NC State Auditor: Legislature’s no-bid Jordan Lake project is legal

akenney@newsobserver.comJanuary 6, 2014 

— N.C. Senate leaders’ approach to a controversial Jordan Lake cleanup project would have been illegal for almost any other unit of state government, according to a letter by State Auditor Beth Wood. But, Wood wrote, the state’s elected leaders are not bound by the rules meant to “increase competition and thus help the state get the best product at the best rate.”

By writing exacting, specific budget language, legislators seemingly guaranteed that the $1.4 million “pilot project,” which will attempt to improve water quality by stirring the lake, will go to Medora Corp. Email records show the North Dakota company worked with Senate leader Phil Berger’s office and the Department of Environment and Natural Resources to secure the contract months ahead of the public bidding process.

“While the law is written with a striking similarity to the published features and performance specifications of a particular company’s product, the General Assembly did not exceed its authority by in essence writing a law directing this appropriation to a specific company,” wrote Wood, who is a Democrat. State agencies and local governments, which typically conduct such projects, aren’t allowed to do that, according to Wood.

The auditor’s office conducted only preliminary research. Wood said her staff was limited by legislative confidentiality rules and couldn’t offer a formal legal opinion. State law makes confidential some communications by legislators’ staffers, but generally allows legislators to make those documents public.

The auditor’s letter was a response to a request from Rep. Rick Glazier, a Democrat from Fayetteville, and Rep. Chuck McGrady, a Republican from Hendersonville, both critics of the legislature’s changes this summer to the Jordan Lake environmental protection program.

A spokeswoman for Berger said that the auditor’s letter was validation for the project, which was pitched as a potential replacement for costly pollution controls.

“While we are sure Rep. McGrady, Rep. Glazier and other agents of fringe environmental groups that oppose economic growth and development in the Piedmont Triad did not get what they hoped for from Auditor Wood, we appreciate her informal assessment,” Berger spokeswoman Amy Auth wrote in an email.

Glazier denied the claim that he is a fringe environmental agent, calling it an immature distraction from the environmental and legal issues at play.

Glazier also claimed a victory in principle, saying the auditor’s letter showed Berger and other legislators had violated the spirit of the public bidding process. He said it’s “bad precedent” to skip the usual process of requesting and reviewing project proposals.

“The only reason it wasn’t illegal is because the legislature has maintained for itself prerogative to award contracts in ways that no other part of state government is allowed to, and to do so in ways that are less transparent and not in the public’s best interest,” he said Friday. “As I read the auditor’s letter, it pretty clearly indicates that ought to be reconsidered.”

In touch with Medora for months

Sole-source contracts aren’t uncommon in government; often, they’re given to companies that already sell products to an agency, in urgent situations, or to companies who have a unique qualification.

But even if a no-bid project was legal, the Jordan Lake project’s legislative backers insist they didn’t hand the contract to Medora.

Berger and Sen. Rick Gunn, another advocate of the circulators, have repeatedly denied that the project’s description excluded competition, even with its calls for “adjustable float arms with a one-inch diameter shaft and turnbuckle,” “Type 316” stainless steel, and polystyrene foam beads to absorb water, which line up precisely with Medora’s SolarBee.

Berger said recently that the legislature only chose a technology – mechanical circulation of algae-plagued waters – and not a manufacturer. He said he understands that the Department of Environment and Natural Resources will decide what type of circulator to deploy.

“If there are other companies out there that have the technology, we’ve put no restrictions out there as to which company they can work with,” he said in an interview before the auditor released her letter. His office stood by that statement Friday.

However, email records show that Berger’s office was in touch with Medora Corp. representatives for months, specifically discussing SolarBee. Ken Hudnell, a local vice-president of the company, pitched the project as Berger, Gunn and others tried to repeal the Jordan Lake environmental rules, a program that would force upstream communities to build wetlands, ponds and other pollution controls at a potential cost of billions.

On June 14, Berger’s senior policy adviser, Jeff Warren, asked Hudnell for “a brief description that is detailed enough to describe this product and only apply to this product.” Warren also asked, a month into the project’s planning, whether there were any “similar products available.”

Where’s the competition?

Hudnell told Warren that there was one competitor, but that it was of “very low quality” and sold poorly “because they frequently breakdown, and sometimes sink.” There is no indication that DENR or Berger’s office contacted Medora’s competition. RWL Water Group, which produces a similar solar-powered circulator, did not reply to a request for comment.

Also on June 14, Medora provided DENR a “sole source” letter which said that the state was considering purchasing Medora’s model SB10000 v18, according to email records.

Berger last month denied that Hudnell was specifically selling Medora’s products in his months-long correspondence with Berger’s office. Hudnell is an adjunct associate professor of environmental sciences and engineering at UNC-Chapel Hill. A former EPA toxicologist, he has been a strong advocate of “in lake” management, and publicly acknowledges that he has worked with Medora for seven years.

Still, Berger said Hudnell was only providing information about the technology generally.

“My understanding is that we’ve been in contact with the professor from Chapel Hill,” Berger said. “Our discussions with him were not about the company.”

Pressed on the specificity of the budget’s wording and email records about Hudnell’s role selling SolarBee, Berger referred questions to DENR, whose representatives repeatedly have said that the General Assembly drove the project.

Neither DENR nor Berger’s office has produced a record of a formal search or comparison of technologies. In fact, media reports may have done more to spread word of the project to vendors with potentially helpful products and ideas.

One company pitched its product – a floating biological filter – only after seeing a news report. Coming just as the legislature inked the budget, the company was told there wasn’t enough money for that approach.

Tom Reeder, head of the Division of Water Resources, says water-circulation technology, such as the SolarBee, is a promising complement to upstream pollution controls. But he would not say whether he thinks Medora’s SolarBee is the most cost-effective or scientifically sound of the “in-lake” options.

“I don’t know. You’d have to ask the General Assembly that,” Reeder said. “It’s the option I’m going to implement.”

In the public’s interest

In her letter, Wood, the auditor, said the state should proceed carefully.

“When procurement is done in such a way that eliminates competition it becomes more important to draft the subsequent contract in a way that protects the state from the risks inherent to sole source contracting,” she wrote. “That will certainly be necessary in this instance.”

Berger’s office refused to comment this week on the auditor’s implication that the legislature discouraged competition, instead referring to the earlier interview with Berger.

Wood also wrote that it was “reasonable to find” that the legislature intended to promote the public’s welfare and interest.

Berger’s office declined requests for full email records on the project’s planning, citing legislative confidentiality rules. His staff did provide a batch of documents to the Southern Environmental Law Center and The News & Observer, “in the interests of transparency,” that included three reports about algae and water circulation, which were authored, or co-authored, by Hudnell, along with documentation about SolarBee.

Also included was a report by the Battelle Memorial Institute, with an appendix featuring brief summaries of 72 vendors and products related to lake clean-up.

Berger said that the circulation technology appears to have the “research backing and peer-review backing,” and that it came to senate leaders “based on a review of the options out there.”

“If we see other technologies that seem to jump ahead of this, I think we’d be foolish not to look at those things,” he said.

For his part, Glazier said he and other legislators would continue to watch the pilot project and the debate over Jordan Lake closely. He also said he will try to limit the legislature’s ability to write no-bid contracts.

Kenney: 919-829-4870; Twitter: @KenneyNC

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