By Jennifer Langston
Herald Writer
Snohomish PUD general manager Paul Elias took a paid leave of absence Friday while the utility hires an independent auditor to determine the extent of problems with consulting contracts.
The decision came after The Herald reported this week that a California management expert had charged $750,000 for work done over the last two years.
Laurence Akiyoshi, an organizational behavior consultant, charged $400 to $425 an hour to help hire top managers, improve customer and computer services, and gauge employee morale. The district is now contesting $45,000 in expenses for what it believes are expensive meals, hotel stays and overpriced rental cars.
The utility was already conducting an internal audit of Akiyoshi’s billings, but decided to widen the scope Friday.
The PUD board of commissioners decided to hire an independent company to review all of its professional services contracts over $100,000, which district officials say total about 60. Those contracts cover a wide range of outside help that the district pays for, including computer consultants, bankers, lawyers, environmental experts and engineers.
Elias, who originally hired Akiyoshi based on work they had done together over the past 10 years at other utilities, requested to take the administrative leave with pay, officials said. He didn’t want any appearance of influencing the review, officials said.
PUD spending on professional services contracts has jumped by 20 percent in the last two years. The utility spent $8.6 million on consultants and outside contracts in 2000. The 2002 budget earmarks $10.4 million for consultants.
Commissioner Don Berkey said the board was concerned after learning about the payments made to Akiyoshi, which totaled more than the highest-paid employee’s salary during that time.
The PUD also failed to notice it had been doubled billed for $65,000, and paid the same invoice twice. The money has now been refunded.
"We need to move decisively to establish the extent of problems with this contract and whether the apparent lapses in contract management … are indicative of larger problems," Berkey said.
Elias was traveling and unavailable for comment Friday. But he said in a prepared statement: "I fully support the board’s decision to do a full independent review. I have requested the board grant me administrative leave until the review is concluded."
Elias apologized to PUD employees this week, especially ones who have had to bear intense criticism from customers who have been cutting to the bone to afford soaring electricity bills. In an e-mail to employees, he said he was confident that Akiyoshi had brought value to the district. However, in retrospect, Elias said he would make a different decision on retaining him.
"I made an error in not assessing the community’s perspective on value," he wrote. "If our community has difficulty with the amount that was charged, then I have difficulty with it."
The PUD’s general counsel, Mike Gianunzio, will act as general manager while the audit is conducted, which is expected to take two weeks. Commissioner Cynthia First said she expected Elias to resume his duties after that.
"The board has confidence in Paul," she said. "We did accept his request for administrative leave; however, this in no way impugns his credibility at all."
The PUD has not yet selected a company to do the independent audit, but plans to use a local firm, officials said. Some of the strongest criticism from customers centered on the $200,000 it cost to repeatedly bring Akiyoshi to Everett from his home in California.
The PUD plans to ask the outside company to do a financial review of other professional services contracts, as well as look at the district’s internal procedures for choosing and reimbursing consultants.
Right now, for instance, the district generally says it will pay for "reasonable" expenses, which leaves the word open to interpretation. Some public utilities set specific maximum daily rates based on federal guidelines.
"What may be reasonable in Las Vegas may not be reasonable in Everett," First said. "We need to get a handle on whether contract expenses have been reasonable."
Akiyoshi, for instance, defended his expenses and hourly billings last week, saying they are actually cheap for someone in his line of work. He gave the district a discount from his normal rate of $525 per hour. He added that what one person considers a reasonable expense may look pricey to someone else.
The PUD also doesn’t require managers to get multiple bids for professional service contracts, enabling them to compare value and cost. Some departments do, others don’t, officials said Friday.
First said she didn’t know if that would be practical or reasonable in every circumstance. That’s why the board is interested in getting input on how other agencies manage contracts for outside help.
"We need to consider all policies," she said. "We’re not going to tolerate extravagances from our employees and our consultants. We want to shine a light on the problem rather than hiding it under a bushel."
You can call Herald Writer Jennifer Langston at 425-339-3452
or send e-mail to langston@heraldnet.com.
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