An El Paso Independent School District internal audit identified practices that found "indicators of vendor favoritism, insider information and bid tailoring" related to a contract with the San Diego-based company Gafcon.
Still, the audit, which was posted online Friday, said EPISD officials acted in accordance with district and state policies, in some cases because no such policies exist.
"These indicators, based on procurement best practices, give the appearance the pre-solicitation and evaluation phases were not conducted in a transparent, ethical, and/or impartial manner," the audit states. "To be clear, these indicators are a warning of a potential risk and not a certain sign of improprieties."
The audit also states, "we did not identify district policies or state laws/regulations related to the pre-solicitation phase of the procurement process. As such, we could not determine whether activities performed within this phase were performed in compliance with such criteria."
The audit was conducted in response to an investigation by the El Paso Times that revealed that Superintendent Juan Cabrera failed to disclose that he had met with representatives from Gafcon and personally crafted the bid with the company's help.
Gafcon was later awarded a contract to oversee Jacobs Project Management of Dallas, which was selected last year to manage projects in the district's voter-approved $669 million bond issue.
Among the audit findings were:
- A district-wide assessment was not performed with key stakeholders to determine whether EPISD needed program management advisory services.
- An April 24 meeting that "gives the appearance the vendor was favored, has insider information, and was given the opportunity to get a head start on planning and preparing their proposal."
- Deficiencies in internal procedures that do not require staff to ask about the role a vendor may have played prior to awarding a contract.
Cabrera on Friday said that he was not surprised by the audit's findings.
"I'm satisfied that it came out just like we thought, that there were no rules, regulations or laws broken and that there's always room for improvement," Cabrera said.
But Trustee Susie Byrd said she was "very concerned" by the audit's findings.
"I'm alarmed," Byrd said. "This is sort of the textbook case of how you should not handle a procurement process if you want the public to trust you."
The El Paso Times reported in September that Scott Himelstein, a San Diego consultant who was paid $1,500 a day by the district, introduced Cabrera to officials from Gafcon, a construction management company. The newspaper's reporting stemmed from hundreds of documents obtained through the Texas Public Information Act.
On April 24, two and half weeks before the release of a request for qualifications, or RFQ, Cabrera, trustee Trent Hatch and businessmen Ted Houghton and Stanley Jobe met with Josh Gaffen and a Gafcon engineer.
"A meeting with a vendor prior to the release of an RFQ can compromise the appearance of fair treatment and equal opportunity for other vendors who would like to do business with the district," the audit states. "The April 24th meeting gives the appearance the vendor was favored, had insider information, and was given the opportunity to get a headstart on planning and preparing their proposal."
The audit then states that when Cabrera was asked if there were any discussions of a potential contract for oversight services during the meeting, he said, "not that I recall, it was...generally what would a statement of work look like...what would the scope...what would they have to do to be successful...what kind of authority would they have to have...what would it look like...to try to do an oversight right...what would a day to day look like."
In a text to a district consultant on April 25, Cabrera said he had "a new structure/idea for G. I think it will work." The audit states that when asked about the text, Cabrera said he didn't remember what it was and guessed the "G" was for Gafcon.
Hatch, who is now the board president, said he was concerned when reviewing the audit, but said no laws or policies were broken.
"I think there's a big difference between illegal practices and the appearance (of illegal practices)," Hatch said. "Obviously we need to ensure that our district avoids both, and ensure that we do everything we can to avoid any appearance of anything that might be questionable."
Records show Hatch suggested to Cabrera the idea of hiring a company that would provide oversight of Jacobs. Hatch said he made the suggestion because he heard from constituents that it was needed.
"As a taxpayer I felt we needed an independent layer of oversight that reports directly to the board of trustees," Hatch said. "I still believe to this day that we need additional oversight on our bond."
On May 5, Cabrera personally crafted language for the RFQ to solicit companies interested in providing bond oversight services, according to documents. Cabrera said in a previous interview with the El Paso Times that he used input from Houghton, Jobe and Gaffen in crafting the RFQ.
