Senator steers millions in NCDOT contracts while taking campaign cash

Firms get millions in NCDOT contracts
Updated: Feb. 20, 2017 at 5:40 PM EST
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RALEIGH, NC (WBTV) - A powerful state lawmaker has pushed to increase the outsourcing of services within the North Carolina Department of Transportation while collecting campaign contributions from private firms that do business with the state agency.

NCDOT has increasingly been required to rely on private firms for engineering and design services since 2011.

Since then lawmakers have required NCDOT to shed hundreds of workers and pay hundreds-of-millions of dollars to private firms instead.

Ten of the largest engineering firms collectively billed taxpayers more than $111 million for services in 2016 alone. That sum does not include dozens of other private companies who were also awarded contracts.

Internal documents obtained by WBTV Investigates show the private firms being hired by NCDOT are building in inflated overhead costs and a built-in profit margin into their bottom line.

But some lawmakers continue to advocate for the outsourcing of more state highway jobs as a way to save money and build state roads more efficiently.

Conservative principles guide push to privatization

State Senator Bill Rabon (R-Brunswick) said it was a pretty easy decision to start outsourcing some services at NCDOT when he and other Republicans took the majority in the state legislature in 2011.

"One of the things that I think all of the Republicans wanted to do when they came here was downsize government, become more efficient," Rabon said.

And, so, Rabon and his colleagues began dictating a series of budget edicts in 2011 that would see NCDOT's workforce slashed and a flood of tax dollars begin flowing to private companies.

Rabon said he was struck by the number of employees working at NCDOT. He and other lawmakers were also frustrated at the lengthy timeline it took to complete a road project.

"It appeared that DOT has quite a number of employees," Rabon said. "There's several departments and several layers of just people supervising supervisors. Supervisors with two or three people and then those supervise two or three people. And that's not efficient."

The 2011 budget required half of NCDOT's engineering projects be outsourced to private companies. That number has climbed over the past five years' budgets. Currently, NCDOT is required to send seventy percent of its engineering and design work to private firms.

Private contracts come with inflated costs

But a review of cost estimates for projects completed by private engineering firms suggests taxpayers may be paying a premium for outsourced services.

WBTV Investigates obtained detailed cost estimates for several projects submitted to NCDOT by private firms.

The project-specific information for the cost estimates was withheld by the employee who provided the documents so as not to reveal the source.

One project totaling $64,966.87 included more than $38,000 in overhead costs. A project breakdown shows taxpayers footed the bill for "general overhead" at 194.33 percent. Another line item lists a "comparative fee" at nine percent.

Current and former NCDOT engineering employees say the "comparative fee" is really a built-in profit margin included in ever project.

The cost breakdown for other projects reviewed by WBTV Investigates found "general overhead" line items listed at 161.63 percent, 146.39 percent, and 149.10 percent, respectively.

(Click the image above for a larger version)

It is not clear if projects completed by private firms—with a built-in profit margin and line items for overhead at up to twice the cost of labor—are more efficient than projects completed by state employees who work for NCDOT.

Rabon, a chief proponent of NCDOT outsourcing in the Senate, said he did not have any information to know if private companies are costing taxpayers less money to design roads.

"We have not received anything from DOT that would indicate that," he said. "One would assume that the private sector globally would be more efficient than the government."

The legislature has required periodic reports from NCDOT as part of its budget language setting specific outsourcing targets. According to Rabon, none of the department's reports have ever included a cost comparison.

But that has not prompted lawmakers to pause and try to answer that question before moving forward with requiring more outsourcing.

"If you don't know whether or not this is actually saving money, why did you continue to increase the percent of private contractors over the last five years?" WBTV Investigates asked Rabon.

"Because I'll go back to where we started. We believe that less government is good," Rabon said.

When pressed by WBTV Investigates on whether or not he had ever asked NCDOT to provide information that would confirm the outsourcing strategy he has pushed is the cheaper option, he couldn't provide a straight answer.

Rabon: "DOT has not given us any indication that we're wrong."
WBTV Investigates: "Have you asked that?"
Rabon: "We ask them to come before Oversight every year." 
WBTV Investigates: "Do you ask them, specifically, 'is this saving taxpayers money?'" 
Rabon: We ask them specifically to lay out their plans, show us what they've spent, how much in the private sector, how much in their sector—
WBTV Investigates: "But you've never asked if this is actually saving taxpayer money?"
Rabon: I don't think they can tell us.

Campaign cash comes amid push for more outsourcing

Campaign finance records show Rabon has collected campaign money from employees of private engineering firms and other companies involved in building roads and bridges, their political action committees and industry-related special interest groups.

Records show Rabon's campaign has taken more than $124,000 since 2012, the first year in which NCDOT was required to hit a specific outsourcing target.

It is impossible to know for sure, though, exactly how much campaign money Rabon took from individuals connected to private engineering firms because occupation and employer information is incomplete for a large number of donors.

An audit by the North Carolina State Board of Elections noted the incomplete donor information in an audit completed in July 2016.

