MTA to Rebid Subway Job in Wake of Disclosures : Transit: Two employees involved in heavily criticized contract for North Hollywood extension are reassigned.

As criticism mounted over the mishandling of an $80-million subway deal, Los Angeles transit officials announced Friday that they are scrapping a plan to award the job to a Pasadena engineering firm and will rebid the contract because of concerns about leaked data, shredded documents and apparent conflicts of interest.

Metropolitan Transportation Authority officials also reassigned two employees who are at the center of the allegations, moving them temporarily to lower positions outside the agency’s contracts division.

The agency is making the moves, Chief Executive Officer Franklin E. White said in a statement, “to remove any doubt of fairness and integrity of the MTA’s procurement process. In fairness to all parties, the personnel involved in the current procurement will not be involved in the new one.”

White’s action came on the same day that The Times disclosed that a confidential report from the MTA inspector general had criticized the handling of a contract for the North Hollywood subway extension. Investigators found that MTA employees who worked on the contract selection destroyed critical documents, allowed secret data to be leaked outside the agency and misled supervisors about possible conflicts of interest on the staff.

Jacobs Engineering, the firm recommended to take over management of the North Hollywood construction, said it plans to vie for the job again.

“Basically, I’m very angry,” said Jacobs President Noel Watson. “We spent a lot of money bidding this contract--probably more than a million dollars. We bid it straight, but the procurement process was flawed and we’re being penalized. . . . But we’re going to bid the damn thing again and we’re going to win it.”

The episode marks the second false start in the effort to find a construction manager for the troubled North Hollywood extension.

MTA officials were hoping to replace the current manager, Parsons Dillingham, by last month because of a series of ground sinkages and other problems along the route, but now they will have to start “from scratch” in soliciting and evaluating bids, said construction chief John Adams. That task will begin next week and take at least two months.

Elected officials applauded White’s move, saying that a decision to move ahead with the Jacobs contract would have proven a political disaster because of the serious concerns surrounding the award.

“I think this is the proper action,” said County Supervisor Yvonne Brathwaite Burke, a member of the MTA board of directors. “Everyone more or less understood that there was no choice” but to put the contract out to bid again.

State Sen. Tom Hayden (D-Santa Monica), an MTA critic, noted that the contract would probably have been routinely awarded to Jacobs had it not been for MTA contracts manager Steven Rhee. It was Rhee who first voiced concerns that the award was tainted by apparent conflict involving an agency consultant who also worked on the Jacobs team, leading to the investigation by the MTA inspector general’s office.

“This all came about because of a gutsy whistle-blower. The credit belongs to him,” Hayden said. “But also you have to credit the MTA for avoiding what could have become another major scandal.”

Even so, Hayden said the episode points up a broader appearance of impropriety at the MTA in awarding billions of dollars in rail contracts to contractors who often have close ties to the agency. “What this reflects,” he said, “is a deep and pervasive culture of wheeling and dealing at the MTA, not just one bad apple.”

State Sen. Quentin L. Kopp, who heads the Senate Transportation Committee, said he wants to determine whether the destruction of documents at the MTA and other problems disclosed by the inspector general may have violated state law.

“When you have a consultant who helps prepare the specification for the bids going to work for one of the bidders, I’d be surprised if that doesn’t violate a code,” he said.

MTA board member Jim Cragin, a Gardena councilman, said he wants the district attorney to look at the contract. “This is on the edge of being criminal,” Cragin said.

Officials at the district attorney’s office declined to say whether they would investigate the contract process. “We read the Times story with great interest, but at this point we’re not going to be making any further statement,” said spokeswoman Sandi Gibbons.

But even if prosecutors do not enter the controversy, Brathwaite Burke and other MTA officials said the agency must push ahead with its own reforms of the contracting process to ensure a better system of checks and balances.

Burke said there must also be more accountability by staffers to avoid a repeat of the problems with the North Hollywood contract. Investigators found that agency managers had ignored the apparent conflict involving the Jacobs consultant and misled their bosses about it.

Two staff members involved in the contract were reassigned Friday.

Mike Baca, director of contracts, and Kurt Meiers, a manager, were each temporarily removed from their positions and given lower positions outside the contracting department, Adams said. Both men were named in the inspector general’s report. Meiers helped evaluate the North Hollywood bids while he had several thousand dollars invested with Jacobs, where he used to work. Investigators also found that the decision by him and Baca not to tell their supervisors about apparent conflict involving the Jacobs consultant “constitutes a serious breach of responsibility.”

Neither Baca nor Meiers could be reached for comment Friday.