DUBIOUS LAUSD BIDS; DISTRICT CONTRACTS SKIRT COMPETITION LAWS.

Byline: Terri Hardy Daily News Staff Writer

In a flurry of spending since voters passed a $2.4 billion school repair bond, the LAUSD hired a North Hills company to paint Blythe Elementary School through eight contracts intended for emergency work or small jobs.

The problem: The Reseda elementary school already had been painted inside and out by another company just a year before.

Even the principal was perplexed.

``I don't quite understand how this happened,'' said Principal William Snow.

It is just one example of questionable contracting practices by which the district has avoided laws on competitive bidding by breaking jobs into pieces below the bidding threshold.

District officials defend the practice as the quickest way to repair damage caused by the Northridge Earthquake and also to show the public its bond money is at work.

But the practice has prompted the Los Angeles County District Attorney's Office to launch an inquiry into how the LAUSD has awarded more than $13 million in repair jobs and improvement projects.

And school officials announced Friday that Superintendent Ruben Zacarias has ordered a major accounting firm to audit all construction contracts awarded since voters approved Proposition BB in April.

A Daily News examination of these informal contracts, known as ``B letters,'' showed the process has significantly driven up costs. Interviews and a review of district documents show the use of B contracts is widespread - more than 3,000 have been issued for work ranging from painting to security bars to air conditioning.

Alarmed by the sheer volume of the B contracts and lack of monitoring to prevent shoddy and overpriced work, the Proposition BB Blue Ribbon Citizens Oversight Committee has demanded that the LAUSD re-examine the process.

``The whole system is being violated,'' said Steve Soboroff, senior aide to Mayor Richard Riordan and chairman of the BB watchdog group.

``The concern is that problems are systemic. How many B letters have resulted in inferior work for too much money?''

Appointed by the LAUSD to oversee painting work, the Southern California Painters and Allied Trades District Council 36 was so concerned that it filed a lawsuit in an effort to stop the granting of B contracts. The suit contends the district has used the B contracts as a way of avoiding paying prevailing wages.

``There is something fishy going on at the LAUSD,'' said Grant Mitchell, executive director of the trade council.

District officials said in an interview last week that they have legally used the B contracts as an expeditious and less expensive way to fix earthquake damage and show Proposition BB dollars are at work.

``The public, our customers, would expect nothing less,'' said Rich Mason, the LAUSD's general counsel. ``It would be expected of us to expedite work and not throw at our customers that we've got six months of red tape before we can finish the job.''

However, Tim Lynch, deputy controller for Los Angeles and vice chairman of the BB watchdog panel said the district misused the B contract process by awarding contracts that should have been formally put to bid.

``Rules matter and should be enforced,'' he said. ``Competitive bidding guarantees an open process and gets the best price.''

The Los Angeles Board of Education must approve all B contracts, which are passed to them by employees in the maintenance and operations division.

School board President Julie Korenstein, who represents the Valley, said she will not sign any more B contracts until stricter controls are in place.

``I'm uncomfortable voting on this until I know they've tightened up the measures used to issue these contracts,'' she said.

Patterns emerge

Two patterns emerged from the review of district documents on contracts:

In the first scenario, a formal contract is issued, sometimes for an unusually low bid. Then, multiple B contracts are issued for work on the same campus - and often to the original contractor.

At a school in Marina Del Rey, a formal painting contract was awarded for $49,000 to a company that submitted the lowest bid. Within four months, the same company was granted several B contracts for the same campus, boosting the cost of the project by $95,000.

Under the second pattern, the district splits a single, large repair job into smaller B contracts, which do not require competitive bidding and advertising.

The B contracts are awarded through employees in the district's maintenance and operation divisions. They are only required to obtain two cost estimates from approved contractors, either by telephone or through sealed bid, and the lowest bidder receives the award. These contracts are for a fixed amount and have a limit of $15,000 for painting jobs and $50,000 for other repairs.

`Bid splitting'

In both patterns, building industry experts and others believe the district is ``bid splitting,'' a process that is illegal if it is done to skirt competitive bidding.

``Splitting is against the rules and shouldn't be condoned,'' said the BB committee's Lynch. ``There appears to be a pattern within the LAUSD of abusing the current system.''

California's Public Contract Code makes it clear that informal bidding can be used by school districts in an emergency or for small repairs.

However, it warns, ``It shall be unlawful to split or separate into smaller work orders or projects any work, project, service or purchase for the purpose of evading the provisions of this article requiring contracting after competitive bidding.''

Mason said the district's interpretation of the Contracts Code allows them to issue B letters at a school campus ``building by building.''

Although a school's aggregate painting costs could be for hundreds of thousands of dollars, Mason said he believes the district can issue B contracts because each building's job is small.

``This does not constitute bid splitting,'' he said.

Beth Louargand, general manager of facilities services, said an example of bid splitting would be ``painting a big auditorium and issuing a B letter for the left wall and another B letter for the right wall.''

The LAUSD began stepping up its use of B letters after the Northridge Earthquake when there was a need to work fast, Louargand said.

District Attorney inquiry

The Daily News reported this month that the District Attorney had undertaken an inquiry into how the contracts were granted. In December, the District Attorney's Office seized several B letter contracts from LAUSD files, a school official said.

Still, the investigation is in its ``very preliminary stages,'' according to district attorney spokeswoman Sandi Gibbons. She added that the district was cooperating fully and is ``the potential victim.''

Sources said the district attorney's inquiry is focusing on the site-by-site awarding of B painting contracts through the technical services unit.

Since voters passed Proposition BB in April, more than 25 percent of painting jobs - $1.8 million worth - have been issued through B contracts, said LAUSD spokesman Erik Nasarenko.

Five senior painters in the technical services unit were empowered to determine which type of contracts to issue. The same five employees awarded the bids, Nasarenko said.

No other oversight measures by the district were in place, except to ensure jobs were paid with the correct funding source, Nasarenko said.

``Obviously, there was a level of discretion with the paint seniors, and that is an issue the district needs to review and possibly institute changes,'' Nasarenko said.

Employees in the technical services unit could not be reached for comment.

District records show a few companies got a substantial portion of painting jobs.

Greg Quinn, executive director of the Los Angeles County Painting and Decorating Contractors Association, said they've detected the same pattern.

``The same companies keep getting the vast majority of the work - it always raises an eyebrow that something is not right,'' Quinn said.

Inspectors from the painting trades council have turned over their information to the District Attorney's Office, including evidence they say shows the LAUSD used B contracts to skirt the prevailing wage laws. Such contracts do not require companies to pay prevailing wages.

Dick Slawson, executive secretary of the trades council and a member of the BB committee, said the public is paying the price for B letters.

``Again and again, you see big jobs broken up into small ones,'' Slawson said. ``It would not have been burdensome or outlandish to put them together and competitively bid the package.''

Contractors who have been awarded many of the LAUSD contracts say allegations of favoritism and shoddy work are the trade council's attempts to promote union-only work.

``The people making complaints are the union groups. They push us into the corner and try to unionize us,'' said Damian Hadjidamianou, owner of Majestic Painting and Decorating, which has received many of the technical services contracts.

Others frequently awarded contracts are Piana Construction & Painting Inc. in North Hills, and Prime Painting and Decorating in Northridge.

Bobby Tsangaris, treasurer of Prime Painting and Decorating, said his company captures many bids because they are competitive and professional.

Prime's vice president, Peter Adamopoulos, said they're able to keep their costs down for B contract jobs because they aren't required to pay their

workers the prevailing wage.