Byline: BILL BURKE THE VIRGINIAN-PILOT
The federal government has suspended payments on the final and largest phase of Hampton Roads' $102 million ``smart highway'' system, citing possible wrongdoing and severe schedule delays.
Meanwhile, the FBI and the U.S. Department of Transportation are conducting a joint investigation to determine if laws have been broken by those involved in the project, which is 80 percent funded by federal dollars.
No criminal charges have been brought, and spokespersons for the two agencies declined to comment on the investigation.
The two agencies are looking into allegations that money on the project was misspent and that false statements were made about defective equipment on the job site. There are also concerns over possible conflicts of interest between the project's prime contractor and a company hired by the state to inspect the work.
The Hampton Roads highway project is the state's most ambitious initiative to use technology to make existing roadways more efficient as an alternative to costly highway construction.
The three-phase project was begun in 1993. By October 2003, 113 miles of interstates were to be equipped with 288 video cameras to alert traffic controllers and Internet-savvy commuters of road conditions; 244 overhead electronic message signs; and 552 miles of fiber-optic cable to tie the system together.
But the final phase of the project is about two years behind schedule, the state said. With only about one-fourth of the contract's time remaining, nearly three-fourths of the work remained to be done in late August, state records show. None of the 170 video cameras or 93 message signs the state contracted for under the project's third phase has been installed.
The Federal Highway Administration has demanded that the state conduct an internal audit of the project before it resumes payments.
The Virginia Department of Transportation is in charge of the project. It signed a $58.9 million contract with a Florida-based firm, Transportation Safety Contractors Inc., for the final phase of the work.
VDOT initiated a review of the project last month in response to the Federal Highway Administration's demands, said Gregory A. Whirley Sr., VDOT's inspector general. He said he did not know how long the audit would take.
Problems with the smart-road project could not have come at more critical time for VDOT and Hampton Roads drivers.
Vital road-building projects in Hampton Roads are imperiled by an unprecedented state budget crisis. A study released this week showed that local highway congestion worsened significantly between 1995 and 2000. And improvements needed just to keep pace with the region's growing traffic demands will be put on hold unless voters approve a $6 billion highway referendum Nov. 5.
With dollars to build new projects in short supply, VDOT is wagering that ``smarter'' interstates will help ease commuter angst. Saturating roadways with cameras, electronic message signs and roadside sensors instead of building new lanes is part of a philosophical shift in Virginia and across the nation. Transportation experts estimate smart roads can increase traffic capacity by up to 25 percent.
In Hampton Roads, theory and reality converge at the Smart Traffic Center, a one-story brick building on Reon Drive in Virginia Beach, where a massive wall of TV monitors provides a round-the-clock view of local interstates. In this nerve center, workers change message signs, provide Internet access to the cameras' views of the roads, and alert emergency crews to accidents and breakdowns.
Questions being asked
In interviews, letters and internal documents, state and federal officials have raised a broad range of concerns over project delays, relationships between companies involved in the project and expenses.
Stephany D. Hanshaw, operations manager of the Smart Traffic Center, raised questions about the competency of the contracting team, including managers on the job. In a recent interview, Hanshaw noted that the
prime contractor's performance has improved in recent months.
Hanshaw and a Federal Highway Administration official have asked VDOT to determine if false statements were made after it was learned that some of more than $2 million of fiber-optic cable components held in storage by Transportation Safety Contractors were faulty. The equipment has since been replaced.
The owner of an Alabama company awarded a $14.7 million contract by Transportation Safety failed to make a required disclosure to the state when applying for certification as a disadvantaged business, according to documents obtained by The Virginian-Pilot.
Transportation Safety paid at least $5.9 million to that same Alabama firm to supply parts and equipment for the job. But the Alabama firm's contract was terminated last year after VDOT determined that shipments had not been made and that the company ``failed to perform a commercially useful function'' on the job.
VDOT auditors have been asked to look into possible conflicts of interest between Transportation Safety and a firm hired to inspect the work. A federal highway official suggested in a June letter to VDOT that if a conflict exists, it could violate federal regulations.
VDOT's Whirley said his office, charged with ferreting out fraud and abuse within the transportation agency, is conducting the state review. His office is cooperating with federal investigators, and if evidence of criminal acts is discovered, it will be turned over to those agents, he said.
``We're early in the process,'' Whirley said. ``There are several things we're looking at, and none of them are founded at this point.'' Whirley declined to specify what issues his office is reviewing.
