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As Legislature mulls funding package, ODOT doesn't expect to hire needed engineering and oversight staff

COURTESY OF ODOT - ODOT is seeking hundreds of millions in increased funding, but lacks a plan to oversee the work and combat waste. As Gov. Kate Brown and lawmakers push to give hundreds of millions of dollars in new taxes and fees to the Oregon Department of Transportation to improve highways and bridges, there still is no plan for precisely how that money would be spent.

It's a crucial point because, as ODOT managers openly concede, they don't have enough staff to oversee the amount of work they would have under a new funding package. That means contracting out the oversight work, a practice that has led to waste and poorly constructed projects for ODOT in the past.

So how would ODOT avoid repeating its earlier mistakes? How would it hire companies other than those that — as a top ODOT manager told auditors years ago — did "crappy, crappy" work on the last big ODOT bridge program?

Paul Mather, ODOT's highway administration administrator, said late last month that how the funding package would be spent is up to the Legislature, and ODOT needs "something more concrete put on the table" to react.

"You can't really design a delivery model until you know what the expectations are," he said of the department's need for direction from the Legislature. "They're not ready for that conversation yet. They're still trying to figure out their approach to it. But when the time comes, we'll be ready to inform that conversation."

Rep. Andy Olson, R-Albany, headed a five-lawmaker group that looked at how to ensure accountability of new ODOT spending and recently issued recommendations such as developing better contract oversight. He said it's important that voters know the state is getting the "best bang for its buck," adding, "If you do not have the accountability measures in there, this isn't going to work."

And the state Department of Administrative Services has issued recommendations that ODOT spend a year preparing a plan to oversee the work — sparking criticism from some lawmakers who say that plan should have been ready by now.

The main problem: to deal with the massive influx of new funding — as much as $300 million a year, according to one legislative committee's recommendation — ODOT needs more staff. But agency managers say that is highly unlikely to happen.

"We already know the answer right now," said ODOT state bridge engineer Bruce Johnson. "If there's an increase in highway funding, would there be a requisite increase in governance staff? In other words, would we add people to our staff in order to handle the increased workload? The answer to that is 'no,' as we understand it right now. So the only way we could do it is to outsource."

He was echoed by another top ODOT manager who cited the cost of hiring permanent employees.

Contracting out requires staff for oversight

ODOT used to handle most of the engineering and oversight of new projects in-house. That changed in 2003, when Republicans in the Legislature mandated the department start contracting out in exchange for a funding package to build and retrofit bridges — a massive program that was sold as creating jobs.

Oregon is still paying for that short-term economic boost. The massive amount of bond funds spent on those and other projects now means that ODOT spends a staggering portion of its state highway fund revenue on debt service — more than $200 million a year. Because it is still paying off debts from past work, its ability to pay employees to oversee new work has become dangerously low.

A 2014 secretary of state audit found the situation to be dire.

"More than one-third of the highways work force is eligible for retirement in the next five years … Insufficient numbers of experienced personnel in the design and inspection functions could delay projects, increase their costs, and reduce contractor oversight, with the risk of lower quality of construction."

Since then, the problem at ODOT hasn't been fixed, according to a report issued by consultants who work closely with ODOT, the Oregon chapter of the American Council of Engineering Companies.

"In anticipation of increased outsourcing, staffing resources need to be added within ODOT to support contracting/procurement," said the report, which looked at ODOT's readiness for a funding package. "ODOT needs strong technical skills and strong project management skills to protect the transportation investment, exercise stewardship, and be a sustainable organization to successfully deliver the program."

The $2.5 billion Oregon Transportation Investment Act of 2003 is frequently praised by ODOT Director Matt Garrett as an unparalleled success.

But it also shows the potential pitfalls of contracting out. The law provided bond funding to repair or replace hundreds of aging bridges statewide, using a massive degree of contracting out.

The program hired two firms to oversee contracting out of design, project management and inspectors, using techniques like the "design-build" method in which the state leaves oversight up to the contractors.

Outsourcing led to cronyism

But internal documents show some ODOT officials suspected the program suffered from cronyism, hiring firms mainly because they'd hired former ODOT officials.

And others questioned the quality of oversight.

In 2010, a top department official, contracting engineer Bob Pappe, told internal ODOT auditors that the private firms used to substitute for ODOT employees and oversee the projects did "crappy, crappy" work, according to the auditors' summary of the interview. "He named several firms that are known to be bad and said the list is a mile long. And ODOT keeps hiring them."

Pappe called Delcan, another outside company hired to oversee bridge contractors' work to ensure quality, "worthless," according to the ODOT auditors. "They haven't found anything important," he said.

Delcan no longer exists as an independent company, having been purchased in 2014.

Defective bridge work

ODOT engineers in 2013 complained to auditors that some bridges built using consultant inspectors were major failures, documents show. One bridge deck needed to be replaced after one year, and another likely will last only 20 years, not the 60 to 70 years hoped, they said.

But Mather, the top ODOT highway official, recently defended the ODOT oversight process used in the bridge program and praised Delcan's work overseeing bridge quality control.

"We were pleased with their work," he said.

He said ODOT has learned important lessons from the Oregon Transportation Investment Act as well as from the Pioneer Mountain Eddyville project.

Problems with design-build

The Pioneer Mountain project, intended to straighten a ten-mile stretch of highway while building several bridges, used the "design-build" method that was supposed to shift costs to the contractor if a project went bad.

The project went bad, and eventually cost $365 million, far more than the $110 million initially estimated. ODOT paid for the overrun, though, not the contractor.

Other design-build projects had problems, too. A consultant inspector on the Sutherlin-Roseburg segment of Interstate 5 in 2005 sent an email to ODOT warning that his employer was refusing to make the contractor do badly needed quality control testing. "If this email gets to the wrong people, I'm toast," he added.

Five days later, threatened with firing, he quit. In 2011 he told the Bend Bulletin newspaper that the design-build method is like "the fox guarding the henhouse."

ODOT officials say design-build is one of the options ODOT would be looking at to contract out the new work.

Johnson, the state bridge engineer, said the state doesn't have much choice, since ODOT won't be adding staff to provide oversight using traditional contracting.

"We actually can't handle it if we get the kind of funding package that we think," he said. "So there probably would be a design-build program to try to accelerate this work if there is more funding."

Mather, the highway administrator, expressed confidence ODOT is up to the job, and stressed that the details of the outsourcing system would be different than the department used in the past.

"We have been watching what they do in Washington, watching what they do in Nevada, Utah, other approaches," he said. "It's not going to be an off-the-shelf model (of oversight) but we will be stealing ideas from other (states)."

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