Rail board zeroes in on project engineers with tough questions over costs, bidding process

Corey Maag, a director of Malheur County Development Corp., led a drive by the public board to question project engineers. Maag is owner of Jamieson Produce in Vale. (ANGIE SILLONIS/Special to the Enterprise)

The directors of the development company building the Nyssa rail center are questioning project engineers about costs, bidding practices and more in an unusually aggressive move to learn more about their deeply troubled project.

Questions from the Malheur County Development Corp. board are aimed at Anderson Perry & Associates, the La Grande company that has been managing construction of the Treasure Valley Reload Center.

Board members said at an unprecedented special board meeting on Saturday, May 7, that they wanted to know more about where money was going in the project and why certain decisions were made.

They acted after a series of investigative reports by the Enterprise and in the face of growing questions from the community about a project that is behind schedule and millions over budget.

The reload center was expected to cost $26 million, opening the way to develop a county-owned industrial project. Now, project leaders say the price tag is an estimated $34 million that they hope a taxpayer bailout will help cover an estimated shortfall of $5 million. They have no money for the industrial park.

“We want to do our due diligence,” said Grant Kitamura, board president and a partner in Baker & Murakami Produce Co. “We’re spending public funds. We need to get and understand where these funds are going.”

Corey Maag, a director and owner of Jamieson Produce in Vale, initiated the extraordinary action by the board.

“I have got some questions regarding some of the money, where it’s going in the project,” Maag said. “Other people in the community are asking questions. It’s my obligation to get the correct answers.”

Lynn Findley, another board member and a state senator, said he helped craft the questions in a recent 90-minute meeting at his home with Maag. Findley also disclosed Saturday that he worked for Anderson Perry 10 years ago.

Jason Pearson, a board member from Eagle Eye Produce, also said he met with Maag to help with the questions.

“These are questions that we need to get answered,” Pearson said.

Others on the board and who attended are Kay Riley of Snake River Produce and Greg Smith, Malheur County economic development director. Smith didn’t engage in Saturday’s discussion about the questions.

There was no explanation why board was meeting on a Saturday, announced just 24 hours earlier. The circumstances suggested the board wanted to act with urgency.

Board members indicated they didn’t understand information about the project even though construction started in November and they got at least monthly briefings from Anderson Perry engineers and Smith.

Smith has been the project manager, retained by Malheur County commissioners under a contract that requires him to “oversee construction design” and “administer all procurements for goods, supplies, materials and professional services.”

His company is paid $6,000 a month for such work, but there was no indication the board intended to question him.

In April, the board approved a contract change that modified several elements of the project, including in the type and amount of rock needed.

 “All of board members have full-time jobs,” said Maag. “Those jobs don’t relate to construction,  so many of these questions relate to certain terminology.”

Kitamura agreed.

“We’re just lay people. We do not understand the construction terms,” Kitamura said.

Board members said at the Saturday meeting they weren’t pointing fingers but some of the questions have a definite sharp edge.

Questions concerned a change to the contract with the first construction company to start work – Steve Lindley Contracting of Union. As early as January, construction crews were encountering far worse ground conditions at the Nyssa site than Anderson Perry had identified. That necessitated a dramatic change, requiring millions of dollars more in rock than had been budgeted.

The board is questioning that original contract and a subsequent change order presented to the board as an accomplished fact to cover the mounting costs.

“By executing the change order, did we bail out a contractor who was low bidder on this?” the board said.

The board also wants to know “is it coincidence that the line items we reduced or eliminated in the change order were the exact line items that made the contractor the initial lower bidder?”

Directors want to know why the billing approach was changed in early February but the board wasn’t asked to approve that change until April.

Baird and Smith gave no indication to directors in board meetings in January, February or March that such a change order was in the works. But public records obtained by the Enterprise show officials at Anderson Perry and Smith’s team were preparing a contract change in January.

The board is now signaling a possible change in terms with Steve Lindley Contracting, asking “can we rescind the original change order and adopt an order that will be in the best interest of MCDC?”

The directors also said that a new bid should have been sought when additional material was needed to prepare the ground “to make sure we obtained low cost of additional material.”

And the board also signaled it was ready to dump a bid to construct the reload center. That price, from a lone bidder, came in millions high and Anderson Perry executives have been trying to shave the cost down. The board indicated it was time to start over.

“We need to rebid the building,” the board wrote.

That could introduce yet another delay in finishing the project on time for this fall’s harvest.

Board members indicated that they were willing to take more time.

“We need to worry less about deadlines and make sure we are fiscally responsible and make responsible decisions,” the board wrote. “Mistakes are usually made when decisions are rushed.”

The directors also zeroed in on a central question behind much of the soaring costs. The project is sited on irrigated farmland with known wetlands, but the wetland was far deeper than engineers anticipated and other areas of the site proved far wetter than expected.

The board is looking to Anderson Perry for answers. The company, according to invoices, charged the project $43,585 to identify and plan for wetlands.

“Why didn’t Anderson Perry dig more test holes to determine that these factors would negatively affect the project’s budget? There were numerous people in the community that were concerned about site’s sub moisture,” the board said.

Baird told the board his company would respond to the questions in writing by Friday, May 13.

“We’re glad to answer,” Baird said.

Kitamura said the answers wouldn’t be made public until the board meets again, now expected to happen on Tuesday, May 17. Kitamura said that would be held in person instead of by phone as has been the board’s practice.

Baird, though, repeatedly has ignored questions from the Enterprise on matters now being raised by the board. He didn’t respond, for instance, to March 12 questions seeking details about rock use, later disclosed to have gone millions over budget. He didn’t respond to April 22 questions about why he didn’t disclose to the development company board at either its Feb. 8 meeting or March 8 meeting that a significant construction contract change was in the works.

Smith has a practice of not responding to questions or interview requests from the Enterprise. He was asked in writing on April 9 about whether he would hold Anderson Perry accountable. 

Smith didn’t respond.

Contact Editor Les Zaitz: [email protected]


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