Crony Bidding And Gross Incompetence Reign
Part I Of A II Part Series
by Charles C. Bonniwell
At a time when Coloradans are desperately pleading for improved and new roadways the agency in charge of the same, the Colorado Department of Transportation (CDOT), is mired in the greatest crisis of its long-storied existence according to insiders.
Formed in 1917 to administer state government transportation responsibilities it long had the reputation for the most competent and least politically comprised department in Colorado government. Unfortunately, according to people who currently work with CDOT, that is no longer the case.
Perfect Storm
The convergence of two events has turned CDOT upside down. The first was the Orwellian named “Keep Jobs in Colorado Act of 2013.” Previously under CRS Sec. 24-92-109 all public projects in excess of $50,000 had to be “awarded by competitive bid.” The drawbacks to this method include occasional “bid rigging” by competing contractors. In addition, so-called “change orders” can drive up costs of a competitively bid project. But overall this method, which was used for decades by CDOT, was the least subjective and generally viewed fairest method to have projects completed at the lowest cost.
The 2013 act substituted the “lowest bid” method with the so-called “best value” model in which bids come in as either (1) Design Build; or (2) Construction Manager/General Contractor (CMGC). While these techniques have various theoretical advantages, especially for unique highly complex projects, including potentially cutting down the time to complete a project, it is a highly subjective selection process with the opportunity for corruption massively increased. To prevent cronyism and exorbitant cost increases, it requires high expertise and absolute diligence on the part of CDOT. What CDOT got was the exact opposite.
Washington Insider
In December 2018, Governor Jared Polis appointed 35-year-old Shoshana Lew as his new Executive Director, a history major at Harvard University with an M.A. in American History from Northwestern. She replaced Governor Hickenlooper’s appointment of 56-year-old Michael Lewis, an engineer with extensive public construction management experience. Lew’s appointment was a shock to CDOT employees.
Lew’s primary qualification, according to insiders, was her close relationship to Michelle Obama who called the newly elected governor for a favor — find a job for Shoshana Lew. Lew is the daughter of President Obama’s Chief of Staff and later Secretary of the Treasury, Jack Lew. Ms. Lew is considered by some as an example of how the rich and well connected can use their positions to secure favored treatment in and outside of government.
While originally intending to get a doctorate in history and become a history professor, she instead joined the Washington based liberal Brookings Institute as a policy analyst. Almost magically, although in her 20s with no experience, she entered the Obama administration and soon became a senior adviser at the U.S. Department of the Interior’s Bureau of Ocean Energy Management and policy adviser at the White House Domestic Policy Council. With no financial background whatsoever, she next was appointed Chief Financial Officer of U.S. Department of Transportation (USDOT) as well as garnering other impressive titles.
As the Obama administration began winding down, she parlayed her position as CFO of USDOT to become the Chief Operating Officer (COO) of Rhode Island Department of Transportation (RIDOT) in the spring of 2017. After a controversial reign as COO for RIDOT of just over one year she was appointed Executive Director of CDOT in December 2018 by Governor Polis — a job, according to CDOT employees, she was wholly ill prepared for. CDOT employs over 3,300 people and has an annual budget in excess of $4.5 billion.
Are Our Darn Roads Even On Her List?
On October 7, 2019, Lew gave an interview with Colorado Public Radio to discuss her job as Executive Director. A horrified listener, Jane Glenn of Sterling, wrote to the South Platte Sentinel:
Basically, she’s bike lanes, big buses, walking paths, light rail, and electric cars.
Are our darn roads even on her list?
The answer is, of course, no. She is a history major with no background in engineering or construction management. But, of course, there are plenty of people in and outside of CDOT who have years of experience in both of those fields and with the hen house opened up with a largely clueless Executive Director and the CMGC bidding process easy to abuse, they rushed to take advantage.
Revolving Door
CDOT has had a massive exit of its top personnel, all of whom have left once they became eligible for early retirement with PERA benefits. They joined consulting firms who now have overtaken the jobs, including design, testing and inspection, that CDOT once performed internally. If you have a firm for any such functions and are not heavily filled with former CDOT employees, you are highly unlikely to be contracted with CDOT.
In theory under the CMGC method, the owner has a different construction manager and general contractor, but not in Colorado, where the functions are combined with one more check and balance disappearing. CDOT no longer has enough civil engineers to begin the design process to start a project and must hire a design firm filled with former CDOT employees. The design firm often works with CMGC entities on other projects, so each has every reason not to cut costs or bring up any areas of conflict of interest to the attention of CDOT.
The CMGC bidding process for a CDOT project is supposed to be competitive, even if highly subjective. However, local construction firms have ceased to enter the process since only one of two national and international firms are chosen for any important project. The two firms are Kraemer North America who is owned by Obayashi Corporation, one of Japan’s largest construction firms, and Kiewit Corporation, a Fortune 500 contracting firm based out of Omaha, Nebraska. Over 75% of the $3.2 billion in recent CDOT contracts have gone to these two firms with the percentage ever increasing.
The 2013 law which mandated the change in bidding, the “Keep Jobs in Colorado Act,” has essentially ensured that Colorado firms and their employees are almost never hired, except for smaller CDOT projects that Kraemer and Kiewit are not interested in. There is one group of Colorado residents that has handsomely profited from the new regimen and that is the scores of former CDOT employees who have joined the dozens of consulting firms hired by CDOT. Not only are they scoring six figure salaries, but are also enjoying their PERA benefits, essentially doing the same job they did at CDOT at a fraction of the remuneration. CDOT itself evolved into little more than an admin organization and, in part, that too will be outsourced over time, although the CDOT state budget is not expected to diminish.
Added Cost
It is estimated that the excess profits by Kraemer and Kiewit, and the tens of millions of dollars paid to consulting firms filled with ex-CDOT employees, adds as much as 30% to the cost of every CDOT project and that percentage is expected to grow in coming years. It is questioned why Colorado taxpayers would want to pay more taxpayer money to a department as corrupt and inefficient as CDOT which is headed up by an individual as uninterested in roads as Shoshana Lew.
As for Ms. Lew she has not only garnered the disrespect of the people she oversees, but her ineptitude has reportedly angered at least some of the 11 commissioners from across the state who oversee CDOT. Her job is apparently safe, however, unless and until Governor Polis cares enough to stop the total destruction of, what once was, one of the most respected government agencies in Colorado.
In Part II of this series on CDOT we will review individual projects that CDOT has undertaken in recent years including the infamous Highway 36 sinkhole and why taxpayers can expect more shoddy workmanship and massive cost overruns.
The original article mistakenly indicated that CDOT has 330 employees. The number is actually 3,300. A zero was inadvertently omitted.