Audit slams VTrans railroad contracts

MONTPELIER - The Office of Vermont State Auditor Tom Salmon, CPA, reported today that oversight of railroad construction contracts in the Vermont Agency of Transportation (VTrans) is inadequate and is costing the State money.

"One conclusion of the audit is that the Rail Division is not ensuring that the required competitive bidding in these contracts is taking place," said deputy state auditor George Thabault. "Contracts are being 'sole-sourced' and this denies other companies the opportunity to compete for State contracts, and may be keeping the state from getting the best price for goods and services."

The rail audit was conducted following a request made by VTrans that the Office of the State Auditor investigate the deficiencies of its rail section and suggest improvements.

"We recognized that we had some issues within our Rail Division that needed correcting, and requested the Auditor's assistance," said VTrans secretary David Dill. "On our own, we were unable to clearly identify our weaknesses in a way that both we and the railroads could understand. Our goal is to use the findings of this report as a catalyst to forge a new and better relationship with the companies that run our rail systems."

The audit report noted four key findings:

1.) VTrans and its railroad subcontractors did not follow procurement regulations designed to foster open, competitive bidding, resulting in $7.2 million of recent contracts with Vermont Railway and one of its affiliates not being competitively bid. The largest no-bid contract for $4,677,727 was also issued without the required approval of the Secretary of the Agency of Administration.

2.) Oversight and administration of rail contracts need improvement. For example, auditors found that $82,401 from rail project salvage proceeds was being held by Vermont Railway to offset against future invoices rather than being returned to the State as required by contract (the Agency has since discontinued the practice of allowing the netting of salvage credits and has adopted new procedures to promptly receive and account for salvage payments).

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