In August 2005, Edmund T. Parker, chief engineer at the state Department of Transportation, voted to recommend Plexus Corp., a small Smith Hill company co-owned by his brother-in-law’s son, for a $9-million, four-year contract.

Edmund T. Parker, chief engineer at the DOT, voted in 2005 to hire Plexus Corp.

THE PROVIDENCE JOURNAL / Connie Grosch

It was one of two new contracts in the works that year for a company that had been on the Department of Transportation payroll since 1997 under what began as a $1-million, 30-month contract to help install a “financial management and project tracking system” — and never ended. The new contract gave Plexus sole responsibility for scheduling and monitoring the progress of every highway construction project under way in Rhode Island.

A Providence Journal review of the Plexus contracts underscores a number of the concerns Governor Carcieri raised last month when, following earlier stories about DOT contracting practices, he empaneled a task force to look into cozy relationships between DOT employees and contractors, never-ending contracts and unquestioned overhead rates. Among the Journal’s findings:

•The first Plexus contract started relatively small and then grew over a decade into a $6.6-million source of business for the company without ever again going out to bid. New assignments included the development of an “RIDOT website” and a “policy and procedure manual” for maintenance crews.

•Auditors disqualified $240,544 of $953,426 in 2004 costs, including loan payments for personal cars and alcohol at a Christmas party, that Plexus had presented to justify the overhead rate — nearly twice its actual labor costs — that it was charging on one of its contracts. These 2005 findings apparently went unheeded until recently.

•Officials in some other states, such as Massachusetts and Connecticut, say they generally leave to their in-house staffs the type of work that the DOT pays Plexus to do — including monitoring of construction schedules. At $108.55 an hour, Plexus Vice President David A. Giardino is being paid the equivalent of $224,640 to do what Connecticut says it pays its own $60,000 to $83,000 project engineers to do, and that is just a small part of their job.

•The company’s owner has close ties to both a top DOT official and to the contract administrator for one of the construction companies his firm was hired to keep on schedule: Cardi Construction.

Cardi’s contract administrator since spring 2006 has been Nicholas Giardino, father of David Giardino and brother-in-law of Parker.

Parker is the DOT chief engineer who was one of several members of an in-house DOT “consultant selection panel” that first chose Plexus over five competing companies for the $9-million schedule-monitoring contract. (Acting on the panel’s recommendation, a Department of Administration committee later followed suit. The contract was finally awarded in March 2006.)

As part of their contract, Plexus employees meet periodically with Nicholas Giardino to discuss construction issues and concerns — such as steel delivery dates — that could affect the progress of the largest highway project under way in Rhode Island: the $577-million Route 195 relocation.

That they are all close seemed evident to those attending Parker’s bachelor party at the 1025 Club in November 2006.

Among those seated at the head table with Parker were his brother-in-law Nick and Nick’s son, David; then-DOT Director James Capaldi; DOT’s head of road design, Robert Smith; and Cardi secretary treasurer Stephen A. Cardi, according to another person at the table, Parker’s deputy chief engineer, Frank Corrao.

Recalling the night recently, Cardi, who attended the bachelor party with his own nephew, Cardi executive Vice President Stephen A. Cardi II, recounted a joke they played on Parker.

Cardi said he got an empty Viagra bottle from CVS and filled it with M&Ms and gave it to Parker, 59, who was getting married for the first time.

“All my life I was terrified of my mother and ‘The Chief Engineer,’ whoever the chief engineer was,” so “it was the one chance in life to ‘get’ the chief engineer.”

On a more serious note, Cardi acknowledged hiring Nick Giardino, who had worked for many years for J.H. Lynch & Sons, about a year ago. “I don’t know how father and son handle the business relationship, probably because most of the stuff has to do with scheduling and scheduling is done by people here who concentrate on scheduling.”

Asked why then the DOT needs its own $9-million construction scheduler, Cardi said: “Because maybe, say we schedule something in one way that might be trying to get extra time for something that we don’t deserve…. RIDOT would need somebody who’s hep enough to be able to find out that we are not correct.”

Nick Giardino did not respond to inquiries. When asked how he views his company’s dealings with his father, David Giardino, 41, said: “Not an issue.”

