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DOT paid $1B for project consults

The state Department of Transportation has paid consultants $1 billion to design roads, bridges and perform other tasks during the past 25 years - instead of doing the work itself, records show.

An array of studies has found that hiring consultants is more expensive for state transportation agencies than conducting the work in-house.

But the S.C. DOT says consultants provide vital services. The agency's more than 700 engineers are sometimes overworked or the department needs specialists to help with complex road projects, department officials say.

Not everyone is convinced.

State Treasurer Curtis Loftis and Transportation Commissioner Sarah Nuckles of Rock Hill think the DOT's consultant use should be studied to see if it is cost effective. Sen. Harvey Peeler, a member of the Senate Transportation Committee who represents part of York County, said he also would like to know more.

The DOT is "paying a fairly large sum of money," Loftis said. "Knowing what I know about the DOT, I'd be more than comfortable in urging that someone examine their consulting practices."

The department has been under scrutiny since it had trouble paying bills last summer. In August, the DOT needed a $52 million advance from the federal government to help pay road paving companies and other contractors, who execute the consultants' engineering plans. The agency's governing board also has drawn fire for voting last April for a $344 million bond package to build roads, even though some projects were not considered priorities.

Nuckles, who fought the bond package, was unaware of the $1 billion price tag for consultants the past 25 years. But she said she has been concerned about competition for consulting contracts. More competition could save money, Nuckles said. She's particularly leery of "on-call" contracts, open-ended agreements in which the DOT will notify consultants if it doesn't have the staff to handle certain jobs.

"You've got millions of dollars tied up in these three-to-five-year, on-call agreements," Nuckles said.

Consulting firms doing business regularly with the DOT include the LPA Group, Florence and Hutcheson and Wilbur Smith Associates, all national companies with extensive experience in road planning. All have offices in Columbia.

Many employees of consulting companies are former state or federal highway agency engineers. Some of the biggest highway construction jobs in the state, including the Ravenel Bridge in Charleston and the Carolina Bays Parkway in Myrtle Beach, relied on consultants for a variety of services.

"Records show consultants also have made plenty of money through the years.

The state paid consultants $9.6 million in 1987; this year the payments were nearly $57 million, according to DOT financial records obtained Friday by The State.

Payments to consultants peaked in 2003, when private companies earned $84 million for engineering, management, appraisal and other professional services, a DOT financial report shows. That peak is associated with a massive road and bridge construction campaign that began in the late 1990s and began to wind down in 2005.

After the building campaign ended, the amount paid to consultants dropped to $35 million by 2008. But payments since have risen by $22 million, records show. Records show that 73 consulting firms have received payments through the DOT in recent years.

Payments to consultants come from a variety of state, federal and local sources, including state gasoline tax revenue and funds from the State Infrastructure Bank, agency officials said.

Former DOT director B.K. Jones said a reliance on consultants has left some staffers underworked and in need of experience. Jones said the 4,500-employee department could improve efficiency by doing more of the work itself.

A.D. Plowden III, a construction company owner from Sumter, said he has seen cases where both state inspectors and consulting company inspectors are on job sites, when it doesn't appear both are needed.

John Walsh, the DOT's deputy secretary for engineering, said agency staff members have plenty to do designing roads and bridges and conducting inspections.

Jones, who ran the department from 1994 to 1996, said he was criticized once by state senators for spending $4 million on consultants. He said the department has created "another bureaucracy" with its use of consultants.

The cost of hired help

A reliance on consultants might suggest that the department would cut its staff.

One report shows that the DOT has 104 more engineers than the department had in 1998, when the move toward hiring consultants intensified. In 1998, the transportation department employed 623 engineers. Today, the department has 727 engineers, according to the State Budget and Control Board.

Walsh questioned the numbers. He also said it is difficult to compare engineers to the agency's use of consultants.

Whether state employees or privately employed, engineers are the brain trusts of road projects. Among other things, they design highways and bridges so that construction companies will know how to build them. Their designs can be critical to whether a road project is done on schedule and within budget. The move toward using consultants is part of a trend at state highway agencies across the country, research shows.

Nationally, plenty of research exists about the use of consultants at transportation agencies - and much of the research says hiring out work is expensive.

One 2011 study, compiled by transportation researchers in California, said "generally in-house services cost less than contracting out." The study said costs "are not the overriding factor in deciding to outsource. Other reasons, such as expediting project delivery and managing workload, take precedence over cost."

"Political rhetoric supporting the increased use of consultants touts the efficiency and cost savings of working with the private sector," a 2003 Georgia Department of Transportation report said. "However, the research literature indicates that hiring of consultants actually costs more than performing the work in-house."

The Georgia study found that many states hire out at least 50 percent of their road work to consultants.

A 2008 report by the U.S. Government Accountability Office said South Carolina began increasing the use of some types of transportation consultants in about 2000 - at the behest of state lawmakers. The S.C. Legislature approved a budget provision in 1996 encouraging the department to hire private contractors for bridge replacements, surface treatment, traffic signals and guardrails, among other things, the GAO's national survey said.

In addition to that study, auditors in South Carolina took the DOT to task in 2006 after finding that consulting companies were at times too expensive. Some 40 construction projects managed by consultants were about 7 percent more expensive than projects managed by the DOT staff, according to the Legislative Audit Council report, which was requested by lawmakers.

The audit also raised ethical questions about some consultants' relationships with the agency.

Handling peaks, valleys

In context, the $1 billion paid to consultants since 1987 is small when compared to the agency's overall budget of $1 billion for a single year. And supporters of privatizing road work say hiring consultants is a good value in the long run.

The DOT's ambitious "27 in 7" highway construction program is a prime example. The program, which did 27 years of work in seven years, would not have been possible without consultants, said former director Buck Limehouse. The DOT didn't have the staff to handle all the extra work, he and other officials said.

That program, which began in 1997-98, is a key reason consultants are still used regularly by the DOT. The program was paid for by selling bonds rather than spreading the work out and paying higher costs later, supporters said.

Walsh, the agency's deputy secretary for engineering, said the DOT hires many consultants to handle environmental work because regulations have gotten stricter and more complicated. The agency also increasingly uses consulting companies to inspect the work done on road and bridge projects and to secure the rights-of-way for projects.

"We do not employ full-time specialists in every specialty area, so we need to have on-call consultants when design-specialists and technical experts are needed, and when manpower requirements do not allow timely delivery" of services, he said in an email.

In the long run, it's better to hire consultants part time than full-time staff members, who might not be needed when the work load drops, Walsh said.

"You handle the peaks and the valleys" by using consultants, he said.

Although the DOT received an additional influx of funding through President Barack Obama's stimulus program, the money was only for "shovel-ready" projects, or those that should not have needed extensive preconstruction consulting work, Nuckles said. Walsh said the DOT needed consultants.

Limehouse, the former director, said the DOT should look for ways to do more work in-house when possible. But he said the agency will always need help.

"We're not going to change from consultants to no consultants," he said.