in Houston, Texas
Rash of improper influence over high-dollar contracts at Houston ISD -- while teachers are cut and schools are closed
Tuesday, Dec 20, 2011, 07:37AM CST
By Mike Cronin and Jennifer Peebles
money

Houston school trustees have been accused in at least seven cases during the last two years of using their influence to affect what companies the school district does business with, public records show. 

In all but one of those cases, trustees are accused of using their influence to give school district work to favored vendors -- even if those vendors weren't the best-suited or the lowest bidders for the job.

The problem goes far beyond the high-profile cases that garnered media attention this summer, such as school board President Paula Harris’ friends doing more than $1 million in business with the school system, and plans for a contract worth up to $640,000 for a health-care consultant with the vaguest of job descriptions.

In two of those cases, people with ties to district vendors threatened HISD supervisors that they could lose their jobs unless the district personnel followed directions, records say.

At the same time, the process by which unelected HISD administrators choose the companies with whom the district contracts -- to build things, provide services or furnish materials -- raises questions and is open to outside influence, outside experts told Texas Watchdog. One former district insider said administrators overrule staff decisions about which companies and suppliers the district should do business with.

The combined effect of the two phenomena: The Houston school district, with an annual $1.6 billion budget that is larger than the budgets of four states, potentially may have overpaid contractors with connections -- all while the school district laid off teachers, closed four elementary schools, cut per-student funding and tried to raise $20 million from the private sector.

Still, some district leaders have talked about asking voters to issue more bonds and possibly raise property taxes next year.  

Leadership aware of the problem

HISD leaders point to the two external reviews of the district’s procurement procedures they have commissioned -- one by a national education nonprofit, the other by an independent auditing firm -- as examples of examining and rectifying public concerns with how HISD awards contracts. Both audits launched this fall.

But internal e-mails and other communications show that HISD’s top leadership have been aware of these problems -- and have tried to fix them -- for months, if not years. And well before the stories broke about HISD’s contracts with Westco Ventures and Dr. Kenneth Wells.

To little avail.

“I am hearing that our facilities staff is offering contracts to companies that did not receive top ‘ranking’ by our procurement folks,” Superintendent Terry Grier wrote in a 2010 email to a group of trustees and top administrators. “I plan to find out if this is happening and why. If it is true, it is going to stop.

“We need to award contracts to the lowest responsible bidder, with an emphasis on responsible, and frankly, board members need to get ‘miles’ away from this process.”

Around the same time, Grier admitted to trustees at a school board meeting that the school system had violated state law in how it handed out certain construction contracts.

Some contractors, Grier told the group, “submitted bids that, under state law, should have been accepted and then, for whatever reason, were not accepted,” according to an audio recording of the meeting.

He also quoted to the trustees the district’s inspector general, Robert Moore, saying Moore had said last year that HISD “had more trouble with this in the last 18 months than all the time that he's been in the district. And 18 months ago is when this kind of started surfacing.”

Eighteen months prior to Grier’s comments would have been November 2008.

Grier, who has been superintendent since 2009, did not respond to a phone call or an e-mail request for comment for this story. Asked to elaborate on Grier’s comments, Moore referred Texas Watchdog’s questions to HISD spokesman Jason Spencer.

“He remembers talking to Dr. Grier about job-order contracting. And subsequently, the audit committee requested that those contracts be re-bid,” Spencer said, referring to Moore. “That was done last spring.”

Another change Moore informed Spencer the district made is that “a representative from the procurement services department has been assigned to assist with construction and facility services bids on a regular basis.”

