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Fixing Schools is a Broken Process

DOE hired consultants, who supervised contractors, who supervised other contractors, who supervised subcontractors, who actually did the repairs

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As the report notes, the department – in particular, the Office of School Facilities, which is supposed to oversee construction and maintenance – appears to have outsourced its fundamental responsibilities. Instead, its elaborate system of contracts “provides consultants with the ability to monitor each other, review each other’s proposals, negotiate fees and modifications with each other, and evaluate each other’s performance, all at the department’s expense.” By surrendering these functions, DOE loses some of its most important tools for preventing fraud and abuse. It also exposes itself to a kind of Alice in Wonderland version of procurement.

Some of the effects are outrageous. For example, in DOE’s upside-down world of contracting, it is the construction-management consultants, rather than the department, who determine which projects at each school will be funded, the timetable for the work and how much the construction managers will be paid. In addition, the program-management consultant appears to exercise “excessive control” over contracting: negotiating fees, making award decisions, drafting documents and even directing department staff. At one point, the program-management consultant was allowed to submit a proposal on a construction-management contract, which would have put the company in charge of supervising itself. Under this system, it’s impossible to assure a competitive bidding process or to determine whether the state is getting good value for its money.

To understand how the department got to this point, we have to back up a bit. Although DOE has always handled some procurement, historically the Department of Accounting and General Services was in charge of procuring construction, repairs and maintenance. For years, DOE officials complained that this arrangement was dysfunctional. In 2004, then-superintendent Pat Hamamoto successfully lobbied the Legislature to move this procurement to DOE as well.

The irony is that moving procurement from DAGS to DOE hardly changed anything. For example, DOE did not have staff to handle the increased workload; so more than 200 DAGS employees – nearly all of those who formerly handled DOE procurement – became employees of the DOE. And because DOE did not have the space to accommodate them, those employees simply remained at their desks at DAGS. Only the names at the top of the procurement chain changed.

Despite the superficial nature of the move, DOE officials still tout its advantages. “It has definitely been a benefit to the DOE to have those functions in-house instead of at DAGS,” says Randy Moore, assistant superintendent of the Office of School Facilities, which is responsible for construction and repairs. However, Moore acknowledges that the change might have been less than expected. “Part of it, in hindsight,” he says, “was that we were able to reduce and pretty much eliminate what had been the historic view on the part of DOE – that all of our problems were DAGS. That ‘us-and-them’ attitude is greatly reduced.” Moore also admits that the old criticisms leveled at DAGS were exaggerated. He notes, “With the benefit of hindsight, DAGS did very good work.”

In contrast, the auditor’s report is highly critical of the Office of School Facilities. Although the department’s handling of management consultants may be the most egregious of its findings, the report offers a litany of detailed accusations. A quick scan of some of its headings is instructive: “Solicitation and selection process manipulated to award contract to predetermined contractor”; “Selected contractor given unfair advantage due to improper communications and apparent bias”; “Recently awarded study contract displays apparent lapses in ethics and judgment”; “Subcontractors are used to evade the procurement process.” The criticisms are so many and so intertwined, it’s hard to keep track.

Interestingly, Moore’s predecessor, former assistant superintendent Rae Loui, seems to be connected to many of the charges leveled in the report. Loui left DOE in December 2005 to become a vice president at M&E Pacific, a long-time contractor at DOE (and the program-management contractor overseeing the Whole School program). The auditor’s report suggests that Loui used her influence with former employees to secure a $300,000 construction-management contract for M&E Pacific in 2006, in violation of statutory standards of conduct. Similarly, officials in the Auxiliary Services Branch of the Office of School Facilities improperly offered Loui advice on how to secure playground equipment projects, providing M&E Pacific with an unfair advantage over other competitors. But Loui is not alone in exploiting her DOE connections; other former employees also seem to have used their relationships to get contracts with the department.

Loui did not respond to our requests for an interview.

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