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June 14, 2007
State Department of Transportation to be Investigated by State Police
Governor Donald Carcieri has asked the state police to begin an investigation into the state’s Department of Transportation contract staffing practices. From Mike Stanton and Katherine Gregg in today’s Projo…
Governor Carcieri yesterday asked the state police to “begin a preliminary review” of the way business has been conducted by the state Department of Transportation…At least we now have a plausible answer as to why the percentage of Rhode Island’s bridges that are "functionally obsolete or structurally deficient” is one of the highest in the country.Bottom line: the now-infamous $102,858 typist was not an isolated case.
And the 145.99-percent markup the DOT was paying Vanasse Hangen Brustlin to provide that typist to an in-house traffic-monitoring center was by no means the highest of the “overhead” rates the DOT has been paying its consultants.
Responding to a public-information request filed a month ago, the DOT earlier this week acknowledged paying “overhead” rates that add anywhere from 65.94 percent to 210 percent to the bills it has been paying private companies for their staff engineers, draftsmen, technicians and typists.
With pay levels averaging $84.73 an hour (including the guaranteed overhead and profit payments), the state, for example, is paying one consulting company — in the middle of the pack — the equivalent of $176,238 a year for each of the engineers and technicians doing wind and traffic studies on a Pawtucket bridge.
One of the highest overhead rates, 201 percent, goes to Plangraphics, a Frankfurt, Ky., company that billed the state for what is broadly described in DOT records as a “plan library archival numbering system.”
The way the Plangraphics contract worked: the company would bill the DOT $260,656 for its direct labor costs and then, more than twice that — $549,203 — for overhead and $90,613 on top of that for profit. (For reasons that went unexplained yesterday, a $76,260 slice of the company’s $900,473 authorized contract went to the DOT’s construction-scheduling consultant, the Plexus Corp.)
One of the lowest rates, 65.94 percent, goes to Cataldo & Associates, the company that made headlines earlier this year for putting 11 retired DOT construction supervisors on its payroll doing the same kind of work they had been doing on state road projects — while drawing pensions. That practice was eventually nixed by the state retirement board.
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The benefits package part of overhead for state employees is 88%. When I scanned the list of overhead rates in the ProJo article, many seemed to fall between 120% and 150%. If the state calculated the rest of overhead for its employees, it would include depreciation and repairs in buildings, utilities, supplies and equipment, liability insurance (general and professional) and probably several others that escape me right now. Then there are administrative, accounting and clerical overhead fees. (Here is where I think Vanasse, etc pulled a fast one in their contract by direct billing a clerk-typist. I think that is inherently an overhead function. They may make the argument that she is direct because she is fully dedicated to the contract. Its not hidden and if the state is stupid enough to roll over, then do you expect they won't direct bill her?) And its likely that for consulting firms, another cost is non-billable hours. Everyone wants to be fully billable, but there is often some down time between assignments (not that something like that would ever happen with state employees!). I suspect that state employees and contract employees might have very similar fully burdened overhead rates. As to Plangraphics, tell me more - if what they are doing is esoteric and specialized, then attracting, training and retaining good people costs money.
Lastly, will someone at the ProJo please send Bakst and Gregg down to the business office and give them an explanation of the facts of life re direct charges, overhead and G&A and fee? I'm not at all sure they get it.
Posted by: chuckR at June 14, 2007 11:50 AM