FBI agents are investigating whether a Maryland highway official steered a lucrative contract to a company that employed his wife, officials said yesterday.
The federal inquiry was prompted by a state audit released yesterday that also found "a number of discrepancies which indicated that the competitive bid process may have been circumvented," state highway officials said.
The audit centered on seven $750,000 traffic study contracts the State Highway Administration awarded last year. Following a tip to its fraud hotline, the state's Office of Legislative Audits found that three of the companies that won contracts were not among the top seven firms that submitted proposals.
In response, Neil Pedersen, the head of the highway administration, said yesterday that the agency is cooperating fully with the investigation and has taken steps to address the problem.
"My goal as administrator is that we have a process that is beyond reproach from an integrity standpoint," he said.
Several employees have been interviewed or received subpoenas, and the state attorney general's office has been in touch with its federal counterpart, according to Maryland Transportation Secretary Robert L. Flanagan's response to the audit.
Before awarding consultant engineering contracts, the highway administration is required to accept proposals from competing companies and then rank them on technical merits. But the auditors could find no documentation supporting why two winning traffic study contracts were awarded to the respective companies. When they inquired about the paperwork, the auditors were told that the "written evaluations were either discarded or not prepared," they wrote.
In the third winning contract, the auditors did find two written evaluations of the consultant's proposal, but it was ranked 12th and 14th -- well out of the top seven. Auditors could find no documentation explaining why a company that initially scored so poorly would be awarded the contract.
They did discover, however, that the wife of one of the state employees who evaluated the bids was employed by the company that won the contract.
The audit also found that the four state highway officials in charge of reviewing the bids, and then recommending which firm should be awarded the contract, had not filed the required financial disclosure statements with the State Ethics Commission.
Officials in the auditor's office and the highway administration declined to release the names of the employees and the companies because of the ongoing investigation. FBI spokesman Richard Wolf confirmed the existence of a probe but declined to provide details yesterday.
Pedersen said the employee whose wife worked for one of the winning contractors "should have recused himself" from reviewing the company's proposal. Any disciplinary action against the employee would depend on the outcome of the investigation, he said.
He added that the agency should have done a better job maintaining the required paperwork for each of the contracts. He said the audit "revealed some improvements that we need to be making."
Now, all highway administration employees involved in procurement have to complete a conflict-of-interest statement before each project, he said. The statement reads in part that neither the employee nor any member of the employee's family "has any financial or other interest whatsoever in any company or business" participating in the procurement process.
The employee must also agree to "evaluate all submittals fairly and impartially."
The highway administration has also completed "a thorough review of everyone involved in procurement" designed to make sure that everyone files disclosure forms with the ethics commission, Pedersen said. Asked if the department should have been doing that earlier, he said: "Hindsight being 20/20, probably."
In a letter announcing the new policies to senior staff in August, Pedersen wrote: "Our standard must be to avoid even the appearance of impropriety."
Yesterday, he added, "We want to have a culture . . . for procurement in which we ensure that we are getting the best value for the taxpayer dollar."