The phrase,'Unsound Transit', was coined by the Wall Street Journal to describe Seattle where,"Light Rail Madness eats billions that could otherwise be devoted to truly efficient transportation technologies." The Puget Sound's traffic congestion is a growing cancer on the region's prosperity. This website, captures news and expert opinion about ways to address the crisis. This is not a blog, but a knowledge base, which collects the best articles and presents them in a searchable format. My goal is to arm residents with knowledge so they can champion fact-based, rather than emotional, solutions.


Monday, February 18, 2008

Did Port break laws to award contracts to cronies?

Did port contracts go to favorites?
Some corrections already made to program, official says


Years ago, electrician Harold Wright got good jobs as a Port of Seattle subcontractor, working for other companies on everything from high-voltage lines to lights in Sea-Tac Airport terminals.

But he never had much luck bidding on small contracts granted directly by the port -- a program created in part to help small-business owners such as himself.

Harold Wright, president of Wright Inc. electrical contractors, says he didn't have much luck bidding on small Port of Seattle projects and eventually stopped bothering to bid altogether. "They were giving this stuff to their friends, and that's what I think today."

A recent state audit reinforces long-held perceptions among some small businesses that the port fails to offer a level playing field, finding loopholes to steer business to favored companies again and again.

"The port has always been funny," said Wright, who eventually stopped bothering to bid on port jobs. "They were giving this stuff to their friends, and that's what I think today."

In one example that auditors believe could point to fraud, port staffers awarded a bid to a contractor in a way that may have limited competition. The new contract seems to have allowed port officials to alter invoices to avoid disclosing that three other contracts with that same contractor had gone over budget, the report found.

Port officials have agreed to investigate that case in 2004, as well as how many similar situations may have occurred.

The scathing state audit, which concluded the port squandered $97 million in its construction program and became overly cozy with contractors, has also spawned a federal criminal investigation.

"It may be innocent, and it may be nothing, but they (auditors) see these things, and it gets their attention, and that's why they're looking," said State Auditor Brian Sonntag, whose office undertook the audit.

Port officials say they're legally bound to award competitive contracts to the lowest responsible bidder, meaning the most efficient, experienced companies may be more successful. But the audit found numerous problems with the port's procurement process for airport contracts under $200,000, which don't have to be advertised:

# It was easy to circumvent the process designed to guarantee that the 1,370 companies who asked to be on the port's "small-works roster" get an equal opportunity to bid, the report said.

# Port staffers could add select companies to a "randomly" generated list of seven small-works contractors that were invited to bid on each job.

# During 2004, 87 percent of the port's small electrical contracts worth nearly $3 million went to the same two firms, Prime Electric and SHJ Electric. State law encourages agencies to distribute work equally among contractors "whenever it would not violate the public interest."

# Port staffers appeared to be steering contracts to a small number of preferred contractors, auditors wrote.

Port Commission President John Creighton called the port's handling of less-scrutinized small contracts -- and efforts to provide opportunities for small businesses -- "a vast area that needs improvement."

Though businesses of any size can bid on contracts under $200,000, state legislation was drafted in part to give smaller businesses a fair shot at winning pieces of public works projects.

"Our actions need to match our words," Creighton said. "We're saying the right things, but in my mind, one of our primary missions as a port is to really foster local small business, and we've been falling down on the job."

The port has already made changes to its small-works contracting program, said Dakota Chamberlain, a seaport manager overseeing the agency's response to the audit. To prevent surprise cost overruns, staffers can no longer authorize more work once 90 percent of a contract's funds have been spent. Contract language warning companies not to accept work exceeding the original amount will be strengthened, he said.

Legislators also have moved to close a loophole in state law, which requires most government agencies to notify all qualified companies on a small-works roster of contract opportunities between $100,000 and $200,000. Port districts, however, are exempt.

In October, the Port of Seattle voluntarily abandoned its practice of only sending bid invitations to certain companies on its small-works roster, Chamberlain said. Depending on what kind of job needs to be done, it now notifies every qualified electrician, plumber or underwater diver on the list.

"It eliminates the discussion that we're showing favoritism and that people aren't aware of opportunities," Chamberlain said.

