MTA'S MONEY TRAIN; BIG CAMPAIGN DONORS ALL ABOARD FOR $444 MILLION IN CONTRACTS.

Byline: Beth Barrett Daily News Staff Writer

MTA spending - uncontrolled, unmonitored and unaccounted for - drove up the cost of subway and rail construction by $444 million for design, engineering and management provided by firms with close ties to influential political figures, a Daily News investigation has found.

Whether the money was properly spent, stolen or simply squandered will probably never be known because the MTA's oversight has been negligent at best, nonexistent at worst.

Documents obtained from the Metropolitan Transportation Authority under the California Public Records Act show a series of basic failings:

Contracts were awarded without meaningful price tags.

Audits were ignored or, for the last two years, not done at all.

Change orders of up to $100,000 were approved by project managers in the field.

Invoices were poorly recorded.

Contracts earmarked for minorities under affirmative action largely went to a handful of firms.

In the absence of internal controls common in any business or public agency, costs for construction and professional services such as design, engineering and management soared by about $900 million more than the original subway budget established in the mid-1980s, records show.

Nearly half of that - $444 million - went to subway design, engineering and management contractors and subcontractors who have made political contributions of at least $215,164 to MTA board members since 1992.

MTA Inspector General Art Sinai reported last week that the agency's financial controls for years were so weak that they couldn't guarantee against waste, fraud and abuse of taxpayers' money.

Now, MTA officials are trying to audit the spending on professional services contracts but say they cannot account for all the money.

Longtime MTA board member Larry Zarian, the mayor of Glendale, said he asked transit agency officials seven months ago for an accounting of where the money had been spent.

``I didn't get an answer. Everyone sat there in shock,'' Zarian said.

``When I first came on the board and wanted to dissect these cost overruns, the answer was, these were already approved by the staff and we're just sanctioning them - this is life, let it go. A contract would be awarded for $20 million and the cost overrun would be $20 million.''

Board member James Cragin, a Gardena council member, said the MTA board has lost control of its contractors and either should regain it ``or the whole board should resign.''

``When I came on board, the rumor was that the contractors ran the MTA,'' Cragin said. ``As time went on I came to think that was true.''

What the records show

According to a December report prepared for the Federal Transportation Administration, 11 of the 12 professional service contracts to design, engineer and manage the subway grew in cost from an original award value of $227 million to a current value of $670 million - nearly a 200 percent increase.

Most of that cost, $428 million, was in two contracts: one with Engineering Management Consultants in May 1992 to design Metro Rail, and another with Parsons-Dillingham to oversee construction, which includes four contracts signed between 1991 and 1993, the records show.

EMC - whose principals include Parsons Brinckerhoff Quade & Douglas Inc. and Daniel, Mann, Johnson and Mendenhall - has subway and Pasadena rail design work valued at $408 million, the records show.

The dollar amount when the contract was awarded? Zero.

Nor did the contract specify the final scope of the project.

Instead, the board approved 60 contract work orders as the rail projects proceeded.

``As the scope of the rail projects was further defined and/or redefined, the values of the change work orders were modified accordingly,'' the MTA said in a statement released last week in response to questions about EMC.

The giant design consortium - the No. 1 political contributor, giving more than $38,000 to board members, not counting the thousands of dollars doled out by their 86 subcontractors - was paid $117 million in the first years of its contract for subway and Pasadena rail design work, records show.

Today, modifications to those work orders and new ones have raised the total value of EMC's contract to $313 million on the subway alone, the records show.

In addition, EMC's fees for the Pasadena light rail line doubled from $47 million to $95 million, after the original $1 billion design was criticized by an outside panel as being overly elaborate, records show.

``The controls over invoices, which averaged $1.4 million a month, were virtually nonexistent (on Pasadena),'' the MTA inspector general's audit said.

The audit found EMC billed $14 million for ``unidentified subcontractors doing unspecified work'' on Pasadena.

EMC also designed tunnels and station features elsewhere in the rail system that some board members now don't want because of the $30 million price tag.

Top MTA officials say they may never be able to match up EMC's work with payments, citing the complexity of the project and lack of proper oversight.

``I don't know if we can reconcile the difference,'' said Habib Balian, assistant deputy to CEO Julian Burke. ``It started as an open-ended deal. . . . The sheer volume of it makes it more difficult.''

`Nothing to hide'

Marty Rubin, EMC's program director, said the firm can justify every dollar it was paid.

In a brief telephone interview, Rubin said EMC was ``paid for what we do on each work order. Where the money went is subject to audits. We billed in accordance with the contract.

``We have nothing to hide.''

He declined a request for a detailed interview.

Records show EMC paid its subcontractors more than $100 million for work on the subway and Pasadena line - in some cases 10 times what EMC reported it originally would commit to them.

EMC initially reported committing just over $500,000 worth of work to four subcontractors and has since paid them more than $43 million.

The firms - Escudero Fribourg Associates; Jenkins, Gales & Martinez; The Nettleship Group; and Kal Krishnan Consulting Engineers - have made political contributions of more than $21,700 to MTA board members.

Kal Krishnan also gave $5,000 in the summer of 1996 to the nonprofit El Sereno Youth Development Corp., a favorite charity of MTA board member and City Councilman Richard Alatorre, according to records filed with the Internal Revenue Service.

Alatorre's wife, Angie, and a top Kal Krishnan company employee served on the charity's board in 1996, records show.

Alatorre did not return calls.

Jenkins, Gales & Martinez, an engineering and architectural support firm, has been paid more than $10 million on an initial $387,913 subcontracting commitment.

