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Audit: Vt.’s No-Bid Rail Deals Top $7 Million

Fri January 30, 2009 - Northeast Edition

MONTPELIER, Vt. (AP) The state Agency of Transportation’s (AOT) rail division let more than $7 million in no-bid contracts to one railroad, including one worth more than $4 million, a review by the state auditor’s office has found.

“One conclusion of the audit is that the Rail Division is not ensuring that the required competitive bidding in these contracts is taking place,’’ said Deputy State Auditor George Thabault. “Contracts are being sole-sourced and this denies other companies the opportunity to compete for state contracts, and may be keeping the state from getting the best price for goods and services.’’

Vermont Rail System President David Wulfson acknowledged in a telephone interview that there may be room for improvement in the way his company deals with the state.

“We’re looking at this audit as an opportunity to tighten up our practices with the state and working with AOT to do things the way that they need them done,’’ Wulfson said.

At issue were construction projects on stretches of track leased from the state by Vermont Rail, Thabault said.

The deputy auditor said Vermont Rail had good knowledge of the track — as the tenant — and equipment to do the construction work. But he said by sole-source contracting, the state still may have missed a chance to get the work done at a better price.

AOT officials, recognizing that they needed to tighten up their rail construction contracting, approached the office of state Auditor of Accounts Tom Salmon in April to ask for the review.

“We recognized that we had some issues within our Rail Division that needed correcting, and requested the auditor’s assistance,’’ said David Dill, secretary of transportation.

“On our own, we were unable to clearly identify our weaknesses in a way that both we and the railroads could understand,’’ Dill added. “Our goal is to use the findings of this report as a catalyst to forge a new and better relationship with the companies that run our rail systems.’’

Thabault said some of the sole-source contracts originated in the early 1990s and had been renewed without the bid process being reopened.

“With a long-term relationship like that you have the risk that maybe you’re not getting the best deal for the state,’’ Thabault said.

Key findings from the audit included:

• The agency and its rail contractors did not follow regulations designed to foster open, competitive bidding, resulting in $7.2 million worth of no-bid contracts. The largest of those, worth nearly $4.7 million — was issued without the required approval of the secretary of administration.

• Vermont Rail was allowed to keep $82,401 in “rail project salvage proceeds’’ that should have reverted to the state, with the rationale that they were an offset against future invoices from the company.

• The state had passed up $37,000 in interest on late lease payments from Vermont Rail. Wulfson disputed this finding, saying he did not believe the auditor’s office understood the lease agreement fully.

• The agency did not adequately follow up on past audits which reported $436,000 of questioned costs related to contracts with Vermont Rail.

Dill said the agency had hired a new rail program manager, would improve its practices and report quarterly to Salmon’s office on progress.

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