The audit mentions the interview with the Times. It also states that when the district's internal auditor asked if Cabrera received anything from Gafcon to help develop the specifications, the Superintendent said he may have "...gotten something on an email...Maybe I got the Gafcon response [to a prior bid], because I remember asking them [District staff] for packets from our specification and some of the responses...I just don't remember."
Cabrera sent the bid document to chief of staff, Jose Lopez, but did not tell him that he had crafted the language with input from Gaffen, a vice president of Gafcon.
He told the Times he didn't think he needed to notify anyone because in his mind "he (Gaffen) didn't drive that. It was more about all the sources of information I received to educate myself and what should be in there based on what (Hatch) wanted."
At the time, Carmen Arrieta-Candelaria, EPISD's chief financial officer, told the Times that she didn't know that Cabrera had help from Gafcon in writing the bid language, saying it was "not a good practice."
Cabrera told auditors that to create the scope of work, he "Googled some stuff on bond oversight" and "looked at a couple of bond program manager contracts." He said more than 80 percent of the words in the bid document were from a previous Jacobs RFQ.
The audit found the two RFQs were materially different. Auditors also compared the bid document to a 2016 scope of services document submitted by Gafcon when it was seeking another contract. It found that both documents had sections with the same font and bullet points, and with similar styles used by Gafcon.
Cabrera said the bid language was generic.
"The bid language speaks for itself. There are only so many words you can use for an oversight of a bond, so I'm not surprised it's similar language," Cabrera said on Friday. "It's nothing like patents or intellectual property. It's oversight of a bond."
The audit points to instances where personal email accounts and the use of personal sharing services like Google Docs and Dropbox were used by district officials, saying that while administrators indicated that all records had been shared, auditors could not confirm that they had received everything that was requested.
"It is important to note that Internal Audit does not have the authority to subpoena these records," the audit states.
Byrd said district policy prohibits the use of personal accounts to communicate district business.
"We put in place the policy some time ago that says employees and board members cannot use personal email to conduct district business," she said. "That all electronic communication should be over a public server, so that they can be easily accessible."
The audit also included a mention that EPISD had paid Gafcon $49,000 from July 1, 2016 to June 30, 2017 for program advisory services.
"That was never disclosed to the board," Byrd said. "The only reason I know about that is because of internal audit. I've never been told about that contract."
Hatch and and trustee Al Velarde said they could not recall any specifics of the agreement.
Cabrera said he also couldn't recall the agreement, but added that the district had hired "a number of contractors" as it prepared for the bond election.
"Anything before the bond was to help us for the bond," Cabrera said. "I just don't know when that was."
EPISD severed ties with Gafcon last year, saying the company requested $2 million for the contract, which was well above the original estimate of $500,000 to $1 million.
Trustees said they'll discuss the audit at a future board meeting.
"Ultimately, we'll have to come together and talk about it and make a decision on how to move forward," Velarde said. He did not say if Cabrera will face any kind of reprimand.
Byrd said she could not say if Cabrera will face a reprimand, but that she strongly believes that employees should meet board expectations.
"He failed the board's expectations," Byrd said. "We, as a board, have made it very clear as part of our strategic plan that we'd lead with ethics."
Hatch said the board will continue to discuss the audit and determine the best course of action.
"Again, it's clear that no laws were broken," Hatch said. "But if there were areas we need to discuss with the superintendent, then we will discuss. We will not turn a blind eye."
The audit included a corrective action plan, or CAP, with nine recommendations to be implemented completely by July 1.
The plan included a recommendation for the implementation of a "period of silence" during the bid process that would extend from pre-solicitation to the award phase.
Under the plan, the district would also create a questionnaire for evaluation committee members that asks about any potential biases or disqualifying information, such as period of silence violations. If such violations exist, a member would be disqualified from serving on the committee "when appropriate."
Other recommendations include requiring that all employees involved in the bid process undergo ethics training and that the district make clear that employees who do not meet the board's expectations should be held accountable for their actions.
"Expenditure of public money requires a strong control environment," according to the Texas Education Agency," the audit states. "A strong control environment requires (that) an organization actively set an ethical tone at the top around procurement procedures and expectations."
