The North County Transit District laid off 80 percent of its employees in less than two years, and now relies almost entirely on private contractors to keep its trains and buses safe and on budget for the millions of passengers riding the system each year.
Ironically, one of those contractors — the consulting firm SC&H Group — has found serious problems with the way NCTD manages its more than 150 contracts, covering everything from construction to legal counsel to bus operations.
The SC&H audit — only recently made public — found the department is rife with inefficiencies, is buried in paperwork and awards far too many contracts without public bidding.
SC&H said NCTD’s “inefficient” and “ineffective” methods are putting the district at risk both legally and financially. It found key employees don’t talk or collaborate with each other; the agency’s billing process is inefficient and prone to error; there is no consistent quality control; and the district fails to monitor state and federal compliance.
SC&H Group published these and more than a dozen other findings in September 2012, but at least some on the district’s Board of Directors didn’t learn of them for eight months. At that point — in May 2013 — the district’s CEO, Matthew Tucker, presented a summary to his board and said he was working to make the recommended improvements.
However, when inewsource requested the Management Action Plan — the formal course of correction required by the audit — NCTD said, “No responsive records” exist. Tucker declined to be interviewed, and NCTD wouldn’t provide a comment on the report or its findings.
He called it “frightening.”
inewsource has been investigating management and contract issues at NCTD since February, and the audit validates its key findings: the transportation agency isn’t effectively monitoring its contractors, and the effects are trickling down to San Diego passengers and taxpayers.
Throughout inewsource’s ongoing investigation, Katz was one of the few high-ranking transit agency officials willing to speak on the record about NCTD and its CEO. Other transportation managers interviewed asked not to be quoted by name due to the transit field’s “small world” atmosphere.
“It’s hard to believe,” Katz said, “that the board [of North County] is aware of all the things that this audit pointed out.”
“If my board had seen something like this,” he said, “they’d be making changes all over the place.”
A sole source procurement sounds complex but the idea is very simple.
When certain government agencies need a service they can’t perform on their own — from graphic design and marketing to manufacturing new train components — they put the job out for bid in the public market. Private companies compete by submitting proposals. Through an evaluation committee, the government agency then picks the winner and awards the contract.
In certain “exigent circumstances” — and only if a set of very strict criteria is met — government agencies may skip this process and offer the contract to a single company without going through the bidding process. This is sole source.
The bidding process is in place to “eliminate favoritism, fraud, and corruption in the awarding of public contracts,” and also to ensure government agencies are getting the best deal possible for taxpayers. SC&H Group cautioned NCTD it was awarding too many of these sole source contracts, and that continuing to do so “may result in increased regulatory scrutiny and potential fines.”
Some were not.
inewsource went through the agency’s sole source contracts in May. A $50,000 contract, awarded in March to a San Diego public relations firm called Cook & Schmid, stood out.
A major Cook & Schmid contract with NCTD — $110,000 for on-call marketing and communications — was awarded just a few months after Castillo was promoted to the agency’s Manager of Marketing and Communications position. She sat on Cook & Schmid evaluation committees at NCTD, became the firm’s project manager at the agency, and in March, decided to award them an additional $50,000 to handle “negative media attention” in the wake of the SPRINTER shutdown.
Castillo did so without advertising the job, and she did it against the recommendations of upper management. In fact, Cook & Schmid was ranked so low in the area of “media relations and emergency communications” by the evaluation committee that NCTD determined not to use the firm for any such services in the future.
The manager of the contracts department, Larry Frum, disapproved of Castillo’s decision, and noted that the district already retained two other public relations agencies — under $790,000 worth of contracts — that were better-suited to provide emergency communications.
Many of the agency’s 150-plus contracts have specific language for service levels, key deliverable dates and safety measures written into each agreement. inewsource has reported problems with contract oversight, some posing serious public safety issues. The SC&H audit not only underscored inewsource findings but it described systemic failings.
