District Favors Firm It Faulted

Los Angeles school officials are proposing that $33 million in contracts be awarded to a joint venture that was criticized two years ago for letting the management costs for campus repairs soar. In addition, one firm in that joint venture recently was dismissed from a large school modernization job in Maryland amid complaints of lax supervision.

Three contracts on the Los Angeles Unified School District board’s agenda today would go to the joint venture of 3DInternational Inc. and URS Corp. to help manage school construction projects that will be financed by state and local bonds. The firm, 3D/I-URS, is one of 21 being recommended to share an overall $230 million in contracts to manage the modernization of existing schools and construction of 85 new ones in the Los Angeles district.

In 2000, a predecessor of the 3D/I-URS joint venture faced severe criticism for its management of thousands of repair and construction projects in the Los Angeles district. The problems culminated in the dismissal of six members of the firm’s management team after the district complained that it was overstaffed.

Last month, the Baltimore County school system, which covers a suburban area, terminated a contract with Houston-based 3D/I Inc. to supervise construction at 46 schools. The company, which received a settlement, had completed more than $6 million worth of work under what was to have been a $15-million contract in Maryland.

Officials of the Los Angeles district say they did not know of the Maryland situation. They said they selected 3D/I-URS, along with the other 20 firms up for the contracts, because they did well in the recent bidding process. The district said it resolved past problems with the 3D/I joint venture by handpicking the best of its people for their technical skills and managing them directly, as it would under the new contract.

“We are hiring individuals,” said Kathi Littmann, the district’s head of new school construction. “The folks I have here from that firm now are just some of the best in the industry.” She said some of the problems in the past resulted from the district’s poor supervision, not from wrongdoing by the firm.

Officials of 3D/I in Los Angeles did not comment directly on the joint venture’s previous contracts, but said its relationship with the Los Angeles district has dramatically improved since construction professionals, instead of educators, have come to run the district’s facilities division. For the upcoming contracts, resumes of his employees were scrutinized more closely than any time in his 40-year career, said Joseph Scarano, regional manager for 3D/I in Los Angeles.

Regarding the company’s problems in Baltimore County, Scarano said the separation was mutual and that a settlement included “an awful lot of money” that the company was owed.

“Like any big firm, you are going to have situations with certain clients that don’t work out the way we would like them to work out,” Scarano said.

The Los Angeles district’s staff recommendation for the contract has incensed critics who think the district lacks adequate internal controls to oversee a multibillion-dollar construction program.

“This has the appearance of an impropriety,” said school district watchdog Gene Krischer at a recent meeting of the citizen committee that oversees the bond project. Krischer has filed a lawsuit on behalf of the district seeking to recover millions of dollars from the previous 3D/I joint venture and others for air-conditioning equipment that he alleged was too expensive and exceeded noise specifications.

He said the firm was found to have charged the district “exorbitant fees, and they were found to be incompetent.”

District officials said they could not have excluded the joint venture, which has had a name change since one partner was purchased by another company. They stress that the previous joint venture was not terminated in Los Angeles and that 3D/I’s termination in Maryland came after the review for the current Los Angeles contract was completed.

“We developed with this procurement, which was potentially controversial, a system that was very fair, very well structured, very well executed and largely, if not entirely, without outside intervention,” said Jim McConnell, L.A. Unified’s chief facilities executive.

The chairman of the citizen panel that oversees the district’s bond program said he had some concerns about hiring a company that didn’t perform well in the past, but that the committee checked out the 3D/I-URS team and believes it will do a good job.

“Based on the advice I’ve received, the team that is doing this contract is a nationally respected team that can get the job done,” said Proposition BB committee Chairman Robert Garcia. “On that basis, it can be approved.”

The contracts must be in place by Sunday, when current contracts for bond managers expire.

The school board’s vote on construction management contracts comes at a time when district officials are still deciding how to set up internal controls to maintain integrity in the contracting process.

In a recent memo, Inspector General Don Mullinax recommended that the board authorize his office to conduct a variety of checks including audits of the applicants before contracts are awarded to “determine the reliability, propriety and accuracy of contractors’ estimating, accounting, internal control and other systems.”

The board has not acted on his recommendation, Mullinax said.

Had he been asked, Mullinax said, he would have done a pre-contract audit on the construction management bidders. One of his staff members observed the bidding process, but his office was not asked for a pre-contract analysis.

The joint venture did not list the Baltimore County schools among its references, said Robert Moeller, who led the three-member panel that reviewed applicants for managing new school construction.

Moeller said the panel called references but did not canvass news media sources for any disputes involving the applicants. The Maryland school district’s dissatisfaction with 3D/I surfaced in March in the Baltimore Sun’s report on the possible exposure at two elementary schools to asbestos particles released during construction.

School officials blamed an industrial hygienist from the company for misjudging the severity of an asbestos release at one of the schools, causing students and parents to be exposed to the cancer-causing material but not in dangerous quantities.

Donald F. Krempel, executive director of facilities, was quoted in the Baltimore Sun as saying, “They [3D/I] don’t always have, in my judgment, the necessary talent and experience in their project managers.”

Krempel was not available Monday. Richard Cassell, head of engineering and construction for the Baltimore County schools, said the terms of the termination agreement prohibit him from commenting on 3D/I’s performance.

“Let’s just say they have been replaced with other firms,” Cassell said. “There were many reasons for it.”

After L.A. district voters approved a $2.4-billion bond in 1997, the district hired 3D/I-O’Brien Kreitzberg, a joint venture in which 3D/I was a principal, to oversee 10 outside project management firms that were responsible for 12,000 repair and modernization projects at schools.

URS Corp. purchased the parent company of O’Brien Kreitzberg Inc. in 1999.

The joint venture’s problems culminated in the winter of 2000, when then-interim Supt. Ramon C. Cortines fired six members of its management team. Cortines said at the time that his decision was precipitated by a threat made by the program manager from the joint venture against the district’s facilities chief, Lynn Roberts, who had criticized the firm for overstaffing.

A month later, an audit by the district inspector general’s office found that fees charged by 3DI/I-O’Brien Kreitzberg and the 10 management firms it was supervising averaged 20% of project costs, well above the industry standard of from 4% to 11%.

Mullinax did not blame the companies. Instead, he pointed to a variety of possible causes, including the rush to get projects started, repeated staff changes and a lack of teamwork between the district and its outside managers.