When Seattle hired a consultant to design a downtown streetcar line, the initial contract totaled $1.85 million. Four years and 11 amendments later, the cost had grown to $14.3 million. Today, the line has yet to be built and the contract is among several now under scrutiny by federal investigators.

Not all Seattle transportation projects incur such cost increases. Plagued by debates and delays, the First Avenue streetcar is unusually troubled.

Still, the project’s design deal is an extreme example of how no-bid amendments — planned or unplanned — can grow consultant contracts over time. All the Seattle Department of Transportation contracts listed in a federal subpoena issued in December are structured the same way, augmented by numerous amendments, and come amid a new push by the agency in recent years.

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Determined to address Seattle’s rapid growth and traffic congestion, the city has taken the lead on ambitious projects like the streetcar and a Madison Street bus rapid-transit line, seeking federal money to help pay for the work and leaning on consultants for expertise.

Authorities haven’t revealed much about an ongoing U.S. Department of Transportation (USDOT) audit announced in November — except that it deals with Seattle projects that have requested or received federal money — nor about an investigator’s use of the phrase “criminal inquiry” in an email, which has stirred confusion about how serious the probe may be.

Some clues emerged, however, after the federal investigator subpoenaed records related to several Seattle Department of Transportation (SDOT) design and management contracts.

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Using amendments to advance complex transportation projects is an established practice. But the subpoena indicated authorities may be trying to determine whether SDOT has been advertising and supervising its consultant contracts properly.

In emails that date to last May, obtained by The Seattle Times under condition of anonymity, a complainant shared concerns with investigators about contract solicitations and amendments, among other issues.

In some cases, SDOT appears to have agreed to pay its consultants more than the agency initially estimated, with projects severely delayed. SDOT declined to answer detailed questions about the contracts and amendments.

The federal review has come as SDOT is trying to recover from years of tumult. After cycling through directors and struggling to deliver promises to voters, the agency is counting on federal dollars to help complete its high-profile projects.

“We are working with US DOT to ensure we comply with their requests,” Seattle transportation director Sam Zimbabwe wrote in an email to employees in December.

“Since 2017, we have undergone a series of changes to ensure more accountability for all of our major capital projects, and since my start at SDOT I have said that I believe in full transparency both inside and outside of the agency,” added Zimbabwe, who took over the agency about a year ago.

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Seattle City Councilmember Alex Pedersen, the new chair of the council’s transportation committee, said he plans to monitor the federal review “very closely.”

Pedersen met with Zimbabwe last month, but SDOT seemed to know few details, he said. Pedersen also contacted USDOT but was told it couldn’t comment on an ongoing investigation, he said.

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We continue to report on the federal review of Seattle Department of Transportation projects. If you have insights, please get in touch with reporters Daniel Beekman at 206-464-2164 or dbeekman@seattletimes.com or Heidi Groover at 206-464-8273 or hgroover@seattletimes.com. To communicate on a confidential and encrypted channel, follow the options available at https://st.news/newstips.

The federal agency’s Office of Inspector General didn’t name any particular projects in November, when the agency announced it would audit  oversight of Seattle’s federal transportation funds, citing “several complaints” on the subject. The review could take up to a year, the agency said.

Then a criminal investigator, an Inspector General special agent, in December subpoenaed documents related to consultant contracts on six projects, including the design contracts for the streetcar line and the Madison bus line.

The inspector general later narrowed its interest to four projects because the other two hadn’t received any federal money, SDOT said.

No cap on payments

The four projects — also including a citywide bus rapid-transit expansion and the completed western part of Mercer Street’s redesign — are mostly unalike. They involve different modes of transportation, span several mayoral administrations and are in various stages of completion. The subpoenaed contracts were awarded to three firms.

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The contracts do, however, share a structure characterized by small initial agreements followed by cost adjustments over time rather than hard payment caps.

Rick Gustafson, a consultant whose firm has advised Seattle on streetcar projects, said the structure is not unusual. While expanding contracts through amendments is less transparent than repeatedly seeking bids, the structure can save time and money, he said.

