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 N.E. 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 O.S. § 1sf. The objectives of our investigation included, but were not limited to, the concerns noted in your request. Our findings and supporting evidence related to those concerns are presented in the accompanying documents. Sincerely, Gary A. Jones, CPA, CFE Oklahoma State Auditor & Inspector E. Scan PRuI-1-T ATToIJEY GENE;A[, OF OKIAI-ioMA April 21, 2011 The Honorable Gary Jones State Auditor and Inspector 100 State Capitol Building 2300 N. Lincoln Blvd. Oklahoma City, OK 73105-4802 Re: OBJECTIVE TWO (Highlighted - Page 2, Number 2. Allegations of Wrongdoing Regarding Awarding of Ta;- Creek Reclamation Contracts by or on behalf of the Lead-Impacted Communities Relocation Trust (LICRAT) Dear Mr. Jones: I have received the enclosed iLfemoranda from Jerry Morris, Stale Director for the lIonorable Tom A. Cohurn, 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 propel-ties 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 he executed on its own behalf and later executed through the auspices of the Department of Ccntt-al 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_S. 2001, § I 8f, that you undertake an Investigative Audit of these matters and provide a report of your findings to address the ftllowing concerns: 1. In regard to the Lead-Jm;)acted 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 1974 (as amended), 61 0.S.2001, §l01 et seq.? B. If the contract was awarded to any bidder than the lowest bidder, was a credible written explanation othe award of hid filed in accordance with 61 0.5. 2001, § 117? 313 N.E. 2lsr Si REii • OK1AHor1A 0 r, OK 73105 • (405) 521-3921 recycled paper • lAXt (405) 521-6246 The Honorable Gary Jones, State Auditor and Inspector -2- April 21, 2011 C. Is there any evidence of an agreement or collusion among bidders, prospective bidders andlor 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 0.5. Supp. 200$, § 115? If so was a knowingly false affidavit of non-collusion filed in support of a hid, 740.S. Supp. 2009, § $5.22? 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 officer contrary to 61 0.5. 2001, § 114? E. Is there any evidence of any unlawful disclosure(s) by any person contrary to 61 0.S. 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 U.S. 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 function of awarding the contract to the lowest and best bidder, 21 0,5. 2001, § 424? H. Is there any evidence that the awarding of the contract was influenced in any way by the promise or transfer of some thing of value or gift to a public official or employee, 21 U.S. 2001, §38l &3$2,21 U.S. 200l, 341(first), or74 U.S. 2001, § 3401 etseq.? I. Is there any evidence of an Open Meeting violation by the LICRAT Trustees in the awarding of the contract, 25 0.5. 2001, § 314? If so, has the District Attorney taken any action in regard to that event? 2. In regard to the re-letting of the contract by LICRAT through the Department of Central Services: A. A. Were bids solicited, received and contract awarded pttrsuant to the provisions of the Public Competitive BiddingAct of]974 (as amended), 61 U.S. 2001, §10l etseq.? 3. If the contract was awarded to any bidder than the lowest bidder, was a credible written explanation of the award of bid filed in accordance with 61 U.S. 2001, § 117? 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, The Honorable Gary Jones, State Auditor and Inspector April 21, 2011 -3- whether the winning bidder served as a “straw bidder” for an actual other person or entity], 61 0.5. Supp. 2008, § 115? If so was a knowingly false affidavit of non-coLlusion filed in support of a bid, 74 U.S. 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 officer contrary to 61 U.S. 2001. § 114? E Is there any evidence of any unlawful disclosure(s) by any person contrary to 61 0.5. 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 U.S. 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 function of awarding the contract to the lowest and best bidder, 21 U.S. 2001, § 424? 1-I. Is there any evidence that the awarding of the contract was influenced in any way by the promise or transfer of some thing of value or gift to a public official or employee, 21 0.5. 