Audit finds red flags in Hartsfield-Jackson contracting


A city audit found red flags in contracting for construction projects in Hartsfield-Jackson International Airport’s $6 billion expansion, indicating an “elevated risk of fraud.”

The audit found errors in the contracting process — including errors that may have affected the outcome of a contract award — as well as unclear reasons for the cancellation of contracts.

City auditor Amanda Noble said her office had already planned the audit, but after learning of the federal bribery investigation into City Hall that came to light last year, it began a more comprehensive review of all airport construction contracts from 2014 through 2016.

Noble said it’s impossible to tell from the auditing work alone “if it was wide-spread, sloppy record-keeping, or if somebody was trying to hide evidence.”

The review “found typical indicators of potential bid manipulation, acceptance of nonresponsive bids, presence of errors, and missing documentation,” the audit report says. It found “what appears to be four incorrectly awarded contracts.”

Calculation errors “put the city at risk,” the report said.

The scope of the audit amounted to 54 airport contracts worth more than $1 billion combined. It’s just a portion of the Atlanta airport’s massive expansion and renovation master plan that encompasses everything from a sixth runway and new Concourse G to terminal renovations, an airport hotel and new parking garages.

Although this audit only focused on airport contracts, contracting is centralized at the Department of Procurement at Atlanta City Hall. “If we were looking at other departments, I’m sure we would have seen the same thing,” Noble said.

The results come amid a federal probe of pay-to-play contracting, in which the city’s former chief procurement officer Adam Smith admitted to accepting at least $44,000 in exchange for contracting information from an unnamed vendor. Smith was sentenced to 27 months in January.

“Without knowing the details of the FBI case, I’m not sure exactly how… or if [Smith] influenced the outcome of an award. I’d be really interested to find that out,” Noble said.

Atlanta Mayor Keisha Lance Bottoms, who was endorsed by her predecessor Atlanta Mayor Kasim Reed, took office in January and has pledged to clean up city contracting. The city’s procurement department is now run by interim chief procurement officer Susan Garrett.

Noble said she hopes the audit is “a resource for whatever reform efforts the mayor and council have in mind.”

The audit found the city canceled 10 of the contract solicitations it reviewed, with unclear reasons for the cancellations in six of the 10.

“Cancellations are a red flag because it could indicate an attempt to steer a contract,” according to international anti-corruption groups, Noble said. Cancellations also waste time and make companies “lose faith in the integrity of the process.”

While city code allows a contracting process to be canceled for any reason as long as it is deemed to be “in the best interest of the city,” using only that standard language “could be an indicator of fraud,” according to the audit report.

“We’re saying there should be an actual reason” for canceling a contracting process, Noble said.

In 29 instances, there were missing results on the procurement department’s review to determine whether a bid or proposal was on time and complete. Eight decisions were made in error, while another 11 results were ambiguous, according to the audit.

The city’s procurement process follows the American Bar Association’s model procurement code, “which is designed to be fair and transparent.” Thus, the process itself “should work pretty well,” Noble said.

But “the problem is the department didn’t document that it followed its procedures,” she said. Given the controversy around procurement, that should be a priority. And, some have been concerned that one individual — Smith — had too much control over contracting.

One criticism of the city’s contracting process is that it’s still a costly, cumbersome paper process — requiring companies to submit boxes of printed proposals to compete for contracts.

Among the recommendations the auditor’s office made to the city’s chief procurement officer: Moving to electronic forms, which could reduce errors. Automating the scoring process could also “better protect the city against fraud and the appearance of corruption.”

Another recommendation was for the procurement department to evaluate bid patterns to detect potential fraud. The audit found that the dollar amounts bid by companies “indicates heightened risk of collusion.”

The current head of procurement agreed with all of the recommendations and pledged to complete the changes by September 2018.

The mayor’s office said the city has already implemented many of the corrective measures recommended, and has convened a search committee for a chief procurement officer.

“Mayor Keisha Lance Bottoms is committed to re-establishing trust in our city’s contracting and procurement process,” Bottoms’ office said in a written statement. “Mayor Bottoms will continue to work to ensure that all the business of City contracting is beyond reproach and that taxpayers feel confident contracts are awarded on merit and merit only.”

MYAJC.COM: REAL JOURNALISM. REAL LOCAL IMPACT.

AJC Business reporter Kelly Yamanouchi keeps you updated on the latest news about Hartsfield-Jackson International Airport, Delta Air Lines and the airline industry in metro Atlanta and beyond. You'll find more on myAJC.com, including these stories:

Never miss a minute of what's happening in local business news. Subscribe to myAJC.com.



Reader Comments ...


Next Up in Business

Atlanta-based Interface in $420 million purchase of German company
Atlanta-based Interface in $420 million purchase of German company

Atlanta-based Interface has made a $420 million deal to buy a German company that is a leader in the global flooring market. Interfact is acquiring Nora Systems, a move that the company said should dramatically expand its market reach to new categories. The two companies are more “complementary” than competitive, said Jay Gould, the chief...
Home sales sag, but prices up 9.9 percent from last year
Home sales sag, but prices up 9.9 percent from last year

Metro Atlanta home prices are up 9.9 percent from a year ago, even as the number of sales has slipped. The strong rise in prices is a sign of the continued imbalance in housing, with demand continuing to out-pace supply. The median price of a home sold in May was $248,445, compared to $226,000 during the same month a year ago, according to a report...
Tapped-out demand for beer partly blamed for layoffs
Tapped-out demand for beer partly blamed for layoffs

A global manufacturer of glass has confirmed plans to close its Atlanta facility next month, laying off about 270 people, most of them hourly workers. Owens-Illinois, Inc., which is based in Ohio, will shutter the Sylvan Road facility around July 18, according to a spokeswoman at the $6.9 billion-a-year company. The decision to close the Atlanta plant...
Talk rising of possible recession, trade key danger for Atlanta
Talk rising of possible recession, trade key danger for Atlanta

Tom Smith watches each Sunday morning for signs of recession at Panera Bread. It’s telling: The size of the crowd, the attitude of the families – are they enjoying the chance to relax and spend a little money on themselves, the way people do when they have a few dollars extra, or are they anxious about keeping their jobs and paying their...
Kempner: Disappearing public companies? Federal regulator concerned
Kempner: Disappearing public companies? Federal regulator concerned

Where did half our nation’s public companies go? If you’ve got a hankering to invest your life savings, it might look as if you have plenty of options, some good and some unnerving. There are stocks, bonds, real estate, gold, and even some cryptocurrency markets that concern regulators. But the number of publicly traded companies has dropped...
More Stories