Altered invoices

In August 2004, Port Construction Services created a new contract for open electrical work -- a catchall category that could cover small jobs that cropped up at the airport.

A port project manager manually added Prime Electric Inc. to a list of randomly selected companies that should have been invited to bid on the work, the state audit found.

Prime Electric, a Bellevue contractor that works on everything from Boeing Co. hangars to high-rise condo buildings, previously had won six small-works electrical contracts at Sea-Tac Airport that year, according to the audit.

The contract files contained no evidence that the other eight contractors received invitations to bid, the audit said, though port staffers said those notifications happened automatically.

Documents later provided by the port showed four companies may have been sent a fax on a Friday afternoon requesting responses by 11 a.m. Tuesday, allowing less than two days to prepare bids, auditors said.

Prime Electric was the sole bidder and was awarded the contract in October for $185,000. There was one problem: Port staffers had been stockpiling invoices for work Prime Electric had performed well before October, auditors found.

Those invoices totaling $75,588 would have pushed the work performed under three previous Prime Electric contracts above the legal $200,000 limit for small-works projects, the audit said.

Port employees should have disclosed the unforeseen cost overruns to the port commission, officials have said. Instead, according to the audit, they altered contract numbers on 12 invoices from Prime Electric and issued new work orders so the company could be paid from the new pool of money.

"They overrun the contract amounts and it puts them in a position where they ... steer contracts to the contractor, because they know they have to pay invoices, and it appeared to me to be intentional," said Patti Jones, president of CDR Consultants, one of two auditors who wrote the state report.

Prime Electric officials said they weren't privy to how the port chose contractors or managed its own internal bookkeeping. Any work they performed was covered under a contract they had bid on, and any job they billed for had to be authorized by port employees each day.

"They were the ones who were dictating," Prime Electric President Wayne Tyrrell said. Because the company had experienced employees working at the airport who were already drug-tested and badged, certain efficiencies allowed them to submit competitive bids, Tyrrell said.

But company CEO Eric Reichanadter said for every contract Prime Electric won at the port during the time, it lost three or four others.

"It's our position that not a single scope of work done at the Port of Seattle was awarded or issued to Prime Electric in any discretional manner whatsoever," he said. "We were asked to bid on the work, we accomplished the work and when our contracts were finished we moved on."

In fact, Prime Electric hasn't done any port work for the past 2 1/2 years, Reichanadter said. For a company that does nearly $40 million a year in business -- he said the voluminous paperwork and delays in getting paid at the port weren't worth the trouble for relatively small contracts.

'Same firms doing the work'

Fred Anderson, who has built Leajak Concrete Construction into a $7 million-a-year business, believes the small-works program should be limited to companies even smaller than his.

Most can't begin to compete with a company such as Prime Electric.

"You don't need to feed those guys any more food," he said. "They're big enough."

Small-business advocates would like to see the port take advantage of legislation passed last year, allowing some small-works contracts to be awarded competitively among similar companies with revenues of under $1 million.

An audit last year of the port's small-business initiative adopted in 2003 found the port had not met internal goals to spend 10 percent of contracting dollars on qualified small businesses. Though it varied widely by division, the overall number for 2006 was 6.7 percent.

Two-thirds of port employees interviewed could not describe any successes from the initiative, the audit found.

"Everybody knew it was a joke the whole time," said Eddie Rye Jr. of the local Community Coalition for Contracting and Jobs, which works to increase opportunities for small and minority businesses. Small-business owners surveyed said "the odds are stacked against new faces since the same firms seem to be doing the work" and "it feels like a huge entity that has its contractors chosen already."

To change those perceptions, the port recently hired Elaine Ko, who previously headed the Inter*Im Community Development Association in the International District and the city's Office for Women's Rights, to head its small-business initiative.

Stephanie Harper proves a savvy small-business owner can succeed. Her company -- SHJ Electric -- was the other awarded a disproportionate share of airport electrical contracts in 2004.

She launched her business in 1993 by winning small contracts at the port. Her business now brings in $2.5 million a year. "Our thought process has been to ... charge the port lower rates and get exposure to work on other projects," she said. "That's where we make our money. Alaska Airlines, Southwest, Delta are all our customers now"

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