Caution: Consultants Ahead

It was back in April of 1993 when the city's Public Works and Engineering Department picked Terra Associates to manage its new "Neighborhood Traffic Projects" program. Despite the rather sweeping title, the program primarily called for the engineering firm to work with neighborhoods on designing and building so-called "911 gates," which close roads to all but emergency vehicles. The idea behind the gates was to eliminate cut-through traffic in residential areas and simultaneously reduce crime risks by keeping out undesirables. The $400,000 contract covered a two-year period.

But it didn't take long before the contract began to bulge. After six months, the public works department went to City Council to request an additional $337,000 for Terra Associates. "The demand from the public for these services has been much greater than anticipated, and we now have over 80 neighborhoods in the process," the department noted in its request. The Council approved the extra payment.

At the time, the public works department's Traffic Management and Maintenance Division was indeed being flooded by requests to have the gates installed across the city. Just a year from the original contract date, program coordinator Susan McMillian wrote to deputy director Jerry Dinkins asking for yet another appropriation for Terra Associates. This time the amount was $975,000.

"We currently have a waiting list of neighborhoods which cannot be served until this additional funding is provided," McMillian said in her memo.

Though Terra Associates' initial duties included updating a city traffic manual, most of the firm's work consisted of meeting with neighborhood associations and helping them with their applications for gate installations. For that, Terra employees were paid as much as $57 an hour.

"If you're paying consultants to talk for you, that's relatively expensive," McMillian admits today.

Before the request for the additional $975,000 could be approved by Council, though, the program stalled. Terra's duties apparently didn't include checking to see if all the residents in the various neighborhoods approved of having their streets sealed off. As it turned out, many did not. "There was an underestimation of what the opposition would be," admits McMillian.

Because residents couldn't even agree about whether to have a gate, let alone about where it might be placed, the majority of the neighborhoods that had initially asked to participate in the program never submitted formal applications to the city. Of the more than 100 proposals Terra was paid to develop, only 13 have been completed. Another eight are still pending. "Many of them died on the vine," says McMillian.

In December 1995, the city rehired Terra to manage the design and construction of the eight remaining projects for $166,000. When its contract is complete, Terra will have billed the city for more than $900,000.

Despite the paucity of completed projects, McMillian says she wouldn't necessarily characterize the money paid to Terra as wasted, although the traffic division now handles the program itself. "We got a lot of research out of the first contract," she says.

That may seem like a lot for research, but it's a mere pittance in the larger scheme of things. Since Mayor Bob Lanier took office in 1992 and installed Jimmie Schindewolf as his public works director, the city has spent more than $4 billion in repaving streets and otherwise rejuvenating its sagging infrastructure. While much of that spending can be measured in tons of asphalt, miles of pipe and acres of refurbished parks, more than $350 million has been pumped into less-concrete components of Lanier's rebuilding program. With little fanfare, the department has dished out huge no-bid contracts to outside consulting firms to oversee the public works construction that has accelerated at a frenzied pace during Lanier's tenure.

At the same time, many of the city employees who used to be responsible for managing public works projects have either been pushed out of their jobs or assigned more menial tasks.

"The city has a lot of engineers who are doing nothing," says one longtime public works employee. "I'm not doing engineering work, really. I'm a Xerox guy."

The shift reflects the department's objectives under Lanier: to ensure that projects are finished on time, and to keep councilmembers and constituents happy.

Those are laudable goals, yet sometimes both quality and cost-effectiveness have been sacrificed in their pursuit. By using program-management consultants for the design and construction of public works projects, the city stays one step removed, making it much easier for poor work to slip by unnoticed until the projects are long closed out. And when problems do surface, the actions of public works management are as likely to be dictated by politics as by sound professional judgment.

Terra Associates' piece of the action is tiny compared to the share of the bigger consulting firms in town. Though some of the money has been funneled to subconsultants, Rust/Lichliter Jameson has received more than $7 million since October 1993 to manage programs in the department's Street and Bridge Division and is in line for $3 million more. In January, Lockwood, Andrews & Newnam (LAN) scored an $8-million contract to run the city's surface-water transmission program, having already been paid almost $15 million in city funds over the past five years. And Montgomery Watson Americas, which oversees the mammoth Greater Houston Wastewater Program, has billed the city more than $280 million for its services.

The firms also happen to be among the city's more generous donors when it comes to funding campaigns, though Lanier and Schindewolf swear there's no connection between contributions and the awarding of contracts. Most recently, LAN donated $10,000 to Rebuild Houston/Together, the Lanier-supported PAC that campaigned to retain affirmative action and for approval of the $545-million bond package. Rust/Lichliter Jameson's parent company chipped in another $15,000 to the PAC, while Montgomery Watson added $25,000.

