It won’t exactly be Oliver North facing down Democratic legislators at the Joint Congressional Committee from 26 years ago. But then again, Dennis Diemer, the General Manager of the Woodland-Davis Clean Water Agency, presumably won’t be lawyered up, ready to take the Fifth either.
The real question is whether anyone on council, this side of Brett Lee, actually cares that much about this issue.
For those who missed it, less than two weeks ago we learned that the second of three firms bidding on the DBO process for the surface water project, CDM Smith and United Water, had “determined that they are unable to correct deficiencies in their proposal necessary to comply with RFP requirements and have withdrawn from the competition.”
Now, just three weeks before the anticipated deadline, the DBO “competition” has been “narrowed to a single highly-qualified DBO team.”
Dennis Diemer noted at the time, “CH2M Hill must still submit a responsive proposal meeting all of the Agency RFP technical, performance and cost requirements by the July 30, 2013 deadline. Once received and determined responsive, CH2M Hill will then enter into contract negotiations with WDCWA as the final step in ensuring that they will meet or exceed all requirements.”
He added, “WDCWA will continue to pursue additional cost savings opportunities and project enhancements during the negotiations.”
One Davis Enterprise columnist has been skeptical. Last week, in response to the claim that the last firm standing “must still submit a responsible proposal…”, Bob Dunning wrote, “Translation: They have us over a barrel. If they walk, the project is dead.”
He continued, “What Dennis Diemer seems to be telling us is that, sure, Monticello Dam burst overnight, wiping out Winters and Davis and Dollar Hot Dog Day at Raley Field, but the rupture does allow young Coho salmon to swim up Putah Creek to spawn, just like we envisioned.”
As he noted sardonically, “Why did we initiate a competitive bidding process in the first place if we’re so clearly better off without it?”
Mr. Dunning added, “Fortunately, several members of the Davis City Council that brought us this project have seen through the bluff and the bluster to realize that the lack of competitive bidding on a project this size is not what the voters had in mind when 54 percent of them gave the go-ahead last March.”
However, that part might be wishful thinking on the part of Mr. Dunning.
From my vantage point, there is just one councilmember engaged on this issue and that is Brett Lee.
“I am very concerned about this recent development,” Councilmember Lee said in a statement. “The WDCWA has been very good at setting the criteria that makes sure that whatever firm is selected will be well qualified to carry out the design, construction and initial staffing of the plant. However, I believe that it is the competitive bidding process that would have provided us with an assurance that we are not over-paying for the project. Even a modest 1 percent to 2 percent difference in bids would yield savings of $2 million to $3 million dollars.”
The rest of the council seems rather alarmingly disengaged on this issue.
Mr. Dunning wrote, “Mayor Joe Krovoza, perhaps the most stalwart supporter of the water project in general, has his doubts about the latest developments.”
He quoted the mayor saying, “I am disappointed that both Violia and CDM expressed strong interest, we worked with them, and then they dropped out. Stinks. I do believe our team was tough but fair on Violia and CDM, and they dropped out. Violia says the process was too long. Hogwash. If they were confident they could win, they’d be bidding. Ditto CDM.”
However, in my conversations with the mayor, he has largely downplayed the development, believing along with Dennis Diemer that the process itself will yield similar results, regardless of the numbers of competing firms.
The problem with that view is that the agency has really lost its leverage. Maybe CH2M Hill will submit the same proposal regardless.
Perhaps Mr. Diemer is correct that the project will come in about 19% below the original estimate. The agency avoids wasting more time and money on the competition. Veolia and CDM dropped out because they knew they would not be able to win.
But CH2M Hill also knows some other things. Critics of the surface water project keep arguing that there is no rush, but they are incorrect on that point. There is a huge rush and the agency must move forward on the present timeline or Woodland will face huge regulatory fines. C2HM Hill knows this, so will they try to take advantage?
The competitive bid process was the last remaining leverage that the agency had on this. Now that it is CH2M Hill or regulatory fines for Woodland, there does not seem anything keeping CH2M Hill from capitalizing on the agency’s sudden loss of clout.
One of the things we feared when both Dan Wolk and Joe Krovoza announced their bid for higher office was that the key issues on the council might become secondary. Right now, Brett Lee seems the only one rightly disturbed by these developments. He is also the only one disturbed by not only the $30 million that the council punted on wastewater, but also the terms of the RFP that preclude council from asking questions.
