With Caltrans Projects Stalled, Many Contractors Are Running on Empty

Ruel del Castillo, flush with new contracts for surveying work, moved his company to much larger quarters in Irvine early this year and bought two more vans as he geared up for jobs the California Department of Transportation had promised to send his way.

But the work stopped suddenly a month ago, when Caltrans Director James W. van Loben Sels--facing lawsuits from his own staff of 8,000 highway designers--froze indefinitely all contracts with outside architects, engineers and land surveyors.

The dramatic action shut down work on $159 million worth of projects already awarded to the private sector but not yet begun. As a result, Del Castillo’s Coast Surveying Inc. and nearly 600 other architectural and engineering companies throughout the state face huge layoffs and, in some cases, bankruptcy. And industry leaders expect the freeze to last at least two more months.

In addition, design work on a host of road projects--such as the elevated Harbor Freeway transit way and the widening of the interchange of the Santa Ana, Garden Grove and Orange freeways--could be delayed. Caltrans already has canceled 13 small contracts and will likely postpone simple, low-priority tasks such as putting up new traffic signals.

Any work earmarked for outside firms in the next fiscal year, which begins Thursday, will be frozen while the agency figures out how to salvage its 4-year-old contracting program.

“There are going to be significant layoffs coming in the industry,” said civil engineer Timothy Psomas, head of Psomas & Associates in Santa Monica. “The ripple effect will create huge holes. If one engineer loses his job and isn’t replaced, five construction workers go home.”

“If we are unable to contract out (design) work, that will translate into lost jobs and long delays in transportation improvements,” said Caltrans spokesman Jim Drago. Van Loben Sels would not talk about the issue.

The Caltrans director took his drastic action after a union of Caltrans workers went to court a second time, challenging the state’s use of outside contractors.

Since 1989, a state law has authorized Caltrans to hire private consultants to help develop highway projects. A Sacramento County Superior Court upheld the law in 1990, after a lawsuit by a union representing the agency workers, but the court invalidated the agency’s methods for determining how much work could be awarded outside.

Last January, the union asked the court to hold Van Loben Sels in criminal contempt. It said he used faulty figures to justify the amount of outside contracting allowed in the current fiscal year. The union asserted that the volume of work had been increasing every year and the agency should be hiring rather than sending the work outside.

In a May ruling, the court agreed that the workload was increasing and that Caltrans predictions about workloads were not reliable. The agency, the court said, used “questionable factual assumptions and reasoning which, at a minimum, underestimate both the workload and the civil service staff needed to perform it.”

The court found that Van Loben Sels did not intend to violate the 1990 order to revise the method, but it warned that the director would be subject to sanctions if he continued to use similar procedures for allocating work.

Caltrans civil servants say the freeze order is unnecessary.

The agency can hire outside engineers anytime it wants, so long as it justifies the need, said Loren E. McMaster, a Sacramento attorney for the Professional Engineers in California Government.

PECG relies on state constitutional provisions intended to halt cronyism and other unethical aspects of the spoils system. As interpreted by courts, provisions require that state work be done by civil servants except in certain circumstances, such as lack of expertise among state employees or a need to act quickly to avoid losing allocated funds.

Consultants also may be used for short-term increases in the workload, to avoid mass hirings and layoffs of state personnel.

“What we’re fighting is the use of contract work to do normal civil service work,” McMaster said. “The workload is going up, and the state isn’t hiring more architects and engineers as it should be.”

Both Caltrans and private contractors are turning to the Legislature. State Sen. Marian Bergeson (R-Newport Beach) last Wednesday introduced a bill that attempts a quick fix. It would give Caltrans new authority to develop guidelines for determining when state work should go to consultants.

But time is not on the side of nearly 600 Caltrans-certified contractors, especially the 150 who are minorities and women.

“I laid off seven people already and may have to lay off another 15 people, which is 40% of my staff--which is going to hurt big time,” said Del Castillo.

He started Coast Surveying in 1981 and began taking on state work immediately after outside contracting was authorized. Previously, Caltrans architects and engineers did all design work.

After authorizing the private contracting, the Legislature required, in effect, that 20% of all outside contracts go to so-called “disadvantaged” enterprises--companies owned by minorities, women or disabled veterans. Latino-owned Coast Surveying became a subcontractor on numerous projects so that the prime contractors would meet that requirement.

By this year, up to 80% of Coast Surveying’s work was transportation-related, and most of it came from Caltrans, Del Castillo said. In addition to laying off seven workers, Del Castillo has his remaining 40 employees on reduced workweeks. “Somehow, we’re going to survive, I hope, but it’s going to be a whole lot more difficult,” he said.

Lynn Capouya, a Newport Beach landscape architect with nine employees, lost three projects, among them sound barriers on the Orange Freeway. Those projects and other Caltrans work already begun and not affected by the freeze amount to 60% of her business, Capouya said, and she was gearing up for more.

“I had one person waiting to be hired and two contract laborers waiting to be put to work,” she said. Now she is scrambling to come up with jobs elsewhere to avoid having to lay off anyone.

Wade Weaver was so angry over the freeze that he sent an impassioned letter to Gov. Pete Wilson two weeks ago. It was the first of numerous letters the governor has received from the industry. The African-American owner of Western Land Concepts Inc. in Rancho Cucamonga had to lay off five of his 16 employees. Now he figures he can last no longer than three more months before he will have to shut his doors.

“What makes this so bad, at this particular stage, for the architectural and engineering industry is that there’s nothing else out there,” Weaver said. “It’s not like old times, when you could say that you don’t need state work, that you could go do subdivisions.”

Large firms also are being hurt by the freeze, even though they rely less on contracts from the state.

Psomas & Associates, with 240 employees in three offices, could end up laying off 20% of its staff, owner Timothy Psomas said. Many would be likely to come out of the company’s Costa Mesa office, which was handling construction surveying for the Orange Crush--where the Santa Ana, Garden Grove and Orange freeways intersect.

“We will definitely lay off employees unless we get better news soon,” Psomas said. The freeze also has stopped work that Psomas had subcontracted out to a dozen companies owned by minorities and women.

“Outside consultants are so intrinsically involved in nearly everything Caltrans does that it’s hard to imagine how the agency can unravel it,” he said.

In a meeting with industry leaders earlier this month, Van Loben Sels “was not very optimistic about solving the problem in the short term,” said Robert Bein of Robert Bein, William Frost & Associates in Irvine. “We were hoping that in the next 60 days there would be some solution, but he didn’t hold out much hope.”

Even if the freeze is lifted, the industry expects to get less work from Caltrans than it did before the moratorium.