As an example, he cited an instance where, he said, Cardi sought a potentially costly 160-day extension because of anticipated delays in steel deliveries. After reviewing Cardi’s “slowed” pace on other aspects of the big project, he said he recommended an acceleration and “easily knocked it down to 38 days.”

In a business where “time is money” — and every delay increases a project’s potential cost, Giardino takes credit for “saving” the DOT between $3 million and $4 million over the last year alone and contends his contract effectively costs them nothing.

On Friday, his Boston-based public relations adviser, Wesley B. Eberle, produced minutes of a meeting that, he said, Giardino and several DOT officials had a day earlier with a federal highway official, John McAvoy. The minutes indicate the Federal Highway Administration views Plexus’ scheduling program as “a great success” that has enabled the DOT to detect when “contractors are manipulating their schedules, pacing delays or posturing issues.” (McAvoy could not be reached for comment.)

Though he has no college or engineering degree, Giardino attributes his success at winning DOT work to his expertise in his niche of the construction industry: “I am really good at what we do.… I was excellent at getting jobs done, managing contracts, and that’s part of my reputation. That’s why I end up getting a lot of work representing DOT.

“If you think about it, it’s no different than the Yankees trying to grab Roger Clemens. They want the best,” he said.

Parker, in an interview last week, acknowledged a close relationship with his brother-in-law Nick, who, he said, has been married for close to two decades to his sister, Ginny, and served as a best man at his wedding.

But of Nick’s son David, who ushered at his wedding, Parker said: “He’s not my nephew. I don’t consider him my nephew. A nephew is a son of your brother or your sister and he is neither.… He is a son of my brother-in-law.”

When Plexus was first up for a state DOT contract in 1997, Parker abstained from voting on the in-house consultant selection panel, citing a family tie.

Last week, he said he did so only because he was unaware then of how state ethics law defines a family member: “It says stepfather, stepmother, stepson, stepdaughter, stepbrother, stepsister, half-brother, half-sister. That’s the legal definition of a family.

“It doesn’t say anything about a step-nephew,” he said. So, “I did not see it as a conflict based on the definition from the Ethics Commission,” he said of his August 2005 vote to recommend Plexus for an exclusive role in construction tracking and scheduling.

Asked about the propriety of a son’s company evaluating construction issues a father might raise in DOT meetings, he said: “If you have honorable people, it can be done. And I think we have honorable people.”

THE DOT’S DRIVE for federal approval to put a single consultant in charge of all construction scheduling and monitoring began with a Jan. 5, 2004, letter from James R. Caroselli, the DOT’s chief civil engineer for construction.

In a letter to the Federal Highway Administration regional administrator Lucy Garliauskas, Caroselli said the DOT had been using several companies on a rotating basis, but encountered instances in which a company would work for the DOT on one contract and then — between jobs — work for the DOT’s contractors.

“After a while I said, you know this has conflicts written all over it.… We want somebody who’s going to represent us, and whoever wants to represent the contractor can do that,” he said.

Asked whether this led to problems, Caroselli said: “I think we stemmed it before it became a problem.”

The FHWA is unable to cite another state that has entrusted all of its contract schedule-monitoring to a single, private consultant.

“Ten years ago this was really a specialty that you needed to hire somebody,” but “it’s become more the norm so we have trained a number of people to do this,” Mark Rolfe, Connecticut’s construction division chief, said in recent interview.

“For the most part, we look to our project engineers to do this work for us. People on our own staff,” Rolfe said.

But then-DOT Director James Capaldi convinced federal highway officials that having a single consulting company do all “contract time determination(s) and project schedule monitoring” would not only be more efficient, but also would “eliminate conflicts of interest” between DOT consultants and the construction companies for which they sometimes moonlighted.

With federal highway approval, the DOT sought bids. Seven came in. One was disqualified. Three were close in scoring by a DOT staff evaluating panel.

At one point, Plexus President Leslie Giardino — who as a woman qualifies as a recognized minority — sought minority business status for Plexus. But a July 15, 2005, staff report for the Department of Administration panel that makes such determinations questioned how much control Leslie Giardino actually had over the company, with a business administration degree from the Katharine Gibbs Colleges and “no previous engineering, transportation or construction-related experience.”