Whistle-blower sparks probe
Leslie R. Gilchrist is one of two equal-opportunity compliance officers in VDOT's Hampton Roads district office in Suffolk. As part of her job, she has reviewed paperwork related to the final phase of the smart-highway project.
Not long after the contract was awarded in early 1999, Gilchrist said, she began seeing inconsistencies in documents that crossed her desk and became alarmed.
She said she notified her superiors of the problems, ``but they wouldn't listen. I felt like I was beating my head against the wall.''
So in December 1999, she went to the FBI. Eventually an FBI agent and an investigator with U.S. Department of Transportation began the probe. The investigators have interviewed Gilchrist numerous times, and have also questioned more than a half-dozen other people as part of their probe, she said.
Gilchrist said she has turned over scores of documents to the investigators, including invoices, purchase orders, canceled checks and reports filed by the project's consultant.
Gilchrist, 54, a 14-year VDOT employee, said she was moved to action by suspicions that taxpayer dollars were being ill-spent. ``That really (ticked) me off,'' she said.
How it works
A federal highway project works like this in Virginia: VDOT gets the Federal Highway Administration to approve the job, hires a contractor to do the work under a bidding process, pays the contractor in increments, then is reimbursed by the federal agency in a series of periodic payments.
But the highway administration put a freeze on reimbursements for the final phase of the project shortly after a highway administration official, Mshadoni Smith, wrote a letter to VDOT on June 7.
``It appears there have been and continue to be some actions conducted by various interested parties that do not meet Federal Requirements,'' wrote Smith, a smart-highway specialist for the federal agency's Richmond office.
The letter requested that VDOT conduct an internal audit before additional ``federal progress payments'' be made to VDOT. The federal agency had made a total of $14.3 million in reimbursements for the final phase of the job when payments were suspended, according to a highway administration official.
One of Smith's concerns was the problematic communications equipment. Hanshaw described it as 24 fiber-optic devices, each costing $94,107. Many of the devices were unusable because components were discovered missing.
The defective devices have been returned to the manufacturer, iMPath Networks Inc. of Ontario, Canada, and iMPath has shipped new ones, Hanshaw said. They are now being tested to ensure that they work.
In her letter, Smith also asked VDOT auditors to determine if false statements had been made regarding federal highway projects. She did not identify the people suspected of making the statements and declined to elaborate on the letter.
Smith asked VDOT auditors to clear up questions involving DMJM+Harris, a New York-based consultant hired by VDOT to monitor and inspect progress on the smart-highway project. Smith and Hanshaw both expressed concerns about the relationship among VDOT, DMJM+Harris, and the prime contractor, Transportation Safety.
Carl T. Crowe, DMJM+Harris' project manager on the final phase, joined the firm after retiring from VDOT in June 1999. Crowe had served as operations engineer at the Smart Traffic Center, reporting to Hanshaw, before leaving VDOT. DMJM+Harris signed a $5.4 million contract with VDOT in October 1999 and has been paid about $3.2 million so far.
While Crowe has headed the team that monitored the performance of Transportation Safety, Crowe's wife, Kim, has worked for VDOT, then DMJM+Harris, eventually leaving that firm to go to work for Transportation Safety.
Documents handled by Kim Crowe while she worked for Transportation Safety were approved by DMJM+Harris and then forwarded to VDOT while her husband was project manager, Gilchrist said.
Hanshaw said he asked VDOT to look into possible conflicts of interest ``as a precautionary measure.''
Carl Crowe, contacted on Thursday, declined to comment, saying press inquiries were being handled by DMJM+Harris' office in New York. A spokeswoman in that office said questions should be directed to Hanshaw.
During a recent interview at the Smart Traffic Center, Hanshaw acknowledged that he had been concerned with Transportation Safety's performance since shortly after the contract was awarded.
``We've had concerns about their ability to do the work,'' Hanshaw said, citing worries about the contractor's ``personnel, knowledge, skills and abilities.''
He said his office gave the contractor written notice when the pace of the work fell 10 percent, then 20 percent, behind schedule. It now lags by about 50 percent, Hanshaw said.
But a significant portion of the project delays are the result of problems beyond the control of Transportation Safety, Hanshaw insisted.
He said the firm lost time when problems with structural supports for the variable message signs were discovered. Concerns about safety prompted a change in national standards for the supports, and Transportation Safety had to re-engineer them, Hanshaw said.
For that reason, he said, he will probably recommend that his VDOT bosses extend the contract - but for 635 days, not the 835 days Transportation Safety requested. VDOT did not respond this week to questions about a possible contract extension.
