http://www.statesman.com/news/statesman-investigates/texas-tightens-reins-on-hntb-which-was-hired-2102749.html?cxtype=rss_ece_frontpage&viewAsSinglePage=true
Texas tightens reins on HNTB, which was hired to manage U.S. disaster grants
Enlarge This Image
Deborah Cannon/AMERICAN-STATESMANGary Hagood Land office seeks to keep work moving. Enlarge This Image 
Deborah Cannon/AMERICAN-STATESMANNim Kidd DPS division now handling assessments. MORE ON HNTB
|
AMERICAN-STATESMAN STAFF
Updated: 11:09 p.m. Saturday, Jan. 14, 2012
Published: 8:55 p.m. Saturday, Jan. 14, 2012
The Texas General Land Office has signed a new contract that puts tighter controls on engineering firm HNTB, which ran into trouble last year for overspending money budgeted for managing federal grants to Texas communities stricken by hurricanes Ike and Dolly.
But it also assures that HNTB will continue to administer $1.4 billion in U.S. Housing and Urban Development grants for public works projects in the Ike and Dolly program, despite concerns that forced the cancellation of the firm's earlier, no-bid $144 million contract with the state's Department of Rural Affairs and that have triggered an audit by HUD's Office of Inspector General.
Land office officials explained that it may be too late in the game to change contractors, which could delay completion of hundreds of nonhousing projects — everything from new roads to upgraded sewage treatment facilities — across dozens of Texas counties that qualified for the disaster grants.
"We must consider the pros and cons of bringing all new people into the program at this time," Gary Hagood, deputy commissioner for financial management at the land office, wrote in a December letter to HUD Assistant Secretary Mercedes Marquez. "In order to prevent program disruption, we maintain a bridge work order with HNTB for continued services."
On Thursday, Hagood told the Texas Senate Committee on Intergovernmental Affairs that HUD auditors have identified several potentially serious issues with the canceled contract with HNTB, which the Department of Rural Affairs signed in August 2009.
The audit is not yet complete, and a report on its findings is not expected until March or April, Hagood said. But if HUD finds that its funds have been improperly spent, it can require states to pay the money back.
The issues, Hagood said, include the possibility that the contract was improperly procured; that a 2011 amendment doubling the size of the contract from $69 million to $144 million was also improper; that HNTB was allowed to bill for ineligible and inflated costs; and that the state imposed no specific performance measures and did not adequately monitor the contractor's work.
HNTB is based in Kansas City, Mo., but is well-connected in Texas. Ray Sullivan, Gov. Rick Perry's former chief of staff and now with his presidential campaign, is a former lobbyist for the firm. Primarily a highway engineering firm, HNTB was also the lead consultant for Perry's proposed Trans-Texas toll road system. Since 2007 it has earned $112 million from the Texas Department of Transportation for various projects, including $38 million in consultant fees for the Trans-Texas project, which was canceled in 2009.
Though relatively new to post-disaster work, which is funded almost entirely with federal grants, HNTB ramped up quickly after obtaining a state contract for hurricane debris removal a few years ago. To date, the state has paid the firm about $58 million for various disaster-related services since 2008; an additional $7.7 million in work orders has been authorized under its new contract with the land office.
Perry's office has said it had no involvement in those contracts.
In February 2011, the Department of Rural Affairs outsourced most of its disaster recovery jobs to HNTB. Six months later, the agency was dissolved, and the land office, whose elected commissioner manages state lands and mineral rights properties, was put in charge of both the housing and nonhousing components of the Ike and Dolly program.
All together the federal grants total $3.1 billion, which has been described as the largest public works program in Texas history.
The changes the General Land Office made in the new contractual arrangement with HNTB range from minor adjustments to more substantial oversight of the firm's work on behalf of the state. The fixed-fee contract lowers the firm's billing rates slightly (less than 5 percent on average), limits the maximum allowable charges and prohibits payment for unauthorized work.
It also transfers some administrative functions back to state employees and gives the state more recourse if HNTB fails to perform. Instead of listing services to be rendered with no deadlines, as the old contract did, it relies on work orders with specific tasks to be completed within six months or less.
