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Was AKRF's work for Ratner a hindrance to hiring by ESDC? No, it was a justification

I wrote in July 2007 about the questionable but apparently legal practice of a developer like Forest City Ratner hiring consultants like AKRF, then paying for AKRF's work on the same project on behalf of the Empire State Development Corporation (ESDC).

Since then, I've learned some details:
--AKRF had been working for Forest City Ratner since June 2003
--the ESDC's conflict-of-interest policy doesn't address issues of consecutive representation
--AKRF was hired without any competitive bidding or public notice because the ESDC was convinced speed and continuity were important.

All this suggests that AKRF, widely acknowledged as the largest and most experienced environmental consulting firm in New York, the consultant of choice for sponsors of major projects, can benefit from some cozy circumstances: in the case of Atlantic Yards, its preliminary work for the developer, rather than raise questions about the ethics about later doing similar work for ESDC on behalf of the public (from an account funded by the project sponsor), instead cemented the contract without competition.

In the case of Atlantic Yards, the voluminous Environmental Impact Statement (EIS) adds up to nearly $4.8 million.

"The noncompetitive, nonadvertised aspect is questionable, as is who’s managing the consultant," observed Hope Cohen of the Manhattan Institute, who's critiqued the EIS process, when I forwarded her some documents for comment. "This question of who’s in charge is a fundamental problem in the public sector."

"Rather than [the ESDC saying] Here’s my list of approved consultants," Cohen added, "You have an applicant saying, I hired a consultant, he’s done 10% of the work so far, so please approve a noncompetitive contract to complete the work under your aegis.

AKRF background

Here's an August 2007 profile of AKRF by the New York Observer, explaining how the firm has grown, and noting controversies over its work regarding Duffield Street in Downtown Brooklyn and on the Columbia University expansion.

Note the (anonymous) comment from a planner who says AKRF violates the "American Institute of Certified Planners (AICP) Code of Ethics and Professional Conduct by not upholding 'the Planner's Responsibility to the Public' as the primary responsibility of ethical behavior" and the response from a former AKRF staffer that the company plays it straight.

While it may be easy to cherry-pick the enormous Atlantic Yards EIS, here are a couple of jaw-dropping statements from it, concerning the prospect of no redevelopment without the project and the responsibility for upkeep of the railyard.)

No rules on consecutive representation

A state judge has ruled (upheld by an appellate court) that it was a conflict for AKRF to work simultaneously for the ESDC and Columbia University regarding Columbia’s expansion project, resulting in the disclosure of AKRF-ESDC documents but not ending the relationship. But no one has formally challenged the consecutive work that AKRF did on the Atlantic Yards project.

Last year, I queried the ESDC about its guidelines regarding consecutive representation, but never got an answer. The AKRF/ESDC contact, acquired via a Freedom of Information Law (FOIL) request, provides something of an answer.

It does contain a conflict-of-interest provision (right; click on all graphics to enlarge) that prevents the consultant (AKRF) from acquiring "any interest" in the project or associated real estate. It prevents any ESDC official from sharing in any benefits from the AKRF contract. It extends the provisions to subcontractors.

However, it says nothing about serving two masters consecutively on the same project.

Does gap make a difference?

Lawyer and urban planner Michael White, in his comment on my blog, questioned whether the work was “truly consecutive” and, beyond that, questioned whether the work “could be ‘consecutive’ when there is an implicit warranty that travels with the work.”

Cohen was more circumspect about the concept of consecutive representation. "I absolutely see the problem," she said, "but should the state put itself in a position where it can’t hire the best firm?"

She acknowledged she didn't have a good solution, but suggested that, at the very least, there should be more transparency around the process. "It would be nice if AKRF had more competition," she said. "They have the most resources, the most experience."

Since June 2003

Though Atlantic Yards was not officially announced until 12/10/03, a document titled Contract Scope for an Environmental Impact Statement indicates (right) an established relationship between AKRF and FCR:
Since June 2003, AKRF has been working closely with the project architects, project attorneys, and other involved parties to prepare a draft EAF [Environmental Assessment Form].

It continues:
Over the past several months, AKRF has worked in coordination with the project team to produce a draft document that reflects the most current project information and analysis framework.

Work carryover?

On p. 33 of the document, there are several footnotes; two are of particular interest, since they regard work done for Forest City Ratner:
1: Assumes that AKRF will be able to use lighting diagrams produced by consultants under contract to FCRC
8: Assumes update of economic/fiscal impact analysis previously performed by AKRF for FCR Sports, and that operating pro forma is available from FCR Sports.


I asked ESDC if those assumptions were borne out and received the following responses from spokesman Warner Johnston.

Regarding lighting:
AKRF was provided information from FCRC's lighting consultants and architects on the type, illumination, and signage coverage (e.g., animated, illuminated, backlit) envisioned for the arena and other buildings on the project site (i.e., retail storefront lighting, internal illumination). The diagrams from the lighting consultants were not included in the EIS.


