'PAY-TO-PLAY' FIX AFFECTS OVERSIGHT ETHICAL VIGILANCE REQUIRES BALANCE.

Byline: Dan Laidman Staff Writer

Stung by City Hall ``pay-to-play'' scandals, Los Angeles officials sought strict ethics reforms to distance political appointees from handling the contracting process and the hundreds of millions of dollars Los Angeles doles out every year.

But as Mayor Antonio Villaraigosa's appointees to three of the most powerful commissions have settled into their roles, the very reforms designed to prevent preferential backroom deals are hindering their goal of ensuring that taxpayer dollars are being well spent.

``The numbers are so huge, and these are public dollars,'' said David Nahai, vice chairman of the Board of Water and Power Commissioners. ``We have to be very careful how they're spent, and at the same time we have to have a bit of a balancing act.''

The dynamic has been most visible in the city's three proprietary agencies that spend the bulk of contracting money and run the Port of Los Angeles, the four city-owned airports and the Department of Water and Power, the nation's largest municipal utility.

The DWP spends nearly $500 million a year on contracts, and board appointees have aggressively signaled their intent to closely scrutinize the contracting process after a commissioner resigned in 2004 and executives of a major contractor were indicted on charges related to billing.

``I think we view contracts as a central instrument for implementing board policy, and that in and of itself necessitates a very close, cautious and vigilant approach,'' Nahai said.

But the ambitious goal of scrutinizing the utility's spending ran up against the limitations of the DWP board soon after its new members were sworn in last September.

``We were presented with a number of contracts with the expectation on the part of staff that we would simply rubber-stamp them,'' Nahai said. ``It appeared to us - and I voiced this concern - that it really not only emasculated the commission, but it really was a betrayal of the very mandate and role that is contemplated for the commission, which is one of setting direction and oversight and determining the agenda of the department.''

Commissioner Nick Patsaouras said that, because the board was seeing contracts only at the very end of the process, he felt he was constantly being told to ``act today or the world will come to an end.''

The DWP board moved to allow commissioners to get involved earlier in the contracting process - while still not tinkering with the selection of vendors - and recently adopted a policy in which many contracts will go to a subcommittee for extensive review before they go out to bid.

At public meetings, a pair of commissioners now will consider most contracts over $150,000 and all contracts involving controversial issues, including Owens Valley environmental work, renewable energy and revenue bonds.

The commissioners plan to focus on the DWP's outreach efforts to small and minority-owned businesses while reviewing the necessity for each contract and setting standards to hold vendors accountable.

``All these questions will be ironed out upfront,'' Patsaouras said.

The plan seems to fit with City Council intention for ethics reforms, Councilwoman Wendy Greuel said. The east San Fernando Valley representative pushed the changes while chairing the council's Audits and Governmental Efficiency Committee.

``What we tried to do was (give) the contracting process the kind of balance that gave the commissioners a role to play but not to have them developing backroom deals,'' Greuel said. ``I approve of the DWP commissioners' asking questions and probing and making sure that the contracts are done in a fair and efficient way, as long as that's a transparent process.''

Both Nahai and Patsaouras, who constitute the DWP contracts panel, said they hope to see other city boards adopt similar policies.

``It enables the commission to set the direction and the course without getting involved in the selection of the particular contracts,'' Nahai said. ``You have control, but at the same time you have the necessary distance so that you can't be accused of the pay-to-play scandals.''

The immediate impetus for the reforms that changed the role of commissioners was a 2003 audit by Controller Laura Chick, who took aim at contracting procedures at Los Angeles World Airports, which is the city's airports agency. An airports commissioner resigned in 2004 amid allegations of pushing a contractor to make campaign contributions.

The airports contracting policy has undergone some change, although there are currently no plans for a dedicated contracts committee like DWP has, said Paul Haney, a spokesman for the LAWA agency.

The airports board did create an ad hoc ethics committee recently, along with an Office of Ethics and Business Conduct.

``The board took this action to support my goal of re-engineering LAWA procedures to ensure ethical behavior at all levels and in all phases of our contracting and contract administration processes,'' Lydia Kennard, executive director of the agency, wrote in a December report to the City Council.

At the Port of Los Angeles, new harbor commissioners also have been navigating the line between scrutinizing contracts and meddling with them.

Villaraigosa's appointee as board president, S. David Freeman, gave a characteristically blunt assessment of the role of commissioners in determining who gets contracts: ``They need to stay the hell out of it.''

Still, when it comes to assessing the necessity and terms of large contracts, Freeman and his colleagues have been aggressive.

They have held lengthy meetings in which board members have grilled both staff members and businesses.

Freeman, a former DWP general manager, pointed to a recent $10 million contract to build a cruise terminal at the port. The board reviewed the deal at the end of the process and opted to delay a decision to do a marketing study first.

The approach has worked so far, Freeman said, although he also notes he likes the approach the DWP board is taking.

``The DWP board has a different set of priorities,'' he said. ``Knock on wood, we haven't seen, as yet, the need for the kind of scrutiny of contracts that they're undergoing, but that's not to say that we won't in the future.''

Dan Laidman, [phone]

dan.laidman(at)dailynews.com