With the blessings of Lanier and Schindewolf, private-management consultants have become so entrenched in the public works bureaucracy that they've moved in alongside city workers at the department's 1801 Main headquarters. And while the number of public works employees has actually shrunk during the past few years, the number of workers employed by consultants for city projects has steadily increased.

As with Terra, the firms' labor costs are not cheap. That's because they charge the city using a multiplier that in some cases more than triples what their employees actually earn. One Rust/Lichliter Jameson secretary working in the Street and Bridge Division, for example, takes home $13.50 an hour, but Rust collects more than $41 an hour from the city for her services.

The multipliers are supposed to cover the firms' costs for such employee expenses as health insurance and vacations, as well as overhead. But Rust, LAN and the others ensconced at 1801 Main use the city's offices, phones, copiers and other equipment -- expenses for which are usually considered overhead. So aside from the costs for salary, the firms' expenses are negligible.

Public works officials like to point out the advantage of hiring consulting firms: As programs increase or decrease in size, the consultant workforce can be adjusted accordingly.

"You expand when needed and you contract when not needed, and that's cost-effective," says assistant public works director John Hatch, who heads the department's Street and Bridge Division.

But with all that money flowing out the door, you'd expect the city to diligently track whether its use of consultants has actually been cost-effective, or whether they're even doing a good job.

Instead, the city has given the firms free rein and little scrutiny -- with predictable results. A Houston Press investigation found numerous examples in which poor management by those firms resulted in big losses to the city. Yet not only has the city never withheld a single payment from the consultants, it routinely renews the firms' contracts -- and expands them by millions of dollars -- without any formal performance evaluation.

The use of outside consultants may be costly, but it does help achieve one important goal: to get every project in the budget finished on time.

"That's one of the reasons they put the program people in, so they could spend the money faster," says one of many engineers who has left the city in frustration. "Is that a good goal?"

The absence of audits or reviews isn't just an oversight. It's policy. According to deputy public works director Buddy Barnes, who oversees eight of the department's divisions as head of the Engineering, Construction and Real Estate Group, the directive that annual assessments of the program consultants should be avoided can be traced to the chief himself.

"Currently that's coming from Mr. Schindewolf," says Barnes.

While program-management consultants make the biggest bucks, they're not the only ones tapping the public works coffers: Millions of dollars' worth of no-bid contracts are handed out annually to engineering consultants to design individual paving, water and other projects.

Assigning the more lucrative contracts is left to the public works higher-ups, including Schindewolf and deputy director Richard Scott. "That's a closely guarded privilege," says department spokeswoman Marty Stein. (Schindewolf would not speak directly to the Press, instead answering questions through his proxy, deputy director Dan Jones.)

Like the program consultants, many of the recipients of no-bid contracts contribute heavily to local political campaigns.

In some cases, the need for hefty design contracts is debatable. The city pays Rust/Lichliter Jameson princely sums to design overlay projects under Lanier's Neighborhoods to Standard program; the public works department's Maintenance and Right-of-Way Group, which has its own overlay program and handles about as many projects as Rust, manages the minimal design chores using city engineers.

By next July, the department will have doled out more than $10 million to five firms for designing sidewalks. Yet contractors who build sidewalks for a living, as well as city engineers, question the need for extensive sidewalk design. If city employees performed the work, says an engineer who has designed miles of walkways throughout Houston, "I guarantee you the sidewalk you'd get is just as good as what you're getting now."

"The city could produce the plans," adds the engineer, "but then you'd have five consultants that wouldn't be on the city payroll."

Most public works projects, especially those of any complexity, do require outside engineering. As any contractor knows, the key to whether a project is completed within budget and on time is the quality of the design, which includes an accurate set of plans and the proper bid specifications. With the public works department churning out hundreds of projects every year and contracting with dozens of area consultants, the design work is bound to run from excellent to lousy.

After the installation of a new water main on Woodway Drive zoomed almost 30 percent over budget in 1993, the city asked the design engineering firm, Manley Consultants, to explain why design errors encountered by the contractor were not Manley's fault. Company president Tim Manley wrote a point-by-point response, but it apparently didn't satisfy the department, which gave the firm an unsatisfactory performance evaluation and temporarily cut Manley out of city contracts. (Manley would not comment for this story.)

