Marriage Contract

The Scotts' personal public-private partnership really paid off in city projects

When deputy director Richard Scott left the Houston Department of Public Works last September, good things started happening to TSC Engineering Co. In the 14 months prior to Scott's departure, the city assigned TSC $161,000 worth of tasks as both a prime contractor and subcontractor. Less than two months after he moved on, TSC landed more than $2 million worth of city business. Another $114,000 with TSC's name on it is headed for approval.

Scott resigned after public works director Jerry King gave him a choice: Either he or his wife, deputy director Hilda Garza Scott, would have to go, as their positions near the top of the department's ladder seemingly violated the city's nepotism standards. The couple ultimately agreed that Richard would move on, and Hilda became head of the Capital Projects Division, where she oversees design and construction. Richard Scott took a job as senior vice president of a local engineering firm.

The firm was TSC.
Scott has apparently made TSC a better company from top to bottom: His arrival signaled an increase in the salaries the firm's employees make off city taxpayers by an average of about $3 an hour, secretaries included. And the multiplier that engineering firms are allowed to tack on to those salaries, allegedly to cover overhead, has increased for TSC from 2.6 to 3.25. The difference elevates a contract's value by thousands of dollars.

Since the job switch, all the official requests for City Council to authorize contracts in which TSC has a stake have the same signature at the lower right corner of the cover page: Hilda Scott. As one of three primary directors who evaluate and recommend engineering firms for King's approval, she has ample authority in determining how millions of dollars in no-bid contracts are awarded.

King says there may be an innocent explanation for TSC's sudden burst of good fortune. The percentage of prime engineering contracts given to minority firms has soared since Mayor Lee Brown took office (TSC, owned by Terence Cheng, is registered with the city as a minority business), and Brown's first year saw an overall increase in city design contracts.

Still, only TSC showed up as a subcontractor on 11 deals approved by City Council in a span of three and a half weeks beginning last October. "There's a rumor now," says a public works employee who deals regularly with engineering firms. "Just [hire] TSC as a 'sub,' and you get the project."

That may be an exaggeration, but even King admits that the flood of contracts and escalating charges commanded by TSC looks a little squiggly under the circumstances. Not to mention Hilda Scott's signature on the documents, although that appears to be changing. Scott now says she didn't mean to sign all those forms. She has taken steps to retroactively remove her signature from at least one TSC authorization and replace it with that of senior assistant director Gary Oradat.

Of course, simply swapping the names only masks the problem as long as Scott continues to wield influence over contracts. The solution, King acknowledges, is to deal directly with the conflict of interest. "What we need to do is come up with a system where she stays out of the selection process," he says.

Under former director Jimmie Schindewolf, the awarding of engineering and consulting contracts was a closely guarded process controlled by a small circle of honchos, including Richard Scott. Once it was decided who would get the most lucrative deals, oversight and accountability lagged: Schindewolf and his minions renewed multimillion-dollar contracts with no formal evaluation, and shoddy design work was rewarded with more business.

King has tried to inject a measure of fiscal accountability into the department's veins, but it hasn't yet permeated. Huge consulting firms such as Montgomery Watson, Rust/Lichliter Jamison and Lockwood, Andrews & Newnam can no longer bank on the free ride they enjoyed during the Schindewolf regime. But the awarding of engineering contracts remains subjective and prone to error and abuse.

Some public works employees who have served under both administrations say the system remains deeply flawed. They say Scott and her underlings accept inflated proposals that cost the city millions. In the past, they charge, project managers would negotiate fees more rigorously. "Now, whatever the consultants ask for, we give it to them," says one city engineer.

Engineering contracts, which by law can't be competitively bid, are supposed to be apportioned to firms based on their qualifications, experience and track record on city jobs. Both former mayor Bob Lanier and Lee Brown have emphasized the need to spread the wealth, so politics plays a role as well. The city tentatively selects a firm and requests a proposal, which becomes the starting point for negotiations.

Item by item, fee by fee, the project manager who will oversee the work for the department then hammers out an agreement that will earn the company a reasonable profit and protect the public interest. If the two sides cannot agree, the city is supposed to try another firm that will be more receptive. But that, says King, rarely happens. "We probably have to be willing to do that and probably have been reluctant to do that in the past," he says.

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