Audit Assails MTA Spending, Management

A long-awaited audit portrays the Metropolitan Transportation Authority as spending proportionally more on design work for rail projects than other transit agencies across the country, rife with fear and distrust, and staffed by an engineering department that is “essentially dysfunctional.”

The phone-book-thick audit, conducted by the consulting firm of Arthur Andersen, found that the MTA governing board of political officials continues to “micro-manage” the agency. It also concluded that transit officials have done a poor job of overseeing the private engineering firms designing one of the nation’s costliest public works projects.

Auditors proposed dozens of recommendations intended to save millions of dollars, free up money for other transit projects and prevent costly and disruptive mishaps like the Hollywood sinkhole last year.

“We’re going to fix the problem,” MTA construction chief Stanley Phernambucq pledged Tuesday. “We have a lot to do. We have to build a team. We have to get people feeling like we’re not out to get them because, like they say in Mississippi, ‘A kicked dog don’t do tricks.’ ”

Among other things, the report found:

* The MTA has spent $130 million on design work for its rail projects--or 19% of total construction costs--compared to an average 9% spent by a sampling of other transit agencies around the country. The report, however, noted that design costs for the most recent work, subway extensions to the Eastside and from the San Fernando Valley to Hollywood, have declined.

* The private engineering firms appear to face little risk financially for design errors, removing an important incentive to make sure they do the job right.

* The 13-member MTA board continues to micro-manage, creating an atmosphere summed up by one staffer: “Fear reigns.”

MTA Chief Executive Officer Joseph E. Drew said he already has taken steps to improve oversight, including setting up a new performance review for MTA executives and hiring a new director of engineering.

“We’ve got to focus on accountability,” Drew said. Asked about the board micro-managing, he replied simply, “The board should police itself.”

The report focused on Engineering Management Consultants, a consortium of private engineering firms designing the Los Angeles subway and other rail projects, and the MTA’s oversight of design work. The audit was ordered by transit officials after a series of design snafus, including faulty design work blamed for the Hollywood sinkhole last year.

But auditors said it was difficult to evaluate EMC’s performance because of “an absence of clarity in defining EMC’s scope and responsibilities and an incomplete set of performance measures to gauge its achievements.”

Phernambucq acknowledged that the agency’s oversight of the engineering firms needs improvement. “We started behaving with the EMC like it was a government entity,” he said. “The healthy skepticism started to fade because we needed them so bad to do our job.”

Marty Rubin, board chairman of Parsons Brinckerhoff Quade & Douglas Inc., one of the engineering firms that make up EMC, said he had not seen the report, but that the consortium would implement the recommendations “as part of our continuous improvement program.”

“I’m proud of the job we have done,” Rubin said.

But he questioned the finding that the MTA has been spending more for design work than the average. “In the past, when the MTA examined the program costs, it compared favorably with other properties,” he said.

Phernambucq said he was not prepared to concede that the MTA is spending more than other agencies. “Their auditors are not engineers,” he said, adding that he wanted to further study the numbers.

Rubin disputed the finding that EMC faces few risks financially to do the job right because it is covered by MTA-provided insurance. “Engineering firms have the greatest incentive in the world to perform cost-effectively and professionally,” he said. “Their reputation is what ensures future assignments worldwide.”

The report also found deficiencies in the MTA’s oversight.

While scoring MTA executives for failing to show trust in their staff, the report concluded that the engineering staff suffers from “miscommunication and distrust . . . and poor execution of their oversight role.”

On a bright note, the report found that recent changes in top management--including the recent hiring of Drew--have given the organization “a much needed reason for renewed optimism.”

The report also concludes that the MTA would risk a bruising court battle if it attempted to fire EMC because its contract is riddled with “ambiguity” and because the MTA had failed to grade the consortium with a “report card” mechanism provided in the contract.

Despite the harshness of the report, the Arthur Andersen partner in charge of its analysis said he did not believe it would be “healthy” for the MTA to point fingers at individuals for shortcomings.

County Supervisor and MTA board member Mike Antonovich was less willing to forgive and forget.

He said he will ask Drew to launch a “thorough housecleaning at EMC to replace those responsible for creating these problems.” He also said he will ask Drew to sack the man he just appointed to lead the engineering department, Joel Sandberg.

“Sandberg is the one who said there was going to be no problem in Hollywood,” Antonovich said, referring to the executive’s work as the MTA’s manager of the Hollywood Boulevard tunneling.

County Supervisor and MTA board member Gloria Molina said, “This is a scathing report that confirms some of my worst fears that there is lax oversight at the MTA and too little accountability from the EMC.”

Drew also said he will call a meeting of all the chief executives of the major construction firms working for the MTA within 30 days to tell them he expects them to “be mindful of every safety watch-point” on their jobs and become “emotionally connected” to the county and its citizens.

He said he wants the top executives at MTA tunneling contractors to feel a “shared responsibility” for their work with him, rather than delegate it to project managers.

“When I have a problem, I want it to be their CEO’s problem too,” he said, referring to such troubles as the recent sinking of the Hollywood Freeway in Studio City by 3.79 inches.

The report comes as the transit giant faces even more troubles: The MTA’s acting controller was fired and led away by police from her office last week amid an investigation by the MTA’s inspector general. Jenny Johnson was responsible for managing accounts payable, accounts receivable, payroll and financial reporting at the MTA.

Also, the Los Angeles Board of Education voted Monday to file a friend-of-the-court brief in support of a lawsuit accusing the MTA of discriminating against minority and poor bus riders.