UPDATE by Andrew Walden July 5, 2012

HART—via an article in today’s Star-Advertiser—is desperately playing catch-up and clean-up after Hawai’i Free Press yesterday revealed the previously unacknowledged conflict of interest between Rail project overseers InfraConsult and their new owners, the engineering firm HDR. But the problems just grow. The Star-Advertiser reports:

The city has a $5.5 million contract with HDR to design the West Loch, Waipahu and Leeward Community College rail stations.

HART's board approved on June 7 a $1.9 million change order to that contract as part of an effort to redesign the stations to cut construction costs. Elements of the design can be used for other stations on the rail route, according to information HART provided.

What was the role of InfraConsult in promoting a $1.9M change order given to HDR immediately prior to announcement of the HDR deal to purchase InfraConsult? Certainly InfraConsult was aware of HDR’s interest in buying their company when HART approved the change order.

• Did InfraConsult make HART personnel aware of the potential conflict of interest?
• What steps did HART take to resolve this conflict?
• Was the $1.9M change order a “sweetener” designed to encourage HDR to buy InfraConsult?

The Star-Advertiser reports:

(Grabauskas) said HART has a plan to cope with the potential conflict of having InfraConsult staff oversee a design contract awarded to InfraConsult's parent company.

"We have put a system in place where no InfraConsult employee will have direct oversight over HDR or this contract," Grabauskas said. "HDR has also informed HART that it will not compete for any future contracts associated with the rail project."

Grabauskas’ sloppy damage control effort merely leads to more questions:

• If HART “has a plan”, then why was this arrangement not announced by HART, InfraConsult, or HDR? What is "the plan"?
• Why did HDR fail to report a material event such as its agreement not to compete for future contracts on one of the nation’s most lucrative public works projects?
• Were they hoping that nobody would notice? Were they and InfraConsult relying on the fact that as privately held companies, they need not report to public stockholders?
• If HART’s secret system is effective at removing conflicts of interest in the design contract for the three stations, then why is HDR removed from bidding on future rail contracts?
• If there is no conflict of interest, the removal of HDR from future bidding reduces the competitiveness of future rail contracts. Why is the removal of HDR from bidding being pitched as a benefit to the public?

* * * * *

Does HDR Purchase of InfraConsult Create a Conflict of Interest on HDR’s Rail Contract?

by Andrew Walden July 4, 2012

Nebraska-based engineering powerhouse HDR is buying InfraConsult, the company founded by ex-Parsons Brinkerhoff execs with Honolulu transit experience. InfraConsult has the HART contract to oversee all contractors on the Rail project. What has not been mentioned anywhere in Hawaii media is that HDR is a rail contractor overseen by its new subsidiary. HDR holds the design contract for three of the earliest rail stations and, oddly, while mentioning all of HDR’s other, non-Rail-related, Honolulu work, HDR failed to mention the three-Rail-Station contract in its announcement of the InfraConsult deal.

Here is HDR’s August 3, 2010 News Release announcing the contract for the three stations:

HDR|Hawaii Pacific Engineers Wins Rail Transit Design Contract (HONOLULU - August 3, 2010) - The city of Honolulu has awarded a design contract for three rail transit stations to HDR|Hawaii Pacific Engineers. The contract will help move forward the designs of the West Loch, Waipahu Transit Center and Leeward Community College stations along Farrington Highway. HDR is an employee-owned architecture firm with more than 7,800 professionals in more than 185 offices worldwide. All of them are committed to helping clients manage complex projects and make sound decisions. HDR is ranked No. 11 overall in the Engineering News-Record Top 500 Design Firms survey for 2010 and No. 8 in transportation.

And here is HDR’s July 3, 2012 News Release:

HDR, Engineering, Inc. has acquired InfraConsult LLC, an infrastructure management and advisory firm with offices in Arizona, California, New Mexico and Hawaii. Financial terms of the agreement were not disclosed. Going forward, InfraConsult will operate as a wholly owned subsidiary of HDR Engineering, Inc.

“We are excited about InfraConsult’s unique expertise, which we will now be able to jointly offer our transportation clients,” said Eric Keen, HDR Engineering, Inc., president. “They provide outstanding program and financial management advisory services and are supporting clients on some of the world’s most complex transportation and transit projects.

“HDR is committed to helping Hawaii grow as a center for technology and trade, and we appreciate working with the Hawaii community. Hawaii’s strategic location is important to HDR as we continue to expand our global focus, ” added Keen.

Michael Schneider, Alan Wulkan and Simon Zweighaft, Infraconsult’s managing partners, said: “We look forward to working with HDR and their ability to reach out to clients around the world. More importantly, we founded InfraConsult on the belief that projects are done by people, not companies. It was critical for us to join a company that shares our focus on client service through strong relationships and great people.”

Schneider, Wulkan and Zweighaft will join HDR as senior vice presidents.

HDR currently serves as the program manager for the City and County of Honolulu’s wastewater consent decree compliance program and owner’s engineer for H-POWER waste-to-energy plant expansion, as well as consultant to Hawaiian Electric Company (HECO) on power and energy projects. Hawaii also is the center of HDR’s Department of Defense activities in the Pacific Rim. InfraConsult serves as program manager for the Honolulu High Capacity Transit Corridor Project.

About HDR

HDR is a global employee-owned firm providing architecture, engineering, consulting, construction and related services through our various operating companies. More than 8,000 professionals are committed to helping clients manage complex projects and make sound decisions. HDR has had a strong presence in Honolulu since 2007, with 73 employees. Learn more at hdrinc.com.

About InfraConsult

InfraConsult is an organization specializing in the development and financing of sustainable infrastructure projects and solutions. The firm comprises experienced and knowledgeable professional partners with a range of disciplines and practices that spans the continuum of infrastructure development, from advice and consulting to development and operation.

While this version of the HDR news release mentions some Hawaii projects, it does not mention the three rail stations or any rail contracts other than those held by InfraConsult. A shorter version of the HDR News Release posted on the HDR website does not mention any of the Hawaii projects.

---30---