Probe Finds Subway Deal Was Compromised : Transit: MTA officials shredded documents, leaked data on bidding and hid apparent misconduct, audit states.

Los Angeles transit officials compromised the awarding of a sensitive $80-million subway contract, destroying key documents on the bids, covering up apparent conflicts among staff members and allowing secret data to be leaked to the firm that won the recommendation for the job, according to a confidential in-house report.

The report, circulated privately this week among top Metropolitan Transportation Authority officials, offers one of the strongest indictments to date of the MTA’s process for awarding billions of dollars in rail contracts, buttressing concerns from critics who contend that the mammoth agency is too close to its contractors.

The findings also threaten to derail the pending award of the trouble-plagued North Hollywood tunnel job to Jacobs Engineering, a Pasadena firm that was supposed to replace the current construction manager because of setbacks in the project.

In the investigative report, the MTA inspector general found that:

* One MTA manager who used to work for Jacobs had several thousand dollars invested with the firm, even as he was helping to evaluate its bid for the North Hollywood job.

* An MTA consultant helped prepare the bid applications for the job at the same time that she was on the Jacobs team competing for the work. MTA managers later misled their bosses about the extent of her involvement and did nothing to eliminate the apparent “conflict.”

* Within hours of the MTA’s evaluation of the bids in January, closely held information about rankings of the four competing firms was leaked to people outside the agency, and Jacobs officials received details about how the firm had fared against competitors in the preliminary round.

* Documents from the bid evaluation process were “purposely destroyed,” in apparent violation of agency policy, and Jacobs was given an erroneously high score in a staff report to MTA board members. The scoring error probably was unintentional, investigators found, but agency staff did nothing to fix the problem even after it was disclosed to them.

MTA officials refused to comment Thursday on the issues raised in the inspector general’s report, and Jacobs executives referred all questions to a spokesman at the public relations firm of Cerrell Associates, who denied any impropriety by the company.

The spokesman, Hal Dash, was unaware of several of the key allegations raised in the report. But in general, he said: “There was absolutely no unfair advantage (to Jacobs). . . . Jacobs feels very, very positive that they played this whole thing by the book and won the procurement fair and square. Bottom line is we’d be shocked if we’re not the winning firm.”

There is more at stake than just Jacobs’ business interests, Dash said. For every day that MTA officials hold off on awarding the North Hollywood contract, Jacobs officials estimate, it is costing the agency--and taxpayers--more than $150,000 in lost time.

The report is expected to be reviewed by the MTA Board of Directors next month, when the board might consider whether to award the North Hollywood tunnel contract to Jacobs as recommended. MTA Chief Executive Officer Franklin E. White and staff members had urged the board to vote on the award last month even while investigators were reviewing the allegations surrounding it, but board members decided to hold off until the investigation was completed.

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In the meantime, MTA officials have been considering rebidding the contract. John Adams, head of the agency’s construction division, said he planned to meet with White on Thursday to discuss the issue but refused further comment.

The Hollywood subway project has been beset by months of financial and construction problems, including sinkage of up to 10 inches of the ground above the tunnel. MTA officials saw installation of a new construction manager as a key step in getting the project back on track and satisfying the concerns of federal officials, who froze $1.6 billion in project funding last year because of the history of missteps along the route.

But the award of the new contract has only spurred a new round of questions.

The inspector general began the investigation into the contract this year after a whistle-blower in the construction contract division raised concerns about a possible conflict of interest by MTA consultant Stefanie Spikell.

Spikell helped MTA officials prepare documents for soliciting and evaluating the firms that were competing for the lucrative Hollywood contract. At the same time, she became a consultant on the Jacobs team and thus had a “personal financial interest in the outcome” of the selection process, the inspector general found.

This created “if not a prohibited conflict, an appearance or perception of conflict,” the report said.

Spikell declined to comment.

The inspector general concluded that Spikell’s role in preparing the bid documents--limited largely to writing and organizational tasks--was nominal enough that it does not appear to have given Jacobs a “competitive advantage.” More troubling, however, was the lax way in which MTA managers dealt with the apparent conflict, investigators said.

Investigators found that managers in the construction division were clearly aware of Spikell’s dual role with Jacobs and MTA.

Before she was named as a consultant by Jacobs earlier this year, an MTA manager on the Hollywood contract, Kurt Meiers, had given her the names of contacts at the bidding firms after the MTA consultant had expressed a strong interest in working on one of their teams, the report said.

MTA managers later misled their superiors about Spikell’s role in developing the bid evaluation criteria for the transit agency, the inspector general said. A report in February to board members who were voting on the contract award “strongly suggested” that Spikell had no role in the process.

The decision by Meiers and contracts director Mike Baca not to notify their superiors “of a serious conflict-of-interest issue . . . constitutes a serious breach of responsibility,” the report concluded.

Meiers refused to comment Thursday, and Baca could not be reached.

Meiers had other conflicts as well, the inspector general’s report said. At the time he began managing the evaluation of the Hollywood contract, investigators found, Meiers “had a personal financial interest in Jacobs,” where he worked until several years ago. He had failed to divest himself of stock in Jacobs and continued to participate in the firm’s 401(K) plan, investments that totaled more than $4,000.

Meiers told investigators that he had forgotten about the stock.

Meiers was also at the center of another issue that investigators said raises “serious concerns”--the shredding of scoring sheets that the seven members of the contract evaluation committee used to rank each bidder.

MTA staff members said that shredding these documents has been standard practice for several years and is needed to ensure the anonymity of the judges. But the inspector general found that the shredding violated MTA policy and that by relying on Meiers to transfer the scores to a computer spreadsheet it became impossible to verify their accuracy.

“In effect, it gave sole responsibility for determining the outcome of a procurement worth tens of millions of dollars to a single individual, without an audit trail, and no procedures to verify the accuracy of the final spreadsheet,” the report said.

Some scores were misreported, investigators concluded. Jacobs was erroneously ranked second instead of third at one stage of the bid evaluation, but the error was not fixed because Baca said he did not think it would affect the board’s final decision.

These rankings are supposed to remain confidential during the weeks-long award process, but the inspector general found that “detailed confidential scoring information” was leaked outside the MTA within a few hours of one January evaluation session.

Jacobs officials acknowledged to investigators that they knew with reasonable accuracy where they had fared well against their competitors and where they came up short. The leaks occurred a week before the bidders went into a critical round of oral presentations before MTA officials.

Although Jacobs officials said that this confidential information never influenced their strategy, the inspector general found that the process was clearly “tainted” by the leaks and that they could have affected the outcome.

Investigators, meanwhile, are trying to identify the source of the leaks.

The range of allegations raised in the case only point up the shortcomings in the MTA’s contracting process, said Jean Boylan, a lawyer for Morrison Knudsen, one of the losing bidders. “You want the best company to get the job . . . not the one who has the most inside information and the most contacts at the MTA,” she said.