FIRM GOUGED MTA, AUDIT SHOWS.

Byline: David Bloom Daily News Staff Writer

The engineering consortium that designs MTA rail projects charges nearly 60 percent more than the standard rate and has experienced huge cost overruns, yet faces little accountability or oversight, according to an audit released Tuesday.

The audit by the Arthur Andersen accounting firm found that Engineering Management Consultants charges 11 percent of the contract costs for rail projects plus a guaranteed profit.

That's about 57 percent more than the 7 percent rate charged by other engineering companies to other transit agencies around the country, the audit said.

The audit also said the Metropolitan Transportation Authority's oversight of EMC is so ``dysfunctional'' that it effectively can't measure how fast, cheaply or well EMC performs its work.

EMC officials could not be reached for comment.

``This is a scathing report that confirms some of my worst fears - that there is lax oversight at the MTA and too little accountability from the EMC,'' said Los Angeles County Supervisor Gloria Molina, who requested the audit after a sinkhole closed Metro Red Line construction beneath Hollywood Boulevard in June.

It was the latest in a series of construction mishaps involving projects designed by EMC, a consortium of engineering firms led by Parsons, Brinckerhoff, Quade & Douglas and Daniel, Mann, Johnson & Mendenhall.

The consortium has provided almost all design services for MTA rail projects, including the Red Line's construction into North Hollywood, since 1992.

The audit also found that EMC does a poor job preventing cost overruns, which have run as high as 110 percent of a project's cost, and has little incentive to do so because of the way it is paid for its work.

The oversight is so bad that if the agency fired EMC, the MTA probably would lose any court suit because it couldn't document whether the consortium had met contract requirements, the audit says.

Furthermore, the agency is so reliant on the EMC that it would be ``difficult, if not impossible, to manage such changes without a severe disruption to the transit rail program,'' the audit says.

The report calls for hiring outside consultants to review EMC designs, changing the ``cost-plus'' payment system to a fixed fee that provides incentives for savings and holding MTA and EMC managers accountable for contract performance.

Joseph Drew, the MTA's chief executive officer, said in a release that he plans to overhaul the agency's contracting and procurement operations and create an evaluation system that will deal with many of the concerns raised in the Andersen report.

Larry Zarian of Glendale, the MTA board's chairman, welcomed the report as a useful tool for continuing reform of the troubled agency.

``We have a good program, with new leadership, but we can improve and these recommendations will help us do that,'' Zarian said.

Arthur Andersen also completed a second audit that followed up on its April 1995 study of the agency's flawed construction operations. The second report, though not publicly available yet, said some important reforms still need to be implemented in construction, including a reduction in ``micro-management'' by the MTA board.