2001, §3$1 & 382,21 0.5.2001, § 341(First), or 74 U.S. 2001, § 3401 et seq.? I also provide herewith the several documents supplied to us by Senator Coburn’s office. Respectfully, Attorney General ENCLOSURES cc: file Lead-Impacted Communities Relocation Assistance Trust TABLE OF CONTENTS Investigative Summary 1 Attorney General Concerns 3 Other Concerns 6 Appendix A: Key Individuals 21 Lead-Impacted Communities Relocation Assistance Trust Investigative Summary This report describes various problems with the LICRAT Property Improvement Clearance Project that was bid and awarded through the Department of Central Services (DCS) in December 2010. Although our investigation did not provide direct evidence for a conspiracy against the state, it did provide considerable circumstantial evidence that a conspiracy may have existed. We observed that the DC$ bid process resulted in this contract being awarded to the same vendor implicated in our report for Objective I, CWF Enterprises, Inc., despite the fact that the March 2010 bid process contained significant 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, modification, 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 benefit 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 Property 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: • 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 qualification process led by Jack Dalrymple, the LICRAT project manager. • That this same pre-bid qualification process would attempt to disqualifr all three other demolition companies by rating them near across-the-board “l’s” on a scale of 1 to 10, although two of the three initially disqualified companies provided examples of prior experience of major and more complex demolition contracts totaling tens of millions of dollars. • 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 1 .1 Lead-Impacted Communities Relocation Assistance Trust “clerical error” as the ostensible justification for increasing the contract award by nearly 78%. • 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. • That it was acceptable to invoke the Alternate bid for additional costs to haul debris to a fee-based Kansas landfill when non-fee based facilities were still receiving debris. • Finally, afier 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 landfill, resulting in a “windfall” to the contractor of over $1 million. We do not believe that the above events can be explained away as poor management or “clerical error.” We believe the above provides sufficient circumstantial evidence for additional investigation into a potential conspiracy against the state. 2 Lead-Impacted Communities Relocation Assistance Trust Attorney General Concerns The Attorney General’s 74 O.S. § 1$f request specifically defined 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 H 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 Office below, but the substantive portion of our reporting follows under “Other Concerns.” Concern A IVere bids solicited, received and contract awarded pursuant to the provisions of the Ptthlic competitive Bidding Act of 1974 (‘as aineudet), 101 et seq.? 61 O.S. 2001, 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 B If the contract wcts awarded to any bidder lot/ic,] thait the lowest bidder, was a credible written expicinatloit of the award of bid flkcl in accordance wit!, 61 O.S. 2001, 117? The LICRAT Property Improvement Clearance Project was awarded to the lowest bidder. As such, no credible written explanation was required. Concern C Is there any evidence of ctn agreement or collusion among bidders, prospecti’e bidders and/or material suppliers in restraint offreedom of competition finchiding, but hot limited to, whet/icr the winning bidder served as a “straw bidder”for an actual other perso,, or entitj], 61 O.S. Sttpp. 2008, §115? We found no evidence of collusion among bidders or evidence of a “straw bidder.” 3 Lead-Impacted Communities Relocation Assistance Trust If so, was a knowingly false affidavit of non-collusion filed in support of a bid, 74 O.S. Sttpp. 2009, § 85.22? We found no direct evidence that a false affidavit of non-collusion was filed. 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. Concern P Is there cmv evidence of an illegal conflict of interest beht’een the entity awarded the winning bid ftlld ctity Trustee of tite public trttst or its chief administrative officer contrary to 61 O.S. 2001, § 114? There was no evidence found of an illegal conflict of interest as it is defined in 61 O.S. 2001, § 114. Concern E Is there any evidence of aity ttulanfful disclosttre(’s) by any persoit coittraiy to 61 O.S. Stipp. 2006, § 116? We found no direct evidence of unlawful disclosure of bid information as defined in this statute. Concern F Is there any evidence that the successful bidder knowingiv provided misstatements of existing or past ntateriat.fact(s, to the Public Trust in stipport of its bid for the awftrdl of the contract, 21 O.S. 2001, §1541.1 and 1541.2? We found potential evidence of a violation of 21 O.S. 2011, § 1541.1 and 1541.2. See discussion of “Bid Affidavit and Survey” under Phase 1 The Bidding Process, Page 7. See also Phase III Contract Charges, Page 14, in relation to the bid affidavit. - - Concern G Is there any evidence that two (2) or nwre persons agreed to take, amid thereafter ujidertook, any action or make aity representation to the Public Trust calculated to impair, obstruct, or defeat the Pttblic Trust in its laufut function of awarding the coittract to the lowest and best bidder, 21 O.S. 2001, § 424? 4 Lead-Impacted Communities Relocation Assistance Trust We found no direct evidence of a “conspiracy” as defined in 21 O.$. 2001 424. However, in the totality of circumstances from the Pre Qualification 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. Concern H Is there any evidence that the awarding of the contract was bfluencecl in cuty way by the proiltise or transfer of something of value or gift to ct public official or employee 21 O.S. 2001, §, 381 & 382, 21 O.S. 2001, 341 (‘first,), or 74 O.S. 2001, 3401 et seq.? The statutes referenced in this Concern define bribery, embezzlement and kickbacks. We found no evidence in the transactions and activities reviewed that would meet the criteria defined in these statutes. 5 Lead-Impacted Communities Relocation 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 LICRAT’s Project Manager, Jack Dalryrnple. 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 Dairymple 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. • CWF Enterprises, Inc. • Kingston Environmental • Abatement Systems — — $1,701,752.97 — $1,740,548.22 $2,260,470.00 Our reporting on this bid process including subsequent changes, amendments and transactions will be addressed in three phases: Phase 1 The Bidding Process Phase 2 Contract Changes and Amendments Phase 3 Contract Charges 6 Lead-Impacted Communities Relocation Assistance Trust Phase 1 The Bidding Process - Pre-Ottatjfication ofBiddei In the awarding of the contract, the Construction and Properties (CAP) Division of DC$ utilized a new construction project bid procedure called the Performance Information Procurement System (PIPS). With PIPS, contractors submit pre-qualification bids which are reviewed and compared by a committee. These pre-qualification bids are used to narrow the field of vendors to those that would be the most responsive bidders. Pre-qualification bids for the Project were submitted by CWF Enterprises, Inc., Kingston Environmental Services, mc, Abatement Systems, Inc., and Crossland Heavy Contractors, Inc. These bids were evaluated by a committee which consisted of the following: LICRAT Contract Project Manager LICRAT Trustee Department of Central Services Department of Environmental Quality Jack Dahymple James Thompson David Mihrn Kelly Dixon 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 Qualification Submittal.’ . fn7ns A Kingston B Abatement CWF D Crossland Dafrymple (LICR4T) 1 1 C Thompson (LICRAT) 1 1 - —_• 1 1 Dixon (DEQ) 1 1 Mthm (DCS) 1 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 firms A (Kingston) & B (Abatement) “did not make sense” and were “not defensible.” The committee’s evaluation for ‘General Performance’ was not used in the final weighted scores of the pre-qualification 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 Dalrymple, resulted in an appearance of favoritism toward CWF in this process. 7 Lead-Impacted Communities Relocation Assistance Trust Bid Affidavit and Survey 61 O.S. § 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 CWf’s bid submitted to DCS, owner Chris White signed a “Bid Affidavit” under oath representing that he did not currently, or had not had any business relationship with the project engineer, any officer or director of the project engineering firm, 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 Dalrymple, the Project Manager for the LICRAT/DC$ 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 Dalrymple. Also, as part of the DCS bid process, a ‘Survey Questionnaire’ was used to collect past performance information on firms submitting bids. Jack Dalryrnple 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 I.’ This evaluation by Dairymple was further documentation that a prior relationship did exist between CWF and Dalrymple. This relationship should have been disclosed on the bid affidavit as required by statute. — Sum;naiy What influence, if any, these issues had on the bid process and its final 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. 8 Lead-Impacted Communities Relocation Assistance Trust Phase 2 Contract Changes and Amendments - Change Order #1 — Unit Price Modjfication The first amendment to the December 2010 contract, Change Order #1, 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: $3.68 per square foot 0-30 day: 3 0-60 day: 60-90 day: $4.65 per square foot $5.75 per square foot On January 20, 2011, before demolition work even began, CWf submitted a letter to project manager Jack Dalrymple requesting a contract modification. The modification was requested because structures pending release from the Bureau of hidian Affairs and the Quapaw Tribe might delay the Project progressive time schedule. The draft documents requesting the amendment implied that the contractor did not have any prior knowledge that ‘Properties on Restricted Land & Properties Occupied by Tenants’ would not be available for demolition as needed, and as such they should receive additional compensation for remobilization and operating expenses incurred because of possible delays. However, the ‘Project Summary’ section of the RFP stated in part, “At publication of this Invitation to Bid (ITB) there are 66 of the 24$ properties that are not ready to be released for demolition. The contractor will be notified 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 modification for an increase in unit cost appeared unwarranted. 9 Lead-Impacted Communities Relocation Assistance Trust (‘Iwuge Order #2 — Alternate Bid The second amendment to the December 2010 contract, Change Order #2, 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 reflect the additional amount required to utilize a licensed landfill 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 specifically stated, “All debris shall go to the EPA Repository.. .An alternate bid shall be submitted for taking the debris to a licensed landfill.” . The winning bid of CWf, included an ‘Alternate Bid’ amount of $1,324,032.96. On December 7, 2010, the Trust board approved the bid pricing of the DC$ contract with the Alternate Bid included. However, before the official contract was signed, on January 3, 2011, an email between DEQ and DCS officials, stated in part, “We have worked out a coordination plan with the repository... .we have no need for accepting the alternate.” Subsequently, on January 7, 2011, the official LICRAT/DC$ 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 DC$ 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, “I spoke with Mike about our concerns with this project and what we could do to resolve them. He confirmed 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 DC$, can be given to any logically here, to CWF. This is what not contractor 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 find 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 Dairymple, the contract consultant or the contractor CWF? 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 landfill instead of using the EPA Repository, at no cost. The RFP stated in Attaclm-ient F of the Unit Price Commentary, “This alternate shall reflect the additional amount required to utilize a Licensed Landfill 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 finalized 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 filled in with debris. The closing and maintenance of the site was the responsibility of the Trust, and under Trust agreement. 11 Lead-Impacted Communities Relocation Assistance 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 Afler determining whether the Alternate bid should have been utilized at all, the next key discussion is the cost pertaining to the Clearance Project. Specifically the allowable expenditure amount and whether the Alternate bid was a ‘lump sum’ or ‘unit price’ addition to the contract. LICRAT, DCS and CWF’s 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 landfill. However, the contract form specifically stated that the use of the Alternate was for fees (and transport) to a licensed landfill, 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 landfill.” Additionally, Under 61 O.S. 