Audit: Michigan taxpayers ripped off with questionable $100K MDOT study

LANSING – Michigan taxpayers did not get their money’s worth when the Michigan Department of Transportation spent $100,000 on a study of the state’s gravel resources, the auditor general said in a report released Friday.

The main reason?

As first reported by the Free Press in June, the department’s leadership allowed the gravel industry to steer the study to arrive at a predetermined conclusion about a looming shortage.

"MDOT allowed industry stakeholders considerable influence in the commissioning and scoping of the study," said the report from Auditor General Doug Ringler.

"This may have undermined the study's credibility and usefulness to MDOT and policymakers because of the industry stakeholders' previously disclosed position in favor of permitted mining for aggregates in local communities."

The Michigan Aggregates Association, which recommended the consultants who conducted both phases of the study, set out the scope of reference, provided direction on costing the study, and even set out the main expected finding, has pointed to the study's first phase to bolster support for a proposed state law that would restrict the power of local governments to deny permits for new or expanded gravel operations.

But Friday's report said because of problems with the scope of the report and its "otherwise limited usefulness," the $100,000 cost "does not appear to have been an effective use of the state's financial resources."

The report's findings are similar to those from an earlier audit conducted by the State Transportation Commission, also in response to reporting in the Free Press.

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The chairman of the State Transportation Commission, Todd Wyett, said in response to the earlier audit that the Michigan Aggregates Association should refund the state for the cost of the study. The association rejected Wyett's proposal, calling it "ridiculous."

According to the latest audit, the MDOT project manager said he and other agency officials "were generally displeased" with the first phase of the report and "felt that it provided little value." Despite that, the project manager gave the consultant who wrote the report a score of nine out of 10 when he evaluated the project, the report said.

MDOT officials have not responded to questions about whether any agency employees have been or will be disciplined over the report.

The auditor general said that former MDOT director Kirk Steudle commissioned the study after communications with Doug Needham, a lobbyist who heads the aggregates association. Needham in 2016 asked Steudle to meet with him to discuss short-term and long-term gravel supplies in Michigan "and how best to develop a plan/report that will substantiate our claim" of a looming shortage.

The report said MDOT improperly split the study into two $50,000 phases to streamline approvals.

Most of the attention has focused on the first phase, which was completed in 2016 by FMI Corp. of North Carolina, a consultant recommended by Needham.

Wallace Marshall, a principal with FMI, said the company stands by the report.

“At no time did MDOT or the Michigan Aggregates Association attempt to influence the results of our study," Marshall said in an email.

“FMI’s report presented a nuanced and balanced set of findings. While we found some areas of the state are facing a significant shortage of aggregate reserves, we showed that other areas have a moderate supply, and others have a surplus."

The auditor general said the second phase, which was not yet completed when the Free Press broke the story in June, also has shortcomings. It was completed this year by Lansing-based Public Sector Consultants, another consultant Needham recommended.

Friday's report said the second phase was supposed to address the impact on MDOT's road and bridge budget if the looming shortages identified in the first phase were not addressed. But it didn't.

Public Sector Consultants told the auditor it did not address that issue because of "inherent difficulty and uncertainty in establishing the actual volume of aggregates that will be needed for these construction projects over time."

Instead, the report only addressed the cost of moving gravel greater distances.

Required monthly progress reports were not provided and there is no written documentation of the change in scope, the auditor found.

Julie Metty Bennett, CEO of Public Sector Consultants, said as the company began work on the second phase, "it became immediately apparent that the available information from the first phase of work, completed by a different vendor, was not robust enough for PSC to draw conclusions on budgetary implications for MDOT." She said her firm provided MDOT with recommendations on a more transparent process for determining available gravel supplies and budget impacts.

Bennett said progress updates were provided by phone and "to the best of our understanding, satisfied the client’s needs."

Senate Bill 431, introduced by Sen. Adam Hollier, is now pending to largely strip local governments of the power to deny gravel permits.

"Just like the Transportation Commission, the Auditor General’s investigation finds the aggregates association corrupted the state contracting process to produce a flawed study to justify their self-interested and unnecessary legislative agenda,” said Matt Resch, a spokesman for the Metamora Land Preservation Alliance, which opposes a massive new gravel pit proposed in Michigan's Thumb area.

 "It is our hope that lawmakers don’t let them get away with it."

Jeff Cranson, a spokesman for MDOT, said the report was commissioned "under the previous administration." He said the agency's new director, Paul Ajegba, "will examine the findings to see what can be learned from this and what kind of safeguards can be implemented as a result to ensure the department is spending taxpayer dollars effectively."

John Sellek, a spokesman for the Michigan Aggregates Association, said the audit "vindicates the ... industry" because it shows that "MDOT sought and accepted input, that its decisions when using that information were theirs alone and that there is zero evidence for sensational claims that the independent report authors were affected in their work."

He said "road building costs continue to rise and the state must take steps to increase raw material supplies, shorten the distance materials are being trucked and end the tyranny of a few wealthy people in Metamora who have pumped hundreds of thousands of dollars into an endless fight that is killing Michigan’s ability to fix the damn roads."

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on Twitter @paulegan4.  Read more on Michigan politics and sign up for our elections newsletter.