Oklahoma State Auditor Inspector 2300 N. Lincoln Blvd. . State Capitol. Room 100 . Oklahoma City, OK 73105 . Phone: 405.521.3495 . Fax: 405.521.3426 January 6, 2014 Honorable E. Scott Pruitt Attorney General of Oklahoma 313 NE. 21St Street Oklahoma City, Oklahoma 73105 Attorney General Pruitt: Transmitted herewith is a summation of our Special Investigation of the Lead-Impacted Communities Relocation Assistance Trust Property Improvement Clearance Project that was re- let through the Department of Central Services and awarded in December 2010. (Objective Two) We performed this investigation, pursuant to your office?s request and in accordance with the requirements of 74 0.5. 18f. The objectives of our investigation included, but were not limited to, the concerns noted in your request. Our ?ndings and supporting evidence related to those concerns are presented in the accompanying documents. Sincerely, Gary A. Jones, CPA, CFE Oklahoma State Auditor Inspector 0 APR 201E, a. a? E. SCOTT ATTORNEY GENERAL or- OKLAHOMA April 21, 2011 The Honorable Gary Jones OBJECTIVE TWO State Auditor and Inspector (Highlighted - Page 2, Number 2. 100 State Capitol Building 2300 N. Lincoln Blvd. Oklahoma City, OK 73105-4802 Re: Allegations of Wrongdoing Regarding Awarding of Tar Creek Reclamation Contracts by or on behalf of the Lead-Impacted Communities Relocation Trust (LICRAT) Dear Mr. Jones: I have received the enclosed Memoranda from Jerry Morris. State Director for the Honorable '1 cm A. Coburn, U.S. Senator, expressing certain concerns brought to the attention of the Senator and his staff pertaining to the awarding of certain contracts for reclamation of properties in the Tar Creek area. Forwarded with these Memoranda was a large quantity of documents gathered and supplied in support of the several allegations. The concerns expressed by the Memoranda are in reference to the suspected unlawful contracting practices of the Lead-Impacted Communities Relocation Trust (also known as LICRAT), a Public Trust and Agency of the State of Oklahoma, as attempted to be executed on its own behalf and later executed through the auspices of the Department of Central Services, also a State Agency. I have determined that these concerns are serious in nature such that an investigation of the matter is warranted. I hereby request, pursuant to 74 0.8. 2001, 18f, that you undertake an Investigative Audit of these matters and provide a report of your ?ndings to address the following concerns: 1. In regard to the Lead?Impacted Communities Relocation Assistance Trust Property Improvement Clearance Project that was let and awarded on or about March 24, 2010 by the LICRAT: A. Were bids solicited, received and contract awarded pursuant to the provisions of the Public Competitive Bidding Act of] 974 (as amended), 61 0.8. 2001, ??101 et seq.? B. If the contract was awarded to any bidder than the lowest bidder, was a credible written explanation of the award of bid ?led in accordance with 61 0.8. 2001, 117? 313 E. 215r51nec1 OKIAHDMA CIFY. 01(73105 Fax: (4051 521 {1246 0 recycled paper The Honorable Gary Jones, -2- April 21, 2011 State Auditor and Inspector C. Is there any evidence of an agreement or collusion among bidders, prospective bidders and/or material suppliers in restraint of freedom of competition [including, but not limited to, whether the winning bidder served as a ?straw bidder? for an actual other person or entity], 61 OS. Supp. 2008knowingly false af?davit of non-collusion ?led in support of a bid, 74 0.8. Supp. 2009, ?85 .22? Were the rights to the contract unlawfully transferred from the winning bidder to another person or entity? D. Is there any evidence of an illegal con?ict of interest between the entity awarded the winning bid and any Trustee of the public trust or its chief administrative of?cer contrary to 61 O. S. 2001, 114? E. Is there any evidence of any unlawful disclosure(s) by any person contrary to 61 0.8. Supp. 2006, 116? F. Is there any evidence that the successful bidder knowingly provided misstatements of existing or past material fact(s) to the Public Trust in support of its bid for the award of the contract, 21 0.8. 2001,? 1541.1 and 1541.2? G. Is there any evidence that two (2) or more persons agreed to take, and thereafter undertook, any action or make any representation to the Public Trust calculated to impair, obstruct or defeat the Public Trust in its lawful ?mction of awarding the contract to the lowest and best bidder, 21 0.8. 2001, 424? H. Is there any evidence that the awarding of the contract was in?uenced in any way by the promise or transfer of some thing of value or gift to a public of?cial or employee, 21 0.3. 2001, ??381 382, 21 0.8. 2001, 341(First), or 74 0.8. 2001, 3401 et seq? 1. Is there any evidence of an Open Meeting violation by the LICRAT Trustees in the awarding of the contract, 25 0.8. 2001, 314? If so, has the District Attorney taken any action in regard to that event? 2. In regard to the re-lctting of the contract by LICRAT through the Department of Central Services: A. A. Were bids solicited, received and contract awarded pursuant to the provisions of the Public Competitive Bidding Act of1974 (as amended), 61 0.8. 