The Maryland Transit Administration failed to verify the accuracy of millions of dollars in contractor-submitted architectural and engineering costs for the Red and Purple light rail lines, according to a state audit released Monday.
The unverified labor bills from four contractor groups hired to work on the two pending transit lines, scheduled for Baltimore and the Washington suburbs, respectively, account for or relate to $232.8 million in overall costs under the multibillion-dollar projects, the audit found.
That figure includes the labor costs as well as overhead and profit calculated under a formula based on the labor costs.
"Although MTA had sufficient procedures in place to approve changes to labor rates, had verified hours worked by individuals, and had monitored the overall progress of the work, MTA did not conduct periodic verifications of the contractors' payroll reports," the audit found. "Consequently, there was a lack of assurance that the billed rates agreed with the actual labor rates the contractors used to pay their employees."
The audit does not allege the four contractors filed misleading or inaccurate costs, just that the state failed to properly vet the varying hourly rates per employee that were submitted.
A joint venture between Parsons Brinckerhoff, RK&K and AECOM is handling both engineering for the Red Line and program management for the Purple Line.
A joint venture between Jacobs Engineering and STV is handling Red Line program management, while a joint venture between Gannett Flemming and Whitman Requardt is handling Purple Line engineering.
The joint ventures were originally awarded contracts not to exceed $280 million, but the value of those contracts was increased in July 2013 to $547.1 million, the audit found. As of September, expenditures had reached about $302.4 million.
Representatives for the various ventures did not respond to requests for comment Monday.
The MTA did not dispute the finding or others by the Office of Legislative Audits, including:
•$10 million in overpayments to Mobility Paratransit Program vendors for fuel.
•Nearly $500,000 in payments of excise tax on fuel that the agency is exempt from paying.
•A failure to verify the appropriateness of a $24 million change order on a MARC commuter rail services contract.
•A failure to comply with procurement regulations for sole-source contracts, recording bids and publishing contracts.
•An underperforming rate structure for buses, Metro and light rail.
The MTA is required to cover 35 percent of the costs associated with public transit through fares and cost-containment measures but has not done so since fiscal 2005, the audit found. To do so, the MTA would have to increase fares by more than the 10-cent increase already required by the end of fiscal 2015, the audit found.
The audit also found the agency failed to properly oversee eligibility for its mobility program, something advocates for people with disabilities also alleged in a lawsuit recently filed against the agency.
In response to the audit, Pete K. Rahn, acting transportation secretary, said in a letter to audit officials that the agency agreed with all of the findings and has taken steps to address them.
"These fiscal compliance issues clearly demonstrate the need for MTA to institute comprehensive control measures that ensure taxpayer funds are fully accounted for and spent properly on programs and initiatives that help us build and operate a safe, convenient transit system for the citizens of Maryland," Rahn wrote. "I can assure you that the issues raised in this audit are taken seriously."
The agency said it already added an additional layer of scrutiny to submitted labor costs for the transit projects and will better document its "monthly reconciliation" of costs to ensure they are in line with preapproved hourly rates.
The questions about the appropriateness of labor costs associated with the two transit lines come as their overall price is being given a second look.
Gov. Larry Hogan questioned the projects' affordability during his campaign, and both have been under review since he took office in January.
The Red Line, which would run from Woodlawn in Baltimore County to Johns Hopkins Bayview Medical Center in East Baltimore, originally was estimated to cost $2.2 billion, but that estimate has increased to $3 billion.
The Purple Line, running across Montgomery and Prince George's counties, originally was estimated at $1.9 billion, but that price has increased to $2.4 billion.
Both projects have been shortlisted for hundreds of millions in federal funding but will rely on substantial funding from the state and the local jurisdictions they serve, as well as heavy investment from private partners.
Construction contracts have not been awarded for either project. Last week, the deadline for bids from companies seeking to build and operate the Purple Line under a public-private partnership with the state was extended by five months, said Erin Henson, a transportation department spokeswoman.
Henson said the companies' requests for an extension came after Rahn asked if they could look for ways to make the projects less expensive.
Bids for the Red Line have not been solicited.