Selection Process of School-Repair Firms Questioned

Capping months of behind-the-scenes deliberations, the Los Angeles Board of Education has quietly endorsed a team of managers for repairs funded by Proposition BB, including several firms involved in last year’s bidding and billing turmoil at the Metropolitan Transportation Authority.

While there have been no indications that unqualified companies have been recommended for management contracts, some parts of the selection process appear to resemble practices that kept the MTA embroiled in criticism:

* Widely published information about problems some of those firms had in past jobs was not brought to the attention of the school board or the committees that conducted a nine-month evaluation of the bids.

* Several of the bidders made large donations to the campaign for the Los Angeles Unified School District’s $2.4-billion school bond, approved by the voters in April, while their bids were under consideration.

One firm has already been chosen to manage the entire project and 10 others are scheduled to be voted on Monday for roles as project managers, overseeing bond-funded work in different parts of the district.

Alarmed by the omission of information and by the web of connections to the MTA, school district critics and some board members are asking whether the district should have required bidders to disclose past lawsuits, investigations or official findings related to previous business dealings. The MTA now follows such a policy as a result of its troubles.

“You would think we would have learned from MTA’s mistakes,” said board member David Tokofsky.

In response to Tokofsky’s objections, district officials now say they will require all school bond contractors to fill out a disclosure form based on the MTA model.

Some critics are displeased by the fact that all 11 firms have some prior connection with the MTA--either directly or through subcontractors they have indicated they will use.

“I believe many of the firms we scared away from the MTA are migrating over” to L.A. Unified, said state Sen. Tom Hayden (D-Los Angeles), who sponsored legislation requiring disclosures by MTA contractors and wants the school district to go further. He suggests it needs a full-time inspector general to administer Proposition BB spending.

Voting with little comment last week, the school board approved as overall manager for the massive school repair projects a joint venture headed by O’Brien-Kreitzberg, Inc. The company was the lead firm in a consortium whose aggressive lobbying for an Eastside subway contract touched off a controversy that contributed to the resignation of former MTA chief Joseph E. Drew. The handling of the contract remains the subject of a criminal investigation.

Though the school board delayed until Monday a final vote on the 10 regional project managers, none of the members raised an objection to the recommendations of a selection committee.

But board members were not informed of some pertinent critical information about the companies.

A private consultant hired to develop background information about the bidders failed to report, for example, that one of the firms--a heavy contributor to MTA officials--was chastised in a 1996 MTA audit for improper billing including the lease of a Mercedes-Benz as a company car.

The consultant’s confidential report, obtained by The Times, also failed to report that another bidder returned funds to clients in connection with a 1995 federal investigation finding that it overbilled on a Thousand Oaks construction project.

Nor did the consultant mention O’Brien-Kreitzberg’s connection with the MTA fracas, in which Drew was chastised for recommending the consortium O’Brien-Kreitzberg headed over more highly rated competitors.

School district officials said they chose the 11 firms from only 19 bidders based on their capacity to handle large, complex projects, on their experience with schools and their strategies for making intrusive repairs without disrupting school work.

The unusual demands of the project--thousands of individual jobs at hundreds of schools over seven years--probably limited the response to the district’s call for proposals, said John Hakel, executive director of Associated General Contractors, a construction trade group, who serves on the oversight committee tracking the use of Proposition BB funds. The district began seeking contractors last summer so work could be expedited if a bond measure was passed.

Hakel said he was not surprised to learn of the MTA crossover because so few firms can take on such work.

Some observers were troubled, though, by the selection process’ failure to turn up problems involving several of the firms that had been published in The Times and other media.

For example, the consulting firm hired to run background checks, Keyser Marston Associates, found no reference to news reports of an MTA audit which concluded that one bidder, Jenkins/Gales and Martinez Inc., improperly billed the agency $234,385, including an “unreasonable bonus” of $36,000 in 1993-94 to the wife of a top company executive, a $2,676 country club membership and leases of a $1,208-per-month Mercedes and a $938-per-month Range Rover with taxpayer money.

The firm has been recommended to run Proposition BB projects in Southeast and Southwest Los Angeles. Its president, Earl Gales, referred a reporter to the MTA, which said the dispute was settled by the contractor with an undisclosed payment to the transit agency.

The report also failed to mention a $5-million lawsuit against a bidder recommended for Eastside school projects, Vanir Construction Management Inc. In that lawsuit, the city of Pasadena blamed mismanagement for cost overruns in the construction of a police building. The suit was resolved and terms of the agreement are confidential.

