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Low-Bid to No-Bid

DART doesn't put its biggest construction contracts out for bid anymore. Could that be why its construction costs have doubled?
Eva Watson

Aha. Finally got my documents from Dallas Area Regional Transit. Think I may be on to something.

Last November DART announced it was suddenly almost a billion dollars short in its budget for new rail line construction. DART gets its money from you. It is committed to building new lines. So you, the taxpayer, will have to come up with the additional billion dollars for those lines.

The question is why.

Ever since revealing the shortfall, DART has been sort of shrugging its shoulders and saying, "Well, everything's been going up." But everything's been going up for a long time. How could a reasonably prudent management fail to notice a dramatic spike in construction costs until the last minute?

Prices didn't go up overnight. And anyway, this is a billion-dollar shortfall in what was supposed to have been a billion-dollar budget. A 100 percent goof. Oops. Until November, DART thought it could build its new lines for $1 billion. All of a sudden it's $2 billion.

Prices doubled? Suddenly? Now I think I have documents that open a window on another possible explanation.

DART is a regional agency. It's not part of the city or the county or the state or anything else. It belongs to itself. It spends $1.1 billion a year. A third of that is spent to run rail and bus lines. The rest pays to build new rail lines.

The documents I now have show a possible explanation for the sudden billion-dollar budget boo-boo within DART's own contracting process, apart and distinct from rising construction costs in the world market.

Basically it's this: For its biggest contracts with general contractors for the construction of new rail lines, DART has virtually abandoned or at least greatly diluted the time-honored process of competitive bidding. Instead, the process of awarding contract work at DART is carried out behind closed doors in a politically charged context.

According to these documents, on April 12, 2005, a small Dallas firm called Carcon Industries, described on its own Web site as an "Hispanic Woman-Owned General Contractor," won a $5.6 million contract for "pre-construction services" and "communications and signals work" on a new DART rail line from Victory Station downtown to just southwest of Love Field.

DART spokesman Morgan Lyons told me that this $5.6 million contract was competitively bid. DART announced it wanted companies to give their best price for such and such an amount of work. Then DART took the lowest bid from a company it believed could do the job right.

Carcon Industries won that job straight-up the honest way, by bidding. Good on them. But here's the amazing part. Fourteen months later on June 13, 2006, DART granted Carcon two "contract modifications," which were not competitively bid, according to Lyons.

One "modification" increased Carcon's contract by $18 million. More than 300 percent. The other one? It increased Carcon's contract by $364 million.

WOW!

A local firm starts out with a relatively modest contract for $5.6 million. A year later DART increases that contract amount by 690 percent. For all but the first small bite, there was no competitive bidding!

I'm not saying Carcon got money for nothing. Absolutely not. They got money for work. But in order to get $387.6 million worth of work, Carcon only had to bid on $5.6 million worth of work.

The CEO of Carcon, Arcilia Acosta, was named one of the "Most Powerful and Influential Women in Texas" in 2008 by Texas Diversity Magazine. She is a contributor to both Republican and Democratic campaigns and the wife of City of Dallas employee Kevin Acosta.

I'm sure she's very competent. But in a year and two months, she goes not just from zero to 60 but from zero to 600 as a DART contractor.

And that was only the beginning. In 2006 Carcon's contract went up another $5.6 million, then another $36.5 million, then another $1.8 million, all through "contract modifications."

The year 2007 was lean. Acosta only got contract modifications for $600,000 and $10 million. This year she picked up some more. At present, as far as I can tell, her original $5.6 million contract is now worth $429.2 million—a 770 percent increase in three years.

And she only had to bid on the first $5.6 million.

Lyons has an explanation for it. It's all done according to an arrangement at DART called "construction manager/general contractor" or CM/GC, which DART adopted several years ago. The intent was to bring a general contractor in early during the design process, instead of after design had been completed. That way the general contractor was supposed to be more committed to the design and less likely to come up with last-minute price increases based on unforeseen problems.

