from CivicStone, wasn’t issued until June 13. The City received two bids, one from HBI and another from FEI Associates. CivicStone subconsultant Grant Henninger recommended the City sign a $140,000 contract with HBI, citing its broad experience, the comprehensiveness of its bid, and HBI owner Holmes’ commitment to be the designated project manager. The council adopted this recommendation July 20, though the contract wasn’t drafted until Aug. 9.

The City wanted a July 21 “commencement date” for the contract; after receiving the draft contract August 9, Holmes’ letter said HBI asked several times to “correct” the date, but that Eliason and Frausto-Lupo refused, insisting HBI “sign a backdated contract” as well as “further reducing” the already “tight” 45-day length of the contract to only 32 days. Holmes considered that unreasonable, especially since the City still hasn’t arranged for the gas, water and electricity to be on during the inspections, and is unwilling to negotiate with Caltrans on the placement of lockboxes to streamline the ability of inspectors and utility service personnel to access the properties. HBI planned to assign eight inspectors to the project and to have at least three, each with their own specialty and on different schedules, do the work.

“The bottom line is we need the inspection and repair estimates completed by 9/15/22,” Eliason told Holmes in an Aug. 8 email.

During the July 20 council meeting when the contract was authorized, Mark Gallatin of the South Pasadena Preservation Foundation (SPPF) recommended delaying consideration of the HBI contract, saying it would give staff time to better vet the bid, HBI’s claims about work it had done elsewhere, and verify HBI personnel’s contractor licenses, which Gallatin said were listed by the state as inactive.

It was these references to the HBI’s bid that Holmes found offensive. He indicated that neither SPPF nor any other “special interest group” should have had access to the bid documents prior to the July 20 meeting. But they were made public when the City published the agenda packet prior to the meeting.

Henninger, the city subconsultant, did not deny the licensing issue but said HBI was not being hired to build, but rather to inspect and make repair estimates. “We don’t need them to have an active contractor’s license now because that is not the work we are asking them to do.”

Council Member Zneimer wanted to know why the city should hire HBI when SPPF had offered to do all the inspections for free.

Henninger said the City is pleased SPPF will be helping with inspections of historic homes under an agreement the City also approved at the July 20 meeting, but “we think we need an expert opinion on the quality of the homes overall” and he did not believe SPPF has that expertise. HBI, by contrast, “has the expertise and will serve the City well in making a good decision whether or not to purchase these homes.”

HBI specializes in inspections, added Frausto-Lupo.

Council Member Diana Mahmud, who said HBI’s bid showed “very good quality work. This council would be subject to criticism if we did not award the work to be done to experts in the field” such as HBI.

Mayor Pro Tem Jon Primuth noted that SPPF had taken a position against the City’s purchase of the Caltrans homes, and so would have a “potential conflict of interest” in doing the inspections. Like other council members, he also said there is a timeline involved that “needs to be complied with” and so he could not abide putting off contract approval.

In view of the inspection snafu, City Manager Chaparyan this week repeated Council Member Donovan’s Sept. 7 statement about securing an eight-week deadline extension from Caltrans. Donovan said the reason the City is doing direct instead of competitive bids is due to the “tight schedule built into SB 381.”

It was unclear what timeline Primuth, Chaparyan and Donovan were referring to. Caltrans spokesman Eric Menjivar on Tuesday said, “There is not a current deadline that the City of South Pasadena needs to meet.”

Moreover, while the City had to and did respond to Caltrans’ solicitation within 30 days, and must execute any purchase and sales agreement (PSA) within 60 days of receiving it, there appears to be no statutory or regulatory requirement for when Caltrans must deliver the purchase and sale agreements. In fact, the agency is well behind the estimated schedule Henninger presented in July for doing so, and the City does not currently expect to see the PSAs until late October–well after the Sept. 15 inspection completion date CivicStone’s Eliason was pressuring HBI to meet.

In his complaint letter, Holmes alleged the City and its consultant: refused to correct the contract commencement date; offered a contract with no payment clause; as late as August 15 failed to ensure utilities would be turned on at the properties; set unreasonable start dates for the contract; was unwilling to revisit the issue of lockboxes with Caltrans; allowed the unlawful distribution of its bid materials; and “tampered” with its bid and contract terms by making changes without its approval.

“The City of South Pasadena would be better served to have the city engineer or the public works contract department handle all engagements with a better understanding of city contract practices, accurate project scheduling based on project readiness, and have the trade communication skills, with the understanding [of] the impact of different team members not performing their duties.”






Ben Tansey
Ben Tansey is a journalist and author. He grew up in the South Bay and is a graduate of Evergreen State College. He worked in Washington State as a reporter in a rural timber community and for many years as an editor for a Western electric energy policy publication based in Seattle.