Government & Politics

Contractor being paid for work done by city employees

The city has paid the private company managing the bulk of New Orleans’ recovery projects more than $3 million for work actually done by city employees, according to an internal memo written by the ousted city capital projects director just weeks before he left City Hall.

Bill Chrisman wrote in the Feb. 20 memo that the engineering and project management monolith, MWH Americas Inc., is charging the city for work on recovery projects that were “completed by [the city’s Capital Projects Administration] either before MWH was even contracted and/or MWH had little to no involvement in.”

“For the majority of the small projects MWH transferred to CPA to manage they have billed dollar values in excess of the entire project cost leaving no funding available to construct the project while providing little to no management services,” he wrote.

The memo was sent as an e-mail to Chief Administrative Officer Brenda Hatfield and copied to other top city officials, including Mayor Ray Nagin.

Chrisman raises the redevelopment of the Municipal Auditorium as an example of one project the city is paying MWH to manage with little or no return. He writes that the city is “now negotiating with a separate contractor to manage” the $80 million project. That firm will charge “a maximum fee of 5 percent of the project’s total cost,” he wrote.  “However,” he added, “MWH is currently charging the City a fee of 6.5 percent not to manage the project.”

Under its agreement with the city, MWH is allowed to charge up to 8 percent of the total capital cost of a project for management costs.

Nagin spokesman James Ross did not respond to questions about the Municipal Auditorium agreement, but he said that MWH generally earns a “reduced fee” on projects that are handled by other contractors or city employees. The money is paid in exchange for “support.” The spokesman did not respond to questions about the specifics of either the reduced rate or the support provided, but if what Chrisman writes in his e-mail is correct, the company will earn $5.2 million for delivering little more than a Web page to display information generated by other entities.

Chrisman is not the only one asking questions about MWH.  New Orleans Inspector General Ed Quatrevaux told Lens investigative partner Fox 8 today that he has reviewed MWH’s contract with the city and that his report “covers much of the same ground” as Chrisman’s memo, but in “much greater detail.” He said he can’t elaborate on details of the report until the city responds, which it must do within 30 days.

Many New Orleanians recognize the MWH insignia from the blue and white “Recovery in Progress” project markers unveiled by the company shortly after it signed on to coordinate the reconstruction of those hurricane-damaged sites. Others may remember the company from the city Web site it created. The site, which serves as the most comprehensive record of the hundreds of public projects now in the pipeline, has the logos of MWH and The City of New Orleans prominent along the bottom of the site, the two logos facing each other on opposing sides.

Beyond its role in communicating and packaging the city’s efforts to rebuild, the company serves as another layer in the city’s bureaucracy. For instance, when a citizen sends a question about a recovery project to City Hall, it is likely to end up in the in-box of an MWH employee. Likewise, when an architect or builder sends an invoice for work on a new school or police station, it is an MWH employee who will sign off on the paperwork to get the contractor paid.

Chrisman, an architect who ushered forward hundreds of recovery projects over the 20 months he worked at City Hall, raised his questions as within a broader discussion of the city’s practice of using disaster grant money in a revolving state construction fund to pay for project management services.

While the city cash stash has been known locally as the “revolver fund,” it operates as two separate funds overseen by the state Division of Administration, but under the direct control of the city. The construction fund is a $200 million pot of money given to the city by the state to pay for projects before FEMA checks are cut. The revolver is the fund the city replenishes with FEMA reimbursements. Eventually, the construction fund will be emptied, but ideally the revolver will stay in the black until the recovery is complete. As of Feb. 28, the city had $79 million in the construction fund and another $28 million in the revolver, or a total of $107 million.

Chrisman has raised steady concerns about the pace at which the city is tearing through the recovery money and has said it could be completely eviscerated by the beginning of the next mayor’s term if the Nagin administration doesn’t change its spending habits.

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  • Mark Gstohl

    Who are the officers and CEO of MWH Americas Inc?