Using public records, Texas Watchdog identified seven cases in which HISD school board members appeared to have involved themselves in the district’s contracting decisions or were accused of involving themselves:
  • An unnamed school board member took actions at the last minute to halt the school board’s planned vote last year on a contract because that board member was unhappy that a certain contractor was not being hired, Trustee Harvin Moore said in an e-mail to Grier and some of his top administrators.
  • School administrators last year delayed final approval of a contract for painting work after Trustee Manuel Rodriguez complained that the district needed to hire more painting companies to provide economic stimulus to the community. Administrators had decided there was only enough work for two companies, or three at the most, but Rodriguez pushed for six to be hired, as in previous years. Harris e-mailed one of her best friends, Nicole West, who runs Westco Ventures, about the delay on the contract vote, records show. Public records aren’t clear on which vendor the district ultimately hired.
  • The school district two years ago hired a company owned and run by a business partner of Harris’ campaign treasurer after Harris was involved in arranging a meeting between the company and a top HISD administrator. Texas Watchdog reported on the e-mails in August, but records released more recently show that HISD officials signed off on hiring the company within 48 hours of the meeting taking place.
  • A local contractor was awarded a piece of an $950,000 contract to change air filters on school air conditioners last year because of the influence of an unnamed school board member, the school district’s head of facilities maintenance told internal investigators. The allegation was later ruled unfounded by the district’s inspector general. A one-time paid campaign staffer for Marshall also has worked for that contractor as a consultant to help the company get business with HISD. Texas Watchdog reported the allegation in September. The staffer was accused of threatening the job of an HISD official, Texas Watchdog reported. 
  • A major contractor for the district, RHJ-JOC, was unfairly given a piece of a contract for maintenance and small construction jobs after passing $185,000 in kickbacks to Marshall through his campaign manager’s consulting firm. The allegation has been made in civil court filings by a rival contractor. The rival also alleges that former HISD Chief Business Officer Dick Lindsay was forced out of his job by Marshall after Lindsay refused to accede to Marshall’s demands that HISD hire RHJ. Marshall similarly engineered the ouster of Grier’s predecessor, Abe Saavedra, the lawsuit alleges. 
  • Harris e-mailed with the district's then-procurement director about a business run by one of her best friends and a local construction company -- five months before the school board voted to approve $8 million in contracts including the friend's company. Two months after that meeting, the school board voted to add both companies to the district’s list of minor suppliers -- those providing services worth less than $25,000 a pop --  for a construction project. Texas Watchdog reported on the incidents in September.
'Not what I am looking for'
 
Harvin Moore hopes he heard wrong.  

The Houston ISD trustee -- who has been a critic of the district’s contracting processes -- said he thought he heard a fellow trustee yank a planned contract vote off a school board agenda because the board member was unhappy about who the contract was going to.

The allegation appears in an e-mail by Harvin Moore to a group of top administrators, including Grier.

“I saw a fellow trustee demand (the contract) get pulled” from a school board agenda, Harvin Moore wrote when it happened in May 2010, “And I believe he said it was because someone was missing from a vendor list. I hope I heard that wrong.”

Harvin Moore did not name the fellow school board member in the e-mail exchange. The only other men on the Houston school board are Marshall, Rodriguez, Greg Meyers and Mike Lunceford. Available public records don’t show which contract was yanked off the agenda.

Harvin Moore, who is not related to district Inspector General Robert Moore, wrote at the time that he was “really upset about this,” and wrote that the last-minute delay in the vote on the contract would have a domino effect that would threaten the then-proposed renovation of Grady Middle School in his district.

Such things are supposed to be “smooth and automatic,” he wrote.

Texas Watchdog reported on Moore’s concerns with the Grady Middle School project in October.

Asked recently by Texas Watchdog to elaborate on his e-mail, Harvin Moore declined to name the trustee who pulled the item from the agenda, but said he was frustrated because he “just didn’t know what was going on.” Harvin Moore also could not remember the identity of the vendor in question.

“I wanted to make sure that nothing like this ever happened again,” he said in a phone interview.

Harvin Moore, a former U.S. Treasury Department official, said he wasn’t sure how things worked now in the district’s contract-awarding process.

“Through the years, board members with influence and contacts have been able to get contracts,” he said. “I hope that’s not still the case, because it sure is important that these things be unbiased and based on the best value for the taxpayers and for the kids.”

