Bidding War for Contract Casts Light on MTA Affairs

It was just a round of golf, but it may also have been about money, politics and the future of mass transit in Los Angeles.

On a Friday afternoon in late summer, county transit chief Joseph E. Drew played 18 holes at a charity tournament in Montebello with two construction industry executives whose consortium was bidding for a lucrative contract to supervise Eastside subway tunneling.

The executives, whose firm Drew later recommended for the job, are players in a bigger, high-stakes game in which three business teams bidding for the $65-million deal have sought to gain an advantage over their competitors in the politically charged atmosphere of the Metropolitan Transportation Authority.

Metro East Consultants, the consortium recommended by MTA chief executive Drew to receive the contract two weeks ago, includes executives who have ties to powerful MTA board member and City Councilman Richard Alatorre. One rival business team has pressed its connections in Washington to try to get congressional members to intervene on its behalf.

All three of the companies bidding for the job have contributed to one of Alatorre’s favorite charities. All have sought examples of their opponents’ tunneling and business failures, and alerted board members and reporters. All have made campaign contributions to some board members.

And the more than 110 registered lobbyists for companies associated with all three bidders outnumber the 13 board members by about 8 to 1. The lobbying is so heavy that MTA board Chairman Larry Zarian, who refuses to meet with the contractors or lobbyists, says they have even tried to contact him through his friends.

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The fierce bidding war offers a rare glimpse into how business is done at the MTA, where decisions take place in a tangled web of special interests, political alliances and rivalries, and a revolving door of employment between the transit agency and the contractors. LeRoy H. Graw, fired as MTA construction contracts chief during the Eastside bid process in September, tried to take advantage of the close relationships when he applied for a job at the bidder he recommended. The company said he has not been hired.

The competition is fierce because the Eastside contract may be one of the last big-ticket items for the next several years at the MTA, which collects one cent from every dollar of taxable goods sold in Los Angeles County. Tunneling to extend the subway from Union Station to 1st and Lorena streets in Boyle Heights is scheduled to begin next year.

The battle took a dramatic turn last week when the MTA’s inspector general halted a board vote on who should get the contract, announcing that he had launched a criminal investigation. MTA sources say investigators seem to be interested in allegations that senior transit agency staff members conspired to change an expert panel’s scoring of the bidders.

Alatorre has said repeatedly that he “in no way influenced” Drew, who is appointed by the board, in his recommendation of Metro East.

“I’m one vote, man,” Alatorre said, insisting that he isn’t the only MTA board member with ties to contractors who seek transit business. He noted that an aide to MTA board member and county Supervisor Gloria Molina, who has criticized Drew’s recommendation, once worked for a lobbying firm that represents a rival bidder.

“The question is can [Metro East] do the job,” Alatorre said. “Yes, they can.”

Another twist came Friday when it was learned that an MTA auditor sought to exclude Metro East from consideration for the job, citing an audit showing examples of poor performance managing tunneling in Boston by one of its partners. Drew said he was not aware of the audit at the time he made his recommendation and it would not have made a difference had he known.

Despaired MTA board member Jim Cragin: “Our integrity is terribly shaken.”

The controversy over the contract bothers longtime Washington supporters of subway construction--threatening to cost federal funding for the entire $5.9-billion Metro Rail project and thrusting Drew into a political cross-fire far bigger than anything he saw in his previous job as Kern County administrator.

The matter erupted into public view Oct. 7 when Drew recommended a team called Metro East Consultants for the contract even though it was ranked last by a panel of construction experts. (The panel was hired by the MTA at a cost of $375,000 to keep politics out of the selection process.)

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In addition, Drew rejected the recommendation of his own construction staff to nominate the panel’s No. 1-rated team, JMA. That company, he said, is too busy supervising the San Fernando Valley subway project, which has been bedeviled by costly delays and a stuck tunneling machine. He rejected the experts’ No. 2 recommendation, Bechtel Infrastructure Corp., saying he didn’t understand the panelists’ scoring.

Drew said he recommended Metro East because the team includes a German firm with expertise in a type of special tunneling expected to be needed in Boyle Heights.

At the heart of the fracas is the fact that although government agencies must choose the lowest bidder for construction jobs, management consulting jobs like the Eastside contract are more like a corporate beauty contest. Rather than proving how cheaply they can do the job, bidders must prove they’re the most qualified.

According to participants, the giant construction outfits that partner up for such work often try to position themselves favorably with an agency by hiring subcontractors as much for their relationships with decision-makers as their construction expertise.

“I’d be less than honest if I said that it’s not considered,” said Dennis O’Connor, an executive at Jacobs Engineering, a partner in JMA.

The MTA’s three-year history has been checkered by controversies involving lucrative contracts:

* In 1993, Mayor Richard Riordan helped win approval for a rail project that brought hundreds of thousands of dollars to Tetra Tech, a company in which he held a stake, according to records. Earlier this year, the state ethics commission cleared Riordan of any conflict of interest violations.

* In 1994, a Times study found that a handful of elected officials who sit on the MTA board have accepted more than $500,000 in campaign contributions from construction contractors, engineers, lawyers, lobbyists and other firms doing business on the subway project.

