CRC audit finds $17M in excess, questionable costs

By Eric Florip, Columbian transportation & environment reporter

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Updated: April 16, 2014, 6:46 PM

 
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An audit of the Columbia River Crossing found $17 million in excess or questionable spending, including larger-than-usual profit markups to project consultants and work that wasn’t authorized by contract in advance.

The report from the Washington State Auditor’s Office, released Wednesday, “did not identify any financial misconduct or abuse.” But it called for the Washington State Department of Transportation to reconsider policies and procedures that resulted in at least some of the misspent money on the now-defunct project, according to the audit.

The biggest chunk of questionable expenses was $12.3 million that went to firms with undisclosed overhead and profit markups, according to the report.

Another $2.3 million was added to two contract task orders months after the orders were completed, according to the audit. Those changes were made without authorization, though the extra work was found to be consistent with the original contract.

And the primary consultant on the project, David Evans and Associates, was overpaid by $1.45 million because of higher-than-usual markups, the report found.

“We’ve had some sense that there were problems,” said state Sen. Ann Rivers, R-La Center. “That’s been confirmed.”

At the direction of state lawmakers, the auditor’s office began examining the CRC last year, around the same time Washington pulled out of the proposed Interstate 5 Bridge replacement project. At that time, legislators didn’t authorize funding for the project itself — only $200,000 for a forensic audit.

Oregon legislators pulled out of the CRC this year, effectively killing the $2.9 billion project. The CRC is expected to be completely shut down by May 31, according to the Oregon Department of Transportation.

In a formal response to the auditor’s office, WSDOT didn’t dispute any of its findings. Deputy Transportation Secretary Cam Gilmour noted in a letter that the report didn’t identify any abuse in $188 million in expenditures from 2005 to 2013, the period during which his agency had the lead on the CRC.

The audit recommended that WSDOT be more cautious when using practices that increase consultants’ compensation beyond what’s stated in contracts. It also urged WSDOT to better control the work of those consultants. But the audit only identified $49,000 in recoverable costs — money that was either paid in error or exceeded contract rates.

The agency said in its response that it plans to recoup that money “as appropriate and as allowed by the terms of the agreement for the CRC project.”

“WSDOT has already implemented several actions on process improvement opportunities identified in the audit,” spokesman Lars Erickson said in an email. “Remaining recommendations will be examined closely.”

The findings come from an audit that didn’t even cover all facets of the CRC. Auditors had previously said the $200,000 allocated for the effort might not allow them to go through every transaction, and instead they would narrow their focus to the biggest contracts and anything that looked irregular.

Contract changes

The $2.3 million added to two task orders was far from the only changes made to the scope of engineering work David Evans and Associates performed for the CRC. One task order, which authorized the company to assist project staff with the environmental impact statement, saw 46 amendments that more than doubled the original $15.8 million task order, according to the audit.

In other cases, WSDOT simply lacks records to show the overhead, labor and profit rates charged by CRC consultants, according to the audit. The agency paid a combined $12.3 million to more than 30 firms that didn’t disclose those margins. And $11.1 million of that went to sub-consultants of David Evans and Associates, the report found.

WSDOT didn’t require detailed cost and profit breakouts for smaller firms, so the agency doesn’t know what profit rates it paid those companies, the report found. WSDOT acknowledges it may have overpaid for that work, according to the audit.

“This is another significant example of the need to reform the way we’re doing business at the department of transportation,” Rivers said. “That’s the bottom line.”

Rivers, who strongly opposed the CRC, is among many Republicans who have called for reforms within WSDOT. Some have cited the agency’s problem-plagued megaprojects in Seattle, and this week’s findings on the CRC only bolster that case, she said.

Partisan disagreement on reforms was a key reason a broad transportation revenue package again fell short in the Legislature this year. But that issue is likely to emerge again when lawmakers return to Olympia for the next regular session in 2015.

State Rep. Jim Moeller, D-Vancouver, said any audit showing how the public’s money is spent is a good thing. And the CRC audit didn’t show any wrongdoing by the project, he said.

“Yes, there’s been some mistakes made. Yes, some money is missing as far as (being) overpaid,” said Moeller, who supported the CRC. “But all in all, the audit didn’t identify any particular financial abuse and misconduct. I think that’s good news.”

Though the report likely won’t alter the course of a project already considered dead, the state should learn from the CRC, Moeller said. That means looking more closely at the profits people are making from taxpayer dollars, he said.

The CRC has spent $200 million to date, including shutdown costs through the end of March.

“I think we need to take a harder look at what’s going to be the use of public dollars in the future, and what that means for megaprojects in the state of Washington,” Moeller said.

Said Rivers: “Moving forward, we have certainly learned what not to do.”