City Accuses Auto-Parts Supplier of $1MM overcharge. Mike Morris, HoustonChronicle.com ($$$)
(In deference to the Chron's fire-wall, I only provide a small, selective quote and encourage you to click on the link above, if you can, and read the entire thing)
In written responses that appear in the audit, NAPA officials said the fees charged as a percentage of sales were associated with expenses such as off-site administrative staff who work on multiple contracts. As for billing the city for its workers' higher-than-allowed salaries, the company said its practice of averaging salaries across worker groups has resulted in an average amount that is below the maximum allowed under the contract.Both practices, the company stressed, were discussed with city officials at the time."The lawsuit filed by the city of Houston comes on the heels of our refusal to essentially provide products at no profit to the city," said spokesman Gaylord Spencer. "What is not debatable is that NAPA has saved the city of Houston taxpayers a huge amount of money since 2011."
It appears that the terms under which private-sector contractors do business with the City of Houston have changed, and are still in the process of changing. Consider how Waste Management was treated when they tried to negotiate a contract with profit factored in. Not only were they vilified, but they were cast as "taking advantage of the City" when, in reality, all they were really doing was not only reflecting market realities but also using the diminutive Mayor's total lack of business experience to negotiate better terms.
Now you have NAPA which, if they are to be believed, interpreted certain items in the contract to mean one thing and, at the time, received approval of City Hall to proceed billing in that manner. Now you have Brown and Turner walking in and blowing it all up.
Either the Parker administration was inept and Ronald Green, as Controller, was asleep at the switch, or the diminutive Turner administration is using Brown's office as a political tool to punish contractors and perform what is basically contract renegotiation through the legal process.
Whatever the case, it's clear to me that the Brown Controller's office is flying through these "audits" with little review and very little thought to the meaning of the terms, his orders clearly being to interpret the contract terms in the best possible manner, for the City of Houston.
Working in the oil and gas business and dealing with both State and Federal auditors is part of my daily job responsibilities, I can assure you that 4 months for a government audit is unheard of, especially when documents are (as stated in the article) "Missing". A much more reasonable time-frame for a thorough audit is six-twelve months. And that assumes that the auditor understands the complex terms in the contract without submitting questions to legal.
I also know that contract law is messy, and words and phrases within contracts typically mean specific things. Very specific things that cannot be unilaterally decided upon by one party whose made it very clear that their top priority is using audits and media-pressure to try and force contractors to operate at a loss for the "good of the city".
I also know that two different parties can come to two different interpretations without one side acting in a dishonest, or fraudulent manner. That is something that Brown and Turner either don't, or won't understand in an effort to score points.
In effect, they are treating the business of the City in the same manner they treat a partisan political campaign. They are trying to do business in the media, by using PR, which could have disastrous long-term effects for the city. Because if the vendors operating with the City of Houston feat that working with a Brown/Turner administration means that they are subject to punitive review when the finances go bad, they are going to start writing this legal risk into the language of their contracts. Given what we've seen, so far, I've little confidence that Brown/Turner have the business knowledge to be able to identify this risk.
The other option is that the vendors will stop participating in the open bidding process altogether, deciding that the risk of doing business with a city that is not an honest partner is hardly worth it. This could throw the City into the unenviable position of having to buy certain items and services at market rates, instead of at the steep-discount which they receive today.
While I believe there is a lot of concern that should be directed toward the Turner administration, I think that a lot of blame needs to be laid at the feet of former Mayor Annise Parker and former Controller Ronald Green as well. In six years we never did see this type of audit activity from Green, and there was never the sense that Parker conducted any sort of review on city contracts. Had that been the case this could have been sorted through long ago and issues of this type, and irresponsible comments, such as the $5MM due comment from Brown, could have been avoided.
Finally, it's fair to ask where the media has been during all of this. Many individuals, taxpayer advocates and other activists/bloggers/citizens questioned the lack of audit activity conducted by Green for almost the entirety of his tenure. During this time the media would run a tut-tutting editorial around election time, Green would release an audit or three, and then there would be silence for two years until the next audit cycle. When he did face a deadline, he was usually late and the work suspect.
During her entire time as Mayor, Annise Parker never seemed interested in focusing on the nuts and bolts of running a city. This would have been especially important in a city that, as we are now seeing, was teetering along on the road to financial collapse. Had she been more interested in solid negotiating rather than parklets Houston might be better off today.
To be fair however, there was/is no meaningful reason for either Parker/Green to do more or Turner/Brown to do better. In Houston, the Middling Regional Daily is more of a City Hall cheerleader than a true watchdog (the tone of this article was very favorable to the City) and even the best local TV station isn't hard-wired for this type of work. The GOP, and conservatives don't do 'urban' and haven't shown a proclivity for doing the dirty work that it takes to advocate on municipal issues. (Although there are signs things are improving). So from that perspective, and given all that power in a Strong-Mayor form of government, there's very little reason to try and make things better.
And it hasn't gotten better, it's apparently become much, much worse. As the Parker-era contracts come up for renewal, and Brown/Turner start scouring them deeper to find revenue dollars, it will be interesting to see just how bad the next rounds of open-bidding truly are. Because, under a leader (which, as we've stated, Houston has been operating without for quite some time) renegotiation of bad contracts to more favorable, but livable, for both parties, terms is the goal when one party is desperately looking to cut costs. A businessman would understand that.
Politicians, especially the bad ones, always return to their default inclination to "fight". After campaigning so long as "fighters" it's the only play they know how to run. If you're thinking this activity runs counter to how Turner ran for office (as a negotiator and someone who would "bring all sides to the table" you're right. Apparently we can't fill a pothole without loving one another in the same manner we can't resolve contract disputes without going to court. Fun.
