VDOT doesn’t know how much U.S. 460 subcontractors have been paid

June 29--RICHMOND -- The Virginia Department of Transportation won't say how much subcontractors involved in its suspended U.S. 460 project have been paid, because it doesn't know.

The department may not even have the names of every company involved in the project, which has cost more than $290 million without land being bought, road construction started or a required federal permit in hand.

It also doesn't know how much profit the project's lead contractor, U.S. 460 Mobility Partners, has made so far, or how much it kept for in-house expenses.

This is not unusual, according to VDOT. Even in traditional project contracts, as opposed to the public-private deal struck for U.S. 460, the department generally works with a prime contractor and may not know who they use as subcontractors, VDOT spokeswoman Tamara Rollison said.

"If this was public information, it would affect the competitive process going forward," Rollison said. "Every contractor would know what its competitors are paying to subcontractors."

U.S. 460 Mobility spokeswoman Shannon Moody made the same argument.

But a joint report on the project by an internal team at VDOT and Virginia'sOffice of the State Inspector General suggests that state officials consider some changes. A lack of access to financial records limited the inquiry's scope, and VDOT audit rights written into the department's contract with U.S. 460 Mobility "were inadequate," according to the report, which was released Friday.

Transportation Secretary Aubrey Layne, Gov. Terry McAuliffe, legislators and transportation watchdogs have said -- in hindsight -- that the contract was skewed in the company's favor. Layne has said repeatedly that U.S. Mobility did nothing wrong, and the joint review found that the company adhered to its contract, that project expenses seem reasonable and that "adequate controls" were in place.

But it also found "an inherent risk that the vendor could overstate the value of certain work performed to maximize revenue early in a project," suggested better access to financial records for future contracts, and called for clearer definitions for expense categories, including "mobilization."

U.S. 460 documents released to the Daily Press months ago list monthly charges of $5.5 million for "mobilization."

The review concluded what project critics have complained about for months: That Gov. Bob McDonnell's administration pushed the project despite warnings from federal regulators that the governor's preferred route may never get a permit. The report says key stakeholders, including Commonwealth Transportation Board members, weren't aware of the risks despite the administration's adherence to the strict letter of state disclosure laws.

It recommends a number of changes to the state's public-private contracting rules, including a 30-day "cooling-off" period after a contract is negotiated to allow General Assembly members to review deals that are struck largely in private. The state would have a chance to terminate that contract if problems arise.

McAuliffe stopped work on the 460 project in March because it was costing tens of millions of dollars a month, but didn't have a required construction permit from the U.S. Army Corps of Engineers. The Corps had told VDOT officials repeatedly that permits would be hard to get, and shared its concerns with the Federal Highway Administration as far back as 2003, according to letters unearthed by the joint review released Friday.

It expressed similar concerns to VDOT dating back to at least 2012, the review found.

A different route?

VDOT is working with the Corps to get the project moving again, perhaps along a different route. The initial one -- 55 miles long and just to the south of the existing U.S. 460 -- would affect 480 acres of wetlands and require more wetlands mitigation than any project completed since the U.S. Clean Water Act went into effect in 1972.

Even Layne, and other project supporters, acknowledge that the original route may never win a permit.

U.S. 460 Mobility, a partnership between construction giants Ferrovial Agroman and American Infrastructure, hopes to be involved if the project restarts, partnership spokeswoman Moody said. The company was paid about $250 million for work done before the state suspended the project. The state spent $43 million or so in addition to the U.S. 460 Mobility contract, with much of that spending coming before the company was brought in.

The project itself has been on the drawing board for decades. The idea was to widen the existing U.S. 460, or create a new one, to ease traffic jams coming out of Hampton Roads, to give trucks leaving the port a faster route and to hasten hurricane evacuations. The state signed a construction contract with U.S. 460 Mobility in late 2012.

McDonnell had supported the project for years, and fast-tracked it under the state's public-private contract rules, which give broad authority to the executive branch. He faces unrelated federal corruption charges and heads to trial next month, but he said during a recent public appearance that he pushed for a new U.S. 460 because it was a top priority for Hampton Roads.

"It's a project that's got to get done, that's really all I can say," McDonnell said.

Indeed, the project has been on the region's most wanted list for years. But Commonwealth Transportation Board members who gave the project a green light later said they didn't realize how much the state would be risking, and how little U.S. 460 Mobility stood to lose if the permit never materialized.

Layne has said that, in a worse-case scenario, the project could cost Virginia more than $400 million, including a penalty fee due to U.S. 460 Mobility, in addition to what the company has already been paid.

Layne was not only on the Commonwealth Transportation Board when the project was approved, he headed up the Route 460 Funding Corp. that issued bonds to help fund it. Even he didn't understand the risks at the time, he has said.

