UPDATE Letters Feb 14/15: UH Promises an Investigation of Mitsunaga’s Allegations
THE SENATE
THE TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII
COMMITIEE ON HIGHER EDUCATION Senator BrianT. Taniguchi, Chair
Senator Gilbert Kahele, Vice Chair
Honorable Senator GilbertS. C. Keith-Agaran
Honorable Senator Sam Slom Honorable Senator David Y. lge Honorable Senator Michelle Kidani Honorable Senator Jill N. Tokuda
Date: Thursday, February 14, 2013
Time: 2:45 p.m.
Place: Conference Room 414, State Capitol, 415 South Beretania Street
RE: Testimony In Strong Support for S.B. 1383-Relating to the University of Hawaii; Department of Accounting and General Services; Procurement; Construction Contracts
My name is DENNIS MITSUNAGA. I have been a practicing Structural Engineer since
1969 and General Contractor since 1971. I am currently President/Owner of Mitsunaga and Associates, Inc. (MAI) and Majority Owner of Mitsunaga Construction Incorporated (MCJ).
I did the Engineering for the Chemistry Building at the University of Hawaii (UH) Manoa for DAGS in 1969 and have since done many, many DAGS and UH projects, including the Rainbow Baseball Stadium. Our firm (MAI) recently completed the design of the UH Hilo Student Housing, Phase I, which is now under construction.
By this letter, I would like to take this opportunity to offer testimony in FAVOR of
S.B. 1383, which transfers construction administration and procurement back to DAGS.
I have been in business since 1969 and have worked with every government agency administering non-bid and construction contracts in Hawaii. During my long career, I have found DAGS to be the most efficient, well organized and cost effective agency.
A. Because of their set up with five (5) separate branches (Contracts, Planning, Design, Project Management and Inspection),their projects go smoothly from start to finish, progressing from one branch to the next. Their staff members are dedicated and well qualified professionals.
B. Bids almost always come in within budget because of their history with past projects. Change Orders during construction are few.
C. Also, because of the existence of their Inspection Branch, the State automatically saves 5-6% for Construction Management (CM) fees during construction.
D. I have come to the conclusion that although DAGS' design fees are among the lowest compared to other State agencies their efficiency throughout the project makes up for it.
On the other hand, working with the UH Office of Capital Improvement (OCI) and its Director BRIAN MINAAI (Brian) has been a nightmare for members of our firm working on the UH Hilo Student Housing, Phase I. In the process of giving us a difficult time, Brian gave away millions of dollars on this project alone and should be investigated for BLATANT MISMANAGEMENT.
A. Brian's process for selection of non-bid consultants is highly suspect.
1. His selection committee consists of his two "Yes Men" assistants and a third member from the department involved with the particular project. In essence since he controls two out of the three votes he himself makes each selection.
2. With the exception of MAI, he only selects his friends from a pool of hundreds of qualified Architects and Engineers in Honolulu. Investigation will show that the consultants he selected were very small and not the best qualified for the projects he "gave" them.
3. A. small firm he selected to do major renovations to the Gateway Hall Dormitory complex was ARCHITECT BRYCE UYEHARA.
a. If you can recall, Bryce Uyehara was the Architect who made major errors in designing the Girl's Softball Stadium at UH Manoa. He designed the "line of sight" too high, so the spectators in the stands couldn't see home plate and the batters' lower body. I remember that it cost the State and UH over $500,000 to make the corrections.
4. We believe that MAI was selected for the UH Hilo Student Housing Project because of UH Hilo's strong and insistent endorsement of MAI. If not for UH Hilo's active participation in the selection process, we all consensually believe that Brian would have given the project to his friend.
B. Had it not been for the two (2) year exemption on procurement that the legislature gave to UH, Brian's actions against MAI after the selection would have been a criminal violation of the State Procurement Law HRS §1030-304.
After the selection, Brian took the following punitive actions against MAI and MCI:
1. Brian directed MAI to replace MAI as the project Civil Engineer with Wesley Segawa (Segawa).
a. MAI had applied for and were selected for this project with MAI as the Civil Engineer of Record.
b. Segawa's fee to do the Civil Engineering for this project was $293,260. MAI had to add a 10% coordination fee of $29,326 plus G.E. tax, hence Brian's directive cost the State an additional $29,326 plus G.E. tax for this project.
2. Brian directed MAI to replace Kimura International as the Environmental Assessment Consultant with Wilson Okamoto.
3. Brian directed MAI to use Palekana to do the permit/processing. Palekana's fee for this service is $23,000.
a. Permit Processing is usually part of the Architect's or Engineer's basic service and there is usually no separate charge for this work.
b. The basic work involves answering questions and making changes that the Building Department may require. These questions and changes has to be answered and done by the designers of record for the specific work; hence the Architect would answer the Architectural questions, the Civil Engineer would answer the Civil questions, the Structural Engineer the Structural questions, the Mechanical Engineer the Mechanical questions, Electrical Engineer the Electrical questions, etc.