Also missed was a passel of conflicts surrounding the construction management firm Lehrer, McGovern, Bovis, which teamed with Jenkins/Gales and Martinez and a third firm in a limited partnership recommended to manage the district’s West Los Angeles projects.

Bovis, an international construction management firm that managed such projects as EuroDisney and the renovation of the Statue of Liberty, was on the Los Angeles City Hall renovation team criticized by a mayoral review panel for ineffective management.

“The scope, the objectives and the costs have varied over time and grown without direct accountability or cost restraining,” the panel said.

Keyser Marston’s reference calls did turn up the fact that Bovis was the focus of a joint investigation by Ventura County and the FBI into charges it double-billed for work on the Thousand Oaks Performing Arts Center. But the summary maintains that “the accusations proved false,” when in fact media reports indicate the two-year investigation concluded that Bovis billed Thousand Oaks and 23 other clients nearly $200,000 for work never done. Investigators filed no charges, however, acknowledging the firm’s repayment of the funds.

Mary Costello, director of corporate communications for Bovis, said the company was asked no questions about either the Los Angeles or Thousand Oaks jobs by the school district, and saw no reason to volunteer information because both cities were highly satisfied with its work.

But Beth Louargand, the Los Angeles school administrator who oversaw the selection process, said she would have wanted to know about it.

“That was exactly why we hired [Keyser Marston] to do a reference check,” she said.

James A. Rabe, who prepared the background reports for Keyser Marston--itself an MTA contractor--acknowledged that the information was pertinent even if it would not necessarily have knocked the firms out of the competition.

Rabe speculated that it might have been missed because his national publication search was done on a database that does not contain The Times.

Perhaps the most glaring oversight concerned O’Brien-Kreitzberg, the firm approved by the school board to manage all bond projects.

Even though MTA officials have praised the firm, which was never directly implicated in any of the transit agency’s troubles, O’Brien-Kreitzberg’s role as leader of the controversial Metro East Consultants consortium was not divulged to the school district.

Metro East Consultants, ranked last out of three bidders for the Eastside subway, was later moved to the top of the list by former MTA chief Drew, who resigned after the move drew accusations of influence-peddling.

O’Brien-Kreitzberg President Alan Krusi said the company is not a target in the criminal investigation that followed.

But the company’s lobbying style contributed to criticism that the MTA was too cozy with certain contractors.

Last summer O’Brien-Kreitzberg donated $20,000 to co-sponsor a golf tournament benefiting a charity favored by influential MTA board member Richard Alatorre, a Los Angeles city councilman from an Eastside district. Executives of the firm’s parent company and of one of its subcontractors joined Drew’s golfing foursome.

For many veterans of MTA contracting, making political donations is an old habit that seems to have persisted in the quest for school bond contracts, leading Hayden to question whether developers were the only ones who learned something from the MTA scandals.

O’Brien-Kreitzberg and its partner in the school team, 3D/International, gave $20,500 to the Proposition BB campaign.

In all, the 19 firms and their subcontractors who were in the running for the school repair jobs donated more than $100,000 to the school bond campaign. The largest donor was CRSS Constructors, a Houston-based construction management firm with an apparently unabashed policy of giving to those from whom it seeks work.

“Our political system puts significant financial campaign pressure on those seeking office,” said a spokesman for CRSS after it won an MTA contract to help manage the downtown Los Angeles-to-Pasadena rail line.

CRSS, which is recommended to oversee the east San Fernando Valley school projects, gave two donations to the Proposition BB campaign, totaling $25,000. Subcontractors included in its bid gave $5,350 more.

Not all contributions ended in district endorsements. For instance, more than $18,000 was given by a rejected bidder that included Heery International--a developer that Keyser Marston reported had been called “sloppy” by a former client.

Louargand said the contributions had no effect on the selection process because the 11 members of the committee that reviewed the bids did not know of them.

Contributions to board members already are restricted by Proposition 208 to $250 for school district elections, although they could receive more if they seek higher statewide office. In the spring election, unopposed member Victoria Castro received contributions from five of the recommended managers and subcontractors and candidate Valerie Fields received contributions from three.

The MTA prohibits its directors from voting on regulatory matters affecting a donor who has given $250 or more in the past year. Pending state legislation would reduce that amount to zero for four years.

No such safeguards applied to L.A. Unified’s process, fueling concerns that the district could fall prey to influence or contract inflation.