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. ‘Cs The licensed landfill used by CWF was B-3 Construction, Inc. A review of this account for the period April 1,2011 August 9,2011 showed 3-3 charged CWF $61,845.98 for 43,206 square feet of demolition debris taken to the licensed landfill. CWF’s billing of the Trust for this amount of landfill 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 landfill, i.e. $158,133.96. — chaitge Order #1 and #2 -Approval Under 61 O.S. § 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 contract were signed by the Board chairman, but we could find no evidence that either change order had been approved in an open meeting by the Trust board. Surnmaiy We could find no evidence that the funding 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 find 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 landfill. 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 $1 million “windfall” to the contractor. 13 Lead-Impacted Communities Relocation Assistance Trust Phase 3 — Contract Charges files were to be maintained by CWf and the Trust for each property owned by the Trust and included as part of the Property Clearance Project. These records were to include information on demolition, structural removal, asbestos removal, landfill fees and debris removal charges; and included reports on Asbestos Rernediation Documentation; Volume Logs of Material; Daily Inspection Reports; and Before and After Demolition Photos. Chris White, President of CWf, signed a DC$ Bid Affidavit form December 6, 2010. This form required in part that, “If awarded a contract, the bidder affirms that the work will be carried out in conformance with the contract requirements and that all invoices submitted for payment will reflect a true and accurate accounting of the work completed.” Following are examples of documentation included in the account files for seven of the Trust properties that were reviewed. All seven are documented with purchase orders and invoices that do not reflect 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 landfill fees, resulting in $6,345.60 of unwarranted charges. 14 Lead-Impacted Communities Relocation Assistance Trust I DATEASSIGNED: 6/24/2011 PURCHASEORDER: ADDRESS: 4625 EMILY [REQUISITION NO. PAGE NO CONTRACT ID NO DATE: 1OF1 6/24/2011f242 jQUANTIW 1 2 960 960 TRUSTID: DESCRIPTION UNIT IITEMID SQ/FT REMOVAL OF STRUCTURE SQJYDS LANDFILL FEE DATE MATERIAL NEEDED SEE BELOW UNITPRICEI ITEMTOTALI $2,832.00 $2.95 $3,s13.60 $3.66 103 S. Ethyl Requisition 247 - The photos below show the lot at 103 S. Ethyl in Picher, Oklahoma, before and afler demolition. / I r 103 S. Ethyl—k — After-Demolition CWf’s ‘Asbestos Remediation Documentation’ reflected 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 $15,900 for ‘Asbestos Removal’. Additionally, the ‘Load Tickets’ and CWF’s ‘Volume Log of Materials’ showed that only six loads of debris, approximately 156 square feet, was hauled from this location on March 25, 2011. Yet, on June 27, 2011 the CWF billed the Trust for 128$ 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. DATEASGNED: 6/27/2011 PURCHASE ORDER: ADDRESS: P2-101 103 South Ethel Piche [REQUISITION NO. PAGE NO CONTRACT ID NO DATE MATERIAL NEEDED DATE: 1OF1 TRUSTID: P2-101 SEE BELOW 6/27/2011t247 15 Lead-Impacted Communities Relocation Assistance Trust QUANTfl’i 1 1288 2 2000 414 A’ Gladys — UNIT ITEM ID DESCRIPTION REMOVAL OF STRUCTURE SOJFT ASBESTOS REMOVAL SOJFT I UNIT PRICE ITEMTOTALI $3,799.60 $2.95 $7.95 $1s,9oo.oo Requisition 225 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 $3,487.92 for landfill fees, for a total of $8,967.73 of unsubstantiated charges. 414 N. Gladys — Before 5/16/2011 PURCHASE ORDER: ADDRESS: 414 N GLADYS PICHER PAGE NO CONTRACT ID NO [REQUISITION NO. DATE: 1OF1 TRUSIID: P2-27A 5/16/20211225 DATE MATERIAL NEEDED I QUANTITY UNIT PRICE ITEM TOTAL DESCRIPTION UNIT ITEM ID REMOVAL OF STRUCTURE LANDFILL FEE 1 953 SOJFT 2 953 SOJFT 16 SEE BELOW I $5.75 $5,479.75 $3.66 $3,487.98 Lead-Impacted Communities Relocation Assistance Trust 926 N. Ottawa — Requisition 165 On August 6, 2010, a ‘Certificate of Inspection’ for 926 N. Ottawa, Picher, Oklahoma showed that, “No structure was present on this parcel at the time of the site inspection.” Additionally, CWF’s ‘Daily Inspection Report’ for february 19, 2011 stated, “Cleaned