2001, 01 et seq? B. If the contract was awarded to any bidder than the lowest bidder, was a credible written explanation of the award of bid ?led in accordance with 61 0.8. 2001, 117? C. Is there any evidence of an agreement or collusion among bidders, prOSpectivc bidders and/or material suppliers in restraint of freedom of competition [including, but not limited to, The Honorable Gary Jones, April 21, 2011 State Auditor and Inspector whether the winning bidder served as a ?straw bidder? for an actual other person or entity], 61 0.3. Supp. 2008knowingly false af?davit of non-collusion ?led in support of a bid, 74 0.8. Supp. 2009, ?85 .22? Were the rights to the contract unlawfully transferred from the winning bidder to another person or entity? D. Is there any evidence of an illegal conflict of interest between the entity awarded the winning bid and any Trustee of the public trust or its chief administrative of?cer contrary to 61 0.8. 2001, 114? E. ls there any evidence of any unlawful disclosure(s) by any person contrary to 61 0.3. Supp. 2006, 116? F. Is there any evidence that the successful bidder knowingly provided misstatements of existing or past material fact(s) to the Public Trust in support of its bid for the award of the contract, 21 0.8. 2001, 1541.1 and 1541.2? G. Is there any evidence that two (2) or more persons agreed to take, and thereafter undertook, any action or make any representation to the Public Trust calculated to impair, obstruct or defeat the Public Trust in its lawful ?mction of awarding the contract to the lowest and best bidder, 21 0.8. 2001 424? H. Is there any evidence that the awarding of the contract was in?uenced in any way by the promise or transfer of some thing of value or gift to a public of?cial or employee, 21 0.8. 2001, ??381 382, 21 0.8.2001, ?341(First), or 74 OS 2001, 3401 et seq.? 1 also provide herewith the several documents supplied to us by Senator Coburn?s of?ce. Respeet?illy, Attorney General ENCLOSURES cc: ?le Lead-Impacted Communities Relocation Assistance Trust TABLE OF CONTENTS Investigative Summary 1 Attorney General Concerns 3 Other Concerns 6 Appendix A: Key Individuals 21 Lead?Impacted Communities Relocation Assistance Trust Investigative Summary This report describes various problems with the LICRAT Property Improvement Clearance Project that was bid and awarded through the Department of Central Services (DCS) in December 2010. Although our investigation did not provide direct evidence for a conspiracy against the state, it did provide considerable circumstantial evidence that a conspiracy may have existed. We observed that the DCS bid process resulted in this contract being awarded to the same vendor implicated in our report for Objective 1, CWF Enterprises, Inc., despite the fact that the March 2010 bid process contained signi?cant violations of the Title 61, Public Competitive Bidding Act and was voided by an Ottawa County District Court on an Open Meeting Act violation. Every change, modi?cation, or re-interpretation of this second demolition contract served only to increase the eventual payout to the contractor and increased the appearance of favoritism directed to the bene?t of CWF Enterprises (CWF). As a consequence of highly questionable change orders and extremely lax contract administration of the December 2010 contract, the payments to CWF, under this second bid award/contract, totaled $3,050,785.93. This amount, along with a payment to CWF of $366,282.56 under the March 2010 contract, brought the total payments to CWF for the Pr0perty Improvement Clearance Project to $3,417,068.49. Contrast this total amount with the original bid received on the project in October 2009, of $599,988.00. To attribute the following sequence of events surrounding the December 2010 contract to simple coincidence or merely poor management, it would have to be ?reasonable? to believe: 0 That a restoration-cleaning company with no heavy equipment and little experience in actual demolition work would receive a perfect ?10? across the board in the DCS pre-bid quali?cation process led by Jack the LICRAT project manager. 0 That this same pre-bid quali?cation process would attempt to disqualify all three other demolition companies by rating them near across-the-board ?1 on a scale of 1 to 10, although two of the three initially disquali?ed companies provided examples of prior experience of major and more complex demolition contracts totaling tens of millions of dollars. 0 That all parties signed a contract omitting the Alternate bid as unnecessary, only to subsequently add the $1.3 million Alternate two months later using Lead-Impac ted Communities Relocation Assist ance Trust ?clerical error? as the ostensible justi?cation for increasing the contract award by nearly 78%. 0 That adding the $1.3 million Alternate bid as a ?clerical error? change order was reasonable and appropriate, although state law prohibits cumulative ?change orders or addenda? from exceeding 10% on contracts exceeding $1 million. 