* In 1994, the MTA ordered construction management consultant Parsons-Dillingham off the subway project to satisfy federal regulators who had temporarily frozen $1.6 billion in subway funding after a review found the firm’s work to be below industry standards. The company and its parent, Parsons Corp., had donated more than $25,000 to MTA board members. It retained responsibility for three major portions of the North Hollywood extension of the Red Line.

In the current competition, Steve Saltzman, a former consultant to O’Brien-Kreitzberg & Associates Inc., the leading partner in Metro East, said he advised his client last year on how to package a team using political criteria.

Metro East’s links to Alatorre include longtime friend David Lizarraga, the president of consortium partner TELACU Industries Inc.; Gerard Orozco, a vice president at subcontractor STV Inc., who worked on Alatorre’s staff; his wife, Hillary Norton Orozco, who is Alatorre’s current chief of staff, and George Pla, president of subcontractor Cordoba Corp.

TELACU, Cordoba and STV have previously worked on Los Angeles transit projects. Metro East attorney-lobbyist Neil Papiano said they were included on the team because they are qualified and “because they have close liaison in the community . . . and will be best able to communicate exactly what is going on.”

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A Bechtel representative acknowledged that the company’s advisors gave consideration to the political connections of subcontractor candidates, but he insisted that their relationships were secondary to their expertise.

Said an MTA official who asked not to be identified: “Each team tried to get subs who were palatable to the major players on MTA.” He maintained that Metro East’s subcontractors were “handpicked” for Alatorre.

Several of the expert panelists who evaluated the Eastside bidders, essentially a jury of the contractors’ peers, expressed reservations about the role of TELACU on Metro East’s team during a question-and-answer period recorded on videotape obtained by The Times. In a round-table discussion one is heard to say: “I thought they brought TELACU in for their political clout.”

Contractors’ efforts to win transit business sometimes take a more personal turn. Saltzman said he advised O’Brien-Kreitzberg that it should attempt to create relationships with board members by contributing to their favorite charities.

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In August, Metro East donated $20,000 to co-sponsor the golf tournament benefiting a favorite Alatorre charity, the nonprofit El Sereno Youth Development Corp. Alan Krusi, an executive at O’Brien-Kreitzberg’s parent firm, Dames & Moore, was in Drew’s foursome. So was David Kim, chief financial officer of Avacon Corp., a Metro East subcontractor. Sharon Neely, a former transportation consultant to Alatorre, rounded out the golfing party.

Drew says he was not aware that Krusi or Kim worked for companies bidding for an MTA contract, and did not discuss the Eastside subway job on the links. Krusi and Kim did not return a reporter’s phone calls.

A JMA executive said his company donated $500 to the tournament. A Bechtel representative said his firm did not contribute to the tournament but bought tickets to the charity’s dinner last year.

The MTA’s ethics department chief, Ryan Nakagawa, said Drew’s role did not violate the agency’s rules because he paid his own way--donating $180 to the charity--and did not receive gifts from the contractors.

Board member Molina said the action showed “incredibly bad judgment” and skirted rules set out by former transit agency chief Franklin E. White in a February 1995 memo that stated: “Please be vigilant in your efforts to avoid conflict of interest situations in all matters, but especially those pertaining to solicitation for professional services. . . . Even the appearance of conflict can cast doubt on the objectivity and impartiality of staff. Our reputation is at stake.”

The contract fight also has a purely political dimension.

Alatorre, who has led the fight to bring a subway to his Eastside district, is among the most influential MTA board members because of his alliance with Riordan, who serves on the 13-member MTA board and appoints three other members. Alatorre is Riordan’s strongest ally on the Los Angeles City Council.

Molina, an Alatorre adversary for more than a decade, has been a leading critic of the MTA’s handling of the Eastside contract. Molina, who is the county supervisor for the Eastside, has said that in light of the subway’s troubled history she wants to make sure the best firms are selected to supervise the extension. The project passes under more homes and businesses than anywhere else along the Metro Rail route and through treacherous soil conditions.

The potential difficulty of the job has also proved a battlefield for the bidders.

JMA executives contend that Hochtief A.G., a giant German construction firm that is a partner in Metro East, designed tunnel-boring machines for the Athens Metro in Greece that are 18 months behind schedule. They also say the firm is considered responsible for the sinking of streets and buildings. The executives pointed out that bid documents show that Hochtief plans to send two of its top Athens tunnel engineers to Los Angeles to manage the Eastside job.

Metro East executives last week said the Athens problems are not Hochtief’s fault, and shot back allegations that JMA tunneling partner Mott-McDonald has mishandled tunneling in Denmark.

Bechtel, meanwhile, filed a protest with the MTA last week contending that JMA should be disqualified from winning the contract. The firm contended that JMA failed to supervise tunneling under the Santa Monica Mountains properly and caused cost overruns in its bid in violation of federal procurement rules.

On Friday, MTA board member and county Supervisor Zev Yaroslavsky placed blame for the embarrassing ruckus squarely on Drew’s shoulders, contending that his reversal of the expert panel and his staff has left the agency “teetering on the edge of oblivion.”

* DEEPER PROBLEMS

Bill Boyarsky looks at MTA’s political underground. B1