SPECIAL REPORT: First of a two-day series
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Road, sewer fees balloon under open-ended contracts
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Pima County wastes much of the money it spends on roads and sewers by avoiding competitive bidding, disregarding its own contractor rating system and failing to track its spending, a three-month Arizona Daily Star investigation shows.
How the county government issues public works contracts helps explain why the cost of a $350 million voter-approved bond referendum in 1997 has ballooned to $700 million today.
Here are highlights of the Star investigation:
Work "as needed." With no public scrutiny and few restrictions, bureaucrats decided who got how much money in nearly half the 300 road and sewer contracts awarded by the county during the past five years. The result: Some contractors get minimal work, some get lots, with little explanation.
Politics vs. quality. Contributions to a supervisor's election better indicate who gets design work than how a consultant scores in a quality-ranking. Five of the six firms getting the most county design work also topped the contributions list, giving about $29,000. By comparison, the five firms getting the most city work gave just $55 to the Tucson City Council.
No accountability. Little tracking is done to ensure taxpayers receive the best value for the $323 million spent during the past five years on roads and sewers - more than half the county's capital budget. One reason: Few files are on computers and paper records are scattered among four offices. Rather than question a contractor when costs exceed estimates, the county routinely just pays.
The Star also examined public works contracts awarded by the city of Tucson, which is about to ask voters to support $400 million in transportation spending. If the plan is approved on May 21, it will be the biggest city sales tax increase ever.
The city, which would use 20 percent of its $40 million a year in new sales tax money on seven road widenings left unfinished by the county, also has problems with its contracting system: About 20 percent of the contracts reviewed by the Star were missing documents, some because summer interns were hired to file them.
The city's system, however, is more in line with best practices nationwide, designed to get value and create distance between elected officials and millions of dollars in contract awards.
"Why would I want the 16th-rated company to do a job when competitive selection means you get the top-rated firm at the lowest price every time?" asked Wayne Casper, procurement director for the city of Tucson.
Yet that's just what happens under Pima County's contracting system.
The Board of Supervisors acknowledged the problem before, in January 2001, when it voted 5-0 to seek an investigation into contract-rigging allegations. More than a year later, though, no key players have been interviewed, and state and local agencies say they aren't investigating.
County Administrator Chuck Huckelberry agrees his process still needs to be streamlined to improve efficiency, but he and the board leaders insist politics don't affect who gets work.
No one can really know that, though, in the view of one official in El Paso County, Texas, which doesn't use "as-needed" contracts.
"There's so much opportunity for misappropriation and the good ol' boy system to kick in," said José Lopez, assistant purchasing agent for El Paso County. "How is anyone supposed to know if the contract went to the most qualified or to my old college roommate?"
Eckstrom defends system
One example of the wide variance between county rankings and awards is Catalina Engineering, 180 W. Magee Road. Rated second among 16 firms seeking bond projects in 1999, Catalina was seventh on the list of contracts awarded. Two lower-rated firms each got twice the work Catalina did.
Supervisor Dan Eckstrom defended the county's contracting system, saying it doesn't bother him that awards don't track rankings.
All the firms on the as-needed lists met a basic level of competency, Eckstrom noted.
"Anybody on the short list is qualified, in my opinion."
As-needed contracts also help the county handle a heavy workload, said Frank Castro, a former county transportation director-turned-consultant, of Castro Engineering, 3580 W. Ina Road. His firm ranks fourth in volume among 43 firms getting county design business.
"They're swamped," Castro said. "They wouldn't have the time or the manpower to do (proposals) for every project."
But Pima County is bucking a national trend in this approach, and contractors question what criteria the county uses in choosing firms from its lists.
"You never know with the county where you're going to end up in terms of work. It doesn't seem to be tied to where you're ranked," said Bob Brittain, from Johnson-Brittain & Associates, 378 N. Main Ave. "It's not like the city or state, where you know if you rank at the top you're going to get the biggest contract."
What is clear with the county system, according to internal staff correspondence, is that using "as-needed" contracts has jacked up the price of projects.
Transportation engineer Ruben Lacandola complained in an August 2000 memo that hourly rates charged by consultants for as-needed contracts are significantly higher than when they're hired competitively.
That's because competitive bidding helps lock in a price by nailing down the specifics of a job. With open-ended contracts, when consultants demand extra money to finish jobs, Lacandola wrote, the county has no grounds to deny their claim.
"They become top-heavy, the principals, project and senior engineers charging a lot of time to the contract," his memo says. "It is no wonder sometimes their fee proposal is two to three times as much what the work is worth."
Purchasing official Mike Studer criticized a growing 1996 contract in another memo, noting as-needed agreements are "very expensive" because they allow hourly billing. He said work should be competitively bid when the county knows in advance what it wants done.
Studer also said in the memo that he might need help persuading county supervisors to approve large increases.
"I'll need a few ‘buzz' words for the summary sheets, in addition to the usual hackneyed phrases like ‘. . . potential loss of federal funding,' (or) ‘it is cost beneficial for this consultant to continue, . . .' " his memo reads.
Little accountability
County rules allow as-needed contracts to be rolled over for three years, which means county departments can generally funnel up to $450,000 to each firm on its call list for different services - with little accountability or competition.
Take South 12th Avenue.
Rather than bid the design portion of the $24 million project, county officials decided to put it under as-needed contracts held by Collins-Piña Consulting Engineers, 33 N. Stone Ave., and DJA Engineering, the predecessor to Castro Engineering. This decision was made despite written acknowledgements by top officials that the job was far larger than normally allowed with an as-needed project.
Each company's contract started out at $100,000 in 1997, then was extended by an additional $275,000 each to absorb the cost of the work.
When this as-needed money ran out, the county issued Collins-Piña a new $800,000 no-bid contract to complete the design.
County Administrator Huckelberry told supervisors that Collins-Piña - the top contributor to supervisors' political campaigns and the top recipient of county design work - should get the job because it had already done the first phase and scored well in the ratings process for a different project under way at the same time.
That argument didn't apply in another as-needed project, though. SAIC/Transcore, a bit player in the political game, which did the first phase of the West Wetmore Road widening, offered to finish the job for $700,000. But the county insisted on soliciting other proposals and gave the work to Collins-Piña - for $990,000.
Huckelberry said the difference between the two was that county transportation officials weren't satisfied with SAIC/Transcore's work.
James Witkowski of Transcore said the decision to solicit other proposals came "as a complete surprise" because the county had already asked his company to submit a work plan and cost estimate.
A few firms get lion's share
Pima County awards most of its as-needed contracts for design work and other services, which totaled $78 million during the past five years.
Construction work, which totaled $245 million during the period, is awarded mainly through competitive bidding.
Pima County code says design work should be spread evenly through a rotation of eligible contractors, as determined by a quality-ranking system.
But somehow, through the years, the rotation has sent the lion's share of the work to a small group of companies.
In a series of 1999 flood-control contracts handed out to six companies at $150,000 apiece, Collins-Piña ended up with almost $226,000 in jobs while ranking No. 6. Meanwhile, the No. 1 ranked firm got $45,253.
In 1997, nine firms were awarded $100,000 open-ended contracts for civil engineering work. By the time the contracts closed, Collins-Piña had received $555,000 in work while Johnson-Brittain & Associates, a firm described in engineering circles as one of the county's most competent, got $25,000.
The city of Tucson, on the other hand, uses a competitive process for all but the smallest projects or those for which an emergency dictates a quick decision, said procurement director Casper.
During the past five years, just 16 percent of the city's 463 public works contracts - and just 7 percent of spending - have gone for as-needed work. At the same time, 44 percent of the county's 296 contracts - and 18 percent of spending - were issued this way.
Prequalifying a number of consultants, as the county does, means some of the work ends up going to companies with low ratings, Casper said.
That's what happens in Pima County: Of seven open civil engineering contracts, the contractors' scores ranged from 85 to 69 on a 100-point scale. All were awarded $150,000 contracts.
So far, seventh-ranked and politically active Castro Engineering has twice as much work as top-ranked Johnson-Brittain.
The national trend is to curtail as-needed contracts, said Rick Grimm, chief executive of the Virginia-based National Institute for Government Purchasing.
Where they're still used, Grimm said, is for small jobs - typically with a cap of $10,000 to $25,000 - or for emergencies.
"For most jobs, you want to go through a specific procurement to find the best of the best for each job," Grimm said. "It's the norm in any professional procurement organization."
