CT Construction Digest Tuesday January 24, 2023
Andrew Brown and Dave Altimari
State officials released a highly anticipated audit into Connecticut’s school construction office late last week, but it is unlikely to alleviate all of the concerns about the multibillion-dollar construction program, which became the focus of a federal investigation last year.
The 23-page report that was produced by Marcum LLP, an independent auditing firm, included an analysis of more than 111 school construction projects that were undertaken in Connecticut between 2018 and 2021.
But some lawmakers are more concerned about what is missing from the audit: namely, a review of interactions between local school officials and the state Office of School Construction Grants & Review.
“This audit is a start but it is by no means a conclusion,” said Senate Minority Leader Kevin Kelly, R-Stratford. “The concern certainly of the federal investigation has always been on the purported influence on municipalities, and that wasn’t even looked at here at all.’
State officials hired Marcum last March in an effort to restore public trust in the school construction program, which was directed for more than six years by Konstantinos Diamantis.
Diamantis, who stepped down from that position in late 2021, was named in several grand jury subpoenas that were issued to the state and several municipalities.
Once that federal investigation burst into public view, several school superintendents, town attorneys and local elected leaders came forward to allege that they felt pressured by Diamantis to hire specific construction companies for their school building projects.
Many of those officials said they felt like they had to go along with Diamantis’s recommendations or they would risk losing state funding for their construction projects.
Republican legislative leaders argued last year that those circumstances made it essential for the auditors to talk with local education officials and to understand whether anyone was pressured to hire certain contractors.
But that type of review was not included in Marcum’s work, as the final report made clear.
“The scope of work for this engagement did not include outreach to the school district, nor did we perform any work on site at the school districts,” the report states. “The School Audit Team within the DAS business office served as the direct, and sole, point of contact for the Marcum team during the engagement.”
Kelly said he did not understand why state officials chose not to involve local officials in the audit process.
“Don’t the people in charge of DAS want to know what happened there?” he asked. “To know they expanded the scope of the audit and they still didn’t look at the real problem is not paying attention.”
The state paid Marcum roughly $240,000 to conduct its audit into the 111 school building projects, according to the purchase order that was signed last year. And the auditing firm spent more than 10 months performing its review.
But officials with the State Department of Administrative Services, which houses the school construction office, said Marcum did not need any information from the local school districts in order to complete its work.
That’s because Marcum’s contract was narrowly focused on the paperwork and processes that the state uses to manage the school grant program.
Marcum’s findings noted, for instance, how state officials within the Office of School Construction Grants & Review often skipped steps while reviewing completed school projects. It pointed out how the state doesn’t scrutinize smaller charges that are billed by school construction contractors and subcontractors.
And it highlighted how the state’s financial share in some school projects was larger than Connecticut law allows, even though there was no explanation for why the state was picking up a bigger portion of the tab.
“Marcum had all the needed documents to do their review thoroughly without having to reach out to the schools,” Jesse Imse, a senior advisor to DAS Commissioner Michelle Gilman, said. “DAS has adopted all recommendations outlined in the report and is committed to maintaining efficiency, consistency and transparency for all of its programs.”
The lack of feedback from local school districts was not the only thing that was noticeably absent from Marcum’s report.
There is also no mention of the demolition and hazardous waste contracts that the state asked Marcum to look into last year.
The CT Mirror published a story in early 2022 that showed that two companies — AAIS and Bestech — received the vast majority of those contracts, which included demolition and asbestos work at school construction sites.
In response to those revelations, the state paid Marcum roughly $111,000 and asked the firm to randomly sample from 321 different demolition and abatement projects throughout the state.
But none of that additional work by Marcum was referenced in the report that was delivered to lawmakers late last week.
Imse told the CT Mirror that auditing process is ongoing and he suggested those results would not be released until a later date.
“The Hazmat Program is a different program than School Construction Grants,” he said. “Our agency continues to work with Marcum to complete the audit to ensure a thorough review.”
Lawmakers may soon get a chance to ask about that auditing process too.
Gilman, who took over as DAS Commissioner last year, is scheduled to come before the legislature next week for a confirmation hearing.
Both overall and nonresidential construction input prices tumbled 2.7% in December from the previous month, the largest monthly drop since April 2020, according to an Associated Builders and Contractors analysis.
Despite that monthly drop, overall construction prices remain 7.9% higher than a year ago, while nonresidential construction input prices jumped 7.6% year over year, according to the report.