So, as you can see from the description above, there is very little the permit processor can do except to provide pick up and delivery service since he does not have the expertise.
Brian's directive was a straight add on to the contract and wasted an additional $23,000 plus our 10% coordination fee plus G.E. tax of the State's money.
c. On a related note, MAI previously did the Civil Engineering as a sub-consultant to Architect Jeff Nakamura (Nakamura) on the Cancer Research Center in Kakaako.
Nakamura called MAI one day to inform us that Palekana was charging him $120,000 to process the permit and that our portion was $32,000. He said not to worry about it because he would pay the $32,000 for us.
1) Looking back, his call is very confusing because the Cancer Research project is in Kakaako and Kakaako is exempt from permit requirements. You may want to ask Brian about this.
4. Unknown to MAI and MCI, Brian replaced MCI as the Design Assist Consultant with AC Kobayashi. He also named Kobayashi as the Contractor for the project.
a. Again, MAI was selected with MCI on its team as the Design Assist Consultant. One of the UH Hilo Administrators commented that they wanted MAI because MAI was the only applicant with a Contractor (MCI) on its team. MCI had also done and is doing a lot of these apartment/dorm type structures.
MCI is currently contemplating filing suit against the UH and Brian for damages.
C. No Accountability of Costs
1. During the design phase MAI was directed by Brian to draw up whatever the Contractor wanted done and to not question his costs.
MAI had no control over the design, cost or schedules. MAI had to follow the Contractor's and Brian's directives. The Contractor set the framing system, materials to be used, and the schedules.
The wooden framing system dictated to us by the Contractor and approved by Brian will require heavy maintenance because of all the rain in Hilo.
2. Although MAI has construction expertise, MAI was never asked to provide any kind of cost estimate for this project. There is no INDEPENDENT ESTIMATE to check Kobayashi's price.
After questions raised by MAI, Brian hired Ryder Bucknell after the fact as a shibai. There is still no independent cost verification since Ryder Bucknell worked in collusion with Kobayashi to come up with their estimate which Brian will probably use to deflect questions which may arise later.
D. Never Ending Project
1. This project is never ending for MAI since the Contractor is constantly making changes to increase their profit margin. MAI is still working to make changes even though a construction contract was signed a long time ago. Any savings generated by MAI changes should be credited back to the State, but we have no way of knowing if this is being done.
E. Blatant Waste of State Money
1. Brian gave the Construction Contract to Kobayashi. Kobayashi in turn subcontracted the concrete and site work to lsemoto Construction and the framing to Coastal Construction. In other words, Kobayashi subcontracted out all of the General Contractor's work since the rest of the work is done by specialty subs.
a. The big question is why didn't Brian give the contract to lsemoto directly instead of Kobayashi.
lsemoto is large, financially stable General Contractor based in Hilo with lots of heavy equipment. They are the largest Contractor in Hilo. I have worked with them before and know them personally.
If Brian gave the contract directly to lsemoto instead of Kobayashi, the State would have saved the 12 to 15% mark up for overhead and profit that Kobayashi probably added to manage the project. The mark up for this project is probably $3 to 4 million.
F. Poor Administration
1. MAI was given the Notice to Proceed for the UH Hilo Student Housing project on 9/21/11. We received the executed contract almost a year later on 9/19/12. This delay would never have happened had DAGS been involved. DAGS would have issued the contract to us within 60 days.
The delay caused a hardship for MAI and its subconsultants.
2. UH Beach Volley Ball Court
a. MAI completed this project over a year ago but has yet to receive a contract.
It is my personal opinion that Brian Minaai and the OCI is not capable of efficiently administering the construction projects at UH. It is my hope that OCI be abolished and the money saved be used for student benefits.
Please pass S.B. 1383 to return the construction administration and procurement of UH projects back to DAGS. Sincerely,
Dennis K. Mitsunaga
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Status, Text: SB1383
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Mitsunaga: Hirono Took Same Illegal Contributions Cayetano Did
Memo to Mitsunaga: If it’s a fact you’re squeaky clean…do you really need the services of Michael Green?
Pay to Play Mitsunaga Challenges White to Take a Fake Polygraph Test
Attack ads "coordinated' with alleged Pay-to-Play engineering firm
Mitsunaga Again: Abercrombie campaign worker seated on development authority
Abercrombie, Mitsunaga, OHA Sharpen Knives to Cut up Kakaako
Flashback March, 2012 -- SB1332: Kobayashi UH Exemption to be Continued?
