New agreement could tell whether Modesto has fixed its problem purchasing practices

Tenth Street Place that houses offices for the city and county of Modesto is pictured.
Tenth Street Place that houses offices for the city and county of Modesto is pictured. Garth Stapley

Modesto is about to revisit some embarrassing recent history regarding the breakdown of its purchasing practices that allowed the city to purchase about $16 million more in goods and services than what had been authorized.

The City Council on Tuesday will consider hiring Modesto-based Garrett Thompson Construction at a cost not to exceed $4.1 million annually for hot-patch asphalt repairs after crews cut open a street to replace a water or sewer main, install a water line or similar work. The contract is for two years with the option for three one-year extensions.

The council also will consider hiring Hughson-based United Pavement Maintenance at a cost not to exceed $200,000 annually for the time period as the secondary contractor to step in if Garrett Thompson Construction is not available.

A city official said Modesto has a critical need for this service, the contracts were competitively bid, and it is strengthening its purchasing practices.

City officials revealed in September that Modesto had spent about $2.5 million more for hot patch work than what had authorized, with most of the extra spending involving Garrett Thompson Construction. This was the first of 45 agreements that officials revealed in the subsequent months in which the city had spent $16 million more than authorized.

The city found the 45 agreements in a review of its roughly 1,000 active agreements. Officials have said the city was reviewing its agreements to see if it could get better deals but uncovered this problem.

Officials have stressed Modesto’s review did not turn up evidence of fraud, and the city received the goods and services it paid for. Garrett Thompson said in September that he was not aware of any problems and his company did all the work it was paid for. He said the work was performed through a series of purchase orders issued by the city.

City officials said the problem was purchasing division employees extended contracts and increased contract amounts without approval. And the departments that used the agreements were lax in monitoring them.

“We noted an overall environment in the purchasing department where work flow seemed in excess of staff resources and manpower,” according to a report by the CPA firm Hudson Henderson & Co., one of the consultants the city brought to help with the investigation. “While controls were in place, they were circumvented to ensure the operations of the City continued and to ensure bills were being paid for the work being performed.

“The purchasing department was under constant pressure from other City departments, vendors, and management to maintain status quo and keep the operations of the City functioning.”

City spokesman Thomas Reeves said Modesto has reformed it purchasing practices — including greater oversight, training and more checks and balances — to ensure this does not happen again. Reeves added that the city’s new budget, which starts July 1, proposes hiring three more buyers and a senior buyer, which more than doubles the purchasing staff.

“We realize how this is a very serious issue for the city,” he said. “... This is a painstaking process in which we are learning from our mistakes and making sure it does not happen again.”

Reeves said the city has been doing the hot-patch work itself but has not been able to keep up with the demand. He said the contracts for Garrett Thompson Construction and United Pavement were procured through competitive bidding. A city report says they were the only firms to submit bids, and the bids were “responsive and responsible.”

The council meets at 5:30 p.m. in the basement chambers of Tenth Street Place, 1010 10th St.