CHARLESTON, W.Va. — West Virginia’s contracts for long-term flood relief — valued at millions of dollars and meant to be a lifeline for vulnerable disaster victims — have expired.
Now state officials are trying to figure out what to do.
Those whose communities are still struggling to recover are worried.
“I do have concerns with the contracts,”said state Sen. Glenn Jeffries, D-Kanawha, who has been focused on flood recovery in his district and elsewhere.
The contracts with the firms that were to provide hands-on help with reconstruction were good through this past weekend.
They wound up in a vortex of questions about their legality, differences of opinion among state officials and frustration over the pace of flood relief.
West Virginia has $149 million available from the federal government, but there’s very little to show for it.
“Survivors of the devastating 2016 flood have waited far too long to receive the housing assistance they need,” House Speaker Tim Armstead, R-Kanawha, said Sunday afternoon.
Most public attention has been focused on a contract with Horne LLP, which was to provide consulting services to manage West Virginia’s long-term recovery effort, including housing, infrastructure and economic development.
That contract drew scrutiny because an initial scope valued at $900,000 was appropriately approved by the state Division of Purchasing. But additional task orders valued at $17,817,108 created red flags with the purchasing division and the Governor’s Office, which paused the work this spring.
That contract actually expired last December. The administration has been working to renew it while dropping some of its scope. Its current status is unclear.
While the Governor’s Office was investigating that contract, it took its concerns to the Legislative Auditor, which opened up its own investigation and led to conclusions that the Justice administration doesn’t seem especially happy about.
Some of the Legislative Auditor’s report focused on larger contracts with construction contractors, valued at $71,430,000.
Those are seven contracts with Thompson Construction Group of South Carolina ($49 million), Danhill Construction Company ($15 million), Appalachia Service Project ($3.18 million) and River Valley Remodeling ($4.25 million).
A legislative audit released last Sunday concluded that the contracts were awarded unlawfully.
They actually were executed prior to this winter’s official release of funding from U.S. Housing and Urban Development.
And the West Virginia Development Office did not comply with the Purchasing Division statutes, the audit concluded.
“As a result, the Legislative Auditor recommends that the Development Office cease all payments under these invalid contracts,” according to the report.
“Further, the Legislative Auditor recommends that the Development Office immediately terminate all contracts which commit the expenditure of Disaster Recovery Funds that were executed prior to receiving HUD’s Authority to Use Grant Funds form.”
Those conclusions cast shadow on an already-difficult situation.
Concern grew at HUD, which had already been watching West Virginia closely.
“I’d say it has a chilling effect on our dealings with HUD and couldn’t have come at a more inopportune time while things are being reviewed,” Brian Abraham, general counsel for Gov. Jim Justice, said Sunday.
Abraham said late last week the state Department of Commerce issued extensions on the construction contracts. But state officials need to reach consensus on whether that step is adequate.
“The underlying debate about the contracts themselves is ongoing, and we have a meeting in the morning in hopes of reaching some kind of resolution we can reach to HUD,” Abraham said Sunday.
Each of the contracts for Thompson Construction Group, Danhill, Appalachia Service Project and River Valley Rehab specifies a term date that ends July 1, 2018, or when the work is concluded, whichever is sooner.
Contacted over the weekend, a lobbyist for Thompson said the company isn’t the right entity to ask right now about the contract’s status.
“At this time, we believe that requests for information about the contracts should be discussed with the State of West Virginia,” stated Angel Moore, a lobbyist for Thompson.
A few days ago, after the legislative audit was released, Thompson Construction put out a longer statement in reaction:
“Thompson Construction Group stands ready, willing, and able to continue with its reconstruction and rehabilitation efforts in West Virginia, and it looks forward to working with the Governor’s Office and Adjutant General Hoyer and his staff as the RISE West Virginia Flood Recovery Program plows ahead.”
The statement said Thompson had reviewed the legislative auditor’s report and disputed some key aspects. Thompson contends Housing and Urban Development’s approval was clear, right before the operational pause ordered by the Governor’s Office.
“The United States Department of Housing and Urban Development gave the state express permission to begin the construction work TCG performed before it was ordered to pause. TCG therefore disagrees with the recommendation that the subgrants should be voided. Families devastated by the floods need action, not further delays,” Thompson Construction stated.
The company also disagrees with the audit’s conclusion about competitive bidding.
“Contrary to certain findings in the report, TCG did participate in a competitive award process on the three subgrants it was awarded, even though the state’s purchasing laws did not require that process.”
A key aspect of the audit, though, was that the bidding was completed internally by the Development Office, rather than being through the Division of Purchasing.
“By not using the Purchasing Division’s competitive bidding requirements, the Development Office’s process to awarding the grant funds is not in compliance with federal regulations,” according to the audit.
One potential solution might be to point toward a section of state purchasing rules exempting grants that do not have a direct benefit to the governing agency like the Development Office:
“If a grant awarded to the state requires the state to transfer some or all of the grant to an individual, entity or vendor as a subgrant to accomplish a public purpose, and no contract for commodities or services directly benefitting a spending unit will result, the subgrant is not subject to the competitive bidding requirements set forth in this chapter.”
If emergency purchasing powers have to be invoked for the contracts, West Virginia might be in a jam.
The state’s purchasing procedures handbook specifies in a couple of places that “emergency purchases are
not used for hardship resulting from neglect, poor planning, or lack of organization by the spending unit.”
Armstead, whose district was badly damaged by flooding two years ago, said the state must be careful but do its best to move forward.
“I share the concerns expressed by the Legislative Auditor regarding the construction contracts and believe the administration must act immediately to address these issues,” he said Sunday afternoon.
“We need to ensure that the law is followed in all respects and that the contracts are executed and performed in a proper manner that prevents our state’s taxpayers from having to pay back federal funds in the future.”
Armstead did not take the position that the contracts should be voided, though.
“I wish we had the luxury of starting over with awarding these contracts, but unfortunately since they expire today doing so would only cause further delays in getting people into their homes. There needs to be immediate action to correct any legal deficiencies in flood-related contracts to avoid any further delays.
“Correcting any legal mistakes relating to construction contracts and opening up the process to additional contractors as quickly as possible must be a priority. The survivors of the flooding who are still waiting for assistance simply can’t be asked to wait longer.”