Many of the top managers leading the Honolulu Authority for Rapid Transportation remain third-party consultants whom the agency has failed to hold accountable, the latest report from the state auditor finds.

That report released Tuesday found that HART in 2017 flagged HDR Inc., CH2M Hill and other outside firms working on rail for “deficiencies” that the agency believes contributed to the project’s climbing costs and schedule problems.

But HART doesn’t conduct or see job evaluations for the consultants responsible for that work, the report says, even though they represent some of the agency’s most senior-level staff and blend into its day-to-day operations.

Ultimately, those workers answer to companies with an “obvious profit motive” that hired them — not the city that’s responsible for rail, according to the findings.

“We … found that HART’s oversight of these consultants given their critical roles on the project is superficial, not well-documented, and does not adequately ensure performance,” the auditor’s new report states.

“Consultants often manage consultants, who manage other consultants,” it adds.

It’s the latest effort by state Auditor Les Kondo’s office to unpack the troubles that have dogged Honolulu rail. The project has seen its costs spike nearly 80 percent since December 2014, from just over $5 billion to just over $9 billion.

This chapter, the second of four that are coming from the auditor under a 2017 mandate from the Legislature, focuses on the accountability gaps in HART’s management structure.

It found that HDR provides on average 19 of HART’s 135 total staff members, at an annual cost of $9.6 million. That comes out to an average of $505,000 in salary, benefits and overhead per employee, according to officials. HART relies on HDR and its other consultants to gauge whether the invoices from their own staff are justified, the report said.

“Determining whether HDR staff work is appropriate is left to the HDR staff’s supervisor … often another HDR employee,” the report said.

The prevalence of so many consultants on Honolulu’s rail project is hardly a new issue. The report points out that the Federal Transit Administration has repeatedly recommended over the years that HART take “more ownership” of the project by gradually transitioning from consultants to staff employed by the agency.

Using consultants has previously raised ethics issues as well.  

A 2015 complaint before Honolulu City Ethics Commission, for example, alleged that an HDR employee and his family took a New Year’s Eve coastal sail on the boat of an employee for Kiewit Infrastructure West, the construction firm he oversaw.

“If this were a City employee, they would be in violation of ethics rules,” the complaint stated. “Why is an HDR employee under contract to the city not being held to the same standard?”

It’s not clear how the commission ultimately handled that complaint.

In its response to the auditor’s latest findings, HART pointed out that many consultants are still needed due to the lack of local expertise to build the largest public works project in the state’s history.

It would be  “extremely difficult,” HART Executive Director Andrew Robbins said in follow-up comments Tuesday, to attract applicants with the same level of expertise to take a job on a smaller city salary that would end by the time rail’s completed. Realistically, HART could transfer maybe a couple of its embedded consultants into city employees at the most, he said.

Still, the agency agreed with the Auditor’s office that “improvements should continue to be made to Consultant oversight.” Going forward, HART will require that consultants’ performance reports be read by supervising personnel at the agency.

If the consultant’s supervisor is employed by the same firm, someone employed by HART will read them instead, the agency stated in its response.

HART also agreed that it doesn’t sufficiently review third-party consultant invoices, and in its response it outlined internal steps to better scrutinize the work being done.

“It jumps out at us that top-level management, the one just below the CEO, on the construction side … it’s all consultants,” Kondo told the media Tuesday. “Our point in the report is they are not HART employees. They report to HDR.”

What The Board Doesn’t Know

The auditor’s latest report also found that HART’s CEO still has “considerable discretion” on what he chooses to share with the agency’s board of directors, despite a 2016 Honolulu City Charter amendment that looked to give the board more oversight of the project.

Specifically, the auditor raised concerns that Robbins does not share the agency’s contingency budgets for rail’s individual contracts.

Without those details, “how can the board ensure that the CEO is accountable for the work being completed within a contract’s budget?” the report asks. “How does the board ensure that the project stays on budget? How does the board assess the HART’s budgeting process?”

HART’s response notes that a couple of board members do review the agency’s contingency budgets for each contract, even though the full board does not see them.

“We have a responsibility to negotiate on behalf of the taxpayers,” Robbins said Tuesday. “We don’t want to signal to the contractors how much we have allocated on each particular task.” He added that the board already considered this issue and decided to keep its involvement in the contract contingency amounts limited to two members.

That withholding of financial information was also on display at a HART press conference Monday, just hours before the latest audit report was released.

Robbins touted HART’s $160 million settlement with its largest contractor, Ansaldo, to cover more than 2,000 days of delays in building rail’s controls and communications systems.

The amount, he said, was far less than what Ansaldo originally requested and it fell within HART’s budget for that claim — so taxpayers should be pleased. But Robbins declined to say what that budget amount was, saying it could give other contractors information about how much added cost HART might tolerate and thus help to drive up costs.

On Tuesday, Robbins confirmed that the board didn’t know the Ansaldo contingency budget either.

The audit report disagreed with Robbins that disclosing such amounts would necessarily lead to higher costs.

“Hiding that amount really hasn’t worked for HART,” Kondo said Tuesday, referring to rail’s multi-billion-dollar cost increases.

HART’s own review process should be capable of rejecting any change orders that don’t have merit, the report further stated.

Much of the push for more board review came in 2016, under previous board members who were irked that HART staff had not provided them key details about utility clearances, and that staff canceled a major contract to build a parking garage and transit center at the Pearl Highlands station without consulting the board.

“We look like potted plants when we don’t have the opportunity to ask questions and make decisions,” former HART board member Michael Formby said at an April 2016 meeting.

In a statement Tuesday, Honolulu Mayor Kirk Caldwell said that he appreciated the state auditor’s latest round of findings. He also pointed out that the HART board recently implemented new policies to more clearly distinguish its responsibilities from those of Robbins.

During his press conference Tuesday, Kondo reflected on how it can be hard to fully grasp the magnitude of the dollar figures involved in the rail project and its steep cost increases.

“It’s numbers to me that are kind of crazy,” Kondo said. “We’re talking about billions, and we don’t maybe appreciate what that means. It went from $5 billion to $9 billion.”

“And it’s numbers. But it’s a lot of money,” he added.

Read the auditor’s full second report here: