The Washington State Department of Transportation (WSDOT) on Wednesday released details of a sweeping plan to overhaul management and oversight of its minority contracting program.
The changes are specifically in response to the federal government's searing October audit that found WSDOT is failing to ensure a certain amount work on the Alaskan Way Viaduct replacement project is awarded to small, locally-owned businesses.
KING 5 News reported in October that the $1.4 billion contract with Seattle Tunnel Partners (STP), the company hired by WSDOT to build the tunnel, was out of compliance with contracting rules. The state awarded the contract to STP with a federally mandated condition: the company must give 8 percent of the total budget to work by small and minority-owned businesses. If 8 percent cannot be achieved, STP at a minimum must show it did everything in its power meet that goal. KING 5 found STP is nowhere near meeting the conditional goal. Figures obtained in October showed STP had paid only $7 million worth of work to small firms, far short of the $91 million goal. The most recent figures, which are preliminary and must be verified by WSDOT’s Office of Equal Opportunity, show $19.7 million has been paid to disadvantaged businesses. Yet that is still far short – 1.73% of the total contract.
Feds: WSDOT may not “aid and abet” skirting regulations
In its audit, the Federal Highway Administration said WSDOT was failing to police the program, concluding that STP created "artificial barriers" and "hardships" on small businesses seeking a portion of the Viaduct work. Instead, the FHWA said STP was funneling most of the work to bigger companies, some of which were owned by STP interests.
The federal agency found WSDOT failed in its duty to ensure STP was working to reach the 8 percent goal and that state project leaders looked the other way when they were well aware of the problems.
“WSDOT failed to intervene when STP created…unnecessary and onerous requirements on (small businesses),” wrote federal investigators. Federal Highways also found the top Viaduct manager at the time of the inquiry, Linea Laird, did not support the idea of an 8 percent goal and voiced her concerns that the number was too high in meetings.
“WSDOT may not aid and abet STP’s outright refusal to meet the goal, despite project managers’ beliefs that the goal is too high,” wrote investigators. “WSDOT, once made aware of artificial barriers created by STP…is obliged to intervene.” They added, “(Small business) contract goals and proper program administration are not optional.”
Laird has since been promoted by the state to WSDOT Chief Engineer.
Sweeping reforms proposed
In the documents released Wednesday, WSDOT outlined an aggressive plan to ensure STP acts in good faith to subcontract Viaduct work to small businesses. And for the first time ever, WSDOT said the state's top transportation official, Secretary Lynn Peterson, and other top agency staff will play a direct role in overseeing how the minority contracting program is operating state-wide.
"Fairness is an essential part of everything we do at WSDOT," Peterson said. "It's something we take very seriously, and we're committed to doing everything we can to create more opportunities for disadvantaged firms on our projects."
Small businesses suffer
Mary Guthmiller is the owner of DBE Electric, an Auburn-based small business with 15 employees. Guthmiller said she was pleased by the WSDOT planned changes. Her firm has a contract with STP to do work on the Viaduct project. But a chunk of that work never materialized, as STP gave it to Fisk Electric instead, a large company based in Texas that is owned by Tutor Perini, one of the two companies that joined forces to form STP.
"I had to lay off key people, project management, my controller," Guthmiller said of what impact losing the Viaduct work had on her business. "I'm down to bare bones staff now."
STP's practice of signing contracts with small businesses and then sending the work to larger companies or performing the work themselves was singled out for criticism in the federal audit.
“(For STP) to come into our town and take jobs away from people that live and work here, jobs we were promised and planned for, and then to perform (the work) with their own forces and take the profits and leave? To me that was just a rip off and a lie,” said Guthmiller.
Here are other highlights of the WSDOT package:
• Sec. Peterson has created an Executive DBE Reform Committee
• A full time staff member is monitoring STP’s efforts toward inclusion
• An outside attorney is conducting an independent third-party review of FHWA's findings
• Secretary Peterson will meet monthly with FHWA officials to review progress
• WSDOT has directed STP to increase outreach efforts
• All WSDOT project managers will be held accountable for implementing oversight
• A best practices manual for setting inclusion goals will be created
• WSDOT will create a new outreach position to engage stakeholders
"Fraud on the Job" investigation
In 2012, the KING 5 Investigators exposed widespread waste, abuse and fraud in the state's minority contracting program in the series "Fraud on the Job". Soon after the series began, Federal Highway Administration investigators started looking into WSDOT's program. KING 5 has learned the FBI and the USDOT Inspector General have active investigations into the state's program and businesses highlighted in the KING 5 reports.