A disadvantaged business
Under a congressional mandate, VDOT and other state transportation agencies are required to spend a certain percentage of their annual highway dollars to hire small socially or economically disadvantaged businesses to work on federally funded jobs.
The money can be allocated job by job in any manner the state agency decides, so long as an overall goal is met. Disadvantaged businesses can include traditional minorities, such as blacks and Hispanics, white women and others.
For the final phase of the project, VDOT specified that at least 15 percent of that contract's $59.8 million value be used to employ a disadvantaged business or businesses.
After Transportation Safety signed the contract with VDOT in 1999, it hired L&K Electric & Paper Supply Co. of Birmingham, Ala., to supply equipment for the job.
As materials were shipped, billing statements and purchase orders passed through VDOT's regional equal-opportunity office in Suffolk, where compliance officer Gilchrist reviewed them.
Gilchrist said she noticed a troubling trend: Items purchased for the final phase were shipped directly from the manufacturer to Transportation Safety without passing through L&K's Birmingham warehouse.
On June 13, 2001, Gilchrist's boss wrote a letter to Transportation Safety, notifying the contractor that VDOT's Hampton Roads equal-opportunity office had concerns.
The review determined that L&K apparently lacked the staffing to fill the orders and that vendors were billing the prime contractor rather than L&K for shipped goods. That practice ``appears to exclude L&K Electric from the ordering and shipping process,'' wrote Queen T. Crittendon, VDOT's district equal-opportunity manager.
In noting that L&K ``has failed to perform a commercially useful function on this project,'' Crittendon informed Transportation Safety vice president Kevin Reichart that VDOT was revoking the credits that Transportation Safety was counting on to fulfill its state disadvantaged-business requirement.
Transportation Safety then terminated its contract with L&K and began looking for a new firm to satisfy the contract requirement, Reichart said.
Reichart would not divulge what portion of the $14.7 million contract was paid to L&K before the contract was canceled. But Transportation Safety paid L&K at least $5.9 million, according to a November 2000 VDOT activity report.
In order to be eligible for work as a disadvantaged business in Virginia, L&K had to be approved by the state. The company was certified after its owner, Adriene Y. Balton, filled out a VDOT form in October 1998.
The notarized form requires an applicant to disclose whether other states have approved or denied certification of the firm as a disadvantaged business. If so, the applicant is required to check ``yes'' and fill out a chart, providing details.
Balton did not check yes or complete the chart.
Three years earlier, in 1995, the Louisiana Department of Transportation and Development denied certification to L&K on a form that identified Balton as secretary of the firm. The denial was ``based on size standards,'' according to the form, signed by Louisiana transportation official Remy B. Graves. Graves noted on the form that one of the owners of L&K, which was seeking status as a small disadvantaged business, was part-owner of a company that grossed $200 million a year.
Contacted in Birmingham last week, Balton, named one of Birmingham's top business people under 40 in 1999, would not discuss L&K's involvement in the smart-road project or its Virginia certification. ``I have nothing to say,'' she said.
CAPTION(S):
Color photos
BILL TIERNAN/THE VIRGINIAN-PILOT FILE
Monitors at the Virginia Department of Transportation's Smart Traffic Center in Virginia Beach provide around-the-clock glimpses of conditions on local interstates. But many more such traffic cams are supposed to be in place.
VDOT Inspector General Gregory A. Whirley Sr. said his office is reviewing the ``smart highway'' project.
Graphic
THE PROJECT
The local ``smart highway'' project is Virginia's most ambitious initiative to use technology to make existing roadways operate more efficiently.
The three-phase project began in 1993. By October 2003, 113 miles of interstates are supposed to be equipped with 288 video cameras; 244 overhead electronic message signs; and 552 miles of fiber-optic cable to tie the system together.
THE PROBE
The federal government has suspended payments on the final phase of the project. Two federal agencies are reviewing if project money was misspent and if laws were broken. There are allegations that false statements were made about defective equipment.
The Federal Highway Administration has demanded that the state conduct an internal audit of the project before it resumes payments.
Photo
VASNA WILSON/THE VIRGINIAN-PILOT
A video camera on a pole above Interstate 264 in Norfolk feeds images to the Virginia Department of Transportation's Smart Traffic Center. The final phase of the ``smart highway'' project is on hold, however, while investigators look into claims of possible wrongdoing.
Graphic
Text by BILL BURKE, graphic by ROBERT D. VOROS/The Virginian-Pilot
CONTRACTOR LAGS FAR BEHIND ON SMART-ROAD PROJECT
SOURCE: Virginia Department of Transportation
(For complete graphic, see microfilm for this date.)
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