The Los Angeles Department of Water and Power and a contractor it hired to reduce dust on a dry lake bed in Owens Valley both have mismanaged the project's finances, resulting in as much as $4.5 million in unnecessary costs, according to a confidential audit obtained Tuesday.
The report, ordered by the DWP Board of Commissioners, found that the utility did not seek competitive bids for some of the work and failed to exercise adequate control over two contracts with the engineering firm CH2M Hill.
At the same time, the audit accused the company of excessively marking up costs, charging for unauthorized work and double billing expenses in some instances.
DWP commissioners seized on the report as evidence of CH2M Hill's trying to pump up profits at the expense of the city.
Commission President David Nahai said he believed the company owes the DWP at least $3.3 million, and possibly an additional $1.2 million, out of more than $106 million it has been awarded since 1998 to control dangerous dust on the dry bed of Owens Lake, about 200 miles northeast of Los Angeles.
"There is no doubt there were lapses in the administration of this contract on both sides," Nahai said. "Although the department could have been a great deal more cautious and exacting, I think that CH2M Hill is at fault for not better policing its practices. I hope and expect that [it] will do the honorable thing, step up to the plate and write a check to the city for the amount the audit is disclosing."
A CH2M Hill spokesman disputed the audit's findings, saying the company consulted the DWP on its scope of work and costs for a project that presents huge, complex and unpredictable challenges.
"We respectfully disagree," said John Corsi, director of corporate affairs in the company's headquarters in Englewood, Colo. "At all times, we were in consultation with DWP about how this project and its contracts should be managed. This audit represents a series of opinions dressed up by facts and the facts are incorrect."
CH2M Hill originally was given a $550,000 contract in 1998 to provide the city attorney's office with expert witness services as it wrangled with regulatory agencies to limit the DWP's liability for reducing dust on Owens Lake.
The lake had been dry since the late 1920s, the result of Los Angeles' diverting the Owens River south to supply the city's growing water needs.
