By Ronnie Ellis / CNHI News Writer

At the heart of federal charges against Leonard Lawson, William Nighbert and Brian Billings is a “rule-of-thumb” that the Kentucky Department of Transportation rejects construction bids exceeding internal bid estimates by 7 percent.

But there is no written policy and the department has for years awarded contracts higher than 107 percent of estimates.

Lawson owns road construction companies which are often the sole bidder on state projects. Nighbert was former Gov. Ernie Fletcher’s secretary of the Kentucky Transportation Cabinet. The government alleges they colluded to rig construction bids in favor of Lawson’s companies. Lawson allegedly paid highway engineer Jim Rummage $20,000 for the estimates and later funneled money through an outside company to reward Nighbert. Billings is an employee of Lawson’s who allegedly took part in an effort to thwart the investigation into the bidding process.

The State Highway Engineer’s Guidance Manual