0 That it was acceptable to invoke the Alternate bid for additional costs to haul debris to a fee-based Kansas land?ll when non-fee based facilities were still receiving debris. - Finally, after invoking the Alternate bid, that it could be presumed legitimate for the contractor to charge LICRAT on a ?lump sum? basis for the entire $1.3 million Alternate, even though billing documentation reported only approximately 15% of project debris was hauled to the fee-based Kansas land?ll, resulting in a ?windfall? to the contractor of over $1 million. We do not believe that the above events can be explained away as poor management or ?clerical error.? We believe the above provides suf?cient circumstantial evidence for additional investigation into a potential conspiracy against the state. Lead-Impacted Communities Relocation Assistance Trust Attorney General Concerns The Attorney General?s 74 0.8. 18f request speci?cally de?ned eight ?Concerns? to be addressed in connection with the contract awarded for the Lead-Impacted Communities Relocation Assistance Trust (LICRAT), through the Department of Central Services for the December 2010 Property Improvement Clearance Project. Each Concern A through is individually listed below verbatim as presented to us and is highlighted in red print; our responses to these questions immediately follow. In the progression of our investigation of the December 2010 contract, it became apparent that there were questions surrounding the bid, the award, and the management of this contract. However, these concerns did not appear compatible with the parameters of the statutory questions proposed in the Attorney General?s request letter. We have addressed the concerns presented to us by the Attorney General?s Of?ce below, but the substantive portion of our reporting follows under ?Other Concerns.? Concern A Were bids solicited, received and contract awarded pursuant to the provisions of the Public Competitive Bidding Act of 1974 (as amended), 61 0.5. 2001, 101 et seq.? It appeared that bids were solicited, received, and the contract awarded through the Department of Central Services, pursuant to the Public Competitive Bidding Act. However, portions of the bid and award process were problematic and are addressed under ?Other Concerns.? Concern If the contract was awarded to any bidder [other] than the lowest bidder, was a credible written explanation of the award of bid ?led in accordance with 61 0.S. 2001, 117? The LICRAT Property Improvement Clearance Project was awarded to the lowest bidder. As such, no credible written explanation was required. Concern Is there any evidence of an agreement or collusion among bidders, prospective bidders and/or material suppliers in restraint of freedom of competition [including, but not limited to, whether the winning bidder served as a ?straw bidder? for an actual other person or entity], 6] 0.5. Supp. 2008, 115? We found no evidence of collusion among bidders or evidence of a ?straw bidder.? Lead-Impacted Communities Relocation Assistance Trust Concern Concern Concern Concern If so, was a knowingly false a?idavit of non-collusion ?led in support of a bid, 74 0.S. Supp. 2009, 85.22? We found no direct evidence that a false af?davit of non-collusion was ?led. See discussion under Concern F. Were the rights to the contract unlawfully transferred from the winning bidder to another person or entity? CWF Enterprises, Inc. was the winning bidder; their contract rights were not transferred to another person or entity. Is there any evidence of an illegal con?ict of interest between the entity awarded the winning bid and any Trustee of the public trust or its chief administrative o?icer contrary to 61 0.S. 2001, 114? There was no evidence found of an illegal con?ict of interest as it is de?ned in 61 0.S. 2001, 114. Is there any evidence of any unlawful disclosure(s) by any person contrary to 61 0.S. Supp. 2006, 116? We found no direct evidence of unlawful disclosure of bid information as de?ned in this statute. Is there any evidence that the successful bidder knowingly provided misstatements of existing or past material fact(s) to the Public Trust in support of its bid for the award of the contract, 21 0.S. 2001, ?1541.1 and 1541.2? We found potential evidence of a violation of 21 0.S. 2011, 9? 1541.1 and 1541.2. See discussion of ?Bid Af?davit and Survey? under Phase 1 - The Bidding Process, Page 7. See also Phase Contract Charges, Page 14, in relation to the bid af?davit. Is there any evidence that two (2) or more persons agreed to take, and thereafter undertook, any action or make any representation to the Public Trust calculated to impair, obstruct, or defeat the Public Trust in its lawful function of awarding the contract to the lowest and best bidder, 21 0.S. 2001, 424? Lead-Impacted Communities Relocation Assistance Trust Concern We found no direct evidence of a ?conspiracy? as de?ned in 21 OS. 2001 424. However, in the totality of circumstances from the Pre- Qualiflcation of Bidders (Page 7), to the Contract Charges (Page 14); there appeared to be an inordinate level of bias directed to the winning bidder that could warrant further investigation. See discussion in the Investigative Summary. Is there any evidence that the awarding of the contract was influenced in any way by the promise or transfer of something of value or gift to a public o?icial or employee 21 as. 2001, 381 382, 21 0.S. 2001, 341 (First), or 74 0.5. 