The problem with this system, it seems to me, is that DART winds up married to a general contractor before the overwhelming lion's share of the work has been bid. In fact, there is no bidding. All the major work, the hundreds of millions of dollars in work, is handled with contract "modifications." Lyons told me these amounts are "negotiated as part of the CM/GC contract, which was competitively bid."

 

Yeah. The $5.6 million worth of work was competitively bid. But how does that get you competitive bidding or the equivalent on the remaining $423.6 million worth of work? There is no bidding. Instead, that work is all awarded according to closed-door negotiations between DART staff and the general contractor.

Acosta's company is part of an entity called "Archer-Western." Archer-Western is a name that appears in all sorts of combinations with other names on DART contracts and at DART job sites: Archer-Western-Brunson-Carcon, Archer-Western-Herzog. There's even an "Archer-Western/Herzog/Azteca-Omega/Robinson Industries with principal designer Stantec." Pity the receptionist.

Archer-Western-Herzog (not Acosta's company) has had good luck too with contract modifications. It started out on April 11, 2006, with a competitively bid contract for $2.5 million. Since then it has been granted "modifications" for $7.6 million; $600,000; $467.5 million; $23.4 million; $140,000; $450,000 and $250,000.

Nothing like a little $467.5 million "modification" on a $2.5 million contract.

I asked Lyons to explain the corporate structure here for me. He said, "Archer, Western, Herzog, Brunson and Carcon are each separate companies. They are teammates on different DART contracts."

Teammates. I'm confused. Web sites for at least two of these supposedly separate corporate entities show them being represented by the same spokesman, Eddie Belmarez, who almost never calls back. In fact, nobody calls back. I have tried for months to get Acosta or anyone at any company with the words Archer-Western in its name to call me back. No luck.

I take that back. Eddie Belmarez called me once. He said he couldn't talk.

Another reason I'm confused? Arcilia Acosta shows up as a general contractor at DART some of the time but as a sub-contractor at other times. I know the same company cannot be both a general contractor and a sub-contractor for itself under DART's rules.

Lyons, DART's spokesperson, assures me that all of these names—Archer, Western, Herzog, Brunson, Carcon, whatever—are all separate entities so no wires have been crossed. But if that's true, why does DART award contracts to something called "Archer-Western-Brunson-Carcon," which it shortens to "AWBC"?

Don't get me wrong. I am not saying that anybody here won work at DART dishonestly or that they're not doing the work. This gets back to Lyons' explanation: that it's all "negotiated" as they go along.

Sure. But these are huge amounts of work that at most public agencies are traditionally broken out in separate contracts, each one put out for competitive public bid from any qualified company in the world that wants to bid. Instead, DART chooses to sit at the table with the same company and negotiate everything a chunk at a time as they go along.

"The primary basis for negotiation," Lyons said, "is an agreed upon unit price that's established as part of the contract competition. As the contract is carried out and the work completed, unit prices are audited annually. That's because the CM/GC is designed for the contractor and the client (DART) to share in project cost savings."

But wait. Look at it this way. First DART gets itself locked into a deal with a general contractor who is going to do all the work. But they don't have a price-certain for the work when they begin. They have agreed not to put that work out for bids. They're married without a pre-nup.

From then on out, it's like arguing with your spouse. You can only win by losing.

Put this in a context with a very political contracting environment in the first place. Lynn Flint Shaw, who was chair of the mayor's Friends of Tom Leppert political fund-raising committee, was also chair of the DART board and chair of the board's contracting subcommittee until her death in what may have been a murder/suicide March 10.

After Shaw's death, Leppert and his top southern Dallas political consultant, Willis Johnson, himself a DART contractor, held a seminar for hundreds of would-be minority bidders at DART telling them how to get in on the gravy train.

Everybody wants in. I understand that, and there's nothing wrong with it. But traditionally the medicine that keeps it clean and holds down prices is called competitive bidding.

I suspect DART staff may simply have lost control in this process of negotiation. Now all the work these contractors have left to do, like completing the new rail lines over the next 21 years, is going to cost twice as much.

You know what? This place badly needs an arms-length external audit. Otherwise three years from now DART will announce that its building costs have just doubled again, very unexpectedly, to $4 billion. The way it is, this train has no brakes.


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