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January 08, 2008

Federal Investigation Opened into Port of Seattle's Contracting Practices

Tay Yoshitani may have been hoping for inertia + short attention spans after a recent state performance audit indicated a pattern of corruption (and lawbreaking?) in the Port of Seattle's contracts and bidding practices. What he and the commission got instead is a federal investigation just opened by U.S. Attorney Jeff Sullivan. The prosecutor has written a letter to Auditor Sonntag, telling him not to divulge any names or details that weren't already made public in the report. And the FBI is on the case.

After originally agreeing with most of the audit's findings, promising changes and the hiring of an investigator, Yoshitani is now showing some desperation, pulling back on the reins and disputing the audit. He's got teammates on the commission:

The audit also found that the port had altered documents needed for the audit, patching holes in records, correcting its past mistakes and eliminating inconsistencies as it went along.

In his letter Monday, Yoshitani said port staff did not alter records but rather "did catch up on backlog filing and documentation."

Yoshitani, along with Commissioners John Creighton and Lloyd Hara, said the reason was that the port staff was unfamiliar with what was required of them during a performance audit and that the act was not duplicitous, but unintentional because the staff treated those records as they would information to be packaged into memos or presentations for review by the commissioners during their public meetings.

It's Circle the Wagons time.

In his "letter to the community", Yoshitani instructs us on the difference between an estimate and a bid:

The auditor states that we wasted $32 million because the construction contract for a portion of the third runway exceeded our initial cost estimate by $32 million. Bids often vary from estimates – particularly when the construction market is booming, as it was at the time. People involved in construction – whether public or private agencies or homeowners contemplating a remodel – understand that even thoroughly researched cost estimates can change as the project nears. Ultimately, the market dictates the cost to build something.

As a painting contractor, I know a little something about estimates vs. bids and I've worked on a number of remodels. Estimates are exactly that; bids are more of a fixed price. While I've never worked on any multi-million dollar contracts, I do know that costs exceeding original estimates should still be in the ballpark (mine are), and if they're not it's usually because of numerous change orders which may include materials costs. Yoshitani blames the cost differential solely on materials, rather than on labor. I'm willing to suspend cynicism for a brief moment. But why is the Port accepting estimates instead of bids in the first place, especially when the project in question only received one? Furthermore, I'd love to know the contractor's percentage mark-up on materials. I'm a pushover, still charging only 15%, while most other painters charge 20-25% -- and many general contractors charge more than that. If the Port only got one offer, if it was an estimate, and the mark-up on materials was hefty (a near certainty), that's a ripe scenario for getting hosed. But it's not the Port's money. It's ours. And that $32 million is about half the yearly tax levy.

Mic Dinsmore may have knee-capped every single rule during his tenure and the results are stunning: $97.2 million in taxpayer money wasted, secret bidding deals, contractors in bed with Port managers and the creation of "a breeding ground for fraud". Now that he's gone, it's up to the new guy to clean house. But instead of opening the windows and letting the daylight in, Yoshitani and some of the commisioners are hinting at battening down the hatches and shutting off the air supply. Who's zoomin' who?

Calling for accountabiltity isn't nearly enough. It has to be demanded because now that the proverbial cat's out of the bag the public isn't going to put up with any more magic tricks performed on its money. Sullivan and the FBI certainly aren't waiting around for those at Port headquarters to decide whether or not to pony up.

Posted by shoephone on January 8, 2008 at 04:25 AM in Policy, Washington Culture | Permalink

Comments

Organizers for publicly financed campaigns frequently say, we only need a good scandal to put this over the top. This may very well be the sugar plum we've been waiting for. Candidates for the Port of Seattle received campaign contributions of over $200,000 (for a $6,000 a year position). Who are these folks really working for? We need publicly financed campaigns for local jurisdictions. Contact your state legislators today and ask them to pass HB 1551 so the choice can be left up to the jurisdictions as to whether they want to use public campaign funding.

Posted by: Marcee Stone | Jan 8, 2008 2:42:33 PM

Believe it or not I actually saw this in the local rag, The Columbian.
Sounds like some chickens coming home to roost, eh?

Posted by: Bustednuckles | Jan 8, 2008 2:58:05 PM

Marcee - that is exactly right, and your organization is doing fantastic work in this regard. HB 1551 SHOULD be an easy win, considering that it gives back to localities a right that was already being acted upon in Seattle. But watch to see which legislators sit on the fence -- in particluar, any Dems. Has Chopp weighed in?

This last year's Port races were out of control in both spending and lies told. The vitrolic behavior was a mirror image of what went on in city council races. But the worst behavior had to be from Bob Edwards, whose last minute mailings tried to paint Tarleton as a close confidant of Dick Cheney's, and an agent on the Halliburtion payroll.

It's really time to end the absurdity of million dollar local campaigns.

Posted by: shoephone | Jan 8, 2008 4:13:29 PM

The usual reason that a bid is very different from an estimate is if the work involved is not really what the estimators assumed, I think. That may apply here, since the third runway included a huge fill operation. Other than that, though, the job strikes me as pretty straightforward to estimate.

Usually, if I remember correctly, when a bid exeeds the estimate by more than a certain amount, the project has to be reviewed. At least, that's how the feds typically handle a contract that large. Was a review conducted before they accepted the bid? I don't see where anything like that was done.

Oh, boy, I just read this:
**** start of quote ****
But the audit's criticism of the port's practices did not deal only with the fact that the contract was reupped annually without competition for 10 years with the approval of the port's five-member elected board of commissioners, who again voted to expand the contract to $136 million in December. The auditors also lambasted the port for paying Parsons for overhead such as office space, as well as general and administrative expenses that the port was already subsidizing.
**** end of quote ****

Holy crap. That's a lot of mismanagement. Any personnel contract that big should have been up for bid at some point. What's more, they apparently let themselves be double-billed for office space.

(That's from the PI article, BTW)

I don't know if any of that is illegal, but it sure is lousy cost management. I guess that's what happens when you let the managers audit themselves.

Posted by: Cujo359 | Jan 8, 2008 11:15:46 PM

"...it's up to the new guy to clean house."

As a non-local, just wondering if Yoshitani is completely new to the commission, or newly elevated from within the commission. Assuming completely new, then you have to wonder what he's thinking putting himself in legal jeopardy for some other guy's malfeasance. To me, that smells like he's on the take from (or in bed with) the contractors.

Posted by: op99 | Jan 9, 2008 3:15:54 PM

Hey Op99 - Nice to see you.

Here's an article on Yoshitani's hiring:

http://seattlepi.nwsource.com/local/298370_port04.html

He came on board last March after great fanfare for his work in California. All the dunderheaded behavior detailed in the audit occured under his predecessor's tenure (the infamous Mic Dinsmore). The problem for Yoshitani is that he first embraced most of the negative report, promising quick reforms. But then he started closing ranks and making excuses for the most egregious episodes of corruption and malfeasance. He needs to be spot-checked by the new commissioners, both of whom ran on a platform of reform.

Now everybody's jumping on the bandwagon of accountability and transparency. This year's events will be more than interesting, especially after the legislature takes away the Port's tax levy.

Posted by: shoephone | Jan 10, 2008 1:59:37 AM

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