Richard Miniter, Contributor to Forbes
Remember those “shovel ready” jobs that President Obama promised the $700 billion stimulus bill would create? Almost four years and more than $250 million in federal grants later, they still haven’t arrived in Los Angeles.
Meanwhile, life-saving improvements to the police, fire and other local government communications systems have been delayed–putting the more than 9 million residents of Los Angeles County at risk.
Here is a story that the mainstream media has largely ignored; a tale of cronyism, special interests, law-breaking, bureaucratic delays, union complaints, last-minute changes in the law solely designed so that Los Angeles could keep federal grant money, panicked spending of federal money, and ultimately more than $800 million of your tax dollars.
Like all tragedies, it holds a powerful lesson: massive Keynesian spending programs often fail to create jobs or grow the economy, but insider “experts” rarely fail to get their piece of the action.
Our story begins with a lofty and laudable goal. In bureaucratic argot, it is known as “interoperability.”
That’s a fancy word for the ability of police, fire, first responders, ambulance drivers, hospitals and even public works department workers to talk to each over a shared network. In a horrific terrorist attack or ordinary mudslide, police might be needed to provide order, fire rescue teams to pull people from collapsed buildings, public-works bulldozers to clear the roads, ambulance teams to be efficiently dispatched and share medical records with hospitals and so on. Imagine if a hospital could review your records before you arrive or a police helicopter could tell an ambulance that the road ahead is blocked but a side road is open. Saving time amounts to saving lives.
To achieve true “interoperability” in Los Angeles County, you need to link together 88 independent cities and agencies (from Beverly Hills to Torrance), the city of Los Angeles, the county government and its sheriff, several port authorities, a national forest and so on. An undertaking that is described by an LA-RICS board member “as hard as going to the Moon.”
But we eventually got to the Moon. Los Angeles County has yet to put up a single tower.
To knit all of the agencies and governments together, Los Angeles County formed a “joint-powers authority” (binding together all of the cities and other agencies in America’s most populous county) to administer the new Los Angeles Regional Interoperable Communications System (known by the acronym LA-RICS), and applied for the largest federal grant ever given for that purpose. And the county got its wish. It received a more than 11 federal grants with a combined value of $250 million, including a $154 million Broadband Technology Opportunities Program grant, the largest of its kind in the nation. The balance, perhaps another $500 million, was to be borne by the taxpayers of Los Angeles.
The champagne was hardly uncorked, when the problems spilled over.
Since communications systems—both radio and microwave—require expertise to design and build, an obscure outfit known as DeltaWrx was hired. The joint-powers authority board didn’t want to pay for the consultants. So the chief executive officer of Los Angeles County, William T. Fujioka, decided to pay them with county money. The County CEO has a “delegated authority” to hire consultants, of course.
Usually, this involves paying a firm $150,000 to do an environmental study or legal research. Yet, in this case, Fujioka agreed to pay DeltaWrx more than $4 million—far more than any other consultant in that period.
I reviewed the consulting contracts listed under Fujioka’s delegated authority quarterly disclosure statement for July-September 2010; it shows only three of the 22 contracts listed were for more than $2 million over that period. DeltaWrx, at $4.075 million, was, by far, the largest. That fact has left some people wondering: What makes DeltaWrx so valuable?
Some of those wondering actually sit on the board of LA-RICS. One was LeRoy Jackson, the City Manager of Torrance. He repeatedly asked some hard questions about DeltaWrx: What is scope of services in their contract, whom do they report to, who is liable for decisions based on their advice? No copy of the outsized contract has ever been made public.
LA-RICS executive director, Pat Mallon, told me that he hasn’t seen the DeltaWrx contract and didn’t know its terms. County Chief Executive Fujioka admitted to me in a telephone interview that DeltaWrx’s “scope of work kept changing.”
One way to clarify DeltaWrx’s role is find out whom the firm reports to and ask that person — but that is not as simple as it sounds. When I asked the LA- RICS executive director: “Whom does DeltaWrx report to?” He laughed. He said it’s a “sort of a hybrid.” DeltaWrx’s president, Michael Thayer, has an office beside executive director Mallon’s and, Mallon explained, “he is supposed to support me” in a rapidly moving set of technical challenges. But Thayer’s boss is actually county chief executive, Fujioka. And DeltaWrx is supposed to be providing technical advice to the LA-RICS board, but the firm doesn’t answer to them.
LA-RICS board member LeRoy Jackson asked why the pricey consultants reported to the County CEO instead of the board? After all, if they work for the board, Jackson said, they should report to the Board. Fujioka, citing a responsibility to manage money the county pays out, told me the board doesn’t pay DeltaWrx’s bills, so it doesn’t have a say. Jackson’s objections were shouldered aside and the DeltaWrx contract continued. Confused yet?
Indeed, every one I talked to about DeltaWrx seemed kind of fuzzy about how the firm adds value.
But it soon became clear how DeltaWrx subtracts value.
The consulting firm, Mallon said, has played an integral role in the project since its start. DeltaWrx’s president helped design the giant “request for proposal” (known as an “RFP” in the lingo) that brought in bidders from around the country in April 2010. It was a three-year undertaking—but the Rube Goldberg contraption soon exploded.
Soon after the initial RFP was awarded to Raytheon and its partners in March 2011, the County Counsel’s office found that the RFP was illegally designed, violating a number of California laws, including the Brown Act. (Months later, Los Angeles County and City would be forced to approach Governor Brown in the hopes of getting what amounts to an exception to his father’s signature legislative act.)