2001, 3401 et seq.? The statutes referenced in this Concern de?ne bribery, embezzlement and kickbacks. We found no evidence in the transactions and activities reviewed that would meet the criteria de?ned in these statutes. Lead-Impacted Communities Reloction Assistance Trust Other Concerns The LICRAT Property Improvement Clearance Project (hereinafter ?the Project?) was set in motion with a Request for Proposal (RFP) released by the Trust in September 2009. The bids received for this RFP were tabled and eventually withdrawn, with a new RFP issued in February 2010. From this RFP a LICRAT Project contract was awarded in March 2010. The March 2010 contract was awarded to Stone?s Backhoe, Dozer Trucking, Inc. and almost immediately assigned to CWF Enterprises, Inc. (CWF). The assignment of the contract was under the sole approval of Project Manager, Jack In May 2010, the work under the contract was halted by the District Court of Ottawa County due to improper activity concerning the bid process. The contract was re-let through the Department of Central Services (DCS) in December 2010, with continuing in his position as the LICRAT Project Manager. Three bids were submitted for the December 2010 contract, with the lowest bidder, CWF, receiving the bid. 0 CWF Enterprises, Inc. $1,701,752.97 0 Kingston Environmental $1,740,548.22 Abatement Systems $2,260,470.00 Our reporting on this bid process including subsequent changes, amendments and transactions will be addressed in three phases: Phase 1 The Bidding Process Phase 2 Contract Changes and Amendments Phase 3 Contract Charges Lead-Impacted Communities Relocation Assistance Trust Phase 1 - The Bidding Process Pre-Quali?cation of Bidders In the awarding of the contract, the Construction and Properties (CAP) Division of DCS utilized a new construction project bid procedure called the Performance Information Procurement System (PIPS). With contractors submit pre-quali?cation bids which are reviewed and compared by a committee. These pre?quali?cation bids are used to narrow the ?eld of vendors to those that would be the most responsive bidders. Pre-quali?cation bids for the Project were submitted by CWF Enterprises, Inc., Kingston Environmental Services, Inc, Abatement Systems, Inc., and Crossland Heavy Contractors, Inc. These bids were evaluated by a committee which consisted of the following: Jack LICRAT Contract Project Manager James Thompson LICRAT Trustee David Mihm Department of Central Services Kelly Dixon Department of Environmental Quality The members of the committee scored the bids submitted on ?General- Performance? information, as provided in the pre-bid responses. The committee recorded across-the-board scores of 10 for CWF, despite CWF not adequately providing all the information required in the ?Pre- Quali?cation Submittal.? Thompson Mihm Dixon CRA CRA 1 1 1 Firms Abatement 1 1 1 CWF Crossland 1 1 5 This stage in the process was supposed to be a pass/fail rating. If these scores would have been utilized, all vendors would have been eliminated from the bidding process, except CWF. According to DCS management, the committee should not have scored the ?General Performance? information, and the committee was advised that the scores assigned to ?rms A (Kingston) (Abatement) ?did not make sense? and were ?not defensible.? The committee?s evaluation for ?General Performance? was not used in the ?nal weighted scores of the pre?quali?cation bid. However, the scoring of a ?perfect? pre-bid score, which would have eliminated all bidders except CWF, along with the historical relationship of LICRAT, CWF, and Jack resulted in an appearance of favoritism toward CWF in this process. Lead-Impacted Communities Relocation Assistance Trust Bid A?idavit and Survey 61 0.8. 108 requires that each bidder accompany their bid with a written statement under oath disclosing the nature of any business relationships currently in effect or that existed within one year prior to the date of the statement with the architect, engineer, or other party to the project. In bid submitted to DCS, owner Chris White signed a ?Bid Affidavi under oath representing that he did not currently, or had not had any business relationship with the project engineer, any of?cer or director of the project engineering ?rm, or any other party to the project within the past year. However, CWF owner Chris White had a prior business relationship with LICRAT and Jack the Project Manager for the contract. The March 2010 LICRAT contract had been assigned from the winning bidder, Stone?s Backhoe, Dozer Trucking, Inc. to CWF through the sole approval of Jack Also, as part of the DCS bid process, a ?Survey Questionnaire? was used to collect past