19-04, Audit of the Honolulu Authority for Rapid Transportation: Report 2Posted on Jan 15, 2019 in Summary
|HART pays HDR over $505,000 per HDR staff per year or over $42,000 per HDR staff per month. Yet HART does not evaluate the performance of the embedded HDR employees.|
IN REPORT NO. 19-04, Audit of the Honolulu Authority for Rapid Transportation: Report 2, we examined the Honolulu Authority for Rapid Transportation’s (HART) current management structure, the relationship between HART and its Board of Directors (Board), and HART’s use of third-party consultants to manage the Honolulu Rail Transit Project (Project), focusing on fiscal years 2017 and 2018.
What Did We Find?
We also found that HART relies on a third-party consultant, HDR Engineering, Inc. (HDR), to staff many of HART’s senior management positions and other positions directly responsible for and critical to the design and construction of the Project, including Project Director; Senior Project Officer of Core Systems, Integration, and P3; Director of Design and Construction; and Risk Manager; among other director, manager and deputy director positions. While HART claims that HDR employees are completely integrated into its organizational structure, with no distinction between HDR and HART employees, the embedded HDR employees are paid and evaluated by their private employer, not HART, with many HDR employees directly overseeing the work of other HDR employees as well as other third-party consultants. And, we found that HART does not evaluate the performance of the embedded HDR employees and approves HDR monthly invoices that average about $800,000, or over $42,000 per HDR employee, with little substantive review.
Why Did These Problems Occur?
Further, HART’s oversight over its embedded third-party consultant shows a lack of consistent follow-through and monitoring of HDR or embedded HDR employees’ performances. According to the CEO, HART hires third-party consultants because it is unable to find highly qualified candidates willing to accept a City and County of Honolulu (City) salary for the positions. In addition, since HART will only operate until the Project is completed, the CEO does not want HART to have to terminate civil service employees at the end of the Project.
Why Do These Problems Matter?
Without clear lines as to the specific types of information requiring Board consideration, the CEO is given broad discretion as to what decisions are his to make. The CEO’s decision to withhold contract-specific allocated contingency from the Board deprives the Board of being able to assess the total amounts HART has budgeted for specific work and to ensure that the Project is on-budget; without that information, the CEO is not fully accountable to the Board. Similarly, we believe that the transition to an entirely different business model, P3, represents a fundamental shift in the completion and eventual operation and maintenance of the Project, and should be reported to and fully vetted by the Board, not left to the CEO. Although the CEO did decide to seek board approval, which was granted in September 2018, we do not believe that decisions of this magnitude should be subject to the CEO’s discretion.
Moreover, with these mounting costs as a backdrop, HART continues to use HDR to staff its key management positions at a cost of $9.6 million per year, or $800,000 per month. Based on an average of 19 HDR-provided employees, HART pays HDR over $505,000 per HDR staff per year or over $42,000 per HDR staff per month. Yet HART does not evaluate the performance of the embedded HDR employees; HART does not even evaluate HDR, generally. But, HART’s ability to complete the Project within the current budget and by the current opening date is dependent on HDR’s employees.
As the FTA has pointed out, filling key management positions with third-party consultants instead of HART employees is less than optimal, leading to less “ownership” and accountability. While we recognize the CEO’s concerns about the eventual shuttering of HART’s operations, there is still a long way to go until the end of the line.