Port, consultant at odds over expenses; contract may be terminated
Published: August 7,2013
GULFPORT — The state port of Gulfport is negotiating reductions in contract costs with CH2M Hill, the global consulting and engineering firm that conceived ambitious expansion plans unveiled in 2008 but since curtailed.
“It’s my opinion we really don’t need all their services they offer and the expenses that are going along with it,” said Bobby Knesal, an engineer and relatively new port commissioner appointed by the Harrison County Board of Supervisors.
“I’m trying to scale it back. We pay them all their office expenses, living expenses, travel expenses. My opinion to the board is that we don’t pay any other consultants those fees.”
The Sun Herald has obtained a copy of a letter the port sent CH2M Hill in May, saying the firm’s contract might be terminated unless expenses are cut. The letter followed Knesal’s review of CH2M Hill’s billings.
The port by the end of May had paid the company $17.9 million on a $35 million contract that runs through January 2015. CH2M Hill is overseeing a $600 million port expansion and restoration. During the current contract period, from January 2012 through January 2015, CH2M Hill can charge up to $14.8 million for time and materials, plus up to $1.1 million for travel and other expenses.
Costs covered include airfare, condominium and office rent, office expenses, cleaning services, daily meal allowances and mileage for CH2M Hill employees.
“All those expenses have been negotiated and approved by the port authority and the state of Mississippi,” said John Corsi, a company spokesman. “We are actually 30 percent under budget on this program.”
Todd Stockberger, CH2M Hill’s chief port planning manager, said the company has taken the initiative to find cost savings.
“We have strived to reduce our costs and make the program delivery just as cost effective as possible,” Stockberger said.
It is not unusual for contracts to cover travel, living and office expenses when outside expertise is needed on complex projects, said Craig Ruyle, who serves on the board of governors for the American Society of Engineers Construction Institute and is based in Washington, D.C.
He said contract terms vary by client. CH2M Hill’s contract is with the port and Mississippi Development Authority, the state agency administering federal grant money funding the project.
Daron Wilson, director of MDA’s disaster recovery division, said MDA reviewed the CH2M Hill contract for compliance with pertinent regulations, and to make sure the work approved is “reasonable and necessary.” The most recent amended contract was signed in January 2012. Wilson said MDA is confident the port’s new executive director, Jonathan Daniels, will thoroughly review the contract and recommend any needed changes.
Daniels said his review is almost finished.
“Just because of the size and scope of that project,” he said, “it’s a pretty significant evaluation.”
Knesal said contractors, engineers and others questioned him about the contract costs after seeing payments to CH2M Hill on the port’s monthly agendas.
Knesal said he took it upon himself after joining the commission in December to examine the firm’s expenses in detail.
He believes redundancies exist, with a CH2M Hill subcontractor coordinating the work of other port engineering firms that could communicate with one another. He also said CH2M Hill has been here long enough to establish an office, and cover those and other expenses as part of the company’s overhead.
“All the other engineers we pay, we don’t pay any of those type expenses,” Knesal said. “Their rates are even cheaper, as opposed to CH2M Hill’s rates.”
Stockberger said CH2M Hill offered a lower price during contract negotiations with MDA and the port to offset expenses the port covers.
CH2M Hill has five staff members working full time on the port project, four of whom live on the coast.
He said other employees fly into Gulfport as needed. A CH2M Hill invoice, provided by the port in response to a public records request from the Sun Herald, shows hourly rates range from $72.60 to $285.18 for CH2M Hill employees working on the port project. The contract shows those rates are scheduled to increase each year, with the chief port planning manager earning $302.55 by 2014.
The monthly invoice for June showed CH2M Hill staff costs of $167,343, subcontracting expenses of $105,036, and a $14,690 charge for air travel, condo and office leases, condo cleaning, meals, daily meals, business meals, auto insurance and other expenses.
Port officials and CH2M Hill talked about contract expenses around June, Knesal said, in a meeting closed to the public.
“They’ve agreed to cut back some,” Knesal said. “I’ve asked them to cut back some more. Jonathan is negotiating with them now. So far, they’re understanding where I’m coming from.”
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