District Halts Contract Vote After Audit

Internal investigators have determined that officials of the Los Angeles Unified School District sought to award a $5.1-million property management contract to a firm without properly reviewing costs and the company’s qualifications.

A confidential report by the district’s inspector general also alleges that an outside lawyer who oversaw the selection process for the contract had an undisclosed conflict of interest. His law firm also represents Trammell Crow Co., the firm recommended by a selection panel to find rental office space and maintain properties where the district wants to build new schools. The attorney says he previously disclosed the conflict and that it did not influence the selection process.

The allegations were considered serious enough that a vote on awarding the contract was postponed indefinitely at Tuesday’s Board of Education meeting. However, Trammell already has been performing the work on a temporary basis.

Earlier this year, the district began a major endeavor to acquire properties for 158 new schools. Houses and apartment units are on some of those sites, and the district wanted a company to maintain them until occupants are relocated and those structures are demolished.

Officials at the district’s real estate branch and the office of the general counsel acknowledged some irregularities in the selection for that contract, but said those were not serious. That the district stopped a flawed contract-awarding process proves that its internal oversight works, according to real estate branch director Scot Graham.

The inspector general “made these recommendations before a contract was signed,” said Graham. “It means we can do something about it.”

Last summer, Trammel was chosen as the favorite bidder to represent the district as it sought to lease administrative office space. Later, that proposed contract was expanded to include managing the school site properties.

Graham said the subsequent internal audit prevented his office from taking Trammell’s proposal before the Board of Education for approval, but that the district employed the company anyway on a temporary basis. Graham said that such measures are certainly unwise but are common and necessary to get things done in the bureaucratic district.

“Hundreds of vendors work without contracts,” he said, noting that one public relations firm was employed by another department for seven months before a contract was approved by the board.

District general counsel Hal Kwalwasser acknowledged that Trammell has been employed to seek office leases for the district since August, but said that he will not stop that. Kwalwasser said that he has the authority to bypass the formal bidding process when the district knows the market, when “time is of the essence” and when the contractor in question has a proven track record.

Graham and Kwalwasser agree that the district crossed the line when the scope of Trammell’s work was expanded to include property management without putting the extra work out to bid. Kwalwasser said he may allow Trammell to manage the district’s newly acquired properties until June 1, when a separate contract would have to be drawn up.