|McCormick Place (Photo by Tudor Hampton for ENR)|
A lobbyist hired by Jacobs Engineering Inc. told executives the prices its competitors had submitted for the McCormick Place expansion construction management contract in Chicago in late 2001, allowing the firm to submit the low bid. Former employees of the Pasadena, Calif.-based company have signed plea agreements saying that lobbyists had provided other key information that gave the firm an unfair advantage and helped win the job. The U.S. attorney considers it a case of blatant bid-rigging and has said that numerous Jacobs officials used and shared the information as Jacobs shaped its proposal and strategy.
Jacobs Group Vice President Warren Dean says none of the information Jacobs had or used broke state or federal law. Dean says the main targets of the federal investigation are political figures and compared the crimes for which the two employees pled guilty to the transgressions for which Martha Stewart was recently convicted. James Nagle, the former head of Jacobs Facilities Chicago office, and Elizabeth Koski, its former top marketing executive, pled guilty to lying to investigators earlier this month.
To be sure, the McCormick Place guilty pleas are part of a broader investigation of political cronies of former Illinois Gov. George Ryan (R). But the investigation has also thrown a spotlight on the use of lobbyists to obtain contracts from the staffs and boards that operate exhibition halls, arenas and airports. Often the lobbyists are hired to curry favor with officials and promote clients, say industry sources, and sometimes they also wine and dine or provide entertainment to the officials with influence over which firms receive lucrative contracts. Such practices frustrate companies that refrain from using them and, according to one source, "spend a lot of money trying to win on the up and up."
"The belief that the fix is in concerning public contracts must end so that honest companies will participate fully in the bid process," says Patrick J. Fitzgerald, the U.S. Attorney in Chicago.
Prosecutors claim former McCormick Place chief executive Scott Fawell exchanged his help for Jacobs in return for gifts and other help by Jacobs lobbyist, Ronan Potts LLC. (Fawell is serving a prison sentence on separate charges).
On Oct. 2, 2001, Fawells key assistant provided Julie Starsiak, an officer of Ronan Potts and a registered lobbyist, information that Jacobs had made the short list. She relayed it to Koski, giving Jacobs two weeks extra time to prepare for the interview, say prosecutors. Prior to learning it would be short-listed, Jacobs found out through Starsiak about how the other bidders planned to satisfy minority-firm participation goals, allowing Jacobs to highlight its firms strengths, prosecutors claim.
Jacobs has its own corporate policy concerning business conduct and it requires employees to behave lawfully and in keeping with societal ethics while pursuing the companys interests. Prosecutors claim Nagle and Koski saw the McCormick contract as a key step in winning more work. Once the investigation by prosecutors and Jacobs had begun in 2003, both Nagle and Koski lied about the extent of Ronan Potts involvement, prosecutors claim. After learning the amount of the low bid, $12.9 million, Jacobs was permitted by Fawell to reduce its bid from $18.8 million to $11.5 million. According to the U.S. Attorney, Nagle and Koski tried to conceal what had actually happened from the prosecutors and Jacobs own investigators and auditors.
A Jacobs spokeswoman says the firm is not prepared to comment on whether Nagle and Koski violated the companys code of ethics. Jacobs will continue to cooperate with investigators, says Dean. The firm has not been charged with any wrongdoing.
A design-build team led by Clark Construction Co., Bethesda, is about to begin the $850-million West Building expansion. A spokesman for the Metropolitan Pier & Exposition Authority, which operates McCormick Place, says it will find a replacement for construction manager Jacobs and seek compensation for its costs (ENR 3/22 p. 16).