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Carcieri calls $102,858 typist ‘tip of iceberg’

01:00 AM EDT on Saturday, May 12, 2007

By Katherine Gregg

Journal State House Bureau

PROVIDENCE — Governor Carcieri acknowledged yesterday that the now infamous Department of Transportation contract paying a private company the equivalent of $102,858 a year for a typist at the DOT’s traffic-control center “may be just the tip of the iceberg.”

With questions swirling about how many other DOT contracts carry equally high markups — in this case, 145.99 percent — Carcieri issued a late-day statement acknowledging that his recently confirmed DOT director, Jerome Williams, has now alerted him: “There are apparently other contracts with similar overhead rates.

“There may also be instances where contracts were being awarded to companies composed of former DOT staff, or to companies related to current DOT personnel. We don’t have those answers now, but we will soon,” Carcieri said.

The governor issued the statement one day after The Providence Journal filed an Access to Public Records Act request with the DOT questioning specific contracts. At that point, the DOT had not filed since October 2005 the roster of contractors it is required to file with the secretary of state every quarter.

“I want to get to the bottom of these concerns so we can determine if there are any inappropriate relationships and ensure that all tax dollars are being spent effectively,” the governor said. “As part of that process, we will also determine who was responsible for approving these contracts and why they did so. Depending on what we find, responsible parties will be held accountable.”

Carcieri has not pointed fingers at any in key positions, past or present, at the multimillion-dollar state agency that fixes roads and bridges, plows snow and builds interstate highways, including former DOT Director James Capaldi, who retired in late December with a $113,192 state pension after more than three decades at the DOT. (Capaldi went to work for the Louis Berger Group, a DOT contractor.)

But yesterday Carcieri said: “The more I learn, the less satisfied I am in how the Department of Transportation has been managed.”

Who does he hold responsible? “I think we can only determine that once we determine the facts,” said spokesman Jeff Neal. At this point, “Director Williams has informed him that there’s a significant possibility that there will be other contracts of concern. The governor wanted to pass that information on to the Rhode Island public and to express his determination to get to the bottom of it.”

The governor’s comments followed the disclosure earlier this week, by The Journal, of the terms of a four-year, $8.4-million contract the DOT awarded the Massachusetts consulting firm Vanasse Hangen Brustlin to staff the agency’s Transportation Management Center — located in a state-owned building across the street from the State House — that was created by a different consultant under an earlier contract.

In all, there were 36 VHB employees working for the DOT during the last pay period, including staff engineers, draftsmen, operators and typists, making between $13.50 and $80 an hour.

The way this has worked: clerk-typist Karenlee Bernardo — a 2002 Republican candidate for the Warwick City Council – is paid $18.35 an hour, the equivalent of $38,181 a year. Another $64,690 goes to VHB for “overhead” (145.99 percent) and “profit” (10 percent).

In her case, the state has been paying thousands more to hire a clerk-typist through Vanasse Hangen Brustlin than it would to hire a full-time state employee. Pay for a clerk-typist starts at $26,746 a year (or $14.70 an hour). The state pays another $8,716 (32.59 percent) in Social Security taxes and fringe benefits, including unemployment, workers’ compensation and retirement contributions. Family health coverage would cost $15,820 more. With wages and benefits totaling $51,282, this worker would cost half what the state is paying VHB.

Asked earlier this week to delineate the company’s overhead, Williams acknowledged questions of his own, saying: “They are using our computers. They are using our utilities … housed in our building.” (Earlier this week, after the contract came to light, Williams negotiated the markup for Bernardo and other administrative staff down from 145.99 percent to 22.5 percent to match the premium the state is paying another private company, Smart Staffing Service, to provide state workers.)

VHB had no comment until yesterday.

When asked what the 145.99 percent covered, the company’s new spokesman, Kevin Gould of Advocacy Solutions, replied by e-mail: “Our audited overhead, as defined by the Federal Acquisition Regulation, includes: Payroll Burden (employee insurance, payroll taxes, 401K match, sick leave salaries, vacation salaries, holiday salaries, etc.) Indirect Costs (travel, insurance, recruiting, etc.) General and Administrative Expenses (administrative salaries, office supplies, telephone, professional licenses, etc.).”

Asked how these non-state employees were hired, Gould wrote: “Positions for the TMC were posted, advertised, and candidates applied and were interviewed. The candidate in question went through this process and had direct and relevant experience for the position.”

Earlier in the week, a Carcieri spokesman said the governor was “surprised and very disappointed to learn that this federal law requires the state to pay such an artificially high markup on these federally funded engineering contracts.”

But Carcieri’s statement yesterday said: “I am concerned that nobody at the Department of Transportation ever thought to question the overhead rate being paid on the VHB contract … Because that’s the way things had always been done in the past, nobody thought to question whether they should continue to be done that way. Allowing historical practice to trump commonsense and good management practice is unacceptable.”

And a spokesman for the Federal Highway Administration added further fuel to the debate about what is and is not required under a federal law that was aimed at giving states the ability to eschew the lowest bidder for the most qualified bidder, and pay “what the market will bear” for highly competitive services, such as engineering.

FHWA Doug Hecox said certain qualified “indirect costs” are not negotiable under the so-called Brooks Act, but “RIDOT can negotiate the number of hours, the type and level of personnel assigned, the deliverables, and even which charges will be direct versus indirect. They can always decide to negotiate with the next qualified bidder instead if they can’t reach agreement on price with the most qualified. In short, there is plenty of room for negotiation over price with the most qualified bidder … just not on indirect rates.”

Meanwhile yesterday, there were differing reports about the status of the DOT’s long-overdue consultant disclosure filings with the secretary of state. DOT spokesman Dana Nolfe said they were delivered shortly after 2 p.m. But finding no record of them, a spokesman for Secretary of State A. Ralph Mollis said a please comply with the law letter was sent to the DOT yesterday.

kgregg@projo.com