You appear to be having difficulties with the legal status of your grandson. First of all, at age 16, most courts would consider the child's wishes paramount, so to the extent that your grandson wants a specific arrangement, most likely a court will take his wishes into great consideration.
This really needs to be formalized in court, for the sake of all involved. If your grandson were to require serious medical attention, or be in trouble with the law, the only person's wishes and authority to act that would be taken into consideration would be the person who has legal custody of your grandson. For his sake, this should be formalized.
If his biological parents are willing to surrender their parental rights, that would make it easier for you to adopt him. Then the only thing needed would be for the biological parents to sign surrender agreements which would be accepted by the court and you would be awarded custody.
But if they are unwilling to do so, then you would have to file for custody in your local family court. The court will conduct a fact finding hearing and decide if there are grounds to terminate parental rights. After that is decided, a dispositional hearing will take place and the court will decide what should be done based on the best intersts of the child.
This could get quite messy, and I would encourage you to hire an attorney. If you must seek termination of parental rights, in most states the court would appoint an assigned attorney to represent each parent, so you would be fighting 2 attorneys by yourself.
This is not an easy thing to do. I hope that I have given you some direction. Let me know if you have follow up questions.