Honolulu Airport contract probed
By Sean Hao
Advertiser Staff Writer
On June 26, 2000, state officials awarded a $1.5 million contract for a system to monitor taxi traffic at Honolulu International Airport. Nine years later, the state has spent $1.3 million and the system is still not finished.
Honolulu-based Ted's Wiring Service was supposed to complete the project, which would track whether taxis pay the correct fees, by mid-August 2003. However, airport officials granted the company several extensions before initiating default proceedings against the contractor in May.
An ongoing probe by the Senate Ways and Means Committee has raised several key questions including:
• Why did airport officials wait until the project was three years overdue before attempting to fine Ted's Wiring for failing to complete the project on time?
• Why didn't the contract with Ted's Wiring include a standard provision allowing the state to collect damages when the contract was not completed on time?
• Why did the airport pay Ted's Wiring $21,000 in 2005 for work on an earlier contract that was completed in 1986?
And the biggest question of all — why did airport officials allow a three-year project to drag on for nine years? So far the answers provided by airport officials haven't been satisfactory, said Sen. Donna Mercado Kim, chairwoman of the Ways and Means Committee.
"What's wrong with this contract that we haven't received our money's worth for nine years?" said Kim, D-14th (Halawa, Moanalua, Kamehameha Heights). "I think it's clearly the fact that the airport contracts are not only convoluted and tend to favor certain people, but that there's not enough oversight. There's no follow-up.
"It's like the wild, wild west."
Airport officials acknowledge mistakes were made, but deny any favoritism was shown to longtime airport contractor Ted's Wiring.
The contract with Ted's Wiring was supposed to result in a system that could track taxis operating in the airport area. The taxi tracking system was meant to provide a check on drivers who pay a 7 percent levy off gross monthly receipts under an honor system.
During a June 30 hearing on the automated vehicle identification system, airport officials said the contract failed because it relied on emerging technology that could not deliver the results that were promised. They said similar problems have been encountered at airports in San Francisco and Oakland.
During the June Senate hearing, Brian Sekiguchi, deputy director for airports, said airport staff gave Ted's Wiring multiple deadline extensions in an attempt to salvage the contract.
"It's obvious this is a contract that's kind of gone bad," Sekiguchi testified. "As you're well aware, the contract should have been over years ago, but staff, to their credit, was trying to do damage control since money was already ... obligated and expensed.
"This contract is not a reflection of how we do things out at the airport," he said.
PROBLEMS IN 2003
A timeline of events shows that problems with the contract first surfaced in July 2003, which was just one month before the system was scheduled to be completed. By September 2006, the contract was 630 days past due. At that point airport officials threatened to fine Ted's Wiring $300 a day for failing to complete the project on time. That threat was never carried out and in October of last year, Ted's Wiring was told to complete the system by the end of January 2009.
Sometime between January and June of this year, airport officials discovered that the original contract with Ted's Wiring had no provision allowing the state to collect damages for not completing the project on time. Airport officials could not explain why such provisions typically included in airport construction deals were not included in the contract with Ted's Wiring.
In May, the airport finally initiated default proceedings against Ted's Wiring and put a claim on a $1.5 million contract performance bond that covers the project. Thomas Terayama, president for Ted's Wiring, did not respond to a request for an interview for this story.
During the June hearing, airport officials said the state may have difficulty terminating the taxi contract with Ted's Wiring because the contract was allowed to drag on so long. However, the airport now says that shouldn't be a problem.
"We do not believe there should be difficulties in collecting on the surety bond as the contract is clear on services to be rendered by the contractor and the contractor's failure to complete the contract under the terms of the contract," the state Department of Transportation said in a written response to Advertiser questions. The agency oversees airports.
The taxi monitoring contract is one of 14 contracts worth more than $10 million that were awarded to Ted's Wiring by the Department of Transportation since 2000. Only one of those contracts was completed on time, according to data provide by the Ways and Means Committee. Airport officials said several of those contracts were delayed by change orders and for other reasons that were not the fault of Ted's Wiring.
During the June hearing it also was disclosed that the state paid Ted's Wiring a total of $21,000 in late 2004 and 2005 for work completed in 1986. The payments were made as part of an effort to close out old contracts, according to airport officials. Some Ways and Means Committee members questioned why the state paid bills submitted by the contractor 19 years late, and whether the state is liable for other old bills.
"If he did the work and we owe him the money, we should pay him," explained Jeff Chang, a transportation department engineering program manager.
It is unclear whether there's a limit to how long a contractor can wait before submitting bills to the state and still get paid. State Comptroller Russ Saito did not respond to Advertiser questions on the subject.
The Department of Transportation said it will change its contract practices as a result of the problems experienced with the taxi project.
"Yes, we are examining our current project management procedures and practices and will continue to improve upon these processes including pursuing training courses in procurement methods and contract management," the department said in a written statement.