Transit Panel Hits Staff’s Uncontrolled Spending : Transportation: Board is angry over contract changes OKd without consulting it. Agency head cites need to keep projects on schedule.

In the normal course of managing its 30-year, $183-billion plan to improve transportation, the Los Angeles County Transportation Commission board of directors was methodically plodding through the 66 items composing its 637-page agenda last week.

Then it came to Item 32.

There, on Page 478, was a staff memo recommending that the board approve $684,092 to change the interior of the Metro Red Line subway cars. The memo said that the changes would improve safety, maintainability and aesthetics of the cars.

What the memo did not say was that the changes were made a year ago. The staff was asking the commission to pay for work already done--work that the commission should have approved in advance. LACTC board members were not happy.

“I think this is the most outrageous example of runaway spending by this agency,” snapped Los Angeles Mayor Tom Bradley, forcing a board vote against paying for the changes, as well as another last-minute modification in the Red Line car contract.

“Isn’t this supposed to come before us before it’s spent?” asked LACTC board member Gerry Hertzberg, an appointee of Supervisor Gloria Molina, during the ensuing debate. “Is this just a charade? Are we just a rubber stamp?”

In its headlong rush to build most of a 350-mile rail transit network and reduce congestion on 510 miles of freeway in Los Angeles County, the LACTC has delegated considerable leeway to its staff when it comes to changing plans and fixing mistakes in the field.

Because the commission meets only once a month, the theory has been that the cost of paying idle contractors to stand by for decisions could exceed the cost of the work itself. The reality is that some board members are beginning to feel that they have lost control of their agency.

“We’re not in control at all,” said LACTC board member Judy Hathaway-Francis, who is a member of the La Habra Heights City Council. “Staff is totally in control.”

Anxiety over the issue is acute because LACTC board members are elected officials who come from cities and other recession-pinched public agencies that are being forced to slash police, fire and public health services.

“Absolutely, it’s a concern,” said Hertzberg. “There’s a legitimate concern that delaying work on a change order can cost taxpayers more than the work, but there is also a concern that we not keep seeing this (work) after the fact, forcing us to make the contractor eat the costs or make the taxpayer eat it.”

The issue goes beyond one expenditure, one project or one meeting.

Commission members last week also challenged and denied such expenditures as:

* $701,664 to reimburse unexpected costs for a company that was prevented from installing escalators in subway stations because construction contractors were behind schedule.

* $289,435 in cost-of-living adjustments in the price of an emergency communication system that is running eight months behind schedule because of unexpected complexities.

* $150,000 in legal fees for one law firm to fight a whistle-blower lawsuit alleging fiscal irregularities “and to assist in one other internal personnel issue currently under investigation.”

In the past, LACTC board members--as well as the directors appointed to run the commission’s semiautonomous Rail Construction Corp. subsidiary--have complained that staff has questionably authorized such expenditures as:

* $719,000 in legal fees for a Washington law firm that advises the LACTC on federal legislation, regulations and labor issues.

* $371,500 to replace flat granite platform-edge paving stones with ribbed concrete pavers, to improve safety and conform with federal law.

* $52,000 to extend the contract of an independent insurance auditor.

“Every time I turn around, we are being asked to approve $10,000, $100,000, $1 million in outside legal fees,” complained LACTC board member Marvin Holen, a lawyer. “But the number of cases that legitimately require $1 million in fees should be very small . . . unless we are simply a pigeon client, which is what we appear to be.”

RCC board member John W. Murray Jr., a Los Angeles Board of Public Works commissioner, said he understands the need for change orders on a large and complex project that is being held to a tight schedule, especially something as ambitious as adding a subway to a densely populated city.

“It would be criminally unfair to say that this (subway project) isn’t working or that it is somehow fatally flawed,” he said. “But . . . I do think it is a public confidence issue if change orders are being approved above the limit without coming before the board.”

LACTC policy gives Executive Director Neil Peterson--and any employee he designates to act in his name--the authority to sign contracts worth up to $50,000. However, policy allows staff members to unilaterally approve change orders worth four times that amount, or $200,000.

Change orders are potentially lucrative contract amendments to deal with unforeseen circumstances, such as boulders in the path of dirt-tunneling machines or delays caused by incorrect or incomplete plans.

Peterson and RCC President Ed McSpedon said that this broad mandate was given to the staff to keep up the pace of work.

“The most costly thing that we can do is stop a contractor in his tracks when he’s running a $50,000-a-day operation,” McSpedon said. The cost of delays are compounded, he added, because of the project’s tight schedule.

“We are running a crash schedule; we know there will be conflicts and we know we are going to have to pay for them,” McSpedon said. “But it is much faster to do it that way than to have to finish Contract A before you let Contract B. And, in the long run, it’s a lot cheaper to do it our way because you can do it sooner. . . . In construction, time is money.”

Even so, LACTC staff has exceeded its $200,000 change-order limit on several occasions.

Peterson, the LACTC’s top staff person and McSpedon’s boss, conceded that some charges were improperly late in being presented to directors. But he said the number is a tiny fraction--1%, he guessed--of the 3,600 change orders made in building the Blue, Red and Green lines.

“The reality is, there are going to be times that this is going to happen,” he said. “We just have to minimize the number of times that it happens by improving communication with the board.”

Hertzberg, among others, was not happy to hear it.

“One is too many,” he said.

Peterson said the problem is partly because of the creation of the RCC in July, 1990. Before then, he said, LACTC members directly oversaw construction and learned of changes as they occurred. Now, he said, the RCC oversees construction, and the LACTC does not learn of changes until after they are approved by the subsidiary board.

“These notices no longer go to the (LACTC) board, they go to the RCC,” he said. “So I understand that when one comes through now, it’s a, ‘Hey, what is this?’ ”

That fairly summarizes the LACTC board’s reaction to the Red Line car changes.

“I am alarmed by some expenditures of money that I think are shocking,” said Bradley, who led the charge against late and excessive change orders.

McSpedon said the Red Line car changes first came up early last year, when the Italian car maker, Breda Costruzioni Ferroviarie, completed the first full-scale model. LACTC officials said that when they inspected the car, they noted several problems:

Crash pads on the seats were made of hard plastic. Some interior surfaces were not made with graffiti-resistant material. Signs consisted of peel-off stickers, which posed a maintenance problem. Wind screens were made of painted plastic panels that chipped and cracked on other subways. Floor mats were made of light-colored material, another maintenance problem.

RCC workers opted to switch to soft foam crash pads, graffiti-resistant interiors, painted signs, new wind screens and dark floors. At the same time, they decided to mute the interior color scheme and change the exterior striping pattern. Because the new materials had to be ordered immediately to avoid holding up production, RCC staff gave the go-ahead in early 1991.

These changes, however, did not come up for a vote before the RCC board until last month, a year after they were ordered by staff.

McSpedon explained the long delay by saying that it was not clear whether the cost of the changes would surpass the $200,000 threshold requiring board approval.

Breda at first estimated that the changes would cost $778,277. But McSpedon said that after several months of negotiation, the manufacturer agreed to settle for $684,092.

“We could have divided it up among four change orders and been within staff authority on this,” McSpedon said. “We bundled them up because it seemed the best way to do it. It was a judgment call, and maybe it wasn’t the judgment that the board wanted.”