The accuracy of those labor rates is key, the audit said, because they also affect the costs of overhead and profit that contractors are allowed to bill to the state. The findings pertain to nearly $233 million in contract payments, according to the report dated Feb. 13.
[Hogan’s decision on light-rail Purple Line expected by mid-May]
The Office of Legislative Audits is part of the Department of Legislative Services, which provides staff support for the Maryland General Assembly, according to a state website. The audit’s findings were first reported in The Baltimore Sun.
The report said the state initially awarded the four architectural and engineering contracts to not exceed $280 million. In July 2013, the state increased those contracts’ value to $547 million. Auditors also noted that the Purple Line’s overall projected cost for design and construction has grown from $1.9 billion to $2.4 billion, while the Red Line’s estimated costs have increased from $2.2 billion to nearly $3 billion.
The future of a Purple Line, which would run streetcars 16 miles between Bethesda in Montgomery County and New Carrollton in Prince George’s County, is up in the air. The state is analyzing the project to see if costs could be reduced and has asked four teams of private companies bidding on it to come up with cost-cutting measures. State officials say Maryland Gov. Larry Hogan (R) will consider both when he makes a decision by mid-May whether to move ahead on the Purple Line. The state also will review the Red Line’s design and costs, state officials have said.
The state’s contracts for both projects did not specify hourly pay rates for the contractor employees’ time, but they limited the maximum hourly rate to $80, according to the audit. Contractors also had to notify the MTA of their actual hourly rates and get the agency’s pre-approval for any subsequent rate increases, the audit said, but the MTA didn’t ensure that the labor rates the firms billed matched the rates that the MTA had approved.
The MTA did properly verify the number of hours that contract employees worked and monitor “the overall progress of the work,” the audit said.
In a letter responding to the audit, acting Maryland Transportation Secretary Pete K. Rahn didn’t dispute any findings, saying that the MTA has “worked to develop detailed corrective actions and strengthened existing procedures.”
He noted that the audit came as part of a scheduled, periodic review.
Erin Henson, a spokeswoman for the Maryland Department of Transportation, said the audit “cites MTA’s failure to ensure the contractors properly paid their employees.”
“What MTA did know,” Henson said, “was what it was paying contractors for and that we were getting what we paid for.”
The audit also found that the MTA’s combined farebox recovery rate — the percentage of a transit system’s operating costs covered by fare revenues — for its bus, subway and light-rail systems statewide did not meet the 35 percent required by state law. Between fiscal years 2011 and 2014, the report said, those recovery rates hovered between 26 percent and 29 percent. State law requires that the 35 percent be recovered by “establishing reasonable fares and implementing necessary cost containment measures,” the report said.
That could provide fodder to some Purple Line opponents, who have questioned whether the state can afford to subsidize a Purple Line’s operating costs long-term.