More than half of all contracts approved by the Buffalo Sewer Authority over a three-year period were not subjected to competitive bidding, a city audit has found.
The review also questions what auditors consider an unusually large number of change orders, revisions that added $8.6 million to contract costs above the prices originally quoted by vendors. In at least 10 instances, project costs exceeded initial contract amounts by 25 percent to 129 percent.
City Comptroller Andrew A. SanFilippo said the findings could lead some to wonder whether taxpayers are receiving "the best bang for the buck" for all sewer expenditures.
"We're not disparaging the companies that provide services, because they certainly have good reputations and a lot of experience," said SanFilippo. "But we also have an obligation to make sure that we're getting the best value."
Sewer Authority General Manager Anthony A. Hazzan insisted that no-bid contracts and change orders are common in an operation that provides specialized services and utilizes unique equipment. He said the authority has internal controls that subject every sole source contract and change order to intense scrutiny before action is taken.
"We do extensive homework," said Hazzan. "If anything is out of line, we don't do it."
He further argued that change orders are the nature of the sewer business, saying the magnitude of some problems aren't apparent until after the work begins.
Under a state law that created the Buffalo Sewer Authority, all expenditures that exceed $7,000 are supposed to be competitively bid. In 1992, the sewer board increased the bidding threshold to $20,000 for public works projects and $10,000 for purchase contracts. But city auditors said the state never approved the change.
Regardless of the threshold, there are exceptions to the bidding requirements, including instances in which bidding is deemed unfeasible due to the specialized nature of products or services being sought. Professional service contracts are a common example.
Frank Belliotti, the city's chief auditor, said the review found that 53.1 percent of the contracts awarded by the Sewer Authority -- or about $9.3 million of the $42.5 million in total contracts -- were no-bid agreements. He called the figure "extraordinarily high" for a process that presumes bidding.
"If you don't send out bids for some of these things, how do you know for sure there aren't (companies) out there who could do it?" Belliotti asked.
But Hazzan said it would be imprudent to hire outside professionals who don't have track records with the authority, or to buy equipment parts that are made by companies other than the original manufacturers.
"There would be havoc if we didn't follow these policies. We would have such problems," he said.
A Common Council committee is expected to dissect the audit soon. The control board also might be interested in the report.
Earlier this year, the state panel agreed to temporarily exempt the Sewer Authority from control board oversight, signaling a truce in a power struggle. But control board officials made it clear they still view the authority as a "covered entity" based on a state law that created the oversight process.
They said the authority might have to start answering to the board in 2005. Sewer officials have threatened legal action, claiming the agency does not fall under the board's jurisdiction, because it does not receive direct or indirect city funds.