Months before Fresno Unified school board members had a chance to vote on school construction projects that now are under federal investigation, the builder who ultimately got the job wrote an email to district officials saying “we are absolutely a go” in reference to those multimillion-dollar projects.
District officials say that the email exchange with Harris Construction, obtained by The Bee, does not mean the deal was done without board approval and that the communication was routine. But some Fresno Unified trustees say otherwise.
“I think it’s very troubling,” Trustee Carol Mills said of staff’s handling of the contracts. “On the face of it, it looks as though staff were exceeding their authority and making a commitment.”
Fresno Unified Chief Financial Officer Ruthie Quinto, however, called the email exchange “normal and legal” and said that the district has been transparent with the public since the no-bid contract scrutiny first started.
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In the July 15, 2011, email, Mike Spencer, vice president of Harris Construction, writes to Fresno Unified Chief Operations Officer Karin Temple and former facilities officer Lisa Leblanc about plans for projects at Fresno, Roosevelt and Bullard high schools. Those projects were not officially awarded to Harris Construction by the Fresno Unified school board until several months later, at separate public board meetings.
Spencer writes, “It was great to hear from you today. Thank you for the call. As I mentioned over text to Lisa, we are absolutely a GO on the modernizations for Fresno and Roosevelt High Schools. Thank you again for the opportunity to help you (do) something wonderful and amazing for our community – we are looking forward to working with you and the team.” In the email, Spencer also mentions an upcoming project at Bullard High.
But the school board did not vote to award the Roosevelt High project to Harris Construction until November 2011. The Fresno High project vote was made in January 2012, and the Bullard High project vote came in May 2012. Ultimately, Harris Construction was paid more than $73 million for work on the three high schools.
‘Willing and able’
On Tuesday, Temple said that Spencer’s email does not mean the deals were official. But because the board voted in March 2011 to approve a list of 14 prequalified contractors for the district to work with, it gave staff the green light to have conversations like the exchange with Spencer, Temple said.
“I didn’t write those words, those words were written to me. I cannot speculate what were intended by those words,” Temple said, referring to Spencer’s email. “We had conversations with different contractors that were prequalified by the board about projects that were upcoming. … We had to talk with them to assess their willingness and availability and interest. The way the process goes, before we can enter into a preconstruction agreement, we have to have a conversation with the general contractor to assess.”
District spokesman Miguel Arias said that the email merely means Harris Construction was “willing and able” to take on the project and that district officials had similar conversations with other firms. Temple said the district also discussed projects with Bush and Turner construction firms, and, “I would assume similar emails exist” with those firms.
A Harris Construction representative declined to comment, citing the ongoing federal investigation of its “lease-leaseback” deals with Fresno Unified. The investigation also is probing deals made with Bush Construction and any financial dealings between district officials and contractors. Leaseback contracts allow school districts to avoid the traditional low-bid process required by law and instead handpick a contractor for a project.
It looks as though staff were exceeding their authority and making a commitment.
FUSD Trustee Carol Mills
The Spencer email included attachments for preconstruction contracts for the projects, which were ultimately signed by the district on Aug. 8, 2011.
“Also, as promised, attached to this email in a Word Doc format are the preconstruction agreements for Bullard, Fresno High and Roosevelt,” Spencer says in the email. “Obviously, the forms are similar with the exception of project name. However, we simply created a separate form for each project to make it easier to track specific issues by site, should it be necessary.”
Temple said that it is routine for contractors to offer contract samples and that Harris Construction did not dictate its own contract. Documents provided by the district show that contracts were reviewed and heavily edited by legal counsel.
The district’s use of preconstruction contracts has played out in court, with trustees questioning their legality. According to the preconstruction contracts for the Roosevelt, Bullard and Fresno high school projects, in return for the district’s selection of Harris Construction for the general project, consulting services “shall be performed at no cost to the district.” However, should the district use another contractor to construct the project, it must pay Harris Construction $5,000, the contract says.
The preconstruction contracts were not individually approved by the school board, and critics say the agreements pose a conflict of interest by allowing contractors to act as a consultant on a project they are later awarded.
After Harris Construction was awarded preconstruction contracts for the three high school projects, it also received the contracts for the main projects. In each of the 15 preconstruction agreements posted to Fresno Unified’s website, the contractor that performed consulting services also handled the general project.
There is no lease-leaseback agreement until the board approves it.
FUSD Chief Operations Officer Karin Temple
Temple said that a preconstruction agreement does not guarantee that the contractor will get the general project.
“The contract very clearly states that there is no lease-leaseback agreement until the board approves it. The language is clear that only the board can do that, and there’s no guarantee that engaging in preconstruction equals a lease-leaseback,” she said. “A preconstruction agreement does not equal a lease-leaseback.”
