MWH Business Practices Haunt Florida Project

In 2004 Cape Coral, Florida, was “the fastest-growing city in the country,” southwest Florida’s News-Press reported, “thousands of new hookups were pushing the city's water and sewer plants toward their limits. MWH mapped out the $469 million plan for the facility expansions and started work in 2006.”
    The city utility expansion program was launched to bring sewer and water services to 10,000 homes in southwest Cape Coral, but audits found that the process wasn’t compliant with state requirements.
    According to the State Attorney General in 2007, the City of Cape Coral may have violated a state law when it negotiated two contracts for major utilities projects. The Attorney General’s opinion addressed issues raised in the state audit concerning utilities operations between Oct. 1, 2000, and March 31, 2005.
    Stated the Attorney General: “Separately negotiating each phase of a multiphase project that has been awarded to a construction manager at risk or program manager at risk does not comply with the plain language or intent of section 287.055(9)(c), Florida Statutes."
    Cape Coral City Manager Terry Stewart responded to the State AG’s comments on the Construction Manager at Risk: “The Attorney General’s opinion may have significant repercussions for communities and agencies beyond the City of Cape Coral…
     “The Attorney General's report said the city was wrong to negotiate the price for complex utilities contracts in phases rather than all at once. The findings could have far-reaching implications that could affect how future utilities projects are bid, how lawsuits are resolved, how quickly the utilities expansion program continues and how much confidence citizens have in the city's government.”
    Added Stewart, “Because of this widespread impact, one option may be to pursue legislation that will clarify the intent of these statutes.”
    Two years later, the project has been stopped, and the March 31, 2009, News-Press reported, “A halt to the billion dollar utility expansion project, stunted population growth and a dismal economy are reasons the city is considering the unprecedented rate increases to pay the bills.
    “Fewer customers are coming online, pushing the cost of facility expansions and design work onto the existing 50,000 rate customers.”
     From the March 26, 2009 News-Press: “City officials say they have no choice. The higher bills are needed to pay for $479 million worth of almost-completed water and sewer facilities and work on future expansion projects that remain in limbo. If the City Council doesn't raise the rates, Cape Coral will default on $315 million worth of bonds, destroying its bond rating -- akin to a credit score -- and leaving the city unable to borrow money.”
     Water and sewer bills could almost double, reported the News-Press, on average 93% over the next five years.
     What happened to the Cape Coral, Florida, utility expansion project should raise eyebrows in Los Osos. Both projects hired MWH for construction management, and now MWH appears twice on the short list for the Los Osos Wastewater Project, for both the collection system and treatment facility.
    If history repeats itself from coast to coast, Los Osos “Prohibition Zone” taxpayers can look down the road to a troubled future of major cost increases, accounting and accountability issues, and, inevitably, based on past experience, higher fees and rates on sewer and water. Has the County learned anything from Cape Coral?
    Said County Council Warren Jensen at the April 7 SLO County Board of Supervisors meeting, when asked if the County had any conflict of interest with MWH: “The mere fact that MWH is a creditor in the Los Osos bankruptcy doesn’t suggest anything particularly sinister. They had a number of creditors when they went into bankruptcy. I just don’t see that that alone has any significance. Now whether there’s some other facts I don’t know…”
 
‘Taken Advantage’
     Councilman Tom Daly believes the City now needs to move ahead with utility expansions, add more customers to the system, and bring the project back under city control, according to the News-Press, “almost a decade after the Cape hired an outside construction management firm to oversee the project.
    "I think people felt like they got taken advantage of with (project manager MWH)," Day told the News Press. "We need to get the profit motive out of the picture."
    But by the time the audit results were complete and MWH could be impacted, it was already too late to shut everything down. Projects in areas known as Southwest 1, 2, 3 and along Pine Island Road in Cape Coral were under construction at the time. Work on the next phase of the project, Southwest 5, was called “too far along” to stop. City council had already approved the start of the next phase before any changes could be made. Work was also under way in Southwest 4. Those lines reportedly will cost each of the area’s nearly 4,000 homeowners $25,000 to $40,000, and the level of outrage in Southwest 4 is running high. Assessments in areas completed earlier fell between $11,000 and $15,000.
    “The council would have to calculate the costs of killing a contract with a firm called MWH Americas to manage the construction phase,” the mayor said.
    Three different audits criticized the city’s management of the utility expansion program, reported the News-Press. One 2006 state audit led to the Attorney General's opinion. A 2006 audit by New York-based Kessler & Associates opened a U.S. Department of Justice investigation into possible bid-rigging in prior projects. The third audit, by auditor R.L. Townsend in 2005, concluded the city was overpaying to run the program.
     Concluded Kessler: “In conducting this inquiry, Kessler encountered issues that it believes require systemic reform within the City. Some of the issues have already been addressed implicitly in this report. These include taking steps to guard against future deception of the taxpayers; diligently monitoring vendors and accurately responding to citizen complaints and inquiries and not discounting them simply because of their source. The fact that certain items at issue in this inquiry -- from questionable bidding practices to obstructing authorized fact-gathering efforts -- pervaded during this engagement suggests serious and systemic management failings.”
     Continued Kessler: “The City should also re-examine its policies relating to allowing vendors complete control of projects without adequate City oversight and determine whether changes need to be made in those policies to ensure that future multi-million dollar contracts are properly supervised and taxpayer funds properly spent.
    “The conduct of certain employees in the context of this engagement is also very disturbing, all the more so since the most egregious conduct was committed by persons in positions of substantial responsibility and leadership.”
    The City Auditor's Office concurred with Kessler’s concerns about questionable bidding activity.
    At least four lawsuits related to the utilities projects were filed.
    John Sullivan, a Cape Coral resident suing the city, told the News-Press that the AG’s opinion only raised more questions. "Are these contracts illegal? If they are, what recourse do citizens have? Are our public officials responsible for this?
    “People have a shot at starting a class-action suit against the city,” said Sullivan, who founded the Cape Coral Minutemen, a group of residents dedicated to lowering costs of the utilities projects. “This is just going to shore up lawsuits."
    MWH’s website (www.mwhglobal.com) says “MWH provides comprehensive management services and solutions across our global platform of 197 offices in 38 countries.”  
    One of those 197 offices listed on the MWH website is at located 1236 Los Osos Valley Road in Los Osos, an office closed since 2005. It could open again soon.
    “It’s like living in the twilight zone,” commented Councilman Mickey Rosado about Cape Coral’s predicament. “It’s outrageous.”
    Even more outrageous than “like living in the twilight zone” is living in the twilight zone and the “Prohibition Zone” and in Los Osos at the same time, continuously, for 26 years.
    It doesn’t get much more outrageous than that.

Compiled from articles originally reported and published in the News-Press, Ft. Myers, Florida.