Though the Producer Price Index shows improvement on the inflation front, the decline in input prices may be a double-edged sword as a sign of spreading economic weakness, according to Anirban Basu, ABC chief economist.
December’s reading represents the smallest yearly increase since January 2021, according to ABC.
“Recent consumer and Producer Price releases indicate that inflation is fading, though it remains well above the Federal Reserve’s 2% target,” said Basu in the report. “Should inflation continue to abate, the Federal Reserve may be able to stop increasing interest rates sooner than anticipated. Interest rate-sensitive segments like real estate and construction would be among the primary beneficiaries.”
Yet Basu said the drop in input prices is “both good and bad news.”
That’s because a decline may also be an omen for economic weakness, said Basu.
“There could be bad news on inflation in the months ahead. War continues in Eastern Europe and the commodity use-intensive Chinese economy is in the process of reopening,” said Basu in the report. “Though there is evidence of improving supply chain functioning and moderation in input prices, contractors should not be tempted into complacency.”
Contractors listed material costs among their top concerns in a recent survey, evidence that any relief may be short lived, said Ken Simonson, chief economist at the Associated General Contractors of America.
“Some prices have already turned higher in January,” Simonson said. “Contractors are right to rank materials costs as a major concern for 2023.”
For example, steel producers have sharply raised prices in recent weeks for hot-rolled coil, Simonson said, while producers of insulation and tile have already announced price increases for February. In addition, recent spikes in futures prices on commodities markets for copper and aluminum may signal higher costs for these products soon, he said.
But for the moment, monthly declines are a welcome sign that the worst of pandemic-era inflation may be slowing.
Crude petroleum prices fell sharply in December by 14.9%, while natural gas prices jumped 45.3%. Over the year, iron and steel prices declined 24.4%, while concrete products surged 14.8%, according to the report.
At the same time, contractors are currently maintaining their longest backlog since 2019, according to ABC’s construction backlog indicator, said Basu, another positive.
NEW ORLEANS — Ensuring your company’s safety program is set up to protect you when facing a potential OSHA fine is a challenging needle to thread.
That was the message from a group of panelists highlighting “The Good, the Bad and the Ugly” of contractors’ safety programs during the Associated General Contractors of America’s health and safety conference Thursday.
Kevin Moorhead, safety director for the St. Louis-based Korte Company, said he recently rewrote his several-hundred-page safety guidebook following an accident on the jobsite. One approach he took was retooling verbiage, changing language that workers “must” or “shall” do something to “should” instead.
That’s because OSHA or lawyers deposing a contractor post-accident, injury or fatality can wield a detailed safety rulebook against them, said Howard Mavity, attorney at Fisher Phillips’ Atlanta office.
Even when a contractor’s internal guidance goes above and beyond OSHA standards, if the agency can show that the company’s own rules weren’t followed, that can become a more severe willful violation, since the employer has demonstrated competency and awareness of hazards and solutions, then not followed them, Mavity said.
In other words, a massive rulebook that most workers won’t read cover-to-cover can end up being a liability, the panelists said.
“The more you have a giant program, the more often things will not get followed,” Mavity said.
Having a safety plan that you know you don’t follow is “borderline malpractice,” said Dan Snyder, co-founder of Safety Mentor, a virtual platform designed to help safety managers.
And too often, all of the understanding of the safety guidebook is placed on the shoulders of one safety lead, with little backup.
“At the end of the day, that’s not sustainable,” Snyder said.
Steps to take
Besides having a well written (and well read) plan, there are other steps contractors can take to keep jobsites safe while limiting liability.
Regularly walking jobsites, identifying hazards and planning far ahead of schedule to ensure workers know of dangers is key to creating a prescriptive approach, Moorhead said. It’s vital to document audits too, identifying not only when there are near misses or close calls, but when something goes well.
“People don’t want to tell on themselves,” Moorhead said.
Mavity, who regularly litigates OSHA-related cases, said the agency or opposing lawyers will always look to use documented evidence against a contractor.
“Lawyers poke holes. That’s life,” he said.
But building trust with OSHA can go a long way, he said. The agency has the burden of proof, and one major defense for citations is due diligence. Well-documented safety audits and prescriptive approaches to daily hazards ahead of time can show OSHA that a firm is taking the right steps to protect workers.
“OSHA is going to use the smaller hammer on the contractor who earns trust with transparent, genuine safety action,” Mavity said.