Ethics worries delay state contract to oversee part of $7.6 billion Maryland highway expansion plan

Erin Cox
Contact ReporterThe Baltimore Sun

Maryland officials delayed a vote Wednesday on a fast-tracked $68.5 million transportation contract amid questions about the expedited bidding process and ties between the winning bidder and the state’s transportation secretary.

The contract would have paid a consortium of companies to oversee a part of Gov. Larry Hogan’s $7.6 billion plan to relieve traffic congestion on major highways in the Baltimore-Washington corridor.

The company leading the consortium, Kansas City-based HNTB Corp., employed Transportation Secretary Pete K. Rahn as a senior executive immediately before he joined the Hogan administration.

Rahn approved the expedited selection process and dined with a friend from HNTB before the state’s selection panel chose the firm’s consortium, according to state officials and public documents.

Rahn’s personal connection to the winning firm drew criticism from about the way HNTB was picked and whether there was enough transparency and disclosure.

A spokeswoman for the Department of Transportation said Rahn was not available to comment on Wednesday.

The department withdrew the contract from the Board of Public Works agenda Wednesday to address concerns from the panel, which includes Hogan and two Democrats: Comptroller Peter Franchot and Treasurer Nancy K. Kopp.

Kopp pushed for the delay. She said she was concerned that the speedy process was too different from the way contracts are typically awarded, and that Rahn might have created an appearance of a conflict of interest.

“I don’t know if there’s any perfect answer that can resolve the treasurer’s concern” about a possible conflict of interest, said Deputy Treasurer Susanne Brogan, Kopp’s spokeswoman.

Brogan said the typical 24-month process for awarding such contracts is too long. “But to go from that to what appeared to be a submit-a-letter-of-interest and have-a-two-hour-interview might be too far in the other extreme,” she said.

MDOT spokeswoman Erin Henson said the agency wanted “to ensure that any questions members of the board have about the project are fully addressed.”

“This project and the process involved is extremely complex, and the department is committed to working with the Board of Public Works, elected officials, and all stakeholders to make sure this transformative traffic relief initiative moves forward,” Henson said in a statement.

A consortium of 26 companies led by three firms — HNTB, Parsons Transportation Group and JMT — was selected using a new expedited procurement process for public-private partnerships. Under the process, companies had just 10 days to submit letters of interest.

The winning venture’s letter ranked second among the four groups that applied, but was selected after an oral presentation before an eight-member panel chaired by Rahn. Henson said Rahn did not cast a vote for a winner.

After the HNTB-Parsons-JMT group was selected, Rahn sought advice from the state’s Ethics Commission on his involvement with the process. He detailed his involvement in the selection process to the commission and reported that he had severed all financial ties with HNTB before joining the Hogan administration.

“Please tell me if I’ve acted in accordance with Maryland’s ethics’ laws,” Rahn wrote in an email to ethics officials on April 4.

Michael W. Lord, the commission’s executive director, responded the next day with an “informal opinion” advising Rahn he could participate in matters involving HNTB as long as he had no financial ties to the firm.

Lord warned that “in instances where an appearance of a possible conflict of interest remains,” it’s up to Rahn to “make the determination of whether the integrity of the agency will be affected in a negative way.”

Rahn’s ties to HNTB were first reported by The Daily Record. HNTB did not respond to a request for comment.

Jim Shea, a Democrat who is running for governor, sent a letter to the Board of Public Works Tuesday asking for more transparency about how HNTB was picked.

“When this much taxpayer money is at stake, the public deserves to know whether the state has unethical and costly conflicts of interest,” Shea said

State Sen. Richard S. Madaleno, another Democrat running for governor, also sought to slow the process.

“It’s time to hit the brakes on this procurement,” Madaleno said in a statement to the media. “I am appalled by the ethical cloud surrounding this whole thing. We are talking about the biggest state-developed project in history, and they are trying to ram the whole thing through.”

Prince George’s County Executive Rushern L. Baker III, who is also in the race for governor, said the episode raises questions about whether the Hogan administration prioritized expedience over transparency.

“Awarding a fast-tracked contract to your buddy is questionable at the very best,” Baker said.

State officials said they used the speedy procurement process because the project is unique.

A Hogan spokeswoman said the governor “has confidence” in Rahn. Spokeswoman Amelia Chasse complimented the transportation secretary and welcomed the added scrutiny into the contract.

“He thinks big, as does the governor,” she said. “This is a big, innovative project that we know will be transformative for the region. Asking probing questions about procurements is why the Board of Public Works exists.”

Last fall, Hogan proposed using a public-private partnership to add 75 miles of toll lanes to Interstate 270 and the entire stretch of the I-495 Capital Beltway in Maryland. While there’s a public process by the state’s transportation agency to figure out how that should be done, Maryland officials determined they lacked the resources to oversee how to bid out and quickly award the contracts to design, engineer and build it.

MDOT decided to hire a consortium of consulting companies to oversee the project — a deal worth about $68.5 million to start that could be extended for up to 10 years.

Rahn put out a public notice in February saying the state would be seeking a firm to oversee what he described as an “innovative and bold” and “monumental” project to quickly and cheaply install the toll lanes.

The state “is very focused on working with absolute best and innovative teams and collaborating with our concessionaire partners,” Rahn wrote in solicitation materials. “We are focused not only on the delivery of this effort but redefining the way these efforts are delivered across the country with private sector innovation, more efficiently than ever.”

On the day before the bids were due, Rahn signed a waiver of traditional procurement rules. The General Assembly approved the waiver system last year as an alternative way to bid public-private partnership contracts when efficiency and the stakes of the project demanded it.

The waiver described the project as “the largest ever proposed P3 in North America” and said normal procurement processes should be set aside for the consulting group because it will take too long to otherwise get a consultant in place. It argued the company should not have to re-apply for the job before it’s complete, as it otherwise would have, because doing so would disrupt the project.

The waiver also argued that launching the traffic relief plan quickly is crucial to Maryland’s effort to lure Amazon’s coveted HQ2 project to Montgomery County, which is one of 20 finalists picked by Amazon as a potential spot for its second headquarters.

Launching the governor’s congestion relief plan “affirms to Amazon, and further solidifies the state’s ‘open for business’ stand; likewise, any doubt about the validity of the TRP P3 project (congestion relief plan) could well jeopardize Maryland’s successful bid for HQ2,” the waiver said.

Damon Effingham, acting director of the watchdog group Common Cause Maryland, said the administration needs to take extra care to be transparent because the project to expand highways with toll lanes is controversial.

“The fast-tracking of it in general is concerning because there needs to be an open debate,” Effingham said. “When you add that to Mr. Rahn’s relationship to that [company] it really heightens the concern that we need to put the brakes on this.”

A spokesman for Franchot said the comptroller supports the mission of the toll lane project, as well as a delay on the contract vote to make sure there are no unanswered questions.

“Anything that comes through the process quicker than normal will raise concerns with the comptroller,” spokesman Joseph Shapiro said. The delay in voting on the contract “allows for full transparency and full disclosure so that members of the public can be confident that the taxpayer is getting the best deal.”

ecox@baltsun.com

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