CT school construction program audit done, but questions remain
Andrew Brown and Dave Altimari
State officials released a highly anticipated audit into
Connecticut’s school construction office late last week, but it is unlikely to
alleviate all of the concerns about the multibillion-dollar construction
program, which became the focus of a federal investigation last year.
The 23-page report that was produced by Marcum LLP, an
independent auditing firm, included an analysis of more than 111 school
construction projects that were undertaken in Connecticut between 2018 and
2021.
But some lawmakers are more concerned about what is missing
from the audit: namely, a review of interactions between local school officials
and the state Office of School Construction Grants & Review.
“This audit is a start but it is by no means a conclusion,”
said Senate Minority Leader Kevin Kelly, R-Stratford. “The concern certainly of
the federal investigation has always been on the purported influence on
municipalities, and that wasn’t even looked at here at all.’
State officials hired Marcum last March in an effort to
restore public trust in the school construction program, which was directed for
more than six years by Konstantinos Diamantis.
Diamantis, who stepped down from that position in late 2021,
was named in several grand jury subpoenas that were issued to the state and
several municipalities.
Once that federal investigation burst into public view,
several school superintendents, town attorneys and local elected leaders came
forward to allege that they felt pressured by Diamantis to hire specific
construction companies for their school building projects.
Many of those officials said they felt like they had to go
along with Diamantis’s recommendations or they would risk losing state funding
for their construction projects.
Republican legislative leaders argued last year that those
circumstances made it essential for the auditors to talk with local education
officials and to understand whether anyone was pressured to hire certain
contractors.
But that type of review was not included in Marcum’s work,
as the final report made clear.
“The scope of work for this engagement did not include
outreach to the school district, nor did we perform any work on site at the
school districts,” the report states. “The School Audit Team within the DAS
business office served as the direct, and sole, point of contact for the Marcum
team during the engagement.”
Kelly said he did not understand why state officials chose
not to involve local officials in the audit process.
“Don’t the people in charge of DAS want to know what
happened there?” he asked. “To know they expanded the scope of the audit and
they still didn’t look at the real problem is not paying attention.”
The state paid Marcum roughly $240,000 to conduct its audit
into the 111 school building projects, according to the purchase order that was
signed last year. And the auditing firm spent more than 10 months performing
its review.
But officials with the State Department of Administrative
Services, which houses the school construction office, said Marcum did not need
any information from the local school districts in order to complete its work.
That’s because Marcum’s contract was narrowly focused on the
paperwork and processes that the state uses to manage the school grant program.
Marcum’s findings noted, for instance, how state officials
within the Office of School Construction Grants & Review often skipped
steps while reviewing completed school projects. It pointed out how the state
doesn’t scrutinize smaller charges that are billed by school construction
contractors and subcontractors.
And it highlighted how the state’s financial share in some
school projects was larger than Connecticut law allows, even though there was
no explanation for why the state was picking up a bigger portion of the tab.
“Marcum had all the needed documents to do their review
thoroughly without having to reach out to the schools,” Jesse Imse, a senior
advisor to DAS Commissioner Michelle Gilman, said. “DAS has adopted all
recommendations outlined in the report and is committed to maintaining
efficiency, consistency and transparency for all of its programs.”
The lack of feedback from local school districts was not the
only thing that was noticeably absent from Marcum’s report.
There is also no mention of the demolition and hazardous
waste contracts that the state asked Marcum to look into last year.
The CT Mirror published a story in early 2022 that showed
that two companies — AAIS and Bestech — received the vast majority of those
contracts, which included demolition and asbestos work at school construction
sites.
In response to those revelations, the state paid Marcum
roughly $111,000 and asked the firm to randomly sample from 321 different
demolition and abatement projects throughout the state.
But none of that additional work by Marcum was referenced in
the report that was delivered to lawmakers late last week.
Imse told the CT Mirror that auditing process is ongoing and
he suggested those results would not be released until a later date.
“The Hazmat Program is a different program than School
Construction Grants,” he said. “Our agency continues to work with Marcum to
complete the audit to ensure a thorough review.”
Lawmakers may soon get a chance to ask about that auditing
process too.
Gilman, who took over as DAS Commissioner last year, is
scheduled to come before the legislature next week for a confirmation hearing.
Construction input prices log biggest drop since April 2020
Both overall and nonresidential construction input prices
tumbled 2.7% in December from the previous month, the largest monthly drop
since April 2020, according to an Associated
Builders and Contractors analysis.
Despite that monthly drop, overall construction prices
remain 7.9% higher than a year ago, while nonresidential construction input
prices jumped 7.6% year over year, according to the report.