Harvin Moore praised efforts by Grier, Chief Operating Officer Leo Bobadilla and Issa Dadoush, HISD’s general manager of facility services, to make things more transparent.

“They’ve been addressing the problem,” Moore said. “They have integrity and ability. It’s just going to take continued work.”

However, records show the contract-awarding process wasn’t smooth and automatic for an HISD school painting contract last year: The trustees got involved in who was hired.

A team of half a dozen HISD procurement and contract administrators worked to narrow down the list of which companies should be included, records show.

Eleven companies wanted in on it, and the HISD team researched and rated each company on its track record, its financial health, how many minority subcontractors it hired, and other criteria over a period of weeks, assigning each factor a numerical score and then ranking each company.

HISD’s procurement staff thought there was only enough work for four companies, so they recommended the top four be hired. In fact, one e-mail shows one procurement staffer had suggested there was only enough work for two or three companies.

The days ticked down. The contract -- to be shared among the four recommended companies -- was slated to be voted on the May 13, 2010, school board agenda.

But Rodriguez was unhappy about it.

In an e-mail to Dadoush on May 10, 2010, Rodriguez asked why the district hadn’t hired six companies for the contract, as it had in previous years.

Dadoush wrote back that his office “determined that four (contractors) should provide sufficient coverage for the District based on anticipated work load.” The potential hires were evaluated on industry best practices, he wrote. The entire school board was carbon-copied on the exchange.

Rodriguez wrote back that he still wanted six contractors hired -- to help out the economy.

“Best Practices have not helped the small minority business in the Houston area, they have been used to deny access to public funds that are being paid to big business, many times not even from the same city or state,” Rodriguez wrote.

“We need to be able to help our community with work, especially in this difficult economic times.”

Rodriguez questioned whether the companies hired for the contract included enough minority-owned companies. Dadoush responded that one contractor, RHJ, itself was a minority-owned company, and the other three contractors had planned to meet goals of using 80 percent, 60 percent and 30 percent minority- and women-owned businesses as subcontractors.

“Thank you for your response, but it is not what I am looking for,” Rodriguez responded. He questioned why more minority companies weren’t hired as contractors, not as subcontractors.

“Small businesses want the opportunity to grow, and make these decisions for themselves and be able to earn the lion’s share of the profit, instead of getting bits and pieces that contractors want to pay,” Rodriguez wrote. “We the district have given the opportunity to the players to help small business grow, but this has not happened. All through the community one can hear of the injustices that the district or it’s contractors have done to the smaller companies. Where does it stop, how does it change?”

On May 12, 2010, the day before the planned school board vote, the school district’s chief financial officer, Melinda Garrett, sent out an e-mail: The painting contract had been removed from the May 13, 2010, agenda so that Dadoush could do a review of the process of evaluating contractors.

The following day, Harris forwarded Garrett’s e-mail without comment to her friend, Nicole West, owner and operator of Westco Ventures, the company that has done more than $1 million in work for HISD.

Westco wasn’t among the bidders on the painting contract, but it has subcontracted in the past on HISD jobs for Fort Bend Mechanical, one of the four recommended companies on the painting contract. Fort Bend Mechanical, an HVAC service and installation company, has done millions of dollars of business with HISD.

'That's when favors happen'
 
School board members routinely hound district administrators when their friends don't win contracts with HISD, former district procurement chief Stephen Pottinger said in a series of interviews with Texas Watchdog during the last four months.

The two school board members who most frequently communicated with HISD administrators about contractor-buddies were Harris and Rodriguez, Pottinger said.

“If the contractor (Rodriguez) wanted didn’t get the award, he’d call me and want copies of all the bids,” said Pottinger, whose own contract was not renewed this summer. (See separate story at this link for more details.) “He got emotionally involved. He’d say, ‘You awarded the contract to this company, but not to this one. Give me a copy of the bid.’ I don’t know what he did with the information I gave him. I don’t want to think about it.”

In response to Pottinger’s statement, Rodriguez told Texas Watchdog his main concern was that HISD officials weren’t weighting or grading the bidders properly.

