Friday, April 30, 2010 |A highly critical state audit of California’s $42 billion high-speed rail project focuses largely on the project’s prime contractor, the same company that helped oversee Boston’s infamous “Big Dig” tunnel project.

Released Thursday by California State Auditor Elaine M. Howle, the audit levels harsh criticism at the High-Speed Rail Authority, the state agency in charge of the voter-approved project, for its monitoring of New-York based Parsons Brinckerhoff.

The firm has not properly accounted for millions of dollars in costs and made tens of thousands of dollars in unauthorized purchases, according to the audit

“[The authority’s] processes for monitoring the performance and accountability of its contractors — especially the entity that has been contracted to manage the program (Program Manager) — are inadequate,” the audit said.

Auditors don’t name the program manager in the report, but a spokesman for the agency said it was Parsons Brinckerhoff. The company has a $199 million contract to bring the project through its environmental impact studies and take the design phase to the point where it is about 30 percent completed and ready for construction bids, the spokesman said.

Parsons Brinckerhoff is an international construction firm that built San Francisco’s Bay Area Rapid Transit system. But the company is most widely known for its role in Boston’s ruinous “Big Dig,” a massive tunnel project plagued by billions of dollars in cost overruns and one death.

The audit, which states in its title that the high-speed rail system is at risk because of “Inadequate Planning, Weak Oversight, and Lax Contract Management,” came to essentially the same conclusion as a Voice of OC story published last month.

State lawmakers had harsh words for both the rail authority and Parsons Brinckerhoff. Hearings on the audit are scheduled for next month in Sacramento.

“It’s clear the Senate can’t allow this project to become the ‘Big Dig West,’” said Sen. Bob Huff (R-Diamond Bar) in a news release.

Costs got so out of control on the Big Dig that, when a final settlement was reached, the Boston Globe reported that Parson Brinckerhoff and its partner, Bechtel, who oversaw the project, agreed to pay $407 million “to avoid criminal charges and civil liability stemming from leaks, the fatal ceiling collapse and other flaws that have plagued the project.”

Parsons Brinckerhoff did not return calls for comment on the California auditor’s report.

The audit listed a number of flaws, including lack of an overall source of funds to build the system. Among the findings:

  • The Authority’s 2009 business plan estimates it needs $17 billion to $19 billion in federal funds. However, the Authority has no federal commitments beyond $2.25 billion from the American Recovery and Reinvestment Act of 2009 (Recovery Act), and other potential federal programs are small.
  • The Authority’s plan for spending includes almost $12 billion in federal and state funds through 2013, more than 2.5 times what is now available.
  • The Authority does not have a system in place to track expenditures according to categories established by the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, its largest source of committed funding.
  • The Authority has not completed some systems needed to administer Recovery Act funds, for example, a system to track jobs created and saved.

The auditors made several findings relating specifically to Parsons Brinckerhoff.

Topping the list was the revelation that the authority paid a total of $4 million in invoices to regional contractors even though Parsons Brinckerhoff never reviewed the invoices of each regional contractor to make sure the work had been performed.

The company was supposed to notify the authority staff that it was OK to pay an invoice before checks were sent out.

Also, the company submitted inconsistent and inaccurate information in its monthly progress reports, according to the audit. And Parsons Brinckerhoff and its subcontractors charged the authority $268,000 for services performed outside of the contractors’ work plans.

Auditors made special note of $46,000 in furniture that the company billed for that it apparently shouldn’t have gotten. The furniture was approved as part of an oral agreement, the audit said, even though the written contract between Parsons and the Rail Authority specifically says oral contracts aren’t binding.

Besides, said the audit, “the written contract requires the Program Manager (Parsons Brinckerhoff) to provide its own furniture, equipment, and systems.”

Even now, with revised policies, the authority is not providing strict enough oversight, according to the audit.

“The Authority only recently adopted written policies and procedures related to invoice payment. However, those policies and procedures do not adequately describe its controls or their implementation,” auditors wrote.

Carrie Pourvahidi, the authority’s interim executive director, said in a statement that “the auditor’s report underscores our budget request for additional personnel and our Board’s active search for a qualified chief executive officer capable of delivering a large public infrastructure project.”

The board’s previous executive director, Mehdi Morshed, retired last month.

Rail Authority Chairman Curt Pringle, who also is the mayor of Anaheim, said in a written response to the audit that steps already have been taken to fix some of the problems highlighted by the audit and that other controls will be put in place.

This is not enough for lawmakers.

Sen. Alan Lowenthal (D-Long Beach), chair of the Senate Transportation and Housing Committee, said his committee will meet May 11 to hear in detail about the audit findings.

“This audit gives the Legislature the facts we need to begin reforming the (rail) agency,” said Lowenthal in a news release.

And Assemblywoman Diane Harkey (R-Dana Point), who is carrying a bill that also instills more oversight into the rail authority’s management, said the audit demonstrates “the procedures to monitor public funds are definitely missing.”

Lawmakers are especially worked up about auditors’ findings that the rail authority is “risking its ability to hold contractors accountable for their performance.”

Said Huff in the news release: “One of the more troubling aspects of the audit was a finding that contractors were paid $4 million in fees without documentation that work was actually performed.”

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