HRT skirted contracting and bidding laws, audit finds

NORFOLK

State investigators say Hampton Roads Transit's former leaders flouted federal and state contracting laws, steering millions of dollars of publicly funded consulting work to "preferred individuals" over about four years.

HRT manipulated some contracts to prevent them from coming before the agency's governing board and failed to seek competition in nearly 70 percent of procurements reviewed by the Virginia Department of Transportation Inspector General's office, that office says.

Additionally, consultant work at times was "improperly" arranged without the knowledge of HRT's procurement office or was secured under expired contracts, says the inspector general's "special review," which was released last week.

"HRT did not comply with applicable procurement laws," the report concludes.

Many contracts dealt with the $338 million Tide light-rail project, which the inspector

general also examined. HRT's senior staff concealed escalating costs from the governments funding it, according to the report.

The state report has prompted another inquiry: The Federal Transit Administration will conduct a formal review of HRT's consultant selection process over the past two years.

Philip Shucet, HRT's new president and CEO, is seeking legal guidance from state and federal law enforcement officials on how to respond to the report's conclusions.

"As far as I'm concerned, it's the same thing as stealing money," said Jim Wood, a Virginia Beach city councilman and past chairman of the HRT board. "If anybody who worked for HRT or works for HRT knowingly violated procurement laws, they should be prosecuted. Period."

Rick West, an HRT board member and city councilman in Chesapeake, called the violations "huge" and possibly worse than other findings in the sweeping report that determined that HRT senior staff hid light-rail cost overruns.

Meanwhile, Shucet has hired a forensic auditing firm to examine billings by one light-rail consultant and its subcontractors to find whether they overcharged the agency. Over four years, the consultant was paid $26 million.

An internal analysis points to "significant discrepancies" in billing, according to HRT bid documents. Overhead costs, furniture, travel and living expenses and automobile expenses are among the areas to be audited.

The state inspector general was asked by Shucet, soon after he assumed leadership of HRT in February, to examine how HRT handled hiring consultants, as well as light-rail budgeting and management.

Shucet replaced Michael Townes, who was forced to resign for cost overruns on the light-rail project and for not pursuing legal action for an alleged embezzlement by two former HRT employees.

Investigators reached their findings from reviewing procurement files, interviewing current and former staff, and examining e-mails.

The report states that HRT: improperly hired consultants without seeking competition in 16 of 24 contracts; failed to establish an "impartial and comprehensive evaluation" in eight of nine contracts competitively bid; produced no documents to show price was considered in five of seven competitive bids; awarded five consulting jobs under expired contracts; and twice hired consultants as temporary employees to avoid seeking competition.

The report cited examples including,

n When a recruiter was hired to fill an executive position, there was no documentation that the job was competitively bid or that the procurement department knew of the hiring. E-mails among senior staff admit that the hiring violated federal law and indicate Townes instructed staff not to use federal money to pay the contractor because rules were not followed.

n HRT policy stated that contracts over $50,000 must be approved by the HRT board. However, the board had no knowledge of payments of $485,000 over 2-1/2 years to one light-rail consultant. The consultant was hired as a temporary employee in five-month periods, for less than $50,000 each period, "in order to keep it within the President/CEO's signatory authority."

"HRT staff took deliberate steps to avoid obtaining Board approval of these services." And by contracting as a temporary employee, HRT avoided the need to seek competitive bids.

n HRT awarded a $9.5 million contract to Williams Mullen for legal services. Although pricing was listed as part of the selection criteria, the law firm was chosen before HRT's evaluation panel even considered the fee schedule.

Additionally, bias was introduced in the process when HRT's technical evaluation included the statements that Williams Mullen "has unequalled knowledge of HRT, its history and its needs" and "has demonstrated excellence in representing HRT... for many years."

n When HRT was selecting a firm to conduct a study for extending light rail into Virginia Beach, Townes, who was not part of the evaluation panel, attended a meeting to tell panel members that HRT might sue one of the proposers for other work it had done for the agency and therefore the firm's hiring could harm HRT's case. Prior to that, the firm received scores that were equal to or higher than the company that was eventually selected.

n A consultant's contract for light-rail construction and management was altered several times when costs started exceeding the contract limits. Early on, the contract with PBS&J Inc. was doubled to nearly $17 million by Townes, without approval from the board, which had authorized a $10 million limit for the work. Townes did not have authority to approve such a large change, so the contract increase was rescinded and replaced with one that brought the contract to the $10 million limit.

About six months later, the company wrote HRT indicating that it still needed the extra money, plus more, for a total increase of $10 million. About six months later, the HRT board authorized $2.8 million.

Then several months later, HRT staff had the board approve an additional $8.1 million. Meanwhile, during the lag, the consultant performed $2.4 million worth of work "without approved funding."

Wood said he found the examples in the report "unconscionable."

"The fact the previous leaders would intentionally bring us contracts below the actual amount really, really ticks me off," he said.

"This report shows me the previous management at HRT routinely lied to me... and routinely withheld information from me as chairman of the commission."

After reading the inspector general report, Norfolk City Councilman and HRT Chairman Paul Riddick described Townes' administration as "a runaway train."

Riddick and Norfolk Mayor Paul Fraim both said they want to recover as much money as possible from consultants who may have been overpaid.

"People who got unjustly rich should be pursued," Fraim said.

West said he wants to know whether the board can collect any money paid to Townes when he left the agency. Several board members, including West, tried to fire Townes but the votes were not there, so they accepted his resignation and paid him nearly $300,000.

"If we knew then what we know now," West said, "there would have been cause to fire him and we wouldn't have had to pay him a dime."

Debbie Messina, (757) 446-2588, debbie.messina@pilotonline.com