Regarding economic/fiscal impact:
The economic impact analysis presented in the FEIS analyzes the impact of the entire proposed project on New York City and State. The analysis AKRF initially conducted for FCRC analyzed the impact of the arena only. The two analyses share certain inputs related to arena operations (e.g., ticket prices, number of events per year, salaries for basketball players). However, specific values used for the FEIS analysis differ in some instances from those used in the earlier analysis based on updated information from FCRC and additional research conducted by AKRF.


Those both seem to be gray areas, in which AKRF at least in part relied on work produced for Forest City Ratner by an outside consultant and on its own work for the developer.

Feb. 2004 request

In a 2/18/04 letter from FCR to ESDC, the developer described an agreement to "pay certain costs" incurred by ESDC with respect to the proposed Atlantic Yards project. Among the services FCR requested that ESDC oversee included:
Services to be provided by AKRF, Inc. ("AKRF") in connection with the environmental analysis of the Project
Legal services to be provided by Sive, Paget & Riesel...
.

Response claims urgency

It took about a year and half until the ESDC wound up signing a contract with the consultant. In response to my FOIL request, I was provided with documents dated 9/29/05 regarding the request for authorization to enter into a contract with AKRF.

A memo from that day states, in part:
FCRC anticipates the opening of the arena and the completion of the newly renovated Rail Yard and other developments planned for the arena blocks and Site 5 by 2009, which represents Phase I of the project, and completion of all other project elements by 2016, which represents Phase II of the project.
In order to meet the aggressive schedule for completion of Phase I of the proposed project, FCRC already has had AKRF begin collecting data to enable the environmental analysis to be completed in time. An exemption from advertising these services in the Contract Reporter has been granted because of this schedule, and because staff recommends that AKRF be retained to continue providing these services for cost and schedule efficiency.

(Emphasis added)

The next paragraph explains that AKRF “is regarded as the premier environmental consulting firm in the New York metropolitan area” and has provided services to ESDC and its subsidiaries for more than 20 years.

Cohen commented, "Public agencies do have rules, in this case the relevant rule being advertising and competitive bidding. They should be required to follow those rules. When they’re making an exception, they should explain in public why they’re doing it."

Minutes from the directors’ meeting that day do not indicate any concern about any potential conflict or any inquiry into the need and scope of "schedule efficiency.".

"Schedule efficiency" or political expediency?

It's hard to say what exactly "schedule efficiency" means. It's hard to have called Atlantic Yards a project of urgency, given that it had been announced nearly two years earlier and was to take at least ten years and possibly much, much longer to construct.

Then again, there was a push to finish the environmental review by December 2006, when the administration of Gov. George Pataki was to leave office, and the membership of the Empire State Development Corporation and the Public Authorities Control Board was to change. (Arguably, the change would have made little difference, but project proponents couldn't be sure.)

FCR's account

AKRF’s compensation would come “from an interest account funded by Forest City for ESDC’s out-of-pocket costs, including consultants.”

Minutes from the 9/29/05 meeting show that ESDC Director Kevin Corbett wanted more details: “The out-of-pocket, did that also cover staff expenses as well…?"

“I don’t think we have discussed that,” responded Rachel Shatz, ESDC’s director of planning and environmental review.

AKRF contract increases

The 9/29/05 action by the ESDC authorized a contract with AKRF "not to exceed $1.5 million," including reimbursables and contingency.

On 4/27/06, after the Draft and Final Scopes of Analysis for an EIS were issued, and after one public hearing, the ESDC directors authorized contract amendments that added $600,000.

The explanation? Additional funding is needed in order to complete the EIS and related tasks due to expansion of the scope of work for the EIS and blight study, requiring substantial amounts of additional effort on the part of the Consultant and its subconsultants. A number of iterations of the EIS scope and draft chapters and the preparation of a response to comments document were necessary based on the large volume of public comments received on the Draft Scope of Analysis, as well as site plan changes, project team review, and expansion of study areas for the EIS. The scope of work on the blight study has also been substantially expanded to include additional analyses, document restructuring, site photographing, and team coordination, which were determined to be necessary in order to provide sufficient documentation of blight to rule conclusively on the condemnations that are proposed as part of the project. The increased budget is also due to additional traffic peak hour analysis and expanded intersection study area required for the traffic study based on team review and public comments.

(If blight means "the fabric of the community is shot to hell," in the words of Penn planning professor Lynne Sagalyn, would it be that hard to document?)

On 9/20/06, after the Draft EIS was issued and a public hearing and two "commmunity forums" were held, $2,056,230 was added to the contract.

The explanation? Additional funding is needed to cover expenses related to completing the Draft EIS and for current and upcoming efforts for the Final EIS's preparation. The additional funds are due to an expansion of the scope of work for the EIS, which also require substantial amounts of additional effort on the part of the Consultant and its subconsultants, most significantly for construction related anlayses. In addition, the project schedule proposed an intense level of effort over a concentrated period and required particiaption of many senior level principles [sic] at AKRF. Also, because of iterative changes to the program, DEIS chapter review and editing was more extensive than originally anticipated. Lastly, documentation has been in the hundreds, far exceeding what both ESDC and the Consultant originally anticipated and budgeted for document production and distribution.

