Familiarity breeds contempt
The San Francisco Public Utilities Commission allows engineering firm to be the top bidder on a contract the company helped create.

By Matthew Hirsch

FRESH FROM SNAGGING a multimillion-dollar Army contract and another defense deal in February worth $3.1 billion, URS Corp. is again on the verge of reaching public-financed pay dirt. And once again the San Francisco-based engineering firm, owned in part by Richard Blum – Sen. Dianne Feinstein's husband – is the subject of public scrutiny over how it landed the deal.

Just one week before the San Francisco Public Utilities Commission hears a recommendation to approve URS for work on the largest regional reservoir of city water – designing improvements to the Calaveras Dam in the East Bay – the union representing SFPUC staff is questioning whether URS should have been able to bid on a project it helped design. The SFPUC paid URS $49,000 to frame the work that needed to be done, then allowed the company to bid on the contract for that work, and then recommended URS get the contract.

"The PUC is supposed to look at its options and then create the [request for proposals]," David Novogrodsky, president of the International Federation of Professional and Technical Engineers, Local 21, told us. "This was the Bechtel way of doing business. This sort of thing is unethical and probably illegal."

Yet city officials say that not only was the process legal, but also that the consultant work performed by URS was public knowledge. URS officials did not respond to calls for comment by press time.

Inside track

When the SFPUC began soliciting proposals in January for a contract to conduct feasibility studies on improvements to the Calaveras Dam, the field of applicants was very narrow. Only licensed geotechnical and civil engineering firms with at least 10 to 15 years experience in dam and large reservoir management, design, planning, and construction were invited to apply.

Four companies responded by the March 6 deadline and received an evaluation and interview. Then a review panel was assembled to reflect San Francisco's ethnic and gender composition while retaining an understanding of the city's water system. So on its face, the selection process seemed fair and competitive.

But as IFPTE representative Vitus Leung recently discovered, URS enjoyed an advantage over its competitors before the selection process even got underway. Leung noticed nothing out of the ordinary when he received a summary of the project from the San Francisco Human Resources Department. But then he requested documents from the SFPUC to ascertain the rationale for contracting out the $4 million conceptual engineering agreement. What he got was more revealing than he anticipated.

Leung received copies of four memos from URS to the SFPUC, the commission's RFP, and a draft agenda item recommending URS for the Calaveras Dam contract. The documents indicate the SFPUC and URS have been collaborating extensively since March 2002 to come up with plans for renovating or replacing the 78-year-old East Bay reservoir. The SFPUC RFP actually restated word for word the three main recommendations from a previous URS memo, dated Nov. 15, 2002. Bidders were supplied with all of these documents before submitting proposals.

Novogrodsky said there is a "built-in factor of conflict of interest" at the SFPUC because outside consultants are routinely weighing in on city projects, either for a specialized service the city does not supply or to validate work performed by another firm. Yet in this case, he said, the SFPUC allowed URS to sidestep the public review process altogether.

The SFPUC paid URS $49,000 to develop a plan that would lead to the conceptual design phase for Calaveras Dam. SFPUC communications director Beverly Hennessey told us those suggestions were modified by city staff before the RFP was issued. Hennessey said URS even asked the City Attorney's Office if its report would preempt the company from submitting a bid on an ensuing contract.

"The City Attorney's Office determined after careful review that the [URS report] did not result in an unfair competitive advantage for URS. Their suggestions were considered so broad and fundamental in the industry that there was nothing that would give them an unfair advantage over other companies," Hennessey said.

The four bids for the conceptual engineering contract were evaluated for qualifications, project management and control, past performance, and project understanding and approach. Thirty percent of the overall scoring was based on the applicant's understanding of and approach to the Calaveras Dam project, an area in which URS held a significant advantage over the competition. And since the rankings were based on the above criteria and not on cost, URS didn't even have to worry about coming up with a competitive budget.

After evaluations and interviews, URS ranked first, followed by Montgomery Watson Harza, a GEI-Washington-HDR joint venture, and ENGEO. The three losing companies were notified of the results, although none will be allowed to view the winning proposal until after the contract is awarded. Bill Rettberg of GEI said a lot of time and effort goes into submitting bids, especially for projects as large as the Calaveras Dam. But the company does not plan to appeal the recommendation, even given revelations that URS played such an inside role, Rettberg said.

"At this juncture we are not contemplating any challenge since we were apparently not in the competitive running in the end," Rettberg said. A spokesperson for ENGEO said the company would not pursue a challenge either, because doing so may jeopardize its current or future contracts with the city.

Novogrodsky said he has never seen such clear evidence of collusion before, but he suspects it happens all the time – unbeknownst to the public. "This is not the way the city should be doing business," he said. "We still have a few billion dollars ahead of us [in the capital improvement program], and this is a bad way to get started."

Standard practice?

The questions surrounding URS's role in shaping the Calaveras Dam project come one month after the City Controller's Office released a report documenting "inadequate" oversight of sole-source contracts. One such deal between the SFPUC and the Bechtel Corp. for previous work in reconstructing the water system was phased out after Bechtel was found to have claimed exorbitant profits (see "Bechtel's $45 Million Screw Job," 9/12/01). The Calaveras Dam contract would bring URS an initial payoff of $4 million with options on all subsequent aspects of the estimated $150 million project.

"There is nothing wrong with consultants doing these analyses," Leung said of the URS report. "Just don't rely on one [firm]. The PUC should have had an array of opinions, not only from URS. They just imported that material into the RFP."

Leung said the public should be concerned that the relationship between URS and the SFPUC will obscure cost projections for the project, since URS is apparently dictating how the project should proceed. The work on Calaveras Dam is part of the gigantic capital improvement program the commission is undertaking to modernize the aging Hetch Hetchy water system. The multibillion-dollar effort will be financed in part by Proposition A, a bond measure voters authorized last year to upgrade facilities such as the dam.

Two years ago the state Department of Safety of Dams asked the SFPUC to reduce storage in the Calaveras Reservoir to 30 percent of its maximum capacity. The department's most current data indicate the dam is facing decreasing stability, and until it's either repaired or replaced, nearly 30 percent of the entire Bay Area water storage space remains out of service.

Every day that the reservoir remains at such a reduced level, drought protection in the Bay Area is compromised. When less water is flowing from Hetch Hetchy, it means there is less water to draw from the reservoir and the risk associated with a catastrophe such as an earthquake increases. Furthermore, the SFPUC anticipates degraded water quality from a diminished supply and an estimated five billion gallons of water lost from discharges to keep the reservoir at 30 percent capacity.

The SFPUC will consider a staff recommendation to award the Calaveras Dam contract to URS Tues/27, 1:30 p.m., City Hall, Room 400, 1 Dr. Carlton B. Goodlett Place, S.F. A public hearing will precede the regular commission meeting.

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