performance information on ?rms submitting bids. Jack completed a questionnaire as a reference and evaluator of CWF. In actual fact, the work performed under this contract was done by Stone?s, not CWF. An accounting of this relationship and contract can be seen in our earlier report ?Special Investigation Summation Objective This evaluation by was further documentation that a prior relationship did exist between CWF and This relationship should have been disclosed on the bid af?davit as required by statute. umm any What in?uence, if any, these issues had on the bid process and its ?nal outcome could not be fully determined or independently corroborated. However, when a vendor is awarded a contract despite crucial relationships not being reported and pertinent information not being disclosed; at a minimum, appearances of favoritism exist. Lead-Impacted Communities Relocation Assistance Trust Phase 2 - Contract Changes and Amendments Change Order #1 Unit Price Modi?cation The ?rst amendment to the December 2010 contract, Change Order was approved March 10, 2011, for an increased, per square foot, pricing structure for properties that may have to be ?passed over? during the planned progression of demolition work. The original contract Demolition A unit pricing was $2.95 per square foot. The new pricing structure, calculated from the ?Notice to Proceed? date of January 28, 2011, would be as follows: 0-30 day: $3.68 per square foot 30?60 day: $4.65 per square foot 60-90 day: $5.75 per square foot On January 20, 2011, before demolition work even began, CWF submitted a letter to project manager Jack requesting a contract modi?cation. The modi?cation was requested because structures pending release from the Bureau of Indian Affairs and the Quapaw Tribe might delay the Project progressive time schedule. The draft documents requesting the amendment implied that the contractor did not have any prior knowledge that ?Properties on Restricted Land Properties Occupied by Tenants? would not be available for demolition as needed, and as such they should receive additional compensation for remobilization and operating expenses incurred because of possible delays. However, the ?Project Summary? section of the RFP stated in part, ?At publication of this Invitation to Bid (1TB) there are 66 of the 248 properties that are not ready to be released for demolition. The contractor will be noti?ed as those parcels become available for demolition.? Because the RFP included a disclosure that selected properties were not ready to be released for demolition, the contractor should have been aware of this issue during the bid process and a contract modi?cation for an increase in unit cost appeared unwarranted. Lead- mpacted Comunities Relocation Assistance Trust Change Order #2 Alternate Bid The second amendment to the December 2010 contract, Change Order added an ?Alternate Bid? of $1,324,032.96 to the Property Improvement Clearance Project. As part of the DCS bid process the ?Request for Proposal? included a directive for an ?Alternate Bid.? This ?Alternate? would re?ect the additional amount required to utilize a licensed land?ll rather than the EPA Repository and would only be used if the EPA repository was not available and as directed by the Owner. The Scope of Work in the RFP speci?cally stated, ?All debris shall go to the EPA alternate bid shall be submitted for taking the debris to a licensed land?ll.? The winning bid of CWF, included an ?Alternate Bid? amount of $1,324,032.96. On December 7, 2010, the Trust board approved the bid pricing of the DCS contract with the Alternate Bid included. However, before the of?cial contract was signed, on January 3, 2011, an email between DEQ and DCS of?cials, stated in part, ?We have worked out a coordination plan with the have no need for accepting the alternate.? Subsequently, on January 7, 2011, the of?cial Project contract was signed by all parties without the ?Alternate Bid.? The signed contract included the following clause, ?This Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral.? The approval by the Trust Board to accept the bid pricing, prior to signing of the contract, appears to be a ?prior? representation and as such would be superseded by the DCS Contract which did not include the Alternate. After the contract was signed and demolition had begun, email exchanges revealed that LICRAT and DCS discussed how to add the ?Alternate Bid? back to the contract. In a March 18, 2011, email between David Mihm, DCS Project Manager, and Angela Hughes, DEQ Programs Manager, Mihm wrote, spoke with Mike about our concerns with this project and what we could do to resolve them. He con?rmed my thoughts on the matter. We are unable to exercise an Alternate after the fact, an Alternate and option can only be accepted if within the Contract. The other alternative we have that I discussed with Mike was the idea of declaring an emergency. We do not suggest this due to the sensitive 10 Lead-Impacted Communities Relocation Assistance Trust nature of the project already. Basically LICRAT, with advice of legal