E-mails published earlier this year by Texas Watchdog show Harris also was in contact with an official at a local firm, Environmental Consulting and Management Services, before that firm was hired to do environmental testing on school building sites in 2009.

ECMS’ owner, Tyrone P. Dorian, is a business partner of Frank Jones, Harris’ campaign treasurer, state records show.

The e-mail trail shows Harris helped arrange a July 8, 2009, meeting between an ECMS rep and an HISD official. Records made public by the school district last month show that, within two days of that meeting, HISD administrators wanted to hire ECMS for work worth up to $10,000.

Pottinger described a phone call from Harris requesting that he meet with two vendors --one of whom was her close friend and Westco Ventures owner Nicole West -- as “a debacle.”

“Harris said, ‘I have two vendors that are upset about a recent contract award, and I need you to meet with these vendors and get it resolved,’” Pottinger said. “It turns out (one of the vendors) was her best friend (West). And, interestingly enough, this woman was absolutely obnoxious. I mean, you would think somebody who was trying to earn -- and I can’t stress the word ‘earn’ enough -- district business would be a little more friendly or accommodating. But she was demanding. Her attitude was, ‘I deserve this. I have contacts. I know people.’

“That’s when favors happen -- ‘I need you to look at this vendor. I need you to visit with this guy,’” Pottinger said.

At the time, Pottinger said he took Harris’ request to “get it resolved” at face value.

“I understood that to mean: Explain why the vendors didn’t win the bid, and allow the vendors to take a look at the vendor process,” Pottinger said.

But in hindsight, particularly, after Harris told Texas Watchdog that she never discussed West with Pottinger -- an assertion that Pottinger says is false -- Pottinger said, “I wonder if it was (Harris’) intent to sway me toward awarding West a contract. (Harris) was so adamant that she never knew who I was.”

Pottinger wondered, too, why West would call Harris, the school-board president, rather than him when he was the one who oversaw the bid process from beginning to end.

“In retrospect, there are a lot more questions than answers,” Pottinger said.

Two months after Pottinger met with West and a representative of the other company Harris had mentioned, The Woodlands-based Sparks Construction, both companies were added to HISD’s list of minor suppliers, those providing services worth less than $25,000 at a time, for a construction project.

In the time since Harris joined the school board in 2008, the school district has hired West and her companies for what the Houston Chronicle called a "boggling variety" of services, including tutoring elementary-school children, private investigation services, private ambulance rental, painting, security alarm system installation and dry cleaning auditorium drapes.

Texas Watchdog has counted at least three friends of Harris doing business with the district. Aside from West, Harris’ campaign treasurer, Houston lawyer Frank Jones, negotiated Grier’s contract, and his law firm, Greenberg Traurig, is on HISD’s list of approved outside legal counsel. Frank Jones’ wife, Demetra Jones, has also done more than $75,000 in no-bid consulting work for the district.

Who's changing the recommendations?
 
School board members are supposed to merely vote yes or no on giving contracts to companies or slates of companies recommended by HISD’s unelected administrative staff.

But therein lies another problem for the school system: The companies and slates of companies “recommended” to the school board are sometimes not the companies that HISD’s professional staff actually recommended for hire.

It was routine for HISD’s procurement staff to recommend that one company be hired for a certain service or supply, only for that recommendation to be changed by some unknown higher authority and a different company to be presented to the school board as having been recommended, Pottinger told Texas Watchdog.

Grier and Garrett have acknowledged a problem with HISD staff making changes to vendor and contractor recommendations.

Speaking at the May 20, 2010, board meeting, Grier and Garrett told trustees that unnamed district administrators had been changing recommendations for contractors hired to oversee certain types of construction projects.

“In this case, there was a set criteria that was proposed” for the contracts, “and the evaluations were done against that criteria. And then the No. 1 companies were recommended by the committee and, after that is when some of the changes were made,” Garrett told the school board.

Those changes were against state law, she said.