"If you don't know how much a job is supposed to cost, you can't know how to respond when you get change orders. They're going to run amok."
Huckelberry said the county has been slowly reforming its procurement system since 1997, but change takes time. Those changes have been more difficult because they coincide with a massive construction program, which has dramatically increased workloads.
"I think the staff has gotten lazy or finds the as-needed process is easier than going to a specific request for proposals for every project that they should," he said.
He said that if the rotation system is being ignored or manipulated, it will be corrected once a study ordered by the board last week is done.
Former Pima County Supervisor Raul Grijalva, who stepped down after 14 years in February to run for Congress, said he's convinced the county needs to scrap as-needed work or dramatically scale it back.
Grijalva said if he had it to do over again, he would have done a competitive selection for the South 12th Avenue project instead of hand-picking Collins-Piña and DJA. He did it, he said, because he wanted minority firms to get the work. Now he sees that he tainted the project.
"You can't justify it. The way we assign as-needed contracts begged to be corrected two years ago and it wasn't."
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Glossary of terms
Procurement: A process by which government obtains goods or services.
As needed: A type of open-ended contract in which a company is awarded the opportunity to provide a service with the exact job and amount to be determined later.
Competitive selection: A process in which government attempts to find the most-qualified or least-expensive firm to do a specific job. Competition may be based on the low bid, generally used for construction projects, or a firm’s qualifications and experience, normally the standard for assigning services such as road design.
Bonds: Voter-approved securities sold by government to pay for construction projects. They are most often repaid through a property tax assessment or a predetermined revenue stream, such as state gas taxes that filter to the local level. No law requires local governments to identify what they plan to build, but local governments generally do.
Sales tax: A tax levied on the sale of goods, based on a percentage of the cost of those goods. In the city of Tucson, goods are now taxed at 7.6 percent of the purchase price.
Public works: Works constructed for public use, such as roads, sewers and buildings, typically built and maintained by the government.
— Arizona Daily Star
Largest open-ended design contracts
Final Award Rank Company Original payout Service Date
1. Malcolm Pirnie $1.5 million $4.1 million Engineering 1987*
2. Cella Barr/ $200,000 $571,267 Misc. sewer system 1993†
3. Collins-Piña/ $100,000 $554,931 Civil engineering 1997 Tetra Tech
4. Castro/DJA $100,000 $473,578 Civil engineering 1997
5. EEC $200,000 $382,609 Engineering design 1998
6. Malcolm Pirnie $200,000 $367,149 Engineering design 1998
7. Catalina $150,000 $336,141 Civil engineering 1999
*extended through 1999; †extended through 2000 source: Star research
These contracts were awarded by Pima County for road and sewer work on an as-needed basis during the past five years. Supporters say this method allows flexibility when change is needed; critics say amounts greater than $25,000 or so should be locked in through competitive selection.
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Chuck Huckelberry
Eight years as county administrator
"We've been moving toward reforming the system. . . . Reform is always incremental. This reform has been made more difficult because it comes in the middle of our biggest public works building program ever."
Sharon Bronson
Democrat, board chairwoman
Six years as a supervisor
"Given the pattern, it would be wise to review our procurement practices and bring them up to industry standards. . . . On the surface, our policies are in line with those in other places. Maybe our practices aren't."
Ray Carroll
Republican, Five years as a supervisor
"Chuck is the lieutenant. He does what people above him tell him to do. . . . I think when contracts are awarded based on favoritism and lack of control you tend to get people who think they're protected and you get slipshod work."
Ann Day
Republican, One year as a supervisor
"Currently we have a soft and squishy system pushed around by political whim. . . . You would think if you have rankings you would follow them. Otherwise, why have rankings?"
Dan Eckstrom
Democrat, 14 years as a supervisor
"I don't know anybody here, Republican or Democrat, who votes on something based on who gives them money. . . . Maybe the firms who do give are the ones who have the most qualifications."
Richard Elias
Democrat, One month as a supervisor
"I don't hear any hard evidence. I've seen insinuations, but I don't see any hard evidence."
Raul Grijalva
Democrat, Supervisor 14 years, resigned Feb. 15 to run for Congress
"The perception that something is wrong is something the county needs to correct. . . . We won't be able to pass another bond election, whether it's transportation or not, whether they're open space or not. Those issues are bigger than any design contract or any particular consultant."