counsel, would declare the remaining work as either a safety or health concern. Projects declared, and accepted by the Director of DCS, can be given to any contractor logically here, to CWF. This is what not recommended. Let me know what you think.? Three days later, on March 21, 2011, Change Order #2 was approved, adding back to the contract the ?Alternate Bid? of $1,324,032.96. The amendment included a statement declaring that the Alternate was being added because it was left off the original contract by ?clerical error.? We could ?nd no evidence supporting the explanation of a clerical error. If leaving the Alternate Bid out of the contract was a clerical error, why was this not declared immediately upon discovery? Why were discussions held on what procedures were available for adding an Alternate, if the issue was simply an error? How does a clerical error of this magnitude go undetected for over two months, by DCS, LICRAT, and Jack the contract consultant or the contractor Change Order #2 ?Alternate Bid Purpose and Cost Purpose Once the Alternate bid was added to the contract, when and if it was to be used was based on whether CWF would need to haul debris to a licensed land?ll instead of using the EPA Repository, at no cost. The RFP stated in Attachment of the Unit Price Commentary, ?This alternate shall re?ect the additional amount required to utilize a Licensed Land?ll rather than the EPA Repository.? Based on review of emails and through interviews conducted, the EPA Repository was approved for accepting of the demolition debris and appeared to never completely close for use by CWF. In an email dated January 6, 2011 from David Cates of DEQ it states, ?The ?nalized and approved meeting minutes represent the written approval of acceptance of the demo debris at the repository. This was the agreed to approach for written approval.? Additionally, Hockerville was available for dumping of debris until the close of the project, at no cost. Hockerville was a DEQ Land Reclamation subsidence site; a ?collapsed mine? approved by DEQ to be ?lled in with debris. The closing and maintenance of the site was the responsibility of the Trust, and under Trust agreement. ll Lead- mpa cted Communities Relocation Assistane Trust Based on the fact that both the EPA Repository and Hockerville were available for dumping, it appeared the invoking and using of the Alternate bid was unnecessary. Cost After determining whether the Alternate bid should have been utilized at all, the next key discussion is the cost pertaining to the Clearance Project. Speci?cally the allowable expenditure amount and whether the Alternate bid was a ?lump sum? or ?unit price? addition to the contract. LICRAT, DCS and supposition was that the Alternate bid was needed and that it was a ?lump sum? addition. Under their assumption, once the Alternate bid was invoked, CWF received the entire Alternate amount of $1,324,032.96 for any project related cost, and not exclusively costs related to disposing of debris at a licensed land?ll. However, the contract form speci?cally stated that the use of the Alternate was for fees (and transport) to a licensed land?ll, and there was no provision that allowed the Alternate to be used for other contract costs. As previously noted, the RFP expressly stated, ?An alternate bid shall be submitted for taking the debris to a licensed land?ll.? Additionally, Under 61 121, ?Change orders to public construction contracts of over $1 million shall not exceed the greater of $150,000 or a ten percent cumulative increase in the original contract amount.? Since the Alternate bid was not part of the original contract, the only authorized means to add the Alternate to the contract would be through the change order process, and the Alternate greatly exceeded the ?$150,000 or ten percent cumulative increase? allowed by statute. The licensed land?ll used by CWF was B-3 Construction, Inc. A review of this account for the period April 1, 2011 August 9, 2011 showed B-3 charged CWF $61,845.98 for 43,206 square feet of demolition debris taken to the licensed land?ll. billing of the Trust for this amount of land?ll debris would have been $158,133.96 (43,206 square feet $3.66 per square feet). Based on these calculations, if any charges were to be allowed under the Alternate, the cost allowed should have been limited to the increased costs related to the 43,206 square feet of debris taken to the licensed land?ll, i.e. $158,133.96. Change Order #1 and #2 - Approval Under 61 0.8. 