City to Audit DWP’s Contract With PR Firm

The Los Angeles city controller launched an audit Thursday of the Department of Water and Power’s $3-million-per-year contract with a public relations firm, which was cited by City Council members this week as an example of questionable spending that undermined the agency’s argument for an 18% water rate increase.

City Controller Laura Chick said in a letter to DWP’s acting general manager, Frank Salas, that her audit would focus on the contract with Fleishman-Hillard Inc. for public relations work. The DWP has an in-house staff of approximately a dozen employees for handling public and media relations.

“I understand the city’s need for help on a regular basis from the private sector for services that can’t be provided in-house,” Chick said. “But we’re talking about an awful lot of assistance for a department that has quite a bit of in-house staff and has just gone to the council and ratepayers and asked for a significant rate increase for water.”

Several members of the City Council applauded the announcement. On Tuesday, the council had put the water rate increase on hold, pending financial review of DWP operations.

“When you have a monopoly on providing water and power in Los Angeles, what is the purpose of spending that much on public relations?” Councilman Dennis Zine said. “We are spending $400 per hour for people to provide public relations when the DWP is talking about raising rates.”

Councilman Jack Weiss also questioned the contract.

“I’ve always wondered why a public utility needs an outside public relations firm to convince people to flick on their light switch and turn on their water faucet,” he said.

DWP Board President Dominick Rubalcava said outside public relations services had been sought when energy deregulation had threatened to open the city to competing utilities. The current contract, he said, will help the DWP communicate with ratepayers on issues including the importance of the water rate increase.

Fleishman-Hillard officials could not be reached for comment.

Chick said she had decided to do the audit after refusing the DWP’s request to pay the December and January invoices for the firm’s services. Many of the billings for those months, she said, did not specify what service had been provided, and others seemed questionable.

In particular, Chick said, she was concerned about billings for $50 to $100 for quarter-hour periods in which Fleishman-Hillard employees said they had left phone messages or sent e-mails.

“There were too many questions,” Chick said. “I asked for an explanation.”

Then she decided to audit the whole contract.

The DWP has paid Fleishman-Hillard nearly $20 million over the last seven years. The agency’s in-house community and media relations staff had a budget of $13 million last year.

The Times reported last May that Fleishman-Hillard had won more than $23 million in contracts with three city departments in recent years. In the same period, the firm and its executives made $137,000 in political contributions to Mayor James K. Hahn and other city politicians. The firm also has provided pro bono services to Hahn and has held fundraising events for him.

A top executive once charged the agency $1,275 for three hours spent attending a lunch and a traveling exhibit on the DWP.

Council members also have criticized the way the contract was structured. The DWP board voted in January 2003 to allow for two one-year extension options of an existing $3-million-per-year contract. Salas exercised the option last June without seeking board ratification.

Chick wrote to the DWP Thursday that the audit would “evaluate the department’s oversight of the contract, as well as the vendor’s adherence to the terms and conditions of the contract.” It also will look at the services provided.

Deputy Mayor Julie Wong said the mayor looked forward to seeing the results of the audit.

“The mayor appreciates that Controller Chick is working to ensure that our city contractors are delivering what is expected of them,” Wong said.