debris from site where house had been moved out... .no loads from site.” However, on April 1$, 2011, CWf invoiced the Trust $2,124 for the removal of a structure. z5 N. Ottawa — Before 926N.OUawa—Ai,r DATE ASSIGNED: 4/18/2011 PURCHASE ORDER: ADDRESS: P2-56 926 N OTTAWA PICHER MATERlA NEEDED DATE ID NO CONTRACT PAGE NO REQUISITION NO, DATE: SEE BELOW 1 011 TRUST ID:P2-56 4/18/2011 165 DESCRIPTION :IQUANTITYJ UNIT IITEMID SOJET REM0VA1OF STRUCTURE 720 11 I 61500 E 21/” Rd — J !uthTcE ITEM TOTALj $295J $2,124.00 Requisition 160 20th Rd., Quapaw, The before photo below shows the property at 61500 F 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.” CWF’s ‘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 4/13/2011 PURCHASE ORDER: ADDRESS: 61500 E 20 RD ]REQUISIIION NO. PAGE NO CONTRACT ID NO DATE: 1011 TRUSTID: 4/13/2011r160 QUANTITY 1 1798 2400 S 570th Rd. — DATE MATERIAl NEEDED SEE BELOW SQJFT IREMOVALOF STRUCTURE I UNIT PRICE ITEMTOTAL DESCRIPTION UNIT IITEM ID I $2.95j $5,3o4.1o Requisition CWF’s ‘Building Demolition Notification Form’ documented the property 570th Rd., Cardin, Oklahoma as burned. The before and after at 2400 S demolition photos show no structures on this property. The final inspector report and material logs showed that approximately 11$ 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. 2400 5 57 Rd., Cardin — Before 2400 $ 570k Rd., Cardin PURCHASE ORDER: ADDRESS: 2400 S 570 RD [REQUISITION NO. PAGE NO CONTRACT ID NO DATE: 1 OF 1 TRUST ID:W-5 4/13/2011t156 1$ — After 4/13/2011 DATE MATERIAL NEEDED SEE BELOW Lead-Impacted Communities Relocation Assistance Trust [juUANTITY UNIT IITEMID 1 1120 I UNIT PRICE ITEMTOTAL DESCRIPTION $2.95 SQJFT REMOVALOF STRUCTURE $3,304.00 2404 S. 57ff’ Rd Requisition 154 — CWF’s ‘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 ‘Certificate 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, CWf’s ‘Volume Log of Materials’ reported only one load of debris, approximately 47 square feet, was hauled from this location. In spite of this, the Trust was billed for 880 square feet of structure removal at a cost of $2,596. 2404 S. 57v ‘Rd., Picher— Before 2404 S. Sii Rd., Picher UNIT SQJFT ITEM ID REMOVAL 19 DESCRIPTION STRUCTURE After 313112011T PURCHASE ORDER: ADDRESS: 24045570 RD PAGE NO CONTRACT ID NO 1_REQUISITION NO. DATE: 1 OF 1 TRUST ID:1V-6L 3/31/2011f154 I LINE:QUANTIW 1 I — DATE MATERIAL NEEDED SEE BELOW IUNIIPRICE ITEMTOTAL $2,596.00j $2.95 I Lead-Impacted Communities Relocation Assistance Trust Summary As shown by this evidence, the Trust was invoiced for structures not demolished, debris not hauled, asbestos not abated, and landfill fees not inculTed. The contractor, project engineer/manager, and DCS contract administrator claim that payment under the contract was ‘lump sum,’ and therefore the billing of cost for individual properties was irrelevant. However, there is evidence to support the position that the entire project was not ‘lurnp sum,’ specifically the Alternate bid; and that the erroneous billing reported here is relevant to compliance with the contract and the affidavit accompanying the contract, which required that the bidder awarded the contract affirm that the work would be carried out in conformance with the contract requirements and that all invoices submitted for payment would reflect a true and accurate accounting of the work completed. DISCLAIMER In this report there may be references to state statutes and legal authorities which appear to be potentially relevant to the issues reviewed by this Office. The State Auditor and Inspector has no jurisdiction, authority, purpose, or intent by the issuance of this report to determine the guilt, innocence, culpability, or liability, if any, of any person or entity for any act, omission, or transaction reviewed. Such determinations are within the exclusive jurisdiction of regulatory, law enforcement, and judicial authorities designated by law. 20 Lead-Impacted Communities Relocation Assistance Trust Appendix A KEY INDIVIDUALS Jack Dairymple, Project Manager LICRAT Dr. Mark Osborn, Trust Chairman LICRAT Jim Thompson, Trust Member (Deceased) LICRAT John Morrison, Administrator, Construction & Properties Division DC$ David Mihm, Project Manager, Construction & Properties Division DCS Angela Hughes, Manager, Land Protection Division DEQ David Cates, Engineer, Land Protection Division DEQ Chris White, Owner CWF Enterprises, Inc. Frank Close, Employee CWf Enterprises, Inc. 21