As its city consulting operation grew, Don Todd Associates farmed out work to other companies, even though the firm's contracts forbade it from doing so in some cases. City bureaucrats regularly approved irregular expenses on Don Todd Associates invoices, including thousands of dollars for computer equipment, food, and, at least once, a car that seems to have been purchased with no regard for city rules or policies.
Public Works officials admit some aspects of the city's arrangement with Don Todd Associates may not comport strictly with the rule book. They admit that nobody has ever evaluated Don Todd Associates' work in writing, as required by city policy. In fact, Public Works officials admit that they are not always sure how much Don Todd Associates is eligible to be paid under specific contracts, because amendments to those contracts don't always show up in the department's computerized accounting system. These admissions are made in candor and good humor. Perhaps that is because, for those inside the city's contracting system, what has happened with Don Todd Associates seems more an example of the rule than an exception to it.
Willie Brown could be forgiven for wondering, "Why me?" The FBI no doubt has its reasons for launching its current investigation of allegations of contracting irregularities in city government, but reasons to look askance at the city's acquisition processes existed long before Willie Brown became mayor. A litany of audits and other official reports have described a city purchasing process that seems chaotic and fraught with apparent waste and possible impropriety.
The city's use of consultants is a special case in point. City departments regularly hire expensive consultants without using a competitive process that could reduce costs, and the consultants do jobs that could be done by city employees, Board of Supervisors Budget Analyst Harvey Rose reported in 1986, 1992, and 1993. Much of the trouble has involved the Department of Public Works, which handles most of the city's construction contracting. In 1996, a civil grand jury criticized the department, reporting that there was essentially no supervision of consultants, meaning that Public Works had little if any idea what they were or were not doing. For the last two years KPMG Peat Marwick LLP, the accounting firm that audits the city's books, has written that Public Works could not account for millions of dollars in federal grants it had received, which "could jeopardize future funding."
It is clear that Don Todd Associates is not responsible for all, or even most, of the city's problems in regard to the use of consultants. But the firm's record at City Hall does explain San Francisco's problems in contracting for personal services in a way no auditor's report could.
According to the Engineering News Record, one of the engineering industry's premier trade publications, Don Todd Associates ranks as the 72nd largest construction management firm in America in terms of billings. Based in San Francisco, Todd operates five regional offices around the country and claims a staff of 100 engineers and construction professionals. This year, among its other projects, Todd partnered with the giant Bovis Construction Corp. to manage a $650 million upgrade of the Metropolitan Oakland International Airport. It has also recently been involved in the extension of the BART rail line to San Francisco International Airport.
But business was not always this sweet for Don Todd Associates.
During the 1980s, the city granted Don Todd Associates the "disadvantaged" status necessary to be considered a minority business enterprise. That is, by definition, the firm took in less than $2 million a year, and its owner, an African-American, was a member of a minority group. Disadvantaged status gave the firm a leg up in seeking city work. Don Todd Associates' job prices could be 10 percent higher than competitors', and, all else being equal, Todd would win the competition. Consultant contracts are awarded after city staff weighs cost and professional experience; a 10 percent advantage is, obviously, significant.
In 1989, the Department of Public Works awarded the Todd firm a $49,000 construction management contract related to a sewer project. With its advantages as a minority business enterprise, Don Todd Associates won the sewer job, even though the firm's initial offer was $30,000 higher than the lowest bidder for the job. Through contract changes, the job's price quickly grew to $87,000, almost doubling in dollar amount within two years.
In 1991, Don Todd Associates was deemed too have grown too large to continue as an officially disadvantaged business in the city system. But this didn't mean the firm had trouble getting city work. That year, the firm entered the previously mentioned master agreement for earthquake services. In 1994, Public Works gave Don Todd Associates a second master agreement -- this one for $750,000. This agreement put Don Todd Associates "on call" to provide, among other things, engineering and secretarial services, computer expertise, cost estimation, and assistance in utility relocation at San Francisco International Airport. In all, over 30 different jobs were included under the blanket agreement.
A $1 million master agreement to help with construction management at the mid-Embarcadero reconstruction project followed.
These master contracts were open-ended. Although the agreements each started with a single job, new jobs would be added by administrative fiat, without shopping the jobs around to competitors. The agreements shot up in value, sometimes quicker than Internet stocks; the explanations for the increases usually involved a need for more hours of work on an existing project, or a need to work on a new project. After the earthquake contract ballooned by 585 percent, the 1994 "on call" contract amount rose to $1.3 million, nearly doubling within two years.