SuperBus Report Urges Closer Look at Bidders : Transportation: Auditor defends contract but says O.C. officials should do more to ensure safety of funds.

After reviewing the way a controversial, $4-million SuperBus contract was handled, an auditor recommended Wednesday that transportation authority staffers more rigorously review the financial health of contractors in the future.

Robert Duffy, chief auditor for the Orange County Transportation Authority, defended the agreement to purchase 10 high-capacity SuperBuses from a Northern California firm, but said officials should do more to ensure that the public’s money is safeguarded.

Duffy said staffers should visit factory sites and have an independent expert evaluate any contract in excess of $500,000 with a company that is the sole provider of a product or service.

He also called for better documentation on non-competitive bids, such as the deal with SuperBus Inc., and suggested that officials require firms to provide certified financial statements when procurements exceed an as yet undetermined amount, or when a contract will continue for several years.

“These sound like the kinds of things that would have prevented this brouhaha . . . in the first place,” said Board of Supervisors Chairman Roger R. Stanton, who also chairs the transportation authority.

Stanton called for a review of the SuperBus deal after The Times reported that company officials had been sued for failure to pay rent and that some of the firm’s officers faced accusations of business fraud in lawsuits unrelated to SuperBus.

Also, The Times reported that the company is now being run out of SuperBus chief executive James F. Elder’s residence in Saratoga, and that the firm is relying on the Mexican government for money to manufacture the innovative buses at a new factory in Baja California.

Elder could not be reached for comment Wednesday. But in previous interviews he has strongly denied the charges contained in the lawsuits and said his company will be able to deliver the ordered buses on time and within budget.

The company’s buses are bigger than the average bus and resemble low-slung horse trailers pulled by big-rig truck cabs.

Duffy said that transit officials did obtain financial statements from SuperBus that indicated that the company had financial problems, but officials would have benefited from financial reports from an accounting firm. The company’s financial statements showed that the firm lost $472,882.46 for the 12 months ending Nov. 30, 1990.

Nonetheless, Duffy’s report stated that the transit district staff didn’t break any rules in its handling of the SuperBus contract because they relied on the same procurement procedures used for federally funded projects.

In the past, Duffy wrote, this procedure never required the agency to obtain company financial statements certified by an independent accountant. The procedures proposed by Duffy would require such statements.

The Transportation Authority will continue to negotiate with SuperBus for the purchase of the 10 vehicles, officials said. The agency approved the purchase in October.

Officials say the public’s money will be protected by a letter of credit, fines imposed for late delivery and warranties. Also, no money will be paid to the company until the buses are delivered. SuperBus has yet to deliver an acceptable letter of credit, however. County officials rejected the firm’s most recent letter because it was drawn on a Mexican bank instead of a U.S. bank.

Duffy said in his report that he wants SuperBus to submit a list of each sole-source vendor that will be used to produce the vehicles, in case parts are needed several years from now.

Duffy also noted that transportation officials maintained an ongoing relationship with the firm during a three-year period when the authority was testing two SuperBus prototypes. He recommended that all proposals by vendors go directly to the OCTA’s contract administrators so they can determine the advisability of proceeding or dealing with alternate products and sources.

Transportation Authority executives agreed and stated in their own summary of Duffy’s report that “sole-source justifications for contracts . . . should not grow out of ongoing relationships with vendors or consultants.”

Duffy’s recommendations will be discussed at Monday’s OCTA board meeting.

The Times’ investigation also found that retired Orange County Supervisor Ralph B. Clark acted as an adviser to SuperBus before the Transportation Authority’s approval of the purchase order last October.

As a result, OCTA’s staff is considering possible registration and disclosure requirements for lobbyists or companies that employ them.