Several years passed as negotiations proceeded over settlement of the final bill. In 1996, the city came after Manley to recoup the costs, estimated at more than $100,000. Again Manley wrote a letter reviewing the charges. Months went by without a reply; in fact, that was the last Manley heard of the matter. A letter that the department drafted last May, asking the company for money, was never sent.

Assistant public works director Showri Nandagiri, who heads the Water and Storm Sewer Construction Division, says the city may yet seek to get its money back, though no one has informed Manley of that possibility. "The issue is still open," Nandagiri says.

Designing storm sewers, streets and bridges is an inexact science. Unforeseen obstacles arise that are no one's fault, such as buried utility lines that don't appear in city records. But overruns can also occur due to shoddy work by the consultant, resulting in needless delays and heavy additional expenses.

When that happens, says deputy public works director Dan Jones, who doubles as the mayor's agenda director, the city does take action. A former radio disc jockey whose smooth baritone hasn't faded despite his years of heavy smoking, Jones has survived several City Hall administrations by deftly handling politically sensitive chores and deflecting criticism of his bosses. When he relays the answers to questions intended for Jimmie Schindewolf, they seem to be coming more from Jones than from the director.

Jones lists several instances in which the city recovered money from errant contractors and consultants: $2 million from Turner Collie & Braden for a water plant screwup; another $200,000 from Lockwood, Andrews & Newnam for a faulty pump-station design. Other efforts are currently in litigation, Jones says.

On the other hand, the Press found more than a dozen instances in which public works staff identified design errors as adding significantly to the cost of construction projects. To date, the city has never collected a dime from the firms responsible, at least as far as anyone with the city remembers. "Not in our division," says Nandagiri, who joined the department in 1994. "Probably other divisions might have done that."

Not in the Street and Bridge Division, either, says John Hatch, though one botched overlay construction job is currently the subject of litigation. Hatch, when first discussing the issue with the Press, promised to produce examples of the city's trying to recoup the costs incurred by consultants' poor design work, but he later backed off that promise, saying he wasn't able "to track that down."

The lack of accountability baffles contractor Don Conrad, who on more than one occasion has found himself on the business end of a bad design job. The city requires consultants to carry insurance to cover design errors, Conrad notes, but to his knowledge, the city has never pursued a settlement from one of its consultants.

"I've never heard of them going to an engineer and collecting under [his] insurance policy," says Conrad. "It just doesn't happen."

The consultants, who write provisions into the specifications that contractors rely on when bidding for projects, often address potential problems with their work in advance, according to Conrad. One way they do that is by writing provisions in the specifications absolving themselves of guilt, which Conrad summarizes as the engineers essentially saying, "If I screw up as an engineer, and you didn't catch it, it's your fault, not my fault."

Nandagiri allows that holding consultants accountable for their mistakes has yet to yield much in the way of concrete results. But rather than simply swallowing the losses, as it has usually done, the department is now trying to pursue avenues of relief. "We were given the direction now that we should do that," he says. "It's new to me."

It's difficult to determine just where the accountability lies. Each division of the public works department is supposed to oversee the progress of projects every step of the way by reviewing plans and specs before projects are bid out and by inspecting job sites daily once construction work begins. But the internal checks and balances haven't always worked as they should, which makes it almost impossible to pin the blame for botched jobs on the designer or anyone else.

Many contractors had hoped that the professional program-management consultants would streamline the system and reduce the routine hassles they often faced, especially in the Water and Storm Sewer and Street and Bridge divisions. Instead, in some cases, consultants are managing consultants who manage other consultants. And as projects have bounced from consultants to city staff and back again, the lines of authority have become blurred, with buck-passing and finger-pointing the norm.

"It's such massive confusion down there now," says a contractor who frequently does business with the city.

Mark Boyer has experienced the confusion firsthand. On September 5, Boyer Inc. complained to Nandagiri about delays the construction firm was facing on a water-line and meter-installation project in Spring Branch. The project had been cursed from the beginning by numerous delays and cost overruns that had resulted in the firing of a management consultant earlier in the year. His crew idled by the city's failure to activate a water main, Boyer pulled his workers from the field and expressed his exasperation in print.

"Quite frankly, I have yet to figure out who is responsible for [the problem]," Boyer wrote to Nandagiri. "It is beyond me how so many people can find so many excuses why it can't be done."

John Hatch was feeling the heat. Hatch, the head of public works' Street and Bridge Division, needed to replace a deteriorating bridge on Chatsworth Drive, a short street in an affluent neighborhood just off Memorial Drive near the Loop. Part of a five-bridge replacement project, the new bridge had been designed by the engineering firm PGAL to meet prevailing city standards.

