Ross Ayers

March 9, 2020

Shady Contracting Practices

Opening:

For my final project, I have elected to research articles featuring issues where contract
management has been a problem or even led to dramatic losses. I was to research four articles or
instances of contract management failure or where contract management needed improvement.
Following are four summaries of articles which have a theme of educational institution
contracting issues, particularly in awarding school contracts to construction and inspection firms.

Also, these articles show how those problems could or have led to serious consequences,
sometimes for an individual and sometimes for the firm or business. The paper concludes with
my recommendations to an illusory company on what issues are most relevant and how best to
address any possible contracting issues that they may have in the future.

Summaries:

L.A. Community College hit with whistleblower complaint over construction bond program:

David Salazar was newly arrived on the L.A. community college scene two years ago,
but he was very well prepared to undertake almost anything or face any adversity; holding two
Master’s degrees and boasting over thirty years of building project management experience in
other districts would seem to have been more than enough preparation. However, he found
himself surrounded by sloppy management, fierce backroom politics, and entrenched
relationships between board trustees and the construction interests.
 He obviously raised some red flags about the situation but caused enough ruckus that he
eventually received a termination notice, after which he filed a whistleblower complaint with the
district. He alleged that the district’s chancellor, Francisco Rodriguez, among others, wrongfully
terminated his contract in retaliation to his raising concerns over the conflict of interests. The
district has actually come under fire for similar complaints in the past; a previous Los Angeles
Times article in 2011 noted several district projects which were rampant with nepotism,
mismanagement, and massive financial waste.

Construction management contract questioned:

A Georgia school district superintendent commented on proposed construction

management contract negotiations in response to claims made by Glenn Singfield on behalf of
Artesian Contracting Co. The superintendent, Ken Dyer, stated that the negotiations are over a
service contract and that it did not require a formal bid, while Singfield held that minority small
business owners should also have a chance at a bid, to receive the same chance at taxpayer-
funded projects as all the other options.

Both Dyer and the other firm, Dukes Edwards & Dukes state that they avoided
discriminatory actions and affirm that the system is in place to afford opportunities to other
smaller, minority firms and Dukes states that they have had much minority inclusion success in
the past as well. However, Singfield feels disenfranchised and sees the whole situation as
nonsense.

Official’s father lands $1 million contract, sparking claim of nepotism at Los Alamitos school
district:

A Los Alamitos school board member, C.J. Knowland, is the son of Knowland
Construction Services president Christopher Knowland, and has brought the board under fire
over allegations of nepotism by competitor T.Y.R. Inc. president Youssef G. Sobhi. Sobhi claims
that his company presented the district with a bid for the contract to inspect the science, math,
technology, and engineering classrooms which were under construction, stating that the bid was
$949,840, almost $22,000 less that the bid which was chosen.

Knowland Construction Services was awarded the contract at $970,900, after recorded
minutes for the meeting show that they utilized two legal opinions to try to show that there was
no conflict of interests. This does not, however, guarantee legality, as I have also learned in the
corresponding Business Law course, and Sobhi asserts that the climate reeks of possible
favoritism. He has demanded a formal investigation by the district, but his claims and assertions
have drawn harsh consideration by an attorney for the district, Terry Tao.

Portland's Concordia University To Close In Spring:

A difficult situation at Concordia University in Portland OR has become too much to

overcome due to the combined effort of declining enrollment and increasing debt. An interim
president, Tom Ries, has only been in office for maybe six weeks before the Board of Regents
decided that closing their doors in the spring was the only option to manage the crippling debt
the university had acquired.

Coming in as a financial administrator he immediately heard alarm bells ringing and

working with the board discovered that it was truly an unrecoverable situation. The loss of the
online student boom which had helped the college in recent years came after issues with the
online contractor which they were using at the time. However, this was only partly the problem
according to Ries. He stated that many of the school’s competitors offered stronger program
choices which was more likely the cause of lower enrollment rates, but that the majority of the
university debt, over two-thirds, was due to recent excessive construction projects.

Discussion:

Through the results of my research, I feel confident stating that the main issue which they
all had in common was a lack of proper consideration for the different facets of contract law.
There was also a link in communication breakdown between purchasing teams and the deciding
boards, or that they did not truly have a say in the selection process. I saw the fact that massive
works projects are likely to attract more firms and that the selection process must be difficult, but
it is up to the purchasing team or management to enforce the best decision on the board.

With a lack of purchasing input on contract management, there seems to be more

likelihood of possible favoritism or nepotism occurring, so there needs to be an increased effort
on purchasing management’s part to analyze the competing firms and stick to educated decisions
about the diversity and ability of the firm to be contracted as well as giving proper consideration
to the closest candidates.

Executive Summary:

To conclude; the major issues facing procurement management can be narrowed down to
a lack of proper communication and a breakdown of the contractor selection process, and a lack
of good risk management. Without a well-planned and properly executed selection process, a
company or entity would have much more work to examine individual firms and could not be
guaranteed of successfully finding a contractor to meet their needs. And without the proper
communication, individual departments or board members may be susceptible to litigation or
damages caused by conflicts of interest.

It is wise to examine not only the firms bidding for contracts but also the members of the
decision-making operator to expose any possible issues. To achieve proper risk management, it
is essential to view every aspect of the contracting process as a potential hazard to the company.
It is all well and good to gain multiple legal opinions; but they are just that, opinions. They are
still susceptible to misunderstanding and misinterpretation as well as being susceptible to
changes in legal and regulatory systems.
Bibliography

Watanabe, Teresa (May 9, 2019). L.A. Community College hit with whistleblower complaint

over construction bond program. Los Angeles Times.

https://www.latimes.com/local/education/la-me-edu-laccd-whistleblower-construction-
bond-retaliation-complaint-20190509-story.html

Fletcher, Carlton (Jun 6, 2019). Construction management contract questioned. Albany Herald.

https://www.albanyherald.com/news/construction-management-contract-
questioned/article_fa1c8ec6-889d-11e9-af03-d3d0084ba9d9.html

Schwebke, Scott (October 4, 2019). Official’s father lands $1 million contract, sparking claim of

nepotism at Los Alamitos school district. Orange County Register.

https://www.ocregister.com/2019/10/04/nepotism-alleged-after-los-alamitos-school-
district-awards-nearly-1-million-contract-to-employees-father/

Manning, Rob (Feb. 10, 2020). Portland's Concordia University To Close In Spring. Oregon

Public Broadcasting. https://www.opb.org/news/article/portland-concordia-university-

closing-spring-2020/