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Michigan’s auditor general recently found that the state Department of Transportation allowed industry representatives to influence a study on the aggregates market.
The Office of the Auditor General’s Fraud Investigative Services Team examined MDOT’s contracting practices for the May 2016 commissioning of the Michigan Aggregates Market Study. Aggregates are grained materials used in construction, such as gravel or crushed stone. The study, commissioned by former MDOT Director Kirk Steudle, was meant to determine whether current permitted aggregates would be sufficient to meet the state’s future highway construction needs.
Michigan Auditor General Doug Ringler issued the investigative report to MDOT Director Paul Ajegba and State Transportation Commission Chair Todd Wyett on Oct. 18. MDOT spokesman Jeff Cranson said Ajegba and Wyett had asked for outside review of the aggregates study.
The investigators concluded MDOT allowed industry stakeholders “considerable influence” in the commissioning and scoping of the study.
“This may have undermined the study’s credibility and usefulness to MDOT and policymakers because of the industry stakeholders’ previously disclosed position in favor of expanding permitted mining for aggregates in local communities,” the auditor general’s report states.
Documentation indicates MDOT’s former director communicated with industry representatives concerning aggregates supply prior to the study and directed MDOT staff to involve one industry representative in particular.
According to the report, the industry representative, identified only as “industry stakeholder,” informed the former director that the aggregates industry won’t be able to meet future demands and asked him to “investigate the looming deficit” and help the industry find solutions to ensure an adequate supply of aggregate material. The auditor general’s office confirmed to Transport Topics that the “industry stakeholder” refers to the Michigan Aggregates Association.
On May 18, 2016, the stakeholder provided the former director with a plan for an MDOT-sponsored market study on permitted aggregate demand. Days later, MDOT’s former director forwarded the stakeholder’s suggestions to his senior managers and stated they should be used as a starting point for an MDOT study.
The auditor general’s office found the stakeholder provided MDOT with project pricing information and two vendor recommendations at the agency’s request. Prior to selecting the vendor, MDOT did not obtain vendor references or review reports from similar projects the vendor had completed.
Michigan flag by Getty Images
“MDOT selected the vendor solely on the basis that it could deliver a report for under $50,000 by the former director’s deadline,” the report states. “MDOT informed us that because the [industry stakeholder] suggested the vendor, it trusted that the vendor was qualified to complete the study.”
MDOT split the study into two parts. Phase 1 was to estimate the permitted inventory of quality aggregate reserves in the state and determine whether these reserves were sufficient for future demands. Phase 2 was to determine engineering and economic impacts to MDOT’s transportation program budget if aggregate supply was not increased.
According to the report, dividing the study into two procurements violates MDOT’s Selection Guidelines for Service Contracts. The agency asserted splitting the project was appropriate because Phase 2 would only be completed if Phase 1 found there was an impending aggregate shortfall.
Additionally, the auditor general’s office found MDOT did not ensure the selected vendors provided all contract deliverables. For example, the vendor’s report for Phase 1 lacked a map of locations of aggregate suppliers and information on state-approved aggregate production and consumption.
The Michigan Aggregates Association asserted that MDOT officials alone were responsible for the administration’s decisions to use the provided information for their study.
“The fact is, all state departments seek input from stakeholders, but only departmental leaders can decide how to use that input, as was the case here,” Michigan Aggregates Association spokesman John Sellek said.
The auditor general’s investigation stemmed from a June 2019 complaint alleging that MDOT allowed an industry stakeholder to influence the commission of the study and did not follow procurement procedures. The complaint also indicated the vendor who conducted the study did not meet contract deliverables.
The investigative team determined the study’s $100,000 price tag was not an effective use of the state’s financial resources.
“The director will examine the findings to see what can be learned from this and what kind of safeguards can be implemented as a result to ensure the department is spending taxpayer dollars effectively,” Cranson said.
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