WBTV Investigates analyzed Rabon's campaign contributes for 2012 through 2016. Rabon chaired the Senate Transportation Appropriations Subcommittee during that time.

In that role, he was responsible for writing NCDOT's budget, which included the outsourcing targets.

A review of campaign contribution data for Rabon's counterparts in the state House of Representatives during that same time period found the senator's campaign took in significantly more money tied to NCDOT contractors and special interest groups than his counterparts in the House.

State Representatives Phillip Frye (R-Mitchell) and Ric Killian (R-Mecklenburg) chaired the House Appropriations Subcommittee on Transportation for the 2011-2012 session. Neither man's campaign took contributions from employees of NCDOT contractors or related special interest groups, records show.

State Representatives Phil Shepard (R-Onslow) and John Torbett (R-Gaston) have been co-chairs of the House Appropriations Subcommittee on Transportation in the 2013-2014 and 2015-2016 session.

During that four-year time period, records show, Shepard's campaign took $14,000 from NCDOT contractor employees and related special interest groups. Torbett's campaign raised $18,250 from that same group, records show.

Rabon, by comparison, took $101,286 during that same four-year period, records show.

"What does that look like to you?" WBTV Investigates asked.

"It looks like I'm doing a good job," Rabon said. "Obviously they (the donors) think that what we have done so far is working. They have more people employed, DOT is going strong."

Records show Rabon did not accept campaign contributions during session. He has not been accused of taking inappropriate contributions by the North Carolina State Board of Elections, the State Ethics Commission or any other watchdog agency.

In his interview with WBTV Investigates, Rabon said he did not keep track of who donated to his campaign and insisted his push to privatize NCDOT services was not connected in any way to contributions made to his campaign.

"We don't write legislation to help contracting firms, we write legislation to help the citizens of North Carolina," Rabon said.

Rabon pushed for more outsourcing

Legislative records show Rabon continued to advocate for aggressive outsourcing at NCDOT during the 2015 and 2016 budget discussions.

The House of Representatives submitted its budget first during the 2015-2016 biennium. A review of the House budget shows both chambers' budget included provisions that increased general outsourcing goals for the next two years.

But under Rabon's leadership, the Senate budget included more aggressive targets for job cuts.

That language—first proposed in the Senate—made it into the final budget bills both years.

In 2015, the budget submitted by Governor Pat McCrory called for eliminating a total of 131 positions at NCDOT—50 administrative positions and 81 field positions—during the biennium.

But language written into the budget by Rabon and passed as part of the final budgets in 2015 and 2016 mandated the elimination of 331 jobs.

The 2015 budget written by Rabon even includes a list of 29 NCDOT positions by job number that must be specifically eliminated. Another provision added by Rabon required an additional 21 positions be cut at the department's discretion.

Other budget provisions included in the Senate budget and passed as part of the final appropriations bill include requirements that NCDOT reduces and reorganizes its staff. Those provisions give the department the ability to make additional staff reductions as necessary.

In 2016, the Senate—under Rabon's leadership as chairman of the Transportation Appropriations Subcommittee—added provisions that required the elimination of 281 positions at NCDOT. The section of the budget that required the cuts did not exist in the budget initially approved by the House.

Prior to the 2015-2016 budget cycle, the outsourcing targets and job reduction language included in the House and Senate budgets had been nearly identical in 2011 and nearly the same in 2013, with the House including a slightly higher target for one specific part of NCDOT.

Rabon provided WBTV Investigates with notes that indicate the senator has sometimes been frustrated by the slow pace of NCDOT's move to privatization.

The notes were included as part of what appears to be a two-page summary prepared for Rabon by legislative staff outlining the timeline for privatization at the department.

One note about the 2014 requirements indicates NCDOT—a cabinet agency that answered to Republican Governor Pat McCrory—was resistant to some of the outsourcing required by lawmakers.

"This was most contentious year. DOT refuses to enact personnel changes," the note reads in part.

Another note regarding the 2015 budget year appears to indicate Rabon was directly responsible for the outsourcing targets set within the budget.

"DOT began to cooperate. You gave DOT one more year to meet prior year targets."

Rabon provides additional statement

Following his interview with WBTV Investigates, Rabon provided an additional written statement. Some claims in the statement below contradict his previous on-camera answers:

Since 2011, lawmakers have heard concerns that the state Department of Transportation (DOT) is failing to meet its own goals for road-building and is instead carrying massive cash balances from year to year – in other words, they're holding onto billions of taxpayer dollars while causing major delays in building new roads and bridges for North Carolinians. In 2015,  first former Gov. McCrory, then the House, and finally the Senate all made recommendations that would outsource more road contracts – especially in areas with the poorest performance and longest delays – based on DOT's own projections that it would result in increased efficiency and projects being completed more quickly. That was my motivation for supporting these changes. The department has been asked repeatedly to provide cost comparisons for outsourcing road projects versus completing them in-house, and it has repeatedly failed to do so, claiming a comparison cannot be calculated.

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