‘How did we get here?’ Auditors probe consulting company in SANDAG’s toll-road failures

When controversy hit the San Diego Association of Governments over its handling of problems with the state Route 125 toll road, the agency’s independent auditors found officials had failed to hold accountable one of the companies at the heart of the problem: HNTB.

The regional planning agency had hired HNTB, a national consulting firm, to monitor the work of another company that had developed the tolling software, flaws in which resulted in thousands of drivers being improperly charged.

Over two reports in 2022 and 2023, auditors found SANDAG continued to extend HNTB’s contracts and pay it millions of dollars, even though it was known the company’s oversight of the tolling system was failing.

But SANDAG’s relationship with HNTB goes far beyond the toll road.

For years, HNTB has done business with SANDAG in an environment of potential favoritism and lax contracting practices, resulting in project delays and in millions in contracts awarded to the company with little to no rationale for why they were chosen over other firms, according to a new report from the agency’s in-house auditors.

Auditors found that some on-call contracts awarded to HNTB lacked clear spending limits and cost estimates, in violation of state guidance and SANDAG’s policies. In one instance, SANDAG was operating under an amendment to a contract with HNTB that hadn’t been signed by a representative from the company, the audit said.

According to the report, long-standing recordkeeping issues at SANDAG resulted in so much missing documentation about its contracts with HNTB that it was difficult for auditors to fully assess how the agency went about hiring the company, or planning the work it was supposed to do.

The audit follows repeated reports from SANDAG auditors in recent years on faulty contracting practices at the $1.3 billion agency — including a report earlier this year that identified HNTB as one of a handful of companies that may have been shown favoritism by SANDAG contracting officials.

Last year, federal investigators opened a probe into SANDAG, and while details were never disclosed, the agency later said it apparently focused on contracting practices. The investigation was apparently closed with no charges filed late last year, officials said.

Contracting audits had already prompted SANDAG to agree to implement all reforms suggested by its independent auditors.

The HNTB audit came with 26 new recommendations, and the agency has agreed to implement all of them, too, said SANDAG CEO Mario Orso.

“Did I learn anything new? No. Did I get more details of how to get better? Yes,” Orso said of the audit at a meeting on Tuesday.

Those reforms include greater tracking of contract cost estimates and schedules, making sure on-call contracts have documented links to ensuing work and reviewing all SANDAG contracts with HNTB to make sure they are accurate.

“We need to do all the things that are put in there as the recommendations, but we need to take it to the next level,” Orso said. “We need to clearly understand how we’re going to control the cost, schedule and scope, which are pillars in project management.”

In a letter to SANDAG board leaders, Independent Performance Auditor Courtney Ruby said that “the reader of this report may be left with the perception of contractor favoritism.”

But due to weaknesses in SANDAG’s recordkeeping system, auditors could not make a determination of whether the company had been improperly favored by SANDAG officials, Ruby said.

In a statement, HNTB Vice President Mark Weber denied that the company had been shown favoritism by SANDAG.

“The processes and policies in need of improvement identified in this audit are not unique to our firm and have come up in past audits as they are specific to past SANDAG processes and policies,” Weber said.

“There is also no finding related to HNTB’s performance nor HNTB’s invoicing,” he said.

For years, HNTB has been a part of a pool of companies SANDAG uses for its on-call contracts, in which a company gets hired to do a general scope of work and is then enlisted to complete task orders.

Auditors examined five of the eight on-call contracts HNTB has been awarded since 2008.

Three of the contracts hired HNTB to do design and engineering work for railway projects. One contract was for roadway system consulting, and another was for the Del Mar Bluffs stabilization project.

SANDAG management told auditors they could not locate key documents about two of those contracts, but eventually turned them over after the audit was finished, the audit said.

“Management did not provide an explanation for the delay in furnishing these records when they were provided a few weeks ago,” said Emilee Mullen, a spokesperson for SANDAG’s Office of the Independent Performance Auditor.

For the Del Mar Bluffs project, SANDAG did not invite all of its on-call vendors to bid on the work, and it instead awarded the contract to HNTB in violation of its own policies, the audit said. Documents associated with three of the contracts did not explain why HNTB was selected over other firms.

From those five on-call projects, SANDAG hired HNTB to do 31 task orders — a contract for a phase of work stemming from the master on-call contract. But of those, only nine had cost estimates for the project, and only four had documentation that helped auditors assess whether HNTB had completed the projects on schedule.

SANDAG’s lack of oversight of HNTB on these projects “exposed the agency to financial risk, project delays, inconsistent results, stakeholder dissatisfaction and diminished public trust,” the audit found.

Other findings in the audit included unnecessary cost overages and yearslong project delays that were not documented.

One contract amendment saw SANDAG pay HNTB another $325,000, even though the change required the company to do less work than it had previously been asked to perform, auditors found.

SANDAG hired HNTB to design a mile-long rail extension in Oceanside known as the Eastbrook-to-Shell double-track project. HNTB was given a 2018 deadline to finish the work and was never given a contract extension, but the work was not completed until 2022, the audit said.

“It’s hard to take it,” Jack Fisher, an Imperial Beach City Council member who sits on SANDAG’s audit committee, said at Tuesday’s meeting. “With such a large agency and so many talented people, how did we get here? But I also have to remind myself you can go forward by looking backwards.”