On 5/17/07, $630,000 was authorized, reaching a total of $4,786,230.

The explanation? As noted last year, the additional funding is needed to cover expenses related to unanticipated additional work, to complete the Final EIS, post-FEIS litigation support in connection with an Article 78 proceeding [the lawsuit challenging to the environmental review], and interim mitigation monitoring services. The additional funds are due to the unusually high volume of substantive comments on the Draft EIS, additional effort associated in responding to comments that were inadvertently omitted from the FEIS issued on Nov. 15, and preparation of the memo in response to post-FEIS comments.

Billing rates

The Contract Scope, from (apparently) 2005, listed the following compensation rates per hour for AKRF:
Chairperson, $245
Senior Officer, $225
Officer, $200
Tech Director, $175
Senior Professional, $135
Professional II, $110
Professional I, $105
Tech II, $95
Tech I, $75

Comments

  1. This contract for the environmental review which was given to AKRF was a $4.78 million contract and through Forest City Ratner’s initiative it was given to AKRF without competitive bid. Officially the contract started out in the lower amount of $1.5 million, but most of the work for which there were contract increases was probably foreseeable. At the 9/29/’05 meeting where the not-to-exceed $1.5 million contract was approved, it was asked whether litigation was expected and counsel to ESDC advised the ESDC director’s that litigation was expected although no law suit had been brought. She predicted a combination of challenges that would involve general environmental challenges. With everything that could be foreseen it is hard to explain why there should have even been a single contract increase of $2.056 million that, in itself, exceeded the entire original amount of the contract that could not be reasonably foreseen. Are “site plan changes” an explanation? Not based on what I saw was originally submitted to the ESDC directors! More public comment than expected? Suffice it to say that from the beginning AKRF knew it was getting a BIG contract.

    AKRF got the contract because Forest City Ratner took the initiative in awarding it to them. The procedure for the competitive process of “advertising these services in the Contract Reporter” and apparently the competitive bid process itself was set aside as a result. So, all that it takes for a developer to take the first step in selecting ESDC’s environmental consultant and set them on their path is to engage (an acceptable?) consultant and pay them to start work? Then the advertising requirement is circumvented?- resulting in the consultant being sole bidder? The advertising requirement is partly to make sure that a good, fair and low price is obtained on the contract. Among other things, circumventing the advertising process means that the contract price could be much higher as a result. So the selection of the contractor and the possibly higher than generally competitive fees both come about by the developer’s initiative? Doesn’t that make the contractor (AKRF) beholden to the developer for such a favor?

    If AKRF is beholden to the developer for the $4.78 million contract, how can the process work the way it is supposed to? How can there be accountability to produce a neutral evaluative set of documents?

    We never get to the problem of whether the state should “put itself in a position where it can’t hire the best firm.” as posited by Hope Cohen because the competitive process to find the best firm to hire has been circumvented. And part of the determination of what firm would be ‘best’ involves the handling of conflicts so they don’t impede the job that needs to be done.

    On several levels I don’t see that the problem of the conflict was recognized or surmounted. For one thing, I don’t see that the ESDC directors were advised that the problem was there or that staff was aware of it and would take steps to guard against the problem. It looks as if the information may have been given to the Directors so little time in advance that the Directors would not have had a chance to realize or evaluate the problem. The advice to the Directors at the meeting was simple: “in consideration of the effort already expended toward preparation of the project’s Environmental Impact Statement, it is recommended that ESDC be engaged to CONTINUE providing these services to COMPLETE the required SEQR review.” The implication is that what was done would be accepted as is and as it had been done for the developer. There is no suggestion that it be reworked so as to adjust for the conflict.

    Another cause for concern is that with these conflicts in place ESDC took the role of lead environmental review agency. Did ESDC tell the other agencies for whom it was then conducting the review that there was a hampering conflict to be adjusted for? These agencies allowed ESDC to be the lead agency, but, in essence, ESDC then allowed FRC to act in its stead as de facto lead agency via FRC’s hiring of AKRF for preparation of a substantial portion of the EIS. It is not permissible for public agencies to delegate the SEQRA responsibilities. If a portion of the SEQRA was already substantially prepared by Ratner how could this not amount to an impermissable delegation?

    9/29/’05 is the date that the ESDC directors authorised ESDC to enter into a contract with AKRF. There was a public interaction immediately following in connection with the 10/18/2005 scoping hearing. Since there is so little time between 9/29 and 10/18, how much of the work for that scoping hearing was done under FCR’s direction and paid for by FCR? How much was done between June of 2003 when AKRF started working for FCR and the date they theoretically switched over to working exclusively for ESDC.

    (BTW: I am not sure that the contractual conflict-of-interest provision that prevents the AKRF from acquiring "any interest" in the project or associated real estate should not prevent AKRF from working for Forest City Ratner at the same time. That involves interpretation, but if ESDC does not interpret it to prevent that conflict of interest then it won’t.)

    Michael D. D. White
    Noticing New York
    http://noticingnewyork.blogspot.com/

    ReplyDelete

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