City Defends Its Decision to Forgo Bids on Civic Arts Plaza Project : Thousand Oaks: Dealing directly with the construction management firm saves money, but it also raises concerns.

Thousand Oaks officials have defended a decision to bypass the competitive bidding process on the Civic Arts Plaza project and hire the construction management firm Lehrer McGovern Bovis, now the target of a federal probe for suspected double-billing.

Instead of soliciting bids and selecting the lowest responsible offer, as it does with subcontractors working on the performing arts center, the city negotiated a $4.75-million contract directly with Lehrer McGovern Bovis, according to documents released last week.

Furthermore, the city did not seek independent analysis to confirm Lehrer McGovern Bovis’ contention that hiring the firm without competitive bidding would save taxpayers millions of dollars, the documents show.

The FBI and Ventura County prosecutors are investigating the international firm for suspected fraudulent billing practices at several project sites across California, including the Civic Arts Plaza and a Calleguas Municipal Water District project in Thousand Oaks, as well as the U.S. 9th Circuit Court of Appeals in San Francisco.

Thousand Oaks officials said their decision to forgo competitive bids when hiring Lehrer McGovern Bovis last summer was made for solid business reasons.

“I have no qualms about it,” Councilman Frank Schillo said. “I thought it was the right thing to do then, and I do now.”

By negotiating directly with Lehrer McGovern Bovis, Schillo contended, the city saved both time and money, since the firm was already working on the Civic Arts Plaza under a separate, $2.43-million contract to oversee the design phase.

That smaller pre-construction contract did go out for competitive bids, and Lehrer McGovern Bovis was selected after an extensive review of 11 firms. The second, more lucrative contract was based on the hourly rates Lehrer McGovern Bovis had charged for the design phase.

Nonetheless, one industry source said Thousand Oaks’ decision to avoid bidding was “highly unusual” and may have yielded a sweet deal for Lehrer McGovern Bovis.

“The public interest is better served by having competitive bids,” said the source, a project manager with a major Southern California construction management firm who requested anonymity.

“It’s very unusual to award a sole source contract on a project that large,” he added. “To have somebody negotiate their own contract in a non-competitive environment is a nice deal--I’d take it any day of the week.”

By allowing Lehrer McGovern Bovis to set the parameters for the construction management contract--including the number of supervisors on site and the number of hours each employee would work--the city lost the chance to get an independent analysis of its needs, the source said.

And in fact, documents indicate that the City Council relied on Lehrer McGovern Bovis’ estimates to reach conclusions about the comparative cost of various construction management options.

The firm’s executives told the city that hiring a new project supervisor for the construction phase would cost nearly $3.5 million more than retaining Lehrer McGovern Bovis--yet city staff never sought an independent evaluation of those figures.

Lehrer McGovern Bovis executives could not be reached for comment.

But Thousand Oaks officials insisted that keeping Lehrer McGovern Bovis on board for the second phase of the project did save both money and time.

“They were on site, they were experienced, they knew our processes and they were familiar with the job,” Mayor Judy Lazar said. “Any other company would have had to acclimate. We viewed it as an expansion of (Lehrer McGovern Bovis’) existing contract, rather than a brand new contract.”

Pleased with Lehrer McGovern Bovis’ work and its prices, the council saw no need to seek out new bids, officials said. Furthermore, sending out a fresh request for proposals and evaluating the responses would have taken at least three months, delaying the tight construction schedule.

“Changing horses in midstream is never acceptable when it can be avoided,” City Manager Grant Brimhall said.

Another industry source agreed that the city did nothing wrong.

“If a client is very happy with the work on an initial phase, negotiating a second contract based on the hourly rates established in the first contract is not unusual,” said Ken Harms, president of the Northern California chapter of the Construction Management Assn. of America.

And even though they did not solicit competitive bids, the City Council tried to bargain with Lehrer McGovern Bovis on the terms of the second contract.

During negotiations last summer, Lehrer McGovern Bovis agreed to cut its hourly fees for every level of employee, from project managers to secretaries. A general superintendent’s wages, for example, dropped from $105 an hour to $85, and the firm promised to waive entirely the $198 hourly fee for top executives.

Lehrer McGovern Bovis also allowed the city to apply an untapped $270,000 contingency fund from its first contract toward the cost of the construction management job.

All told, the construction management firm shaved $700,000 off its asking price, settling on $4.75 million as an estimated cost. A contract amendment later tacked on nearly $73,000 for additional services, primarily supervising waterproofing and window installation work.

As spelled out in the contract, Lehrer McGovern Bovis sends the city monthly bills for its personnel, and also for travel, telephone and other expenses. So far, the charges have been lower than anticipated. With the building 55% completed, the firm has charged the city for only 45% of the $4.75-million contract, Brimhall said.

Although the FBI and Ventura County prosecutors are investigating the giant international firm, Thousand Oaks officials say they have found no evidence of fraud.

Still, the investigation has shaken some city leaders.

“Until someone can show us otherwise, I think their work has certainly been effective for us,” Mayor Lazar said. “But it’s an accounting process, so if you really want to (double-bill), you can. It’s a reputable firm, but that doesn’t mean they’re not vulnerable to doing something wrong.

“I hope nothing’s been done wrong, in error or otherwise,” Lazar said. “But I’m just not sure.”