HISD Ignores State Law in Fast-Tracking Construction Contracts, Audit Finds

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Refusing to be delayed or stymied by something like a state-mandated cap on construction contracts without board approval, Houston ISD's Construction and Facilities Service Department got creative.

To avoid having to actually get prior school board approval of its job-order contracts – as required by law – the CFS department just made sure each contract came in under the $500,000 threshold and went ahead with the work on its own. Similarly, construction jobs were broken up into different parts, although they actually were the same job, to avoid having to go to the school board if they wanted to exceed the yearly $1 million cap on the same project.

That's just some of the findings of an HISD internal audit that found HISD probably paid more than it should for certain jobs – somehow a contract for “up to $480,000” became exactly $480,000 with no supporting line item documentation of what that money was spent on. And although the district is supposed to use a unit price book to help it determine costs, that didn't happen, the report said. In addition: “Work for several job orders had started, as approved by HISD management, and payments were made before Board approval,” the report said.

As a result, operation of the JOC program, an administrative tool that's supposed to move repairs and maintenance along on lesser but still needy projects a district has, has been suspended.

In the HISD response to the audit, CFS defended itself saying that they were on a short timetable with definite needs, that they thought they were following the law and that they won't do this again. And they pledged to try to recover some of the money paid out by (finally) asking for specifics from the companies who billed them. Superintendent Terry Grier's packaged statement released by the HISD press office is that “Superintendent Terry Grier has seen the report and believes it is a fair audit.”

“The law is very straightforward. Even a lay person like me would be able to read that,” said HISD trustee and audit committee member Anna Eastman. Even if the district is able to get some of its money back by asking for a detailed accounting, by skipping the process of competitive bidding, the district can't be sure it's getting the best pricing available.

Eastman concluded there had been “an abuse of authority” after reading the investigative report, says job-order contracts are a tool the district needs and would like to see them reinstated with better safeguards in place.

“I think it's something we need particularly because we have so many schools and it's difficult to stay on top of maintenance,” Eastman said.

In recent years the use of JOCs has grown exponentially, Eastman said. Unfortunately for the district, administrating these contracts has gotten it in trouble before.

In its audit, three firms were chosen at random. The auditors focused on those that had contracts totaling above $500,000. In a contract between KBR and HISD for asbestos abatement at North Forest High School two orders were written for $480,000 each, with no final accounting of the costs. At Lakewood Elementary School there were two job orders written one not to exceed $213,418 and the other not to exceed $330,116. “The same contractor (KBR) is performing both tasks, both proposals involve the same square footage and the job orders are sequentially numbered. Based on the scope of work the two jobs were components of the same project and should have been administered under a single abatement and demolition contract valued at $505,039 with separate Board approval,” the audit said.

“In administering future job orders or construction projects in general, CFS should not divide the work to fit statutory limits,” the audit said. And “CFS should ensure that a final accounting is performed whenever 'Not to Exceed' language is contained in a job order, construction contract, or change order.”

Most taxpayers would assume that was already standard operating procedure, but apparently it hadn't occurred to the fast-moving HISD. Now they'll have time to think about it. 

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