Audit sinks Port of Seattle management practices

The State Auditor's Office released a performance audit of the Port of Seattle today. It isn't pretty.

• Port construction management lacks cost controls and accountability.
• The Port circumvents competition requirements in violation of its own policies and sometimes in violation of state law.
• Port policies and Port management’s interpretations of its policies result in a lack of transparency and thwart Commission oversight of construction management activities.
• Port construction management records are incomplete and disorganized.
• The Port fails to enforce basic contract requirements, resulting in delays, extra costs, and an inability to defend against claims.
• Port construction management is vulnerable to fraud, waste and abuse.

According to the report "auditors identified $97.2 million in unnecessary costs. The Port has the potential to avoid similar costs in the future if it institutes every audit recommendation."

Among the other conclusions of the audit:

• The Port lacks sufficient policies and procedures to safeguard public assets from misuse, abuse and fraud. In cases in which controls are in place, they are not always followed.
• The Port Commission has largely delegated decision making responsibilities for construction projects to Port management and employees. In some cases, vendors control projects and make decisions that should be made by the Port.
• Port executive management has withheld information from and sometimes has misinformed the Commission about the terms and progress of construction projects.

Auditors found these conditions are caused by:

"The Port Commission’s adoption of Resolution 3181, delegating some of its decision-making authority to Port administration, including some oversight of construction management. The former Chief Executive Officer’s broad interpretation of the resolution effectively distanced the Commission from information and oversight authority of capital projects. The audit found no record of the Commission reassessing or questioning whether it was meeting its responsibilities to oversee construction projects.

• Port management does not segregate the duties of procurement and contractor oversight. Port employees routinely award contracts and then oversee the contractors they selected. This creates a conflict of interest because those who work with the contractors may develop working relationships that prevent them from awarding and overseeing contracts with a higher degree of objectivity and diligence.

• Port commissioners have largely ceded the authority to award and manage contracts to low- and mid-level project managers.

• According to an e-mail to the contracted auditors, the Port maintains it “is not subject to any specific legislative framework governing its procurement practices other than those which govern public works design and construction contracts.”

• The Port does not enforce standard construction contract provisions, leading to significant cost and schedule overruns.

These conditions leave the Port’s construction management vulnerable to fraud, waste and abuse. For example, Port management authorized a Third Runway contract that cost $32.7 million more than the Port engineer’s original estimate. The contract violated state law, and details of the arrangement were concealed from the Commission.

In addition, a consulting agreement awarded in 1998 increased without competition from $10 million to more than $120 million and is being used to augment Port staffing, unnecessarily costing taxpayers $60.5 million."

I wonder if anyone at the Port will be getting a golden parachute as a result of this audit?

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[Western Rail News Network]

WESTERN RAIL NEWS NETWORK

Special Edition

September 2008

BNSF/PORT OF SEATTLE ONLY RECEIVE ONE BID TO OPERATE THE EASTSIDE CORRIDER RAIL LINE - STAKEHOLDERS HIGHLY CRITICAL OF PROCESS

Bellevue, WA - The Port of Seattle announced today that it will begin negotiations with GNP/Ballard to provide freight and excursion rail service on the northern portion of the Eastside rail corridor. GNP/Ballard, a partnership between Byron Cole, who operates the Ballard Terminal and Meeker Southern Railroad, and Tom Payne, owner of GNP Railway, will pay the Port for use of the land, which runs from Snohomish and Woodinville.

Today's public announcement by the Port of Seattle follows an email that was sent out yesterday by the Port (to key stakeholders) which indicated that the GNP/Ballard bid was the only one that the Burlington Northern Santa Fe (BNSF) Railway and the Port of Seattle received in response to the Request for Proposals.

The selection of GNP/Ballard by the Port of Seattle to do freight and excursion rail service caught many by surprise as GNP Railway has been promoting a controversial proposal to run 6 to 12 private commuter rail trains a day on the line from Snohomish to Bellevue. The Port of Seattle has resisted GNP's proposal and had maintained that it only wants to have the line be used for freight and excursion train purposes. However, the selection of GNP/Ballard now leaves many wondering whether the Port of Seattle will reconsider its position and allow private commuter rail service on the line.

In addition to the controversy over the possible allowance of private commuter rail service on the line, several groups are calling for an investigation of the Port of Seattle for its mismanagement of the RFP process. At a hastily put together Eastside Corridor stakeholder strategy meeting in Bellevue this morning (see attached photo), a number of key stakeholders expressed outrage about the Port of Seattle for its lack of openness regarding the RFP process, and many were asking why the Port only received one response to such an important RFP.

"If the RFP process was so good, why did the Port of Seattle only get one response?"
said Ron Parsons of Rail Specialists, Inc., a well-known rail industry consultant who has been openly critical that the Port of Seattle had given BNSF to much power in this RFP process and the Port didn't take any control or ownership of it.

Bill Whitaker of Allied Transportation Group, who represents some of the shippers in the Bellevue-Snohomish area, indicated that he was highly concerned with lack of openness by the Port of Seattle and BNSF, and was shocked that there was only one bidder. "Anytime you only have one bidder, it calls into question the quality and integrity of the process....people like to have choices."

Pat Williams of the Bellevue Citizens for Government Accountability said that his members were extremely disappointed that the Port of Seattle unilaterally chose to not allow the RFP to cover the Bellevue-Woodinville portion of the line. "What that says to us is that Port of Seattle doesn't care about rail between Woodinville and Bellevue.....no wonder they had only one bidder!"

"This Port has shown blatant incompetence during this whole process and the taxpayers should be angry," stated Bill Jones of the Puget Sound Taxpayers Union. "The Port of Seattle has mislead King County taxpayers from the start about its plans for this rail corridor. The fact that only one bidder came forward clearly shows there were major problems with the RFP process."

At the end of the meeting in Bellevue this morning, the various stakeholder groups vowed to push on and shine a bright light on the Port of Seattle concerning its mishandling of this process and to immediately get policymakers to intervene to repair the damage.

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