"They've been put on notice this is how we want things to be done," said Matt Chaplin, assistant general counsel at the land office.
At the same time, however, the new land office contract extends the time for completing the projects to 2017 — two years beyond the current target date of 2015 and five years longer than originally planned.
Hagood said 2015 is still a "feasible" target that he will push HNTB to meet.
According to the latest land office figures, more than 70 percent of the money for the first round of nonhousing projects remains unspent, more than three years after the 2008 storms. Meanwhile 99 percent of the administrative and planning budget has been depleted.
That has raised red flags at HUD and the state Capitol.
In October, HUD Assistant Secretary Marquez scolded Texas for the low percentage of completed projects — the lowest among the states that received significant HUD grants for the 2008 disasters, she said. In a letter, she questioned the state's "capacity to carry out disaster recovery activities in a timely manner."
Marquez also asked the state to submit plans within 90 days for how it intended to staff, manage and speed up the Ike and Dolly program, as well as its "use and oversight of contractors, including HNTB."
In November, the Senate Intergovernmental Relations Committee grilled state officials about problems in both the housing and nonhousing programs.
In last week's hearing, Hagood updated committee members and forwarded the General Land Office's response to Marquez's letter. In it, he told Marquez that the agency is committed to "continuously and systematically improve the program" and is working with HUD on performance measures and grant expenditure rates.
When committee Chairman Royce West, D-Dallas , asked who would make sure the program meets HUD muster, Hagood replied, "I will."
The new organizational chart submitted by the agency shows land office employees, not HNTB personnel, in most of the managerial positions for disaster recovery — a change from the setup under the Department of Rural Affairs. The contractor's staff has also been reduced by about 20 percent.
"They were doing things state employees should be doing," Chaplin said.
At Thursday's Senate committee hearing, questioning was relatively brief and low-key compared with the November session. Hagood was asked about the fee schedule accompanying HNTB's contract, which raised committee members' eyebrows a few months ago because of high hourly rates. While the fees have been trimmed and the number of highly paid employees reduced, fees still average $294 an hour for the top half-dozen earners.
Hagood cautioned that those are "maximum allowable rates," which include the contractor's profit. "I can promise you we're not paying anyone those dollars — they're for budgeting only," he said. "On average it's 15 to 20 percent less than the fee schedule."
Sen. Robert Nichols, R-Jacksonville , told Hagood that after hearing from local officials in his district last year who were frustrated with how the disaster program was being run, "all have consistently told me y'all are doing a much better job. I think we did the right thing by moving this to the land office."
The land office's contractual relationship with HNTB has become the vehicle for another state agency, the Department of Public Safety, to secure HNTB's services in a different disaster response area: producing damage assessments for last year's wildfires in Bastrop and other counties.
Because of that arrangement, Nim Kidd, director of the DPS Division of Emergency Management, also testified before the Senate committee.
Damage assessments are typically made by the Federal Emergency Management Agency, aided by the Division of Emergency Management and individual contractors called reservists, who are paid a day rate to assist the state in responding to hurricanes, floods, wildfires and other emergencies. Currently 17 reservists are on active duty for the DPS division.
Emergency management director Kidd has signaled his intention to hand off much of the reservists' work to a large firm under a single contract. Internal documents tracking HNTB's invoices to DPS have pegged its average billings at about $190 an hour, compared with about $35 an hour for the reservists.
Dealing with the reservists' separate contracts, which can number 50 or more during periods of high usage and must be renewed every six months, is cumbersome, expensive and inefficient, Kidd told senators.
"They're not going to become extinct," he said. "But we're going to get out of the reservists as soon as we can."
About this story
Since October, a Statesman investigation has examined the role of a politically connected engineering firm, HNTB, in administering $1.4 million in federal grants to help Texas communities recover from hurricanes. Nearly all the money budgeted for overhead in the first round of grants is gone, while 70 percent of the planned projects remain unfinished. The firm's original $144 million state contract was canceled, but it continues to manage the grants under a different contract.
