The Illinois Dept. of Transportation is at war with one of Chicago’s most important engineering consulting practices over billings and payments.
A federal judge in late June ordered IDOT to pay Chicago-based designer McDonough Associates almost $2 million that the DOT had withheld from the company for work on three projects. IDOT had stopped paying and suspended the engineering firm for three years because of what IDOT claims were years of overbilling.
IDOT started turning over the money to McDonough July 17, but other than announcing the payments has declined to comment on the matter.
Last month McDonough sued in U.S. district court in Chicago to overturn the suspension and force the payments. “What we have demonstrated is an abuse of power,” claims William Sullivan, an attorney for McDonough.
Others also are wondering about the barring of a longstanding, reputable company by IDOT’s chief procurement officer, Bill Grunloh. In February, he directed IDOT staff to stop paying McDonough.
An op-ed writer in the Chicago Tribune said that although he was wary of McDonough’s longstanding political connections in Chicago, IDOT may have overstepped.
“Grunloh has the department's final say, meaning that an unchecked, bureaucratic decision could put a private company out of business…So, I'm going out on a limb here by suggesting that not every government contractor is corrupt. Taxpayers deserve protection from cheaters and insiders, sure, but they also need to know that their government is fair and just.”
A full-service design consultant with 135 employees, McDonough Associates performs civil, structural and environmental engineering design and construction management. The company also has a support staff of surveyors and construction inspectors.
Accounting Errors First Noticed
The billing and payment controversy goes back to work performed over a roughly ten-year period and involves IDOT's discovery of accounting errors on McDonough’s invoices.
McDonough officials say it was a difference of opinion about which "bucket" some expenses should have been placed in.
According to McDonough’s complaint, IDOT hadn’t audited McDonough’s record’s in nine years when it sent auditors to McDonough’s offices in 2008. The number of years that had passed necessarily “magnified” any error in application of accounting principals, McDonough claims.
Two years after the 2008 audit, IDOT sent McDonough a draft audit report stating that “there was an underlying issue involving policies which caused time that was project related to be posted to ‘pre-contract'; or ‘office’ in general ledger accounts.” After IDOT informed McDonough, appropriate adjustments were made to ten years of overhead rates charged, according to McDonough.
But another, follow-up audit in 2010 had a very different tone and approach to the discrepancies and IDOT labeled them as fraud. To McDonough, this 2010 audit amounted to a “stealth attack” carried out on orders from Springfield, the state capital.
In ordering IDOT to pay McDonough, federal judge Milton Shadur ruled that the suspension of McDonough was “a pre-ordained result…Grunloh’s actions were in clear absence of jurisdiction and exceeded his authority.”
The court also ruled that the suspension wasn’t legal.
State Code Requires Notice
To suspend a contractor, Illinois Administrative Code requires a notice be given to a contractor or subcontractor and include the cause on which the proposed suspension is based; a clear and concise statement of the matters asserted and acts complained of, and the statutes, cause or rules upon which the allegations in the notice are based; and the legal authority and jurisdiction under which the action is taken and the consequences of a failure to respond.
In an email, Daniel K. Curley, McDonough’s senior vice president, said the money owed to McDonough included $2 million for design and construction management work on U.S. Rt. 20, U.S. Rt. 45 and I-55 (Arsenal Road).
At a July 13 court hearing in Chicago on the case, Shadur chided IDOT’s attorneys, saying that the firm not having “dotted all the i’s and crossed all the t’s” was an illegitimate reason for suspending McDonough:
“The short answer is that that is the way this agency performs on a continuing and regular basis. So it will not do for you to say, ‘Well, they are lacking this,’ when the showing that is made is one that would-- that if applied to every project would mean that we would still be operating with horse and buggy because the IDOT would never get anything done.”
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