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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.

North County Transit District

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 Tucker’s Management Action Plan — the formal course of correction required by the audit — NCTD said, “No responsive records” exist. Tucker declined to be interviewed, and his staff wouldn’t provide a comment on the report or its findings.

No members of the board, who all are elected officials from cities in North County, would speak about the report on the record.

Richard Katz, a former California State Assemblyman who sits on the boards of both transportation agencies in Los Angeles, read the SC&H report and offered inewsource his opinion.

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.”

Sole source

One of the deficiencies in the report cited NCTD’s overuse of sole source procurements.

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.”

Since the report was issued nine months ago, the district has awarded at least 10 more sole-source procurements to vendors for at least $2.5 million.

A few contracts were justified under “exigent circumstances” in relation to the SPRINTER shutdown in early March — $371,000 for new trains rotors, for example.

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.

The NCTD employee who awarded the contract, Deborah Castillo, came to Oceanside a few years ago after serving as Cook & Schmid’s Director of Social Marketing and Environmental affairs.

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.

NCTD sole source
NCTD sole source procurements

Frum was overruled by the district’s Chief Financial Officer, Ryan Bailey, who acknowledged the contract was “not a sole source” — but approved it anyway “due to circumstances.”

Castillo did not respond to an email request for comment on the Cook & Schmid contracts.

Compliance Monitoring

Another deficiency raised by SC&H cited NCTD’s poor monitoring of contract compliance.

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.

SC&H found,

“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…”

It cautioned,

“Inadequate monitoring of contracts could result in the District paying for services that were inadequate, incomplete, or outside the scope of the work.”

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.

There were 13 key findings altogether, many of them revealing the contractor — American Logistics Service — was out of compliance with its agreement with North County.

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.

In its September report, SC&H wrote, “it is unclear where the responsibility lies to assess contractor compliance.”

Katz, the LA board chair, 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.”

Richard Katz
To see Katz’s full bio, click here

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.”

Brad Racino was the assistant editor and senior investigative reporter at inewsource. He's a big fan of transparency, whistleblowers and government agencies forgetting to redact key information from FOIA requests. Brad received his master’s degree in journalism from the University of Missouri in...

8 replies on “Auditor finds major deficiencies in North County Transit District’s Contracts Department”

  1. Accountability Matters:

    Great article on waste, fraud and corruption at NCTD. The board and chair in particular has been complicit and allowed all the disgusting and bad behavior that has occurred there since 2009 when the new CEO arrived.

    It was great to see a California transportation leader like Mr. Katz opine on the potential consequences of keeping the current CEO in his position. His read is it is a safety risk to allow such uncontrolled behavior at a public agency.

    Bill Horn needs to do the right thing and end the pain up there at Mission and dispatch the CEO out of the building.

    Do you know at NCTD they call the riders “those people”. Well its time for Horn to side with those people and get rid of his overpriced flunky he has there doing all his dirty work.

    Thanks again Brad Racino for the expose!

  2. For the first 30 or so years of its existence NCTD did a great job of providing safe and efficient transit services. It had a very competent, experienced and committed workforce and was devoid of scandal or major controversy. NCTDeven recognized by a conservative taxpayer watchdog group for its fiscal frugality. Then came the new “turnaround” CEO Matt Tucker. Under Tucker’s leadership virtually all of NCTD’s adminstrative and management staff was either retired, fired or run off.

  3. Continued… New managers hired at significantly higher salaries and signing bonuses came and went so fast they couldn’t keep the org chart up-to-date. Most departed with sweet severance packages, too. All while the bulk of the agency’s vast institutional knowledge and experience was forced out.

    Ye reap what yea sows.

  4. Brad,

    Now that the ICF/IBI. audit results are on the NCTD website for the Positive Train Control Project (PTC) you need to do an expose on this badly managed NCTD project.

    Major findings included:

    Unable to account for 21 million in funds
    No schedule
    No cost control
    No scope control
    No WBS control
    No risk management system in place
    No configuration management
    No quality assurance/control in place
    = No accountability.

  5. SC&H LLC. who did the NCTD audit mentioned above isn’t even registered to do business in California as an LLC or Corporation.

    No registration in California = no state income tax paid = no credibility.

    NCTD uses unregistered corporations and LLC’s to do work in California and doesn’t require them to show proof of payment of workers compensation nor state income tax nor license to practice in California.

  6. Does one suspect a bit of racism in all the criticism? Or is it that all the union hacks that were
    fired, are still out for blood.
    As someone who ACTUALLY uses the NCTD, I have found them to be one of the most responsive
    government agencies that I have dealt with.
    To not to put too fine a point on it, but the reporter is quoting a firm that was fired ,and they are
    an unbiased source?
    In the fiasco that followed a subordinate(Union member btw) NOT informing management about
    a problem with the brake rotors(That he WAS aware of) and somehow the Mr.Tucker is responsible???
    Or Mr Katz? Whose Metrolink WAS responsible for 25 deaths. Give me a break.
    PBS has a long history of going after responsible black leadership who did not “toe the party
    line” This is just another example of Left wing liberal racism

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