Not all agencies use small base agreements with amendments. Joseph Casey, who served as general manager of the Southeastern Pennsylvania Transportation Authority from 2008 to 2016, said he didn’t structure contracts that way.

There’s nothing inherently wrong with the practice, as long as the agency discloses an accurate scope of work and an accurate estimated value when it advertises the contract, Casey said. And amendments should stick to the advertised scope, he said, though cost overruns on transportation projects are common.

Contracts must be advanced as advertised and any amendments should be necessary, he said, speaking about procurement generally rather than Seattle’s projects. Otherwise, “you could have someone approving this and that and whatever the contractor asks.”

When SDOT advertised the Madison bus-line-design contract in 2015, it estimated the work would cost up to $9 million, then signed a base agreement of about $39,000. Thanks to 15 amendments, the contract with KPFF Consulting Engineers today totals $11.2 million, with construction yet to begin.

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For the streetcar, the city estimated in 2014 that the work would cost up to up to $2.4 million, and signed a base agreement of $1.85 million. Eleven amendments later, in 2018, the contract with Parsons Transportation Group had grown to $14.3 million.

Such amendments can vary in size and cost. Some change technical details in the work assigned the consultants, while others move the work to the next stage of design.

Michele Clark Jenkins, senior director at an Atlanta-based legal consulting group, said federal investigators may want to understand why SDOT used requests for qualifications to advertise and award the contracts, asking consultants to demonstrate their expertise rather than submit cost-based bids. The practice can open the door to scope and cost increases, she said. 

A law known as the Brooks Act requires a qualifications-based selection process for engineering and design-related services using federal money. The Seattle contracts under review have included outreach and project financing.

Another common area of review is compliance with federal requirements to subcontract a certain amount of work to disadvantaged businesses, such as those run by women and people of color.

“There are a lot of places where people can go wrong” with those commitments, Clark Jenkins said.

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The consultants involved — Parsons Transportation Group, KPFF Consulting Engineers and CH2M Hill — declined to comment or did not respond to inquiries.

Nature of the inquiry

Even though USDOT’s interest appears to be aimed at certain contracts, the contours of the review remain fuzzy.

Breaking procurement regulations is wrong but usually doesn’t result in criminal charges, Clark Jenkins said. That tends to happen only when governments and contractors engage in outright fraud, she said.

Seattle and USDOT have publicly characterized the review as a noncriminal audit. According to the Seattle City Attorney’s Office, the subpoena was “administrative” in nature, Deputy City Attorney John Schochet said. 

Yet Jason Foster, the special agent who issued the subpoena, referred to an ongoing “criminal inquiry” in an October email to a complainant.  

A criminal inquiry is a preliminary step during which the inspector general determines whether to start a criminal investigation; not all inquiries lead to investigations.

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The Office of Inspector General conducts both audits and criminal investigations, and has federal law-enforcement authority, including the ability to make arrests and execute search warrants.

Foster didn’t return a request for comment, and USDOT wouldn’t confirm or deny the existence of a criminal inquiry.

Federal auditors have made no references “to this being a criminal investigation in any communications with the city of Seattle,” SDOT spokesman Ethan Bergerson said. In his email to employees, Zimbabwe said federal authorities had “not shared any additional information with us about the nature of their audit.”

Many SDOT employees are puzzled by the potential “criminal” nature of the inquiry and even about the reasons for the inquiry, said one staff member not cleared to speak publicly about the matter. Though employees are concerned, “certainly no one seems to be quaking in their boots,” the staff member said.

The bus and streetcar projects listed in the subpoena will ultimately involve King County Metro. Metro has not been formally contacted by investigators, though a Metro staffer had an informal conversation with Federal Transit Administration officials about the review, Metro spokesman Jeff Switzer said.

“We continue to prepare and plan for implementation of the projects and will assess the path forward for the projects once the results of the USDOT audit are available,” Switzer said in an email.