Councilmember Lee was also the lone voice of concern about the increased costs for going to a one-month billing cycle which will now require monthly meter readings, even though Mr. Lee pointed out ways that the city could save $200,000 or more by going to a more sophisticated system that reads the meter bimonthly while breaking the bill into two parts.
When only one councilmember seems engaged and concerned on these fronts, the ratepayer and the taxpayer end up on the short end of the stick.
Tough questions need to be asked of Mr. Diemer. Tonight’s discussion will go a long way toward determining the extent to which we have a council engaged on the issues at hand.
—David M. Greenwald reporting
[quote]There is a huge rush and the agency must move forward on the present time line or Woodland will face huge regulatory fines. C2HM Hill knows this, will they try to take advantage?[/quote]
There’s no reason to believe otherwise. Whether they can successfully capitalize on the situation is a more complex question.
[quote]”There is a huge rush and the agency must move forward on the present timeline or Woodland will face huge regulatory fines.”[/quote]On the other hand, what State interest is served in levying “huge fines” on a city that obviously is making good faith efforts and progress? Does anyone really believe that Woodland wouldn’t be excused under these circumstances?[quote]”Perhaps Mr. Diemer is correct that the project will come in about 19% below the original estimate.”[/quote]So, now, we’re projecting that the project bid will come in over the estimate because we’re down to one bidder? Perhaps; we’ll see. [quote]”The competitive bid process was the last remaining leverage that the agency had on this.”[/quote]I don’t know that is is accurate. Many projects involve only one bidder from the start; they’re completely negotiated.
It’s not as though we suddenly are defenseless when we start working with a single company. Aren’t we represented by engineers and others who would protest if the company tried to take unreasonable liberties? The ultimate leverage is that CH2M Hill needs to come up with an acceptable bid.
You may be correct that CH2M Hill will take advantage of being the only bidder. What action are you suggesting that the council take because of this fear?
Let me see if I have this right: The JPA and Davis are advocating doing business in a sole source contract for more than half a billion dollars with a company that two days after our March 5th Measure I election pleaded guilty in Federal Court to felony high level corporate fraud on its government customer? The fraud went on for years and years, and ratified at the highest levels of the company management.
The JPA, Woodland, and Davis would be government customers.
What am I missing here?
Why is the Davis CC even pursuing this deal any longer?
i don’t think the plead in a 15 year old case by a subsidiary is a big deal, but the rest is perplexing and troubling. i don’t understand how the city can maintain that having a soul source contract even at this late stage doesn’t put us into a huge disadvantage.
In my opinion Mr. Diemer had better stop by CVS and buy a load of lipstick because that’s the only way he’s going to be able to dress up this pig.
the problem is that he won’t have to wear the lipstick because the emperor has no clothes (how’s that for a mixed metaphor?)
FYI…
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Thursday, March 7, 2013
CH2M Hill Hanford Group Inc. Admits Criminal Conduct, Parent Company Agrees to Cooperate in Ongoing Investigation and Pay $18.5 Million to Resolve Civil and Criminal Allegations
The Justice Department, in conjunction with the U.S. Attorney’s Office for the Eastern District of Washington, announced today that Colorado-based CH2M Hill Hanford Group Inc. (CHG) and its parent company, CH2M Hill Companies Ltd. (CH2M Hill) have agreed that CHG committed federal criminal violations, defrauding the public by engaging in years of widespread time card fraud. In order to resolve CHG’s civil and criminal liability, CH2M Hill has agreed to pay a total of $18.5 million, commit an additional $500,000 towards accountability systems, consent to a corporate monitor, and to continue actively cooperating with the ongoing fraud investigation .
Between 1999 and 2008, CH2M Hill had a Department of Energy contract to manage and clean 177 large underground storage tanks containing mixed radioactive and hazardous waste at the Department of Energy’s Hanford Nuclear Site in southeastern Washington (the Tank Farms Contract). The Hanford Site was used for the production of nuclear weapons during World War II and the Cold War. According to the statement of facts agreed to by the United States and CH2M Hill, CHG hourly employees involved in the cleanup routinely overstated the number of hours they worked, and CHG management condoned the practice and submitted inflated claims to the Department of Energy that included the fraudulently claimed hours.