But the neighbors didn't want a modern bridge, which they feared would alter the quiet, tree-lined ambiance of the surroundings. In fact, some of them didn't want a bridge built at all, preferring instead to have the street sealed off at the bridge and turned into a pair of disconnected cul-de-sacs.

That wasn't an option, but Hatch wanted to accommodate the public. After several discussions with the residents and Councilman John Kelley, Hatch recommended an alternative that would reduce the width of the bridge by several feet more than the standard ordinarily used by the city, which is set by the American Association of State Highway Officials (AASHTO).

The red flags went up for staff members managing the project. "For the record," wrote Street and Bridge engineer Luis Garcia, "I do not agree with and prefer not to sign the plans for this design alternative since it is substandard."

Garcia's boss, Herb Lum, backed him. Though the AASHTO standard wasn't required by law, he wrote Hatch, "It has been the department's practice to adhere to (meet or exceed) AASHTO requirements."

The biggest concern with the substandard width, Lum explained, was safety. Since it was traversed by two school bus routes, the narrow bridge posed a potential hazard. As a senior assistant city attorney had mentioned in a discussion with Lum, the city might be setting itself up for a lawsuit if an accident occurred, especially if the width of the bridge deviated from the usual standard. And while some of the neighbors didn't want the bridge, he noted, others had urged the city to make safety the prime factor in its decision.

Hatch was unmoved. Using a lesser standard set by the Texas Department of Transportation, Hatch and his boss, Buddy Barnes, ordered that the bridge be designed and built at a narrower width. The redesign cost almost $50,000.

Herb Lum was later transferred to another division.
The decision avoided an age-old problem. If there's one grudge that the average citizen bears, it's that government isn't responsive enough. Anyone who lives in a large city has likely experienced a bureaucratic snub of some sort. To address such grievances, many municipal administrations across the country have tried to become more friendly and "customer-driven."

Under Lanier, the public works department has taken the concept a step further: If there's any way to do what the customer (or City Council member) wants, do it -- even if problems are glossed over or shielded from the public, or if rules have to be bent or broken. When city staff complain that plans don't meet code or that projects are otherwise flawed, they are often ignored or overruled by their superiors -- especially if bad publicity will result or construction schedules will be delayed.

Deputy public works director Buddy Barnes, who transferred into his position from the Greater Houston Wastewater Project in early 1996, disputes the idea that sound decisions by staff are rejected from above for political reasons. A former Army officer who radiates a quiet but firm authority, Barnes cites the priorities of the Engineering, Construction and Real Estate Group, which are boldly framed on his office wall: quality, timeliness, customer satisfaction, cost control, commitment, unity.

Barnes says that part of his job is to make decisions that balance the rules with the public interest, a sentiment echoed by Hatch. In the Chatsworth case, Barnes says, he and Hatch considered all the factors and concluded that the bridge could be narrowed while protecting public safety as well as neighborhood wishes. "It was an engineering decision," he maintains.

That seems reasonable, although one disillusioned engineer views the process differently. "We have a new city policy," the engineer says. "Anybody who bitches to a councilmember gets serviced."

Other decisions seem to be based more on political than on professional considerations. When a Richmond Avenue pizza-parlor owner wanted his steep driveway fixed because his customers' mufflers scraped the pavement on their way out, John Hatch called a contractor off of a nearby project and had several thousand dollars' worth of work performed at taxpayer expense. Hatch says city roadwork on Richmond had contributed to the problem, and therefore he felt obligated to make repairs -- even though no work had been done on the street for several years and Hatch could not document his claim to the Press.

When Councilwoman Helen Huey wanted Glenmore Forest included in a neighborhood street-reconstruction project, Barnes wrote her last April that since Glenmore was a private street not maintained by the city, attaching it to the project wouldn't be possible. "We will hold the [residents'] petition in our files and upon notification of the dedication, Glenmore Forest will be placed on the approved list of streets to be reconstructed," Barnes wrote. Glenmore has yet to be dedicated as a city street. It has, however, been added to the reconstruction project, and the city has already shelled out for its design.

To speed up a rush repaving job on Preston Avenue, the consultant hustling the plans through the system bypassed the required signature from a traffic engineer. The street is now almost finished, and a dramatic hump at the juncture of Preston and Smith jolts motorists where a gradual slope should be. "[A] traffic [engineer] would have noticed immediately," says a source familiar with the project.

