Time for Expanded Oversight of RSD Construction

Reprinted from Mercedes Schneider’s blog


Louisiana State Superintendent John White has found himself the focus of an Office of Contractual Renewal (OCR) and Division of Administration (DOA) investigation for his questionable methods regarding Louisiana’s assessment contracts.

White has publicly complained that such is evidence that Louisiana Governor Bobby Jindal is out to get him. White’s buddy, Louisiana State Board of Elementary and Secondary Education (BESE) President Chas Roemer, a career politician, tries to deflect focus from any White/BESE wrongdoing by dismissing the entire situation as politics.

The problem with White’s complaints and Roemer’s curt dismissal is that White and BESE did not follow proper procedure regarding assessment contract procurement. Furthermore, White has a history of intentionally ignoring proper procedure in favor of advancing sloppy contracts that favor vendors over the interests of the Louisiana taxpayer.

White doesn’t “superintend.” He incubates chaos, including inviting corporate theft. And Roemer and his White-protecting BESE majority are readily available to protect the incubation.

Regarding such incubation, let us consider building contracts for the Recovery School District (RSD), a district flush with $1.8 billion in FEMA cash in order to rebuild or renovate 85 schools following Hurricane Katrina.

According to a 2013 Cowen report, the $1.8 billion from FEMA wasn’t all of the money made available for the School Facilities Master Plan (SFMP):

The School Facilities Master Plan (SFMP), adopted by the Orleans Parish School Board (OPSB) and the state Board of Elementary and Secondary Education (BESE) in 2008 and revised in 2011, establishes a blueprint for renovating and rebuilding crumbling school facilities. The $1.8 billion lump sum settlement awarded by the Federal Emergency Management Agency (FEMA) coupled with funding from the community development block grants (CDBG) program, insurance proceeds, New Market Tax Credits (NMTC) and State Historic Tax Credits, and external grants allow OPSB and RSD to complete the SFMP; the stated mission is to ensure that all New Orleans public school students attend a school in a new, renovated, or refurbished school.

That sure is a lot of dough. The Cowen report does not provide a total, but know that it is multiple billions of dollars.

The same Cowen report notes that, sadly, the costs of rebuilding are greater than expected and even “threaten the completion of the plan”:

Yet, the SFMP has cost significantly more than originally estimated. The budgets for projects, both under construction and completed, have exceeded their original budgets by 24 percent on average. Unanticipated cost increases threaten the completion of the plan. Continuous review of the costs and revenue projections, the scope and scale of the projects, and the educational program needs are essential to ensure efficient and equitable implementation of the plan.

Oversight is needed, the report notes.

Indeed it is.

Cracks in the Walls

Oddly enough, there was an arrangement for oversight of RSD construction. Via a 2010 cooperative endeavor agreement with the state Department of Education, being led then by Paul Pastorek, the city of New Orleans Inspector General Ed Quatrevaux was supposed to monitor RSD spending on school construction and rebuilding.

Problem is, in the true edu-reform mindset of holding others “accountable” without being held accountable, RSD wasn’t (and isn’t) too keen on being required to answer for its fiscal decisions.

On June 7, 2013, Quatrevaux wrote to tell White that he was canceling the agreement to oversee RSD construction because RSD was interfering with Quatrevaux’s oversight, including “routinely fail[ing] to provide access to its records”; “routinely attempt[ing] to restrict the scope of the agreements”; “permitt[ing] its own contractor to provide testing,” and “arbitrarily [withholding] payments due under the Agreement.”

Under the guise of supposed “efficiency,” in April 2013, RSD emailed its employees to not respond “directly” to any requests from state agencies for information and instead to send all requests to one individual, RSD Deputy Chief of Staff Laura Hawkins.

In truth, third-party oversight of RSD construction spending is indeed needed. And in 2014, third-party oversight of RSD construction spending should begin with an investigation of RSD contracts and of White’s and BESE’s pronounced failure to address Quatrevaux’s concerns.

In 2007, the Recovery School District (RSD) put on a nice show with the rapid construction of three new schools and two renovations. Known as the “Quick Start Initiative,” the three new schools were L.B. Landry High School, Lake Area High School, and Langston Hughes Elementary, and the two renovations were Fannie C. Williams Elementary and Andrew Wilson Elementary.

And while BESE member Jane Smith, who toured RSD schools in August 2014, referred to these few newly constructed, RSD showcase schools as “Taj Mahals,” she also noticed cracks climbing the walls in the stairwell at one school

As part of an ongoing exchange regarding RSD rebuilding, on June 27, 2013, Quatrevaux registered his concerns with White and BESE regarding RSD’s paying the construction project manager, Jacobs CSRS of Poydras Street in New Orleans, for oversight of work that was not completed in relation to a 2007 contract between Jacobs CSRS and RSD.

Nevertheless, despite its not even completing work related to the first contract, Jacobs CSRS was awarded a second and a third contract. Thus, Jacobs CSRS had three contracts with RSD, each for three years, beginning in 2007 and ending in 2016.

Quatrevaux took issue with Jacobs CSRS being paid to oversee RSD school construction and renovation that did not happen.

Both White and BESE have ignored Quatrevaux’s concerns. Neither White nor BESE has intervened, and now, RSD has awarded Jacobs CSRS a third opportunity to dip into FEMA and other RSD construction funds in order to manage a “master plan” that pro-charter Cowen laments is short on money.

