DWP to Launch Audit of Project to Reduce Dust

Worried that a project to reduce dust in the Owens Valley is becoming a “bottomless pit,” the Los Angeles Department of Water and Power board agreed Tuesday to launch an audit of the multimillion-dollar effort.

The board ordered documents drawn up to hire an accounting firm to conduct a thorough review of spending on the project, whose cost has increased from an original projection of $120 million to $415 million over seven years.

The board, which was appointed this summer by newly elected Mayor Antonio Villaraigosa, also asked DWP General Manager Ron Deaton to draft a plan for audits of all 168 contracts worth $2 million or more each for architects, construction management and construction.

On Tuesday, DWP officials told the board that the cost of the dust-reduction program could grow further if an air-quality district in the Owens Valley succeeded in getting the city agency to expand the 29-acre area covered by the current program.

“Are we in a bottomless pit?” asked board member Nick Patsaouras. He did say the program is “a noble goal. We have to do it. We screwed it up. We have to fix it.”

The DWP, which caused the problem by diverting water from the Owens Valley for decades, is under court order to reduce dust by planting grass and bringing water to dry areas.

In addition to a broad audit of the dust-reduction program, the board said it wanted outside auditors to look at the work and bills of engineering firm CH2M Hill, which has provided design and construction management services.

Board members were particularly troubled by the growth in the firm’s contracts.

CH2M Hill was originally given a $550,000 contract in 1998 to provide the city attorney’s office with expert witness services as it argued with regulatory agencies to limit the DWP’s liability for reducing dust.

The contract was amended to $12 million without seeking new bids so the firm could help design a system to reduce dust, and that contract was later increased to $13.5 million, officials said.

New bids were eventually sought, and CH2M Hill received a new contract for $28 million in 2001 for design and construction management, according to Richard Harasick, the DWP’s manager of the project.

The firm received a $10-million extension in 2002, $17 million more in 2003 and $36 million last year, officials said.

Deaton said $16 million is proposed for the firm in the coming year.

Patsaouras said the escalating cost bothers him, because it appears that the DWP launched the project without a firm idea of how it was going to reduce dust.

But he also sees a potential conflict of interest in having the firm that designed the project be the construction manager also.

“So the fox is watching the chickens,” Patsaouras said.

The department has heard complaints from some of its workers about wasteful spending on the Owens Valley project, including the construction of faulty structures that had to be torn down and rebuilt.

“When we started this, we didn’t know what would work,” Deaton told the board. “We have tried things. They didn’t work.” Deaton took over the DWP a year ago.

CH2M Hill is a politically influential company at City Hall, having worked for many of the large city departments while also helping to elect decision-makers.

The firm and its employees have made $42,000 in political contributions to city candidates in the last five years, including $14,000 to former Mayor James K. Hahn, $20,000 to Hahn’s fight against San Fernando Valley secession and $1,500 to Villaraigosa.

Patsaouras said close scrutiny of the firm’s contracts is needed to address “the perception that CH2M Hill is running the DWP.”

The board took other actions Tuesday that show it is willing to question the way things have been done for decades at the DWP.

Members repeatedly complained that reports from Deaton and the staff on new contracts were inadequate.

A report on an audit that found fault with an agency fiber-optics program drew complaints from board members for failing to indicate whether the problems identified are being fixed.

The board criticized staff reports on new contracts for failing to detail how decisions to award them were made, whether local firms were given a chance to compete and how firms performed on any previous work for the agency.

“I am concerned about the paucity of information on which to base a decision,” said H. David Nahai, vice president of the board.

On one contract, to spend $1.7 million to replace defective aerial booms used for repairing power lines and purchased from a firm that went bankrupt, board members voiced alarm that the city had not done more to protect its treasury, including requiring insurance.

Patsaouras also questioned routine expenditures, such as the advertising agreement with the Dodgers and the amount for public relations.