San Mateo County Grand Jury • 2006-2007

San Mateo Union High School District Construction Contracting Procedures

Published: July 13, 2006 11 pages
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Findings 11 findings

F1
A senior Skanska employee was provided at no charge to the District for pre- bond work. This employee was a former employee of Kitchell, the construction management company that oversaw Measure D.
F2
Skanska was selected as a paid pre-bond consultant. There was no competitive process in awarding this contract for $97,000.
F3
Skanska, as the pre-bond construction management company for the initial project planning, assisted in the selection of architects, some of whom are charging fees allegedly exceeding current market value.
F4
Some or all Trustees relied upon a document stating that architect agreements and fees were thoroughly reviewed by counsel. 4
F5
The Board of Trustees did not use its legal counsel to perform a full review of the proposed architect agreements in a timely manner.
F6
The Board of Trustees approved the architects’ agreement subject to approval of contract language by the District’s legal counsel, with fees that allegedly exceed customary industry rates. There appeared to have been little or no negotiation of the fees or terms of the agreement.
F7
Skanska was selected as the sole construction management company even though there had been significant disagreement among District staff about awarding the oversight of the $298 million Measure M construction projects to a single company.
F8
Skanska’s proposed contract for $23,966,660 was placed on the Board of Trustees’ agenda for approval despite the fact that: (1) there was no competitive process used for the $5 million design management portion of the proposed contract - only the construction management portion was competitive 10 ; (2) there was little or no negotiation of the terms and fees set forth in the proposed contract; (3) witnesses were unable to justify the entire increase in Skanska’s proposed management fees from $10,940,990 to $23,966,660.
F9
Witnesses informed the Grand Jury that Skanska management fees set forth in its proposed contract submitted to the Board of Trustees for approval on March 8, 2007, exceed current industry norms.
F10
On April 19, 2007, the Board of Trustees discontinued its relationship with Skanska.
F11
California Education Code Section 15278 requires a citizen’s oversight committee be established to review bond expenditures. Conclusions The Grand Jury asserts that the process by which the proposed construction management contract was developed was flawed and that the District must improve the process for selecting and retaining construction managers. The SMUHSD Measure M construction management selection committee lacked sufficient financial, contractual and construction experience (or failed to engage persons with such experience) to assist them in their selection process for the award of the Measure M construction management projects. The considerable influence exerted by Skanska’s project executive throughout both the contracting process and the alleged negotiations raises questions about whether the 5 District should have allowed a party who had a significant financial stake in this project to have so much responsibility. The Skanska proposed contract for $23,966,660 was the result of a deficient contracting process. There appears to have been little or no negotiation or review of the management fees. A majority of District Trustees neglected their oversight responsibilities in accounting, financial and contractual matters regarding the District’s Measures D and M construction projects. The Superintendent failed to provide adequate management oversight to ill-equipped District staff in accounting, financial and contractual matters, especially those surrounding Measures D and M construction projects.

Recommendations 6