Here are some excerpts from Quatrevaux’s June 27, 2013 letter to White, which was copied to BESE:

“Dear Mr. White: 

The principal disagreement involves compensation to the Project Manager/Construction Manager, Jacobs CSRS, for services delivered from November 30, 2007 through march 31, 2013. The RSD entered into two contracts for PM/CM services that appear to favor the contractor.  We found that the compensation to the PM/CM remained lose to the contracted amount while the amount of rebuilding in dollar terms was greatly reduced.

The PM/CM received $18,189,198 for its services in accordance with the 2007 contract. The contract related that the professional fee was for managing the completion of 13 newly constructed or major renovations plus nine other schools estimated to be in construction at the end of the 2007 contract. The estimated cost of rebuilding work in the contract was $483,930,344.

By the end of the contract, the PM/CM had managed the completion of five new or major renovated schools and 11 major or minor demolition projects. Only $231,922,820, or 48 percent, of the estimated $483,930,344 work was actually completed, yet the PM/CM was paid the entire contracted amount of $18,189,198.”

Got that? Jacobs CSRS received full payment despite having to manage only half of the contracted work.

Continuing with Quatrevaux’s concerns about the 2010 RSD-Jacobs CSRS contract, which is even more of a joke than the 2007 contract outcome:

“The 2010 contract called for the PM/CM to be compensated $26,994,177 for its services. The original contract also stipulated that the professional fee was for: managing the completion of 22 newly constructed or major renovations and 70 minor school renovations; seven demolitions of campuses; mothballing nine historic school buildings; and dismantling or relocating of five temporary education facilities. The estimated cost of rebuilding work in the contract was $983,487,533.

Amendment #3 to the contract was executed April 2012 and increased compensation to the PM/CM by $7,899,903 (29 percent) to a total of $34,894,080. At the same time, the amendment reduced the estimated value of work from $983,487,533 to $432,840,524, a 56 percent reduction.”

Less Work, More Pay

How’s that for a clincher? The dollar value of the oversight decreases by over half (which means a lot less work is being done, so there’s substantially less to “oversee”), yet Jacobs CSRS gets a raise.

And guess what? Only half of the amended 2010 contracted work for $432,840,524 was completed– yet Quatrevaux estimates that Jacobs CSRS was compensated 74 percent, or $25,735,412, for overseeing the outcome of the amended 2010 contract.

In other words, first, in 2010, Jacobs CSRS was to be paid $27 million to manage RSD improvements totaling just shy of one billion dollars. Then, in the end (March 2013), Jacobs was paid roughly $26 million for overseeing improvements totaling one-fourth of the original dollar amount.

In his June 27, 2013 letter to White, Quatrevaux notes the following regarding the 2007 and 2010 contracts combined:

“…RSD management should have realized that the PM/CM would require fewer professional staff after the rebuilding program was slowed by two-thirds from its original estimated value. Within the scope of our review, RSD continued to pay for PM/CM services that were underutilized without altering contract language to permit for variations, delays or changes within the building program. …

The failure to amend the 2007 contract to reduce the professional services fee when only 48 percent of the construction value was completed may have cost taxpayers an estimated $9,472,055 for services not required. The failure to amend the 2010 contract when the value of completed construction projects was reduced by 56 percent may have cost taxpayers an estimated $23,207,386 for services not required.”

So, Jacobs CSRS is getting paid for not working. But there is more:

White and RSD (and BESE, via its refusal to act) appear to be fine with allowing the RSD schools’ construction company to hire its own concrete testing firm. Quatrevaux shows this for the nonsense that it is by referring to a case of concrete testing fraud in New York where the construction company hired the concrete testing firm as opposed to an independent third party firm being brought in to test  the strength of the steel and concrete being used in construction projects.

“I advised your predecessor at RSD (Paul Vallas) that a criminal prosecution in New York City revealed that the construction company had colluded with the independent concrete testing firm to falsify the results of concrete tests at 117 sites in Manhattan. Those sites included the base of the Freedom Tower, Yankee Stadium and the Second Avenue Subway station. The faulty concrete that threatened the structural integrity of them was replaced at considerable expense.

The state legislative auditor reported in 2012 that RSD allowed the construction company to hire the concrete testing firm, and recommended that a third-party firm conduct the tests. The RSD did not accept the recommendation. On January 30,2013, the OIG (Office of Inspector General) advised the RSD that allowing the construction company to select a testing firm was a poor practice and recommended independent concrete testing (attached). The RSD never responded.

I urge you to reconsider what is an invitation for fraud by substitution of inferior goods, a fraud that could threaten the structural integrity of the buildings that serve our children.”

The 2012 Legislative Auditor’s report on RSD construction can be found at https://app1.lla.state.la.us/PublicReports.nsf/989452071AA2634486257A1B004E9A3E/$FILE/0002AD55.pdf. Pages 4 and 5 offer details on substandard concrete samples, unqualified testing, and RSD refusal to directly hire testing agencies and instead allowing the construction company to do its own quality control hiring.

In the closing of his June 27, 2013, letter to White, Quatrevaux offers this suggestion to a man who defies anything remotely resembling oversight:

“I recommend you consider ending the reliance on a contractor to protect the state’s interests. In addition, you may wish to consider establishing an Inspector General for the Department of Education.”

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