However, at a Fresno Unified news conference last July, Temple said otherwise: “In every case, when we engaged a contractor in preconstruction services, we had already qualified them. We had gone through a process and they had been identified as the best contractor for that job. It was our intent when we engaged them in preconstruction that they build the project.”
When asked about the inconsistencies, Temple said, “again, a preconstruction agreement does not equal a lease-leaseback contract because only the board can award a lease-leaseback contract” but said when entering into a preconstruction services agreement, “it is the district’s intent that the contractor will build the project subject to board’s approval of lease-leaseback contracts.”
Temple said, “The contractor is clearly at risk during the preconstruction period … as approval of the lease-leaseback contracts rests exclusively with the board of education.”
Quinto said the email with Spencer is routine.
“How is it, I would ask, that you enter into a preconstruction services agreement if you don’t first talk to a prequalified contractor? You have to talk to them and ask them if you’re interested in that job,” she said. “We know what best business practices are.”
‘Something doesn’t square up’
Some trustees say the district’s policy about which contracts require board approval violates the state Education Code.
School board President Luis Chavez said Thursday that “something doesn’t square up.”
“I’m looking at the timeline, and a prequalification vote had already occurred previous to this, so why do they need to have a conversation about capacity and ability? Shouldn’t that have been handled? There shouldn’t be back and forth between staff and a contractor,” Chavez said.
“We need to be extra careful and make sure there’s not even the impression of any kind of inappropriate behaviors. What’s clear from this whole situation is the district needs a policy discussion on how we go about administering our contracts.”
Trustee Brooke Ashjian said the email exchange has major legal implications. While district officials say that preconstruction contracts do not meet the financial threshold that requires board approval, the Education Code says all contracts must be approved and/or ratified by the board.
“We’re under investigation by the FBI, and whether it’s a violation of federal law or state law, this is wrong on all levels,” he said. “I’m going to leave it to law enforcement to decide if it’s criminal. The board is supposed to be running the school district. The board is responsible for the school district.
“We hired the superintendent, and he is not keeping us in the loop. I don’t care if they got all 10,000 employees of FUSD to sign off on it, it’s not valid and it’s not legal. Any contract has to come before the board, period.”
Mills, an attorney, said that the Education Code regarding contracts is clear. If the contracts are deemed invalid, Harris Construction could have to repay the district.
I’m going to leave it to law enforcement to decide if it’s criminal.
FUSD Trustee Brooke Ashjian
“The dollar limit does not make any difference. I know district staff will try to disagree but I think the statute is very clear,” Mills said. “I don’t think the prequalification list gave them approval to enter into contracts that did not comply with Education Code. It may be routine and normal to have conversations (with a contractor) before you bring something to the board for approval, but none of these came to the board.”
According to Temple, the district’s policy exempts contracts of less than $15,000 from prior school board approval.
“No payment is required for preconstruction service agreements when the same contractor who performs those services is approved by the board for the lease-leaseback contract because that contract includes and subsumes the preconstruction services agreement,” Temple said.
Others mum on issue
Trustee Christopher De La Cerda said he could not comment on the Spencer email because he was “not aware of the documents.”
Trustee Janet Ryan said, “Fresno Unified board members should be discussing issues at the board table and not in The Fresno Bee.”
Trustees Valerie Davis and Cal Johnson did not respond to The Bee’s request for comment.
We know what best business practices are.
FUSD Chief Financial Officer Ruthie Quinto
After The Bee asked the district about the emails Tuesday, Superintendent Michael Hanson sent trustees and other officials an email alerting them of a potential story.
“Apparently, Mackenzie at the Bee is in the process of calling each of you about a story she is working on regarding lease-leaseback. … There are many other points that need to be made,” Hanson says in the email. “I have given Ruthie and Karin the green light to work with Miguel to start aggressively countering the misinformation. This is one more important example of how I have to redirect precious staff time to such matters.”
The leaseback financing process is under scrutiny across the state. Meanwhile, a pending legal case brought by another Fresno contractor alleges that Fresno Unified deliberately misused the leaseback process to assure that Harris Construction would receive a $37 million Gaston Middle School project.
Fresno Unified has signed 25 leaseback deals since 2011 – a majority of which were paid for by Measure Q, a bond measure that Harris Construction and its owner, Richard Spencer (Mike’s father), contributed the top donations to help pass. Richard Spencer also has contributed to school board members’ election campaigns.
As part of an investigation of the district’s no-bid contracts that began in 2012, The Bee in December requested emails between district and Harris Construction officials under the California Public Records Act. The Bee has not yet received those emails, but the district is expected to turn them over by the end of the month.