Buy now, pay later; Change orders skew county budget projections

The Hudson County Freeholders got a lesson on how not to run a budget at their July 11 caucus when they grilled staff members from the county executive’s office about a series of change orders put on the agenda for possible passage. Change orders are additions to a signed contract generally requesting additional funds for work that had not been expected when the original contract was signed. The cost of change orders shows up at the end of a governmental budget cycle, and because they are paid later, a town or county could technically claim a balanced budget yet wind up with a deficit at the end of the year. Freeholders grilled administration officials on a series of change order posted for payment during the summer sessions. In one case, a change order for maintenance of the electronic security systems at the county jail for last year was 20 percent over the original $215,000 contract, or about $40,000. While asking for this additional money, county officials also asked the freeholders to renew the contract to Quanta Secursystems Inc. of Hanover, M.D. for the year 2000 for less money than the 1999 contract. “How can you be asking for $40,0000 more to cover costs for 1999 and yet want to renew the contract for $10,000 less in the year 2000?” Freeholder Bill O’Dea asked. Adding to the confusion, county administration officials admitted that actually, maintenance costs for the security system at the Hudson County Correctional Facility will go up for the year by about 4 percent, and yet – O’Dea pointed out – the overall contract is 4 percent less than last year. The basic maintenance costs for 1999 were $178,000, but with other costs attached, the contract awarded was $215,000. The change order requested for the 1999 contract would bring the total cost to about $255,000. While Mallory Whiting of the county finance office claimed that the basic maintenance cost for the year 2000 will rise to $186,000, they have only budgeted $205,000 for overall costs. “Last month, we were told we have to upgrade the correction facility to the tune of $32 million,” O’Dea said. “The security system – because it has serious problems – is part of that upgrade. If you’re telling me last year additional costs to deal with the antiquated system cost $40,000 more, I can understand that. But how can you tell me that it will cost less this year when the upgrade won’t happen for a couple of years?” Whiting said costs do vary from year to year. But O’Dea feared that if the system is very antiquated and the county is forced to pay additional fees this year, another change order may be likely for the end of the current contract. “If it is going to cost us that much, let’s just budget the item right from the start,” O’Dea said. The freeholder agenda had change orders for electronic security, general dry goods, replacement of a sidewalk, orders for paper, as well as for second floor renovations to the county’s Public Safety and Health building. In several cases, the change orders were all 20 percent of the original contract, the legal limit before which the county must go out to bid. County Administrator Abe Antun said that in some cases, the change orders came as a bridge between the end of one contract at the beginning of another so as to allow various departments to continue ordering supplies. Chairman Sal Vega asked if it was the administration’s intention to always ask for the maximum amount in each instance, even if the full amount would not be expended. County administration officials said this was a hedge against additional orders that might come in after the request for the change order but before the new contract took place. Freeholder Al Cifelli asked if this was legal, and whether or not the change order must be for the amount needed, not a figure speculating on future needs. William Northgrave, counsel for the County Executive’s office, said no regulation prohibited the county from providing the additional cushion. Transmission problems In another matter, Freeholders Barry Dugan and Thomas Liggio questioned the high price of transmission repairs on transportation vehicles. Dugan said that over two years, the contract had resulted in 14 vehicles repaired in 1999 and seven vehicles so far this year, at a cost of about $2,490 each. Considering that the contract called for a $5.25 per hour labor charge, both freeholders wanted a review to determine the number of hours put into the repairs and whether or not the costs were justified. Antun, however, said the repairs were reviewed by members of the county garage. “Many of those vehicles were older passenger vehicles,” Antun said. Vega said if the repair costs were so high, it may be prudent for the county to examine the possibility of modernizing its fleet.


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