121E, if an awarding public agency has a governing body, all change orders shall be formally approved by the governing body of the awarding agency and the reasons for approval recorded in the permanent records of the governing body. Both change orders of this 12 Lead-Impacted Communities Relocation Assistance Trust . - Li. contract were signed by the Board chairman, but we could ?nd no evidence that either change order had been approved in an open meeting by the Trust board. Summary We could ?nd no evidence that the ?nding of the Alternate Bid was necessary, given that the EPA Repository along with the Hockerville subsidence site was available to the Trust at no cost. Additionally, we did not receive an adequate explanation of how the Alternate Bid was added as a ?clerical error? after the contract had been executed by all parties. We also could ?nd no statutory authorization that would allow the modifying of a $1,701,752.97 contract through a $1,324,032.96 clerical error, a 78% increase in the contract amount. Furthermore, if the Alternate had been a legal addition to the contract, the use of the $1,324,032.96 should have been limited to $158,133.96 of added cost incurred to utilize a licensed land?ll. Based on the actual language of the Alternate Bid, maintaining the position that it was a ?lump sum? addition to the original contract provided in excess of a $1 million ?windfall? to the contractor. 13 Lead-Impacted Communities Relocation Assistance Trust Phase 3 Contract Charges Files were to be maintained by CWF and the Trust for each property owned by the Trust and included as part of the Property Clearance Project. These records were to include information on demolition, structural removal, asbestos removal, land?ll fees and debris removal charges; and included reports on Asbestos Remediation Documentation; Volume Logs of Material; Daily Inspection Reports; and Before and After Demolition Photos. Chris White, President of CWF, signed a DCS Bid Affidavit form December 6, 2010. This form required in part that, ?If awarded a contract, the bidder af?rms that the work will be carried out in conformance with the contract requirements and that all invoices submitted for payment will re?ect a true and accurate accounting of the work completed.? Following are examples of documentation included in the account ?les for seven of the Trust properties that were reviewed. All seven are documented with purchase orders and invoices that do not re?ect a true and accurate accounting of work completed by CWF. 462 S. Emily Requisition 242 As shown in the photo below, the historic home in which Mickey Mantle was married, was salvaged and moved to the City of Commerce. The City of Commerce paid the Trust $3,000 for the structure and paid for the cost of the move. Yet, on June 24, 2011, CWF invoiced the Trust $2,832.00 for removal of the 960?square-foot structure and $3,513.60 for land?ll fees, resulting in $6,345.60 of unwarranted charges. 14 Lead-Impacted Communities Relocation Assistance Trust DATE ASSIGNED: PURCHASE ORDER: ADDRESS: 462 EMILY 6/24/2011 DATE: REQUISITION NO. PAGE NO CONTRACT ID NO DATE MATERIAL NEEDED 6/24/2011 '242 1 OF 1 TRUST ID: SEE BELOW QUANTITY UNIT ITEM ID DESCRIPTION UNIT PRICE ITEM TOTAL 1 960 SOJFT REMOVAL OF STRUCTURE $2.95 $2,832.00 2 960 LANDFILL FEE $3.66 $3,513.60 103 S. Ethyl - Requisition 24 7 The photos below show the lot at 103 S. Ethyl in Picher, Oklahoma, before and after demolition. 103 S. Ethl?~ I-eore Demion AfterDmonelitio IOS.thyl ?Asbestos Remediation Documentation? re?ected 2000 square feet of ceiling texture was abated from this structure on or about March 30, 2011. However, before asbestos remediation was performed, the property burned leaving no structure for abatement. Even so, CWF billed the Trust $15,900 for ?Asbestos Removal?. Additionally, the ?Load Tickets? and ?Volume Log of Materials? showed that only six loads of debris, approximately 156 square feet, was hauled from this location on March 25, 2011. Yet, on June 27, 2011 the CWF billed the Trust for 1288 square feet of structure removal at a cost of $3,799.60. This transaction resulted in the full $19,699.60 of charges being claimed by the contractor and approved by the project manager. 1 DATE ASSIGNED: PURCHASE ORDER: ADDRESS: P2-101 103 South Ethel Piche 6/27/2011; DATE: REQUISITION NO. PAGE NO CONTRACT ID NO DATE MATERIAL NEEDED 6/27/2011 '247 1 OF 1 TRUST ID: P2-101 SEE BELOW i 15 Lead-Impacted Communities Relocation Assistance Trust 414 N. Gladys Requisition 225 LIN E: QUANTITY UNIT ITEM ID DESCRIPTION UN IT PRICE ITEM TOTAL 1 1288 FT REMOVAL OF STRUCTURE $2.95 $3,799.60 2 2000 FT ASBESTOS REMOVAL $7.95 $15,900.00 As can be seen in the photos below, no structure existed at 414 N. Gladys, Picher, Oklahoma, before the noted demolition and haul date of May 12, 2011. Despite that fact, CWF invoiced the Trust $5,479.75 for structure removal and $3,487.98 for land?ll fees, for a total of $8,967.73 of unsubstantiated charges. 414 N. Gladys Before 414 N. Gladys After PURCHASE ORDER: ADDRESS: 414 GLADYS PICHER 5/16/2011 DATE: REQUISITION NO. PAGE NO CONTRACT ID NO DATE MATERIAL NEEDED 5/16/2011 '225 1 OF 1 TRUST ID: P2-27A SEE BELOW LINE: QUANTITY UNIT ITEM ID DESCRIPTION UNIT PRICE ITEM TOTAL 1 953 FT REMOVAL OF STRUCTURE $5.75 $5,479.75 2 953 LANDFILL FEE $3.66 $3,487.98 16 Lead?Impacted Communities Relocation Assistance Trust 926 N. Ottawa Requisition 165 On August 6, 2010, a ?Certi?cate of Inspection? for 926 N. Ottawa, Picher, Oklahoma showed that, ?No structure was present on this parcel at the time of the site inspection.? Additionally, ?Daily Inspection Report? for February 19, 2011 stated, ?Cleaned debris ?om site where house had been moved out. . ..no loads from site.? However, on April 18, 2011, CWF invoiced the Trust $2,124 for the removal of a structure. 