The Los Angeles firm has contributed $16,300 to MTA board members since 1992.

``Our work is proportionate to the amount of work EMC is doing,'' Earl Gales said. ``I don't have an opinion as to why certain costs have escalated.''

Robert Gutierrez, marketing vice president for Kal Krishnan and a close friend and major fund-raiser for Alatorre, said his firm only did what EMC asked.

``We only respond to changes that come in,'' he said. ``We don't dictate. We're the supporting cast.''

Kal Krishnan had an original subway commitment of $156,353 from EMC, but has been paid $5.7 million.

``You have to understand construction design,'' Gutierrez said. ``It's like you paint a bathroom and then you want to change the window, then the faucets. The scope keeps changing. Do you think EMC is going to do more drawings for free?''

Patricia Nettleship, chief executive officer of The Nettleship Group declined to be interviewed. Officials with Escudero Fribourg did not return calls.

`Work not anticipated'

The other prime contractor, Parsons-Dillingham, has a current subway contract that includes $117 million in modifications not in earlier versions. Officials said changes in scope and ``work not anticipated'' were responsible.

Parsons-Dillingham, hired to oversee rail construction, has had its contract revalued by the MTA from $144 million to $261 million.

Contracts for the three subcontractors - Kal Krishnan; Jenkins, Gales & Martinez; and The Nettleship Group - grew from $2.8 million to $52.7 million including work they did for Parsons-Dillingham and other prime contractors.

Parsons-Dillingham joint venture companies have made more than $24,000 in political contributions to MTA board members since 1992, records show.

Chris Dixon, the firm's project manager, said increases reflected ``changes in the scope of services'' and delays.

Dixon defended the contract's flexibility and its performance bonuses.

``I think it's about the only way you can do major new programs,'' he said. ``It's almost impossible to define everything up front.''

New rules

While the truth about where all the MTA money went may never be known, some MTA problems are tackled in an effort to solve the agency's financial crisis.

For instance, fixed fees now are being negotiated into some contracts. JMA Joint Venture, which took $55 million of the North Hollywood construction management work, agreed with the MTA to fix the cost of its contract last year.

``Fixed fee is a good change for the agency,'' said Dennis O'Connor, an executive with CRSS Constructors, a Jacobs Engineering division. ``We're looking at North Hollywood coming in on time and under budget.''

New state laws intended to keep board members from voting for contractors who have contributed heavily to their campaigns went into effect this year.

The agency also is policing itself and has eliminated some practices such as the annual picnic held by EMC and Kal Krishnan for agency staff members, who paid about $5 to attend.

``We don't want to cause the future perception to be other than what it was, and since people are free to make their own perceptions, we don't want to give them a perception to create,'' said Jeffrey Christiansen, the MTA's deputy executive officer in program management.

Turnaround specialist Burke has drawn a line between the MTA's construction staff, which works closely with consultants, and a more independent procurement and estimating division. The authority of project managers to approve change orders of up to $100,000 in the field also has been revoked.

``In an effort to better manage resources and employ proper checks and balances . . . the cost estimating function will transfer from the Construction Division to the Office of the CEO,'' Balian wrote in a Dec. 16 memo.

``It is critical that we ensure that the fair cost estimates produced by this group are done so independently.''

MTA staff have sternly been warned not to recommend subcontractors to contractors, too.

JMA complained that a Kal Krishnan employee was suggested to them on North Hollywood. O'Connor said there were concerns when the firm was added to another team on the Pasadena line.

O'Connor said he would have preferred to give all the work to the original firm, KJM & Associates of Bellevue, Wash.

Instead, Kal Krishnan has been paid about $838,033 as a subcontractor; KJM has been paid about $725,685, according to MTA records.

``I won't speculate on what would have happened if we'd said no to Kal,'' O'Connor said.

KJM's owner, Karen Mask, said she asked why Kal Krishnan was brought in.

``You can read between the lines,'' she said. ``It was nothing the original team couldn't have done.''

RED LINE CONTRACTORS IN THE BLACK

Bay Area Rapid Transit's Heavy Rail (BART) and Los Angeles County Metropolitan Transportation Authority's Subway Program since 1986:

BART

Rail Line Extensions Completed: 3

Miles Completed: 23.4

Budgeted Cost: $1.2 billion

Expenditures to Date: $1.1 billion

Total Percent Increase to Date: - 8 percent

MTA

Rail Lines Completed: 1

Subway Miles Completed: 6.5

Budgeted Cost: $3.4 billion

Expenditures to Date: $4.3 billion

Total Percent Increase to Date: 26 percent

Contracts From an original To the current To the

rose ... value of ... value of... benefit of

19,077%$1,555,455 $312,292,366 EMC

1,460% $42,695 $665,887 IT Corporation

182% $3,800,000 $10,710,000 Fluor Daniel

122% $40,000 $88,966 Law/Crandall

81% $144,380,824 $261,505,058 Parsons-Dillingham

42% $864,075 $1,224,075 High Point Rendel

37% $480,000 $655,475 Tetra Tech

13% $48,556,685 $55,000,000 JMA Joint Venture

13% $491,870 $553,683 METCALF & EDDY

11% $5,302,066 $5,898,396 Enviro-Rail JV

4% $13,046,549 $13,550,483 CH2M Hill 

-1% $8,324,634 $8,270,151 LKG-CMC

Total Increase: 195%

Total original value: $226,884,853

Total current value: $670,414,540

SOURCE: MTA

CAPTION(S):

Box

BOX: RED LINE CONTRACTORS IN THE BLACK (see text)

Bradford Mar / Daily News