Key $1 million transportation audit unready close to deadline

Oregon Bridges : Fremont Bridge

Mike Gehring, ODOT bridge crew maintenance supervisor, climbs to the top of the Fremont Bridge on August 13, 2015. Bruce Ely / Staff

(Bruce Ely)

UPDATED: This story has been updated to reflect new information about the readiness of the preliminary findings.

Third-party auditors were expected to reveal their long-awaited assessment of Oregon Department of Transportation management Thursday. But that now seems unlikely because their preliminary findings aren't ready for public release, a state official said Wednesday.

That surprised the Oregon Transportation Commission chairwoman, who expected the panel would learn the preliminary findings as scheduled, since the completed report is due in less than two weeks.

"My understanding was that we would have an overview of the draft findings," said commission head Tammy Baney. "At this point, it is a little bit odd."

The delay was caused at least in part because a section of the report, appraising ODOT's handling of conflicts of interest, was omitted by auditors from a late-December draft.

Washington D.C.-based consultants McKinsey and Co. initially failed to appraise ODOT's handling of conflicts of interest. They also didn't include a review of whether decisions at the transportation agency were being made by the right people.

Those are surprising omissions, given that potential financial conflicts and ODOT's organizational structure have been a central concern of lawmakers and the agency's oversight commission. A conflict-of-interest assessment and decision-making review is also asked for in the audit contract.

Gov. Kate Brown called for the audit more than a year ago after transportation negotiations failed. Lawmakers say the audit is critical to assuring them that ODOT is well-positioned to execute a mammoth construction and repair package negotiators hope to approve in the upcoming legislative session.

Bret West, the state manager overseeing McKinsey's work, said the company knew it agreed to include conflict-of-interest and decision-making findings in its report. But after seeing a draft, West had to tell them to add the information, he said.

"They accepted that feedback and I have not seen an update," West, an executive at the Department of Administrative Services, said Tuesday.

McKinsey staff conducting the audit did not return calls seeking comment. The company is tasked with reviewing ODOT's operations, decision making and interactions with its oversight commission, according to the contract work statement.

Baney said the conflict-of-interest review is a "critical piece" of the audit.

"We need to have that information," said Baney, who has used her position to pursue greater supervision of ODOT business. "Transparency and even perception of conflict can present problems."

McKinsey landed the ODOT review only after the state backed out of its agreement with the original contractor, John L. Craig, fearing a potential conflict of interest.

Craig had for years managed the agency's outsourced bridge repair program, leaving him in a position to review his own work. Craig had also eyed the ODOT directorship, records show. He did not respond to a request for comment.

Craig had agreed to do the audit for $350,000. The state is paying McKinsey nearly $1 million.

The final report, including policy recommendations, is due February 1. The governor has said she's committed to implementing the audit's recommendations.

Governor Kate Brown visited the Oregon Department of Transportation office in Southwest Portland to thank ODOT employees and talk about the recent storm and the impact on transportation, along with ODOT Director Matthew Garrett, Jan. 13, 2017. Mike Zacchino/Staff

McKinsey auditors, however, will not write that part of the report. Policy recommendations will instead be handled by Department of Administrative Services executives, who report to the governor. ODOT will also have a seat at the table when recommendations are drafted, said agency director Matt Garrett, but won't directly write the proposals.

The Oregonian/OregonLive requested a copy of the draft findings, which McKinsey is reviewing to redact "trade secrets," according to a Department of Administrative Services spokesman.

What trade secrets are being blacked-out?

"That's a great question for McKinsey," Baney said.

-- Gordon R. Friedman

503-221-8209; gfriedman@oregonian.com

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