Grier and Garrett’s comments referenced the same type of contract for which Morganti was being eyed for work at Grady Middle School, in a role that would give them broad leeway over directing and managing the entire rebuilding project.

District officials had to redo some questionable contract decisions to make sure they followed the law, Garrett said at the meeting

“When we went back and looked at the recommendations that were made, we have come back and, on the exhibit, the companies that are listed are the ones that came out as the No. 1 ranking of the committee in all cases,” Garrett said.

“And before, they weren't,” Grier added.

The superintendent said he intended to change things -- and there would be consequences for those who did not toe the line:
“We want to make sure that once, quite frankly, the (selection) committee submits the bid recommendation to our staff, that we take that recommendation, that there's not people pulled off the list or other people put back on the list by other people in the organization because they think that somebody might not have the capacity to do more than three jobs or four jobs, or because of this or because of that.

“And, quite frankly, we've had administrators pull people off a committee, and your own (Inspector) General, Robert Moore, has asked, 'Why were those decisions made?' And we have not been able, frankly, to provide written documentation as to why and to support those decisions …

“Quite frankly, when I got here and I started hearing the complaints, and I started investigating, and that's when we started pulling (contracts off school board agendas). I promise you, we made it very clear to our staff that we were going to do this right and we were going to be in compliance, or, quite frankly, we're going to have some changes to personnel.”
Worst to first
 
But at that very same meeting at which Grier made those comments -- May 20, 2010 -- school board members took steps to hire a contractor on a construction project that Pottinger and an outside expert say should not have gotten the recommendation of HISD’s staff.

The case is that of the rebuilding of Grady Middle School in West Houston. The company whose name was presented to the school board as having been “recommended” for the job, Morganti Texas, had scored well below competing bidders on ratings that were supposed to be objective and impartial.

Despite that, Morganti got the initial nod for the Grady Middle project, and the school board even voted to begin negotiating the Grady contract solely with Morganti -- a contract that might well have been a done deal, had the company not eventually tried to jack up the project’s price tag by $2.5 million, prompting HISD to end the negotiations.

Harvin Moore, who represents the area including Grady, has called the district staff’s recommendation of Morganti “contract steering” and “corruption.”

As Texas Watchdog reported in October, HISD's staff ranked Morganti 18th in the “quantitative scoring” category and 15th in the “qualitative results” category. And the district selection committee rated Morganti as having the worst overall reputation among the 28 potential bidders on the Grady project.

“How do you go from that to first?” Harvin Moore asked at the time.

He’s not the only one with questions about the Morganti deal.

“Looking at the figures for the Morganti award, it appears that these figures are skewed,” said Cindy Hallett, the former longtime procurement chief of the Eanes school system outside Austin.

Texas Watchdog asked Hallett to review HISD’s documentation on how the district arrived at the recommendation of Morganti for the Grady Middle project. Hallett and Pottinger don’t know each other and have never met.

“If I were (Satterfield & Pontikes Construction), the vendor that consistently scored No. 1 on the qualitative analysis, I would definitely formally contest the award.”

Dick Lindsay, the school district’s chief business officer at the time and now a vice president with Satterfield & Pontikes -- the same company that is rebuilding Grady Middle School – declined to comment or answer any questions when reached by phone by Texas Watchdog.

When HISD kicked Morganti off the Grady project, the district quickly hired Satterfield & Pontikes to take over. Satterfield has since built the school, and it is scheduled to open until after Christmas break in January, Moore said.

Pottinger wasn’t involved in the choosing of the contractor for Grady Middle -- construction issues are handled by an entire separate department than the one he ran -- but, he, too questioned the initial choice of Morganti.

“Something’s wrong,” he said. “If the quantitative (rating) was worth half of the total score, it’s very difficult statistically for that vendor to become ranked No. 1 overall.”

Pottinger also told of another incident in 2010, one in which he was personally involved.   

The school district was considering contracting with a series of companies for a certain service, he recalled.

“We recommended multiple vendors based on their scores in the evaluation process, and gave the recommendations to Dick Lindsay,” Pottinger said.