SA: Gov. Neil Abercrombie supports the UH exemption, which is to sunset in June unless lawmakers extend it under Senate Bill 1332.
The top beneficiary of design-assist has been Albert C. Kobayashi Inc., which won the $113 million UH-West Oahu project, the $119 million Cancer Research Center of Hawaii job and a $22.5 million research building through its association with the Research Corp. of UH. This month, Kobayashi was given the design contract for a UH-Hilo dormitory.
Several contractors who have done business with UH told the Star-Advertiser's Rob Perez they are rethinking whether to invest the time and resources to pursue design-assist projects at UH because the selection process is too subjective and favors a single company. Without their competition in bidding for construction projects, there is real concern about whether reasonable costs are achieved.
Kobayashi did not respond to Perez's repeated requests for comment, a disappointing silence heavy with either apathy or arrogance. The company's recent receipt of the three sizable UH jobs totaling $254.5 million of taxpayer money, which has raised industry and public eyebrows, warrants an explanation.
UH President M.R.C. Greenwood said such complaints that the procedures are unfair are "a little premature," (because she isn’t quite done doling out the loot) since only one UH design-assist project has been completed -- the more than $6 million School of Nursing facility. However, more than $500 million worth of construction projects have been started under the new system.
Tim Lyons, president of the Subcontractors Association of Hawaii, testified to legislators a year ago that "the new way of doing business at UH" may leave "some people screaming that it is unfair and (it) would seem to us that the Legislature would want to exert its oversight function" on the procurement process. The group consists of nine separate subcontracting organizations.
Lax oversight is another questionable aspect of the exemption: The UH gets to decide the merits of procurement protests filed against it, a self-policing power few other isle government agencies enjoy. The university has denied all six procurement complaints filed against it since this pilot began. A losing contract bidder must file a lawsuit to challenge a UH contract award to a competitor, which can be expensive and cumbersome.
Any talk of extending the UH exemption must include provision of a third-party contract appeals process.
read … Premature
Flashback March, 2012: Abercrombie, Greenwood Team Up to Steer $260M in UH Contracts to Bert Kobayashi Inc
SA: Since 2008, they note, three of four sizable construction jobs, including the $113 million UH-West Oahu project and the $119 million Cancer Research Center of Hawaii, have gone to Albert C. Kobayashi Inc. via a selection method that was based largely on qualifications and did not include traditional competitively priced bids.
Contracts for the West Oahu campus, cancer center and a research building were all awarded through the Research Corporation of the University of Hawaii using a process called design assist.
This month the university awarded the design contract for a fourth project, a UH-Hilo dormitory, to Kobayashi, giving the firm the inside track to snag the more lucrative construction work for that job.
If Kobayashi gets the job, it will have landed four of the five design-assist projects at the university over the past four years, including the two largest. The only one it sought but didn’t get: a (piddling) $6.3 million renovation. (Denied to create deniability, of course)
… Kobayashi Group (is) a company with past ties to UH. Its founder, Bert A. Kobayashi Sr., was a former UH regent and son of Albert C. Kobayashi, founder of the construction company, which eventually was sold to employees….
The university’s process for awarding contracts is getting renewed attention this legislative session as lawmakers and the Abercrombie administration look for ways to expedite construction projects to create jobs. Some believe the UH system could be a possible model for streamlining the state’s contracting methods.
The university has been able to institute new procedures because legislators in 2010 granted it a temporary exemption from key provisions of the state’s procurement code.
The exemption gives the university greater flexibility in purchasing goods and services, including the ability to forgo traditional price competition in soliciting certain construction proposals.
The exemption also allows UH to decide the merits of procurement protests filed against it — a self-policing power few other government agencies in Hawaii have.
“That is highly, highly unusual,” said Jim Nagle, a Seattle attorney with expertise in public procurement law….
The exemption is set to expire in June, but a pending bill, SB 1332, would extend it to give the UH more time to gather data on the effects (because it is so lucrative). Gov. Neil Abercrombie, the General Contractors Association of Hawaii and others support an extension.
“If the City and County of Honolulu were seeking a similar exemption from the procurement law to create their own process for awarding contracts, and utilized this created process for awarding contracts for the rail projects, people would be outraged,” Fujioka said in a statement to the Star-Advertiser.
Patrick Shin, owner of Nan Inc., one of the largest contractors in the state, said he is discontinuing funding for four UH engineering scholarships because of the procurement flap.
“Everybody in the construction community is so fed up,” Shin added.
SA: University of California system self-polices with third-party help
read … Contracting system enables UH to play favorites