W. Sheppard Miller III, who represented Hampton Roads on the transportation board until McAuliffe replaced him earlier this year, said the push was partially a product of Virginia's one-term restriction on governors. Virginia is the only state that forbids governors from seeking re-election, and its budget year is staggered so that governors typically don't write the spending plan in place for their first two years in office.

That encourages a "hurry up and get it done" attitude, Miller said.

But Miller defended state rules that allow U.S. 460 Mobility and other lead contractors to keep profits and subcontractor payments a secret.

"That's information that my competitors could gain an advantage from," he said. "It would be unrealistic to trace every transaction."

There are exceptions to that rule. Many projects, including this one, come with requirements to use minority- or woman-owned businesses, as well as small businesses. U.S. 460 Mobility gave VDOT quarterly reports detailing payments to those contractors. VDOT provided these reports to the Daily Press, but first redacted figures in the documents, blacking them out at U.S. 460 Mobility's request.

The state's Freedom of Information Act allows trade secrets and other proprietary information to be kept from public view, and gives state agencies -- in this case VDOT -- responsibility for determining what shouldn't be released.

VDOT said the redactions, and its lack of detailed information on subcontractors, don't translate to a lack of transparency. But it makes it difficult to track spending on a very controversial project.

How much was wasted?

"I think there are substantial questions about how we spent $300 million at this stage of a project," said Trip Pollard, an attorney for the Southern Environmental Law Center who has followed the project closely.

"How did we spend this money?" he asked. "How much of it was wasted?"

The project has at least 131 subcontractors, based on a list U.S. Mobility provided VDOT in response to a Daily Press inquiry. The list includes local companies and international conglomerates. Its length points to the breadth of the project, which would be the largest in Virginia since the interstate system.

There are dozens of construction, engineering, surveying, drilling or soil-testing companies on the list. It includes banks, phone companies, printers, a courier, accountants, sign makers, computer and software companies, insurance companies, lobbying and legal firms, a furniture company, an aerial photographer and a document shredding company.

And the list may not be complete.

"VDOT does not have a comprehensive list of all subcontractors (i.e. subs to the subs) involved in the project," department spokeswoman Rollison said in an email.

The Daily Press reached out to 32 companies on the list, seeking information about what they did for the project. Designated spokespeople and executives for most of the companies did not return telephone messages or emails.

In several cases, someone at the business said they couldn't comment. Two said U.S. Mobility reached out and asked them not to discuss the project with the press. Moody said the company made "courtesy calls" to project partners to let them know their company's name was being released.

"It is up to the companies as to what they share regarding their businesses," Moody said in an email. "However, it is standard practice that media inquiries on any project be forwarded to the prime contractor."

A few business owners and managers were willing to discuss their role. Vernda Kelley, an accountant in Missouri who specializes in state tax laws around the country, said she was asked for an explanation of Virginia sales and use tax laws.

Grubb Print & Stamp in Portsmouth, one of several printing companies hired, created stamps and brochures. Bizport in Virginia Beach printed road plans.

Freedom Automotive, a Hampton Roads dealership owned by U.S. Rep. Scott Rigell, R-Virginia Beach, sold vehicles to U.S. Mobility. Nine were delivered, and several more remained on order earlier this month despite the stop work order.

Hayden Frye & Associates in Virginia Beach was one of several surveying companies who worked along the proposed 55-mile route. They established property lines to prepare for rights of way acquisition along a portion of the route, Hayden Frye said.

New Day Office provided furniture for the project headquarters in Suffolk, space U.S. 460 Mobility shares with the Route 460 Funding Corp. New Day Owner Matt Brady said the contract was about $250,000, and that competition for it was fierce.

Many of the subcontractors handled environmental reviews along the route as officials prepared to apply for a construction permit. Joe Waldo, a Norfolk attorney who represents land owners in eminent domain cases, said a number of his clients complained about repeat visits, seemingly for the same or similar work.

"What we're seeing is repeated trips to some properties by the same company," Waldo said. "And to the property owner, that doesn't make sense. Get organized, tell us what you want, and come one time."

Waldo also said that U.S. Mobility or its contractors would tell property owners someone was coming, but give only a window of several months for the visit. He said these problems were much more common on the U.S. 460 project than others he's worked on.

Moody said project consultants made great efforts to notify owners before visits and, when possible, coordinate visits to limit the number of trips. A number of tasks fall under the definition of "environmental purposes," she said in an email.

Fain can be reached by phone at 757-525-1759.

___

(c)2014 the Daily Press (Newport News, Va.)

Visit the Daily Press (Newport News, Va.) at www.dailypress.com

Distributed by MCT Information Services