Though the Producer Price Index shows improvement on the
inflation front, the decline in input prices may be a double-edged sword as a
sign of spreading economic weakness, according to Anirban Basu, ABC chief
economist.
December’s reading represents the smallest yearly increase
since January 2021, according to ABC.
“Recent consumer and Producer Price releases indicate that
inflation is fading, though it remains well above the Federal Reserve’s 2%
target,” said Basu in the report. “Should inflation continue to abate, the
Federal Reserve may be able to stop increasing interest rates sooner than
anticipated. Interest rate-sensitive segments like real estate and construction
would be among the primary beneficiaries.”
Yet Basu said the drop in input prices is “both good and bad
news.”
That’s because a decline may also be an omen for economic
weakness, said Basu.
“There could be bad news on inflation in the months ahead.
War continues in Eastern Europe and the commodity use-intensive Chinese economy
is in the process of reopening,” said Basu in the report. “Though there is
evidence of improving supply chain functioning and moderation in input prices,
contractors should not be tempted into complacency.”
Contractors listed material costs among their top concerns in a
recent survey, evidence that any relief may be short lived, said Ken Simonson,
chief economist at the Associated General Contractors of America.
“Some prices have already turned higher in January,”
Simonson said. “Contractors are right to rank materials costs as a major
concern for 2023.”
For example, steel producers have sharply raised prices in recent weeks for hot-rolled coil, Simonson said, while producers of insulation and tile have already announced price increases for February. In addition, recent spikes in futures prices on commodities markets for copper and aluminum may signal higher costs for these products soon, he said.
But for the moment, monthly declines are a welcome sign that
the worst of pandemic-era inflation may be slowing.
Crude petroleum prices fell sharply in December by 14.9%,
while natural gas prices jumped 45.3%. Over the year, iron and steel prices
declined 24.4%, while concrete products surged 14.8%, according to the report.
At the same time, contractors are currently maintaining
their longest
backlog since 2019, according to ABC’s construction backlog indicator, said
Basu, another positive.
Why an overly detailed safety plan can be a liability
NEW ORLEANS — Ensuring your company’s safety program is set
up to protect you when facing a potential OSHA fine is a challenging needle to
thread.
That was the message from a group of panelists highlighting
“The Good, the Bad and the Ugly” of contractors’ safety programs during the
Associated General Contractors of America’s health and safety conference
Thursday.
Kevin Moorhead, safety director for the St. Louis-based
Korte Company, said he recently rewrote his several-hundred-page safety guidebook
following an accident on the jobsite. One approach he took was retooling
verbiage, changing language that workers “must” or “shall” do something to
“should” instead.
That’s because OSHA or lawyers deposing a contractor
post-accident, injury or fatality can wield a detailed safety rulebook against
them, said Howard Mavity, attorney at Fisher Phillips’ Atlanta office.
Even when a contractor’s internal guidance goes above and
beyond OSHA standards, if the agency can show that the company’s own rules
weren’t followed, that can become a more severe willful violation, since the
employer has demonstrated competency and awareness of hazards and solutions,
then not followed them, Mavity said.
In other words, a massive rulebook that most workers won’t
read cover-to-cover can end up being a liability, the panelists said.
“The more you have a giant program, the more often things
will not get followed,” Mavity said.
Having a safety plan that you know you don’t follow is
“borderline malpractice,” said Dan Snyder, co-founder of Safety Mentor, a
virtual platform designed to help safety managers.
And too often, all of the understanding of the safety
guidebook is placed on the shoulders of one safety lead, with little
backup.
“At the end of the day, that’s not sustainable,” Snyder
said.
Steps to take
Besides having a well written (and well read) plan, there
are other steps contractors can take to keep jobsites safe while limiting
liability.
Regularly walking jobsites, identifying hazards and planning
far ahead of schedule to ensure workers know of dangers is key to creating a
prescriptive approach, Moorhead said. It’s vital to document audits too,
identifying not only when there are near misses or close calls, but when
something goes well.
“People don’t want to tell on themselves,” Moorhead
said.
Mavity, who regularly litigates OSHA-related cases, said the
agency or opposing lawyers will always look to use documented evidence against
a contractor.
“Lawyers poke holes. That’s life,” he said.
But building trust with OSHA can go a long way, he said. The
agency has the burden of proof, and one major defense for citations is due
diligence. Well-documented safety audits and prescriptive approaches to daily
hazards ahead of time can show OSHA that a firm is taking the right steps to
protect workers.
“OSHA is going to use the smaller hammer on the contractor
who earns trust with transparent, genuine safety action,” Mavity said.