“The lack of communication and sharing of how contracts are monitored is inefficient and ineffective. There are no clear documented requirements as to how contracts are to be monitored, communicated, and reported…”
The district has done just that.
In February, inewsource published an investigation into the agency’s security force after finding that the company providing NCTD its armed guards wasn’t training the employees for the job at hand — and hadn’t been for years.
The company, Universal Protection Service, had detailed language in its contract guaranteeing training the officers were required to receive, such as counterterrorism and defensive tactics. Yet all officers interviewed said they hadn’t received any of it.
This despite the fact that the guards are the first line of defense for NCTD’s rail lines — the southernmost portion of the second-busiest rail corridor in the country and a target for terrorism. With tracks passing by water-treatment facilities, a marine base, and residential and industrial areas, NCTD’s COASTER train carries armed men who admit they wouldn’t know what to do if one blew up or derailed.
These officers cost the district millions each year, and in response to inewsource’s investigation in February, NCTD audited Universal’s contract files and found Universal was “failing to meet the contractual requirements.” It threatened to terminate the contract unless the private security company took immediate corrective actions.
Universal has since put into place a training regime for its officers and taken steps to satisfy the contract requirements, according to officers interviewed and a Universal spokesman.
The SC&H “Compliance Monitoring” finding also relates to a situation that arose last summer, when a separate audit found multiple deficiencies with the contractor responsible for providing bus service to the district’s disabled passengers.
The audit found NCTD staff didn’t monitor their contractor’s drug and alcohol testing for its drivers, had no supervision in place for tracking bus performance, and didn’t know where their contractor’s office was located.
The audit found disabled passengers were waiting hours to be picked up after their workday ended, and were being dropped-off at their worksites hours early. This placed a liability on employers, who had to stay on-site to make sure employees made it to the bus safely, not to mention the stress it put on passengers, according to the report. The contract is worth $20.5 million over six years.
According to two representatives from local businesses whose clients depend on the bus service, ALS’ performance has improved since the audit.
Katz, the LA board chairman, had his own thoughts on responsibility.
“Who’s being held accountable around here?” he asked.
“There’s so much in this audit,” he said, “that any one section, frankly, is enough to raise red flags.”
An expert opinion
Since neither SC&H nor NCTD would comment on the audit, inewsource asked Katz to put it into context and to reflect on some of the findings.
Katz sits on the Board of Directors for LA’s Metrolink passenger rail system and LA County’s Metropolitan Transportation Authority — two of the largest transportation agencies in the state moving tens of millions more passengers each year than NCTD. Katz spent 16 years as a California State Assemblyman, where he served as Chair for the Assembly Transportation Committee, led investigations into government waste, and crafted policy.
“You read this thing,” Katz said of the report, “and it just keeps going and going.”
He added, “How do you not monitor [contracts] for contract compliance? How do you know if you’re getting your money’s worth?… Who’s watching this stuff? And who allows it if they know about it? If the CEO doesn’t know about it — they should.”
Katz has spent years working alongside NCTD, since Southern California transit agencies must work together constantly when it comes to planning and service.
Katz concluded, “The lack of consistency, the lack of oversight — let alone sitting on this [report] for eight months — it makes you wonder how they’re operating the railroad. They should have seen this audit and said, ‘Oh my god, this is not acceptable, and it’s got to be fixed today.”
“We would have fired people who had sat on this for eight months,” he said.
Katz believes many of the agency’s managerial decisions over the last few years have been “not only financially suspect,” but have “created a potential for serious safety issues” that concern him and his “entire Board.”
Katz knows about safety — he was assigned to oversee LA’s Metrolink after the 2008 Chatsworth collision which killed 25 passengers. He said his board has taken measures to ensure something that horrific never happens again in California — yet NCTD’s role as a part of the second-busiest rail corridor in the country has him worried.
“Accountability matters,” he said, “and it must be applied equally from the CEO to the newest employee.”