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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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The auditor’s report lays the blame for all these abuses squarely at Moore’s feet. “The lax tone from the top has unintentionally set the stage for a culture of disregard of procurement rules in the Office of School Facilities. The assistant superintendent of the Office of School Facilities exemplifies the attitude that public procurement rules just get in the way of doing the work.” In other words, Moore either invited misconduct by his outspoken disdain for procurement rules, or he tacitly encouraged a climate of “anything goes” by turning a blind eye to shady practices so long as they “got things done.”

Moore takes the criticism calmly – particularly criticism of department outsourcing. “That occurred because when all this work transferred over from DAGS. The number of people that transferred was not commensurate with the volume of work.” He adds, “Actually, our objective is to staff on a permanent basis for the steady level of work and to contract out for the peaks. And the DAGS people came over during one of those peaks. By the end of the calendar year, that level will be way down and we will no longer be contracting for those services. Actually, we haven’t had any contracts for that in a fairly long time; we’re just working off the old contracts.”

Former superintendent Pat Hamamoto responds to the accusations in the auditor’s report with much the same tone as Moore: What about Loui’s undue influence? “I think there were instances in which it didn’t come out the way it should have.” Have any employees been disciplined? “That’s a personnel matter; it’s confidential.” What has been the response to the report? “I think most of the findings, we took care of them.” It’s as if DOE officials read a different report than the one Higa wrote. Nonetheless, Hamamoto referred the auditor’s report to the Criminal Division of the Office of the Attorney General.

Of course, not everyone believes that the state auditor’s office is the last word in evaluating the effectiveness of government programs. For example, former state highway administrator Pericles Manthos (who had his own run-in with Higa several years ago) points out that the use of program management consultants isn’t unique to Hawaii. “Program management is used in a lot of Mainland states,” he says, “because they just don’t have the manpower, and they haven’t for years.” In addition, Manthos isn’t sure the “bottom line” should be measured by what’s cheapest for the agency. “It should be what’s best for the public.” By that measure, who’s to say expedience isn’t as important as good value and fair play? But Manthos’ primary complaint is that, while an auditor might be good at crunching numbers, that doesn’t mean she can assess complicated subjects like construction or engineering. “The financial finding is important,” Manthos says, “but it’s not the only thing.”

Former superintendent Hamamoto agrees. “Let me explain why,” she says. “When the auditor audits us, there are some considerations that we look at. For example, did she compare us to a large company? Did she consider manpower? etc. When she looks at it from a process standpoint, then I can understand it and put substance to what she says. But, when they get technical about either the way construction contractors are, or make broad generalized statements, yes, we do get concerned. Are they using people with expertise, who understand what’s going on, when they make those audit findings?”

For Higa, procurement rules are simply the standards of good government. “There’s something called a fraud triangle,” she says. On a scrap of paper, she sketches out an equilateral triangle, labeling the sides: opportunity, pressure and rationalization. Opportunity, she says, arises wherever there is a climate of lax enforcement. Pressure can be as simple as “I can’t pay my mortgage this month.” Rationalization, she notes, often takes the form of truisms: “Everyone does it” or “This benefits everyone.” Higa pauses and taps gently on this last leg for emphasis.

“And this is the classic rationalization,” she says. “ ‘We’re doing it for the children.’ ”

What Should Be Done

Included in the state auditor’s report on DOE’s procurement system is a long list of recommendations. Here is a selection:

The superintendent should review the use and structure of $21 million in project and construction management contracts for the Classroom Renovation Project, focusing on

  1. Inappropriate involvement and influence of project management consultants in awarding these contracts.
  2. Whether these management functions qualify as professional services and should be performed
    in-house.
  3. Why consultants were able to influence/determine the contract and program budgets.
  4. Why consultants were responsible for determining scope, and ultimately compensation, of their own contracts.
  5. Why consultants were provided with so much authority.
  6. Determining whether these contracts violated the procurement code by allowing consultants to determine their own scopes and fees.

For the full list of recommendations, and to read the report in its entirety, visit www.state.hi.us/auditor/Years/2009reports.htm

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