Business as usual in government work doesn’t always equate with business in the public interest. It’s in the public interest for government to keep a firm hand on projects, especially for those likely to rack up hefty bills over the long term.
That appears not to have happened with Oahu’s critical, costly HPOWER project, according to the city auditor, who concluded that insufficient oversight led to the mishandling of contracts for the waste-to-energy installation by the city.
The dollar signs tell the story: Too many of them were passed through without the proper gatekeeping that such a major project requires.
The city needs to find a better way to ensure taxpayer funds are being spent wisely, which didn’t seem to be the case here.
City Auditor Edwin Young’s office took on the project after the City Council passed a bill in 2012 formally requesting the study. The report was based on auditing work begun in November 2013 and concluded last month.
In a letter to the Council last week, Young said the original two contracts for the facility’s design, construction and operation totaled $313.7 million.
After they were awarded, Young reported, the city’s Department of Environ-mental Services “initiated three major capital projects and used 79 contract modifications … to construct, improve, expand and refurbish the HPOWER facility.” The resulting, revised total came to $993 million.
Cost overruns are par for the course in Hawaii construction, but that kind of bloat signals something is seriously wrong.
The original operations award, a 20-year contract, went to Honolulu Resource Recovery Venture in 1985, which also got the design-build job that same year. Covanta acquired the operating contract in 1993; just last year, the company was given a $52.9 million service fee to operate and maintain the facility.
The auditor called $751,700 of the payments “improper and questionable” — and questioned the fact that the operation contract Covanta eventually got had been extended without challenge for 27 more years.
The city administration, represented by Managing Director Roy Amemiya Jr., has defended its management of the contracts as allowable under the state procurement code.
Specifically, officials pointed to the facility’s expansion to include a third boiler unit as within the scope of Covanta’s operating contract. That pact stated that Covanta was responsible for “alterations and construction,” according to the audit, leading the city to conclude that a new bidding process wasn’t necessary.
Even with the city’s response, Young continued to push back, countering that he did not find evidence that the sole-source contract was justified.
In addition, audit staffers extracted records of billing by subcontractors that they termed “excessive.”
Inflated costs outlined in the audit included travel expenditures that departed from city policies requiring “the most economical and direct route.”
If this critique sounds familiar, it’s because similar observations have been made about the city’s rail project contractors being excused from riding herd on their subs.
The Council has demanded better oversight and transparency from Honolulu Authority for Rapid Transportation and its contractors, and the same should be expected here.
Anything less is simply not acceptable in this era of skyrocketing costs, supported by tax rates that are rising fast.
At the state level, Gov. David Ige has taken information technology contractors to task, insisting on better supervision of their work and benchmarks, and payment only upon delivery of what’s expected.
The city administration argues that it has followed the law on procurement.
Even if the critic stipulates that this is technically true, that doesn’t mean enough rigor has been applied to the process.
Clearly, it hasn’t.
HPOWER is conceptually a success story, and an essential part of Honolulu’s refuse management program.
The city now must make sure it succeeds on a practical level, so that a waste-to-energy operation doesn’t generate its own waste, in the end.
Correction: The city auditor’s criticism of the city’s handling of HPOWER reviewed contracts originally issued in 1985 and covered work prior to fiscal year 2013. An earlier version of this editorial incorrectly faulted Mayor Kirk Caldwell’s administration for mishandling the contracts; the audit covered a period prior to his becoming mayor.