Sustained Outrage

Highway robbery?

barrel.jpgWhile working on today’s column, I learned from the governor’s office about an alarming federal audit of charges by engineering firms that are paid with federal highway money.  After a number of states complained of the fees they were charged, the feds looked at the charges of 41 design and engineering firms out of 3,580. Here’s a taste of the findings:

“We found that indirect cost rate claims from 21, of our sample of 41, D&E firms included unallowable costs — some expressly unallowable — totaling about $15.7 million. Of that amount, state DOT contracts were charged about $5.5 million, of which about $4.4 million — the Federal share — was reimbursed with Federal-aid funds. Examples of unallowable costs we found were:

$301,667 for 45 automobile leases — 5 of which were luxury class including Mercedes, BMW, and Lexus — with no documented business purpose.

$280,609 in executive compensation in excess of the Federal statutory cap.

$247,685 for items such as social dinners with clients; dining club memberships; outings to professional and college sporting events; theme and holiday parties; and trips to Atlantic City, a city zoo, and a county expo fair.

The firms in the sample included more than $3.5 million in unallowable executive compensation in their charges. Of that amount, federal high way grants to states paid $2.8 million, and states paid the rest.

At that rate, the Office of the Inspector General in the U.S. Department of Transportation projected, design and engineering firms overcharged state transportation departments $41.2 million for executive compensation. The federal share would be $32.9 million.

Gov. Joe Manchin points to this audit as one of the reasons for  HB2977, introduced in the Legislature on Friday at his request.

The bill would change the way state-funded engineering contracts for highways and water projects are granted. The bill would require the state to keep an annual list of firms qualified to do various kinds of design and engineering work. Qualified firms would be able to bid on projects. The lowest bids would win, with a preference given to in-state firms. A similar process is already in place for construction contracts. Lawrence Messina of the Associate Press offers more details.

Architects’ and engineers’ concerns about the governor’s bill are spelled out in my column. There is also more about the current system of picking engineering firms, a federal process called Qualifications Based Selection, at the Web site of the American Council of Engineering Companies of West Virginia.