A confidential legal analysis, conducted by the County Counsel’s office, was soon circulating among key decision makers. It concluded that the RFP was “flawed and cannot proceed,” adding that there were so many legal defects that “it would result in a court voiding any contract” awarded under it. Among the numerous legal defects, it ignored the state’s strict contracting laws on new construction. The RFP included constructing some 255 towers and digging up sidewalks to string fiber-optic cable. How could the costly consultants not realize that California’s construction contracting laws would come into play?
So three years of effort and tens of millions of taxpayer dollars were thrown away and Los Angeles had to start over, in July 2011.
The Los Angeles County Board of Supervisors was not amused. The board’s chairman, Zev Yaroslavsky, thundered: “This is one of the worst and potentially most costly mistakes I have ever witnessed in all my years in government.” Yaroslavsky has been observing the microscopic hijinks of Los Angeles politics for decades.
Bureaucratic blundering also frustrated another Supervisor, Mike Antonovich. His staffer, Anna Pembedjian, said he was “very unhappy about the way the first RFP was handled.”
Yet no one was fired. The County Counsel, Andrea Ordin, retired, but that may have been unrelated to the legal contracting mess that was described by nearly every participant as a “fiasco.”
Thayer — the $4 million man — had his fingerprints all over the illegal RFP. He remains at his post. As for DeltaWrx (once known as Thayer Consulting)? It secured a $1.69 million contract renewal to continue its work on L.A.-RICS in May 2011. Despite repeated calls to his Woodland Hills corporate offices and emails to his L.A.-RICS email address, Thayer refused all requests for an interview.
Instead, Pat Mallon—who had wowed county officials by successfully forming a joint-crime lab to be shared by Los Angeles County and city investigators—was brought in to fix the mess as executive director in May 2011.
Meanwhile, the only hope Los Angeles had of meeting federal deadlines for spending tens of millions of dollars meant that it had to get a mulligan so it could play past California law. That proved relatively easy to do thanks to a flexible minded committee chairwoman in the state legislature. “There was no way that we were giving up a great public safety tool just because someone forgot to dot the I’s and cross the T’s,” Assemblywoman Bonnie Lowenthal (D-Long Beach) told the Los Angeles Times. “Federal money isn’t so easy to come by these days and we can’t afford to let this get away.”
With Lowenthal leading the charge, the California legislature passed a law creating a unique loophole in state contracting law… so that L.A. could keep its federal grants. They couldn’t afford to let the money get away.
After the missed deadlines, technically illegal procurement plans, the shouting behind closed doors and the last-minute changes in state law, a new danger loomed. Again, it found that L.A. could not spend money in accord with the federal deadlines. This time, the enemy was time. Time itself.
If Los Angeles County and City didn’t spend $58 million by the federal deadline of May 2012, it would have to return that grant money. And they couldn’t possibly do it. Working at breakneck speed, the L.A.-RICS staff and board had presented a new RFP in November 2011. Bids came in from all over the country. There was simply no way the staff could get through the statutory contract evaluation process in time.
Even if the new contract was awarded in the coming weeks (as expected), there was simply no practical way for the contractor and its sub-contractor firms to spend that much money in that little time on approved uses. Despite their best efforts, it looked like L.A. was going to have to return some of its federal grant money…
That is, unless Fujioka became creative. And he did. He identified millions of dollars in existing city and county contracts where he could legitimately spend federal grant money in some way or another, to further the LA-RICS plan. All perfectly legal and perhaps bureaucratically brilliant—but driven by the fear of losing federal money and the impending wallop of missed federal deadlines. The County chief executive demanded that LA-RICS board members and county officials get their proposals in immediately. Panic was setting in. The money was about to go back to Washington.
One clever solution was dispatcher’s consoles. Police, fire and other dispatchers sit at a console loaded with equipment, sort of mini-Mission Control. But Houston, we have a problem. Those consoles were due to be replaced and new ones would not be compatible with the system LA-RICS was designing. Why not use the federal grant money to upgrade to new, compatible consoles? Anything to soak up federal grants before they left L.A. County unspent.
Meanwhile, the police and fire fighters’ unions began to have objections of their own. The LA-RICS system would literally be a matter of life and death for those unionized public-safety officers. “We understand that there are tight timelines the JPA [LA-RICS] is trying to meet, but we ask , what is the rush?” wrote Dave Gillotte, the president of Los Angeles County Fire Fighters Local 1014, in a letter to L.A. County chief executive Fujioka. “Why not make sure that we do it right? We don’t want to repeat the same mistakes of New York, Pennsylvania, and other failed systems across the country in our efforts to get it done quickly. It is heartbreaking for us to see that ten years after 9/11 that New York still does not have an operating system due to vendor failures. We strongly believe that we have one shot to get this right. We believe that with our collective lobbying efforts they [the Obama Administration] will be patient with us in order to ensure we have the best operating system possible for our men and women of public safety.””
It is a good question, perhaps the fundamental question of LA-RICS. Why rush? Why can’t the deadlines be relaxed, as the union leaders thoughtfully suggested? And the unions even offered to lobby the Obama Administration for a deadline extension. So why rush?
Mallon knows the answer. “The federal government wanted those jobs in 2011. They will take them in 2012,” he said. “But not 2013.”
He’s right. The federal deadlines are very unlikely to be eased. The soft-spoken former Sheriff’s Department commander is too polite to say the obvious: it is presidential politics.
Why spend federal money today to create jobs in a future year when President Obama may not be in the White House to enjoy the credit? 2012 is an election year, after all. Meanwhile, the people of Los Angeles County wait for a radio system that will actually allow their more than 50 police and 31 fire departments to talk to each other.