And when a traffic engineer got a set of substandard plans to review and sign -- a set he'd already reviewed and rejected several times -- he expressed his frustration by signing the document with a phony name. No one noticed, and the plans sailed through the system.

The signature on the plans was I Give Up.

It may be, as Buddy Barnes, John Hatch and others say, that the public works department is working to improve quality as well as move projects through the system. But if consultants and contractors aren't held accountable for inferior work, and if managers themselves manipulate the system for political reasons, it will be impossible to determine whether those efforts succeeded or failed until well after Lanier leaves office.

Before Conrad Construction Co. even started building storm sewers in the Ridgecrest area just northwest of the Loop, problems with the company's contract surfaced. In particular, the streets in the subdivision had been misidentified as asphalt instead of mostly concrete, which costs considerably more to tear up and replace. The extra work, first noted by Conrad in July 1996, increased the cost of the project by more than $130,000, to almost $2.8 million.

A month later, Conrad's concerns had not yet been addressed, prompting a letter to Showri Nandagiri of the Water and Storm Sewer Division. Nandagiri then ordered Conrad to proceed with construction of the storm sewers while public works sought formal permission to increase the contractor's fees according to city rules. Since any hike of more than 5 percent must be authorized by City Council, Nandagiri wrote the contractor, "Council approval is being requested to approve this additional cost."

To that end, a request was drafted for Council approval and signed by Buddy Barnes, Nandagiri's boss. But before the item reached City Hall, Barnes renegotiated the amount of the change with Conrad to $125,000, slightly less than 5 percent of the total contract. The matter was handled internally, and Nandagiri's staff completed the paperwork in late October.

It took only a few days before the engineers working on the project realized that $125,000 wasn't going to cover the overruns. In fact, as Conrad submitted one additional change request after another, the amount of money still needed to complete the project mushroomed. By December, the total exceeded $200,000. Still, the Council was kept in the dark, even though the city code mandates that all such requests be processed within 30 days.

Winter turned to spring, and the storm sewer work progressed. In March, the deficit had sprouted to at least $270,000 when the problem came to the attention of both Nandagiri and Barnes. They acted immediately. The request to Council would be forthcoming, Barnes told Conrad. "None of this work can be done until additional funding is approved by Council," Nandagiri warned in a note to the project managers. Nobody told Conrad to shut down, however, and the bills continued to mount.

By June, Conrad was getting worried. The money appropriated in the contract was almost spent, and still no request had reached the Council. In August, the contractor threatened action. Several weeks later, the city finally placed the contract change on the Council's agenda -- months after the work had been completed. The Council accepted the increase of $325,000, which included a few items not yet finished, pushing the total overrun to almost $550,000. Another $150,000 emergency appropriation later, the project was done.

When construction projects shoot 20 percent over budget, City Council is supposed to be informed about it in a timely fashion. But in the case of the Ridgecrest storm sewers and other projects reviewed by the Press, Council wasn't informed until it was too late for them to do anything but pay off or risk a lawsuit from the contractor.

"That happens on a lot of city projects, just not to this degree," Conrad says.

That's not always a bad thing. Shutting down a project while waiting for paperwork to clear the system can be costly, and sometimes it makes sense to proceed if the need for a change is obvious. But with Ridgecrest and others, the intent was to avoid embarrassing questions and circumvent the process, which badly compromises the ability of the city to monitor and enforce its contracts. "It was wrong," admits Nandagiri.

There are other ways public works end-runs the Council, such as transferring items from one contract to another so the first doesn't overrun by more than 5 percent. While the Press interviewed Nandagiri, a representative of the consulting firm Turner Collie & Braden stopped by and asked for approval to do just that on a sludge basin contract. If Barnes and Schindewolf approve the move, Nandagiri says, it'll happen. "We don't normally do it" unless there's an emergency, he says. "It used to happen more frequently."

The Ridgecrest case may be atypical, but even after the fact, no one seems to agree on what happened. And no one will stop the buck. Conrad believes the original design was faulty, and he's critical of city employees for their inability to follow through. The design consultant blames Conrad, though his argument seems weak. In a written review of the project, the program consultants fingered the design consultant while generally absolving themselves. Buddy Barnes believes that the program consultants are the most culpable, even though others had their moments. "There was mixed responsibility at one time," Barnes says, "but basically they have the responsibility."

Public works officials acknowledge that accountability has been a problem, that money has been wasted, that rules have been broken. But they say that most of those problems have been dealt with or can be traced to incompetent employees who have since left the agency, and that the current regime places quality at the top of its priority list.

"I'm sure it's as good as it's ever been, if not better," says Barnes.


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