Specifically, CH2M Hill and the United States agreed that CHG’s hourly workers “consistently refuse[d] to perform any overtime work unless that overtime was offered, or ‘called out,’ in 8 hour blocks.” As stated in the agreed statement of facts, “[t]he inability of CHG’s upper management to secure the necessary overtime volunteers for various jobs threatened CHG’s ability to complete various projects linked to the Tank Farms Contract performance incentives. This in turn threatened CHG’s ability to earn certain fees, and therefore profits under the Tank Farms Contract.” According to the agreed statement of facts, the inability to obtain performance based incentives would have directly impacted the personal corporate bonuses of certain members of CHG’s upper management. Consequently, “certain members of CHG’s upper management, certain direct supervisors of the hourly workers, and certain other supervisory personnel, accepted the practice of hourly workers only working until the particular overtime job was completed, leaving Hanford, and falsely claiming a full 8 hours even when the job took less than 8 hours,” according to the agreed statement of facts.
Unfortunately, the widespread time card fraud at CHG was not limited to overtime abuse and had occurred for many years, in some instances even pre-dating the Tank Farms Contact, as stated in the agreed statement of facts. Further the agreed statement of facts provides that, “[c]ertain members of CHG’s upper management, certain direct supervisors of hourly employees, and other certain supervisory personnel, did not discipline, formally or informally, CHG hourly workers for routinely engaging in known time card fraud. In fact, certain of CHG’s direct supervisors of hourly workers engaged in patterns designed to avoid the detection of the routine time card fraud by law enforcement and internal auditors.” In this manner, as CH2M Hill agrees, CHG “knowingly, willfully, and with intent to defraud, facilitated CHG’s hourly workers routinely getting paid for hours they did not work and combined, conspired, and agreed with CHG hourly workers to accomplish the same, all at the sole expense of the citizens of the United States.”
“Contractors owe a duty to the taxpayers to accurately bill the United States for work performed,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division of the Department of Justice. “This settlement demonstrates that the Department of Justice, working together with its law enforcement partners, will hold contractors accountable for false billing and restore wrongfully taken funds to the Treasury.”
“This sort of systemic fraud is an appalling abuse of the trust we place in our contractors at Hanford and it simply will not be tolerated,” said Michal C. Ormsby, U.S. Attorney for the Eastern District of Washington. “However, we are pleased that CH2M Hill has stepped up and admitted to the criminal conduct of its subsidiary and has agreed to pay back a good faith estimate of what was taken, including criminal proceeds from the conspiracy.” U.S. Attorney Ormsby went on to outline that pursuant to the global agreement, “CH2M Hill has also agreed to take substantial remedial steps going forward including having its remaining subsidiary at the Hanford Site, CH2M Hill Plateau Remediation Company, consent to a corporate monitor for 3 years, and to commit an additional $500,000 towards making sure something like this does not happen again.” U.S. Attorney Ormsby also noted that, “under this global resolution, CH2M Hill will continue its commendable cooperation and help ensure that all individuals who participated in this conspiracy and profited from it will be brought to justice as well.”
“I am pleased with today’s announcement. I would like to express my thanks to the entire team – including Inspector General Special Agents, the United States Attorney’s Office, the Department of Justice Civil Frauds Division and the FBI—for their efforts on this investigation,” said Gregory H. Friedman, the Department of Energy Inspector General. “It is essential that Department of Energy contractors be held accountable for effective stewardship of U.S. taxpayer dollars.”
The global resolution consists of CH2M Hill paying $16,550,000 to resolve its civil liability under the False Claims Act. In addition, CH2M Hill entered into a Non-Prosecution Agreement with the United States Attorney’s Office for the Eastern District of Washington to resolve its criminal liability. Under the terms of that agreement, CH2M Hill will refund an additional $1.95 million in wrongfully obtained profits, dedicate $500,000 to foster increased accountability at the Hanford Site, and pay for independent monitoring to ensure that CH2M Hill takes adequate corrective actions. To date, eight individuals have pleaded guilty to engaging in the same time card fraud scheme and conspiracy that CH2M Hill has now admitted CHG itself was a conspirator in.
The civil fraud allegations under the False Claims Act resolved by today’s settlement were initially alleged in a whistleblower lawsuit filed by Carl Schroeder, a former employee of CH2M Hill and one of those who pleaded guilty to the scheme. Under the False Claims Act, private citizens can sue on behalf of the United States and share in the recovery. The act, however, bars whistleblowers from recovering if they were convicted based on their role in the scheme.
This case was handled by the Civil Division of the Department of Justice and the U.S. Attorney’s Office for the Eastern District of Washington, with investigative assistance provided by the Department of Energy Office of Inspector General and the FBI.
The False Claims Act suit was filed in the United States District Court for the Eastern District of Washington, and is captioned United States ex rel. Schroeder v. CH2M Hill, No. 09-cv-5038 (E.D. Wash.).
13-275
Civil Division