The report also noted that while her husband, David Giardino, at one point, made her the majority shareholder by “gifting” 60 of his 100 shares to her, their 2004 personal tax returns listed him as “manager” of Plexus and her as “administrative assistant.”

With a hearing scheduled, she withdrew the application. In an interview last week, her husband said she did so because the questions grew increasingly personal and invasive.

Along the way, something else of note happened. DOT staff was persuaded to widen “the spread” between Plexus and its nearest competitor, the Milford, Mass.-based Project Technologies Group.

In the end, third-place Trauner Consulting, of Boston, didn’t make the cut because it had “never done work for RIDOT and is therefore unfamiliar with RIDOT policies and procedures,” according to minutes of the consultant selection committee.

Second-place PTG was bypassed because it “did not provide adequate staffing to accommodate the anticipated workload, nor did they possess the experience needed to manage this contract.”

Initially, Plexus had a “two to three point” lead over PTG, review team member Caroselli acknowledged for the first time last week.

Caroselli said the initial scores were submitted to Frank Corrao, the deputy chief engineer under Parker. “He reviewed them and said: ‘Jeez, based on your notes, it looks like there should be a little more gap between these individuals. Can you go back and relook at it?’ ”

In other words, Caroselli said: “We were urged, based on our notes, that the spread looked like it should have been bigger.”

Corrao had no recollection, when asked, of any revisions in the scoring.

But Caroselli said he took Corrao’s words at the time as nothing more than an acknowledgement that the group — himself included — was inexperienced in selecting consultants.

“So the group met again, re- scored the contenders, and Plexus’ lead grew to six points. The biggest thing is they were in the state; they were located here; they were familiar with the way we did scheduling and they had the staff,” Caroselli said.

There was also behind-the-scenes jockeying over how much Plexus should be paid under the new contract, which didn’t get its final signoff until March 2006.

A year earlier, DOT auditors had taken issue with some of the Jan. 1-Dec. 31, 2004, expenses that Plexus used to justify the overhead rate it was charging on its many-times extended 1997 contract.

The FHWA has taken the position that overhead rates are for the most part not negotiable. Until April, Plexus was being paid 1.996 times — nearly double — its “actual” labor costs plus a 10-percent guaranteed profit on its new contract.

But in a 2005 audit with potential implications for all of Plexus’ contracts, the DOT auditors cited “a lot of credit card purchases for which there were no receipts.” They said: “Some costs were presented twice … A lot of personal expenses were included with business expenses, such as loan payments for personal cars…. Unallowable entertainment costs included alcohol at a Christmas party, lunches, gifts, etcetera.”

In short, “for the period audited, the rate developed by the consultant did not accurately represent costs incurred by the consultant in accordance with federal acquisition regulations and RIDOT contract conditions,” wrote Principal Auditor Kathleen A. Duncan.

Of the $953,426 in 2004 costs Plexus presented, the audit “disallowed” $240,554.

In one of two recent interviews, new DOT Director Jerome Williams said he had been assured the DOT had never been billed for any of these disallowed expenses and that Plexus’ overhead rate had been reduced as a result of what he at first described as a “pre-award audit.”

But documents provided by Giardino himself last week indicate the rate reduction to 1.9736 did not go into effect for the big construction-scheduling contract until this April. That month, Plexus was paid a total of $169,221, including $73,353 in direct labor costs. The rest was mostly overhead ($71,417), profit ($14,477), and payments for travel, mileage, copying costs and a “subconsultant,” United International Corp.

The DOT’s explanation Friday for the time-delay: “It can take considerable time to do a thorough audit,” but “when a rate changes, the difference is always adjusted retroactively back to the year in question.”

Asked how much, if anything, Plexus owes, Williams said the question was one of many “under review.”

Altogether, Plexus has been paid $8.2 million so far from its two newest contracts with the DOT and the 1997 contract that has been extended year after year.

In addition, the company has received $416,235 in the last year and a half alone from side contracts to do similar schedule tracking — on state projects — for a number of engineering companies, including the Maguire Group, which has been working with Cardi on the massive Route 195 relocation.

Giardino says he has now severed all of these contracts. The DOT says he was never paid twice for the same hours.

FOR THE FIRST YEAR or so of Plexus’ new four-year contract, at least one other company — Arnold Engineering — still had a hand in clocking the progress of the Route 195 project. Now all of the schedule monitoring of Cardi’s work is performed for the state by Plexus.

The DOT did not respond until Friday to repeated requests, over several weeks, for copies of Plexus’ update reports on its biweekly meetings with DOT contractors.

Minutes Arnold Engineering kept of its “schedule and issues meetings” show Nick Giardino representing Cardi’s at regular meetings with Plexus staff to discuss Route 195 issues big and small.

At one point, for example, Arnold, working as a subconsultant to the Maguire Group, the engineering company working with Cardi, warned that the project had fallen behind schedule because of problems with girders.

“During this update schedule period this project lost another three days.… One hundred fifty-four activities should have started but did not and one hundred sixty-five should have finished but did not.”

On March 30, the Maguire Group got a letter from the DOT’s deputy chief engineer, Kazem Farhoumand, informing him that Arnold’s services were no longer needed. “Effective May 1, 2007, Plexus Corp. will be performing all tasks related to construction contract monitoring,” the letter said.

Arnold was cheaper than Plexus by nine cents on every overhead dollar.

When asked the rationale for dropping the company, deputy chief engineer Corrao said the money allotted for Arnold’s contracts had run out and a decision had to be made to “either add money to that contract to continue to have him on board” or shift Arnold’s responsibilities to Plexus, which “had already included hours to maintain that as part of the project.”

Given the choice, Corrao said: “They just felt that it was not in the state’s best interest at the time to add additional monies to his contract or write an amendment or contract addendum to Dave Arnold’s contract for whatever project that would be on I-195.”

In a recent interview, Arnold Engineering president David Arnold said he didn’t even try to compete with Plexus when the “global” scheduling contract was put out to bid in 2005.

“It was kind of assumed who was going to get the job, so why waste time bidding it,” he said.

LAST MONTH, after news reports about the equivalent of $102,858 that the DOT was paying another consulting company for a typist, Governor Carcieri promised a full-scale inquiry into the possibility of other similarly “outrageous” overhead rates and “inappropriate relationships.”

In a statement issued the day after The Providence Journal began filing written requests for information about DOT consultants, Carcieri said: “There are apparently other contracts with similar overhead rates. There may also be instances where contracts are being awarded to companies composed of former DOT staff or to companies related to current DOT personnel.”

“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,” he said May 11.

It is unclear whether Carcieri was referring to the Plexus contract.

Late last week, after being questioned about the Journal’s findings, DOT Director Williams said he is withholding judgment until state Lottery Director Gerald Aubin — a former Providence deputy police chief — completes the review Carcieri last month asked him to conduct of DOT consulting contracts. His deadline is June 22.

“Per the governor’s directive, we are working with Gerry Aubin on the review of all DOT consulting contracts. As such it is important to review all of the facts on any relationships with DOT staff before a definitive comment is made,” Williams said.

“At this point, however, based on initial information, there are things that, had I been here at the time, I would have done differently prior to the bidding of this contract,” he said.

“Knowing that there may be a perception issue with employees of the potential bidders, I would have modified the evaluation committee [so] that no one on the committee was in the same department as the DOT employee. In addition, disclosure memos would have been requested prior to the bidding to ensure that all relationships were known at the time.”

As for what comes next, Williams said: “I expect there will be changes in what we do. I think there will be findings and then there will be recommendations on moving forward and I’ll take those actions. I don’t want to do it piecemeal.”

Last week, Williams, in the job less than six months, sent the DOT staff a chin-up memo that began, “I want to take a moment out of our busy day to commend the job done by the department on the overnight [highway] closures.… This teamwork should be remembered in light of some of the media stories that have come out or may yet come out which shed an unfortunate shadow over us.

“Continue to be proud of what you do. I am proud to say that I work at the Department of Transportation and you should be too.”

kgregg@projo.com