926 N. Ottawa Before 926 N. Ottawa After DATE ASSIGNED: PURCHASE ORDER: ADDRESS: 926 OTTAWA 4/18/2011 DATE: REQUISITION N0. PAGE NO CONTRACT ID NO DATE MATERIAL NEEDED 4/18/2011 165 1 OF 1 TRUST SEE BELOW I LINE: QUANTITY UNIT DESCRIPTION PRICE ITEM TOTAL 1 720 SOJFT IREMOVAL OF STRUCTURE I $2.95 $2,124.00 61500 20?" Rd Requisition 160 The before photo below shows the property at 61500 20th Rd, Quapaw, Oklahoma with no structure present. Additionally, asbestos ?Certificate of Inspection? dated August 5, 2010, stated, ?No structure was present on this parcel at the time of the site inspection.? ?Daily Inspection Report? for April 5, 2011, describes the work performed at this address as, ?Clean up of remains of a 1798 sq ft residential structure.? However, on April 13, 2011, the Trust purchase order documented ?Removal of Structure? at a cost of $5,304.10, when all evidence shows that no structure existed at this location. 17 Lead-Impacted Communities Relocation Assistance Trust ?dd- 1-4 20111 Rd., Quapaw Before 61500 20111 Rd., Quapaw After PURCHASE 61500E20 RD 4/13/2011 DATE: REQUISITION N0. PAGENO CONTRACTING DATE MATERIALNEEDED 4/13/2011150 10F1 TRUSTID: SEEBELOW LINE: QUANTITY UNIT ITEMID DESCRIPTION UNITPRICE 1 1798 SOJFT REMOVALOF STRUCTURE $2.95 $5,304.10 2400 57 Rd. Requisition ?Building Demolition Noti?cation Form? documented the property at 2400 570th Rd., Cardin, Oklahoma as burned. The before and after demolition photos show no structures on this property. The ?nal inspector report and material logs showed that approximately 118 square feet of scrap metal was removed from this site. Yet the Trust was billed for 1120 square feet of structure removal at a cost of $3,304. .V .- 1. ?if I 2400 Rd., Cardin After 24005570110 A 4/13/2011 DATET REQUISITION NO. PAGE NO CONTRACT ID NO DATE MATERIAL NEEDED 1 . . 4/13/2011 156 1 OF 1 TRUST SEE BELOW 18 Lead-Impacted Communities Relocation Assistance Trust LINE: QUANTITY UNIT ITEM ID DESCRIPTION UNIT PRICE ITEM TOTAL 1 1120 FT REMOVAL OF STRUCTURE 2404 s. 57 Rd Requisition 154 $2.95 $3,304.00 ?Daily Inspection Form? stated that work performed at 2404 S. 570th Rd., Cardin, Oklahoma, consisted of clean up of a burnt structure and removal of scrap metal. However, an asbestos ?Certi?cate of Inspection? for this site, dated August 6, 2010, stated that, ?No structure was present on this parcel at the time of the site inspection.? Additionally, ?Volume Log of Materials? reported only one load of debris, approximately 47 square feet, was hauled ?om this location. In spite of this, the Trust was billed for 880 square feet of structure removal at a cost of $2,596. Rd., Picher After 2404 570 PURCHASE ORDER: ADDRESS: 2404 570 RD 3/31/2011 DATE: REQUISITION N0. PAGE NO CONTRACT ID NO DATE MATERIAL NEEDED 3/31/2011 '154 1 OF 1 TRUST SEE BELOW LINE: QUANTITY UNIT ITEM ID DESCRIPTION UNIT PRICE ITEM TOTAL 1 880 50/ FT REMOVAL OF STRUCTURE $2.95 $2,596.00 l9 Lead-Impacted Communities Relocatlon Assistance Trust -.. .- Summary As shown by this evidence, the Trust was invoiced for structures not demolished, debris not hauled, asbestos not abated, and land?ll fees not incurred. The contractor, project engineer/manager, and DCS contract administrator claim that payment under the contract was ?lump sum,? and therefore the billing of cost for individual properties was irrelevant. However, there is evidence to support the position that the entire project was not ?lump sum,? speci?cally the Alternate bid; and that the erroneous billing reported here is relevant to compliance with the contract and the af?davit accompanying the contract, which required that the bidder awarded the contract af?rm that the work would be carried out in conformance with the contract requirements and that all invoices submitted for payment would re?ect a true and accurate accounting of the work completed. DISCLAIMER In this report there may be references to state statutes and legal authorities which appear to be potentially relevant to the issues reviewed by this Of?ce. The State Auditor and Inspector has no jurisdiction, authority, purpose, or intent by the issuance of this report to determine the guilt, innocence, culpability, or liability, if any, of any person or entity for any act, omission, or transaction reviewed. Such determinations are within the exclusive jurisdiction of regulatory, law enforcement, and judicial authorities designated by law. 20 Lead?Impacted Communities Relocation Assista nce Trust Appendix A ICEY INDIVIDUALS Jack Project Manager LICRAT Dr. Mark Osborn, Trust Chairman LICRAT Jim Thompson, Trust Member (Deceased) LICRAT John Morrison, Administrator, Construction Properties Division DCS David Mihm, Project Manager, Construction Properties Division DCS Angela Hughes, Manager, Land Protection Division DEQ David Gates, Engineer, Land Protection Division DEQ Chris White, Owner CWF Enterprises, Inc. Frank Close, Employee CWF Enterprises, Inc. 21