Lindsay was forced out in February 2010. It’s never been clear why he left.

Pottinger recalled that Lindsay put the item on the school board agenda for a vote – but listed completely different vendors than Pottinger’s team recommended.

Pottinger said he and his colleagues talked to Garrett about the vendor switch.

“This is not what we recommended,” Pottinger said they told her. “There’s a problem here. I remember she got really upset. I don’t know if she got upset at us or at him. But she was upset.”

Pottinger said he followed up with Garrett because “as soon as we gave the data to somebody else and they were able to manipulate that data, this is what happens. This is the result.

“The auditors got involved – super-involved,” Pottinger said. “So, Melinda said, ‘Cancel the contracts with the current vendors and rebid it.’ And all of a sudden, Dick Lindsay disappeared.”

***
Contact Mike Cronin at mike@texaswatchdog.org or 713-228-2850. Follow him on Twitter at @michaelccronin or @texaswatchdog. Contact Jennifer Peebles at jennifer@texaswatchdog.org or 281-656-1681. Follow her on Twitter at @jpeebles or @texaswatchdog.

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Photo of ‘Money Hand...' by flickr user stevendepolo, used via a Creative Commons license.


Like this story? Then steal it. This report by Texas Watchdog is licensed under a Creative Commons Attribution 3.0 United States License. That means bloggers, citizen-journalists, and journalists may republish the story on their sites with attribution and a link to Texas Watchdog. If you do re-use the story, e-mail news@texaswatchdog.org.
Comments
Smoking Pottinger
Tuesday, 12/20/2011 - 09:21AM

Longest. Story. Ever.

How can you write so much and not mention that your main "expert" source, Steven Pottinger, was fired for trying to find Russian mail order brides for an employee and telling an employee to bring a box to his office to make him think he was getting fired.

Jennifer Peebles
Tuesday, 12/20/2011 - 09:52AM

@Smoking: Thanks for writing in. We go into the Russian mail order bride/empty box accusations in more detail in a separate story we published today. We've gone back into this story to include a link to that story from the first time we mention Mr. Pottinger.

Take care,

Jennifer Peebles

jennifer@texaswatchdog.org

Roger Clegg
Tuesday, 12/20/2011 - 10:57AM

Re "minority contracting": Why do race or ethnicity need to be considered at all in deciding who gets awarded a contract? It's good to make sure contracting programs are open to all, that bidding opportunities are widely publicized beforehand, and that no one gets discriminated against because of skin color or national origin. But that means no preferences because of skin color or what country your ancestors came from either--whether it's labeled a "set-aside," a "quota," or a "goal," since they all end up amounting to the same thing. Such discrimination is unfair and divisive; it breeds corruption and otherwise costs the taxpayers and businesses money to award a contract to someone other than the lowest bidder; and it's almost always illegal—indeed, unconstitutional—to boot (see 42 U.S.C. section 1981 and this model brief: http://www.pacificlegal.org/page.aspx?pid=1342 ). Those who insist on engaging in such discrimination deserve to be sued, and they will lose.

rbblum
Tuesday, 12/20/2011 - 03:47PM

Sooner or later the people will believe and embrace the concept that 'all men are created equal'.

Sooner or later the people will believe and embrace the concept of 'best business practices'; buying the best quality at the best prices in an open, competitive marketplace.

Sooner or later the people will believe and embrace the concept that the independent school districts of Texas can function effectively and efficiently by consolidating or merging the administrative offices and duties in accordance to geographical regions or counties.

makeitright
Wednesday, 12/21/2011 - 04:02PM

All the dirt comes out in the wash. It is inconceivable the manner in which board members will go to get their best buds jobs. lt is sickening some of these folks are using their positions to enhance best friends "companies" financially, and almost intimidating others to make sure they get the jobs. That alone should be investigated.A company based on their scores and bids should be awarded jobs, not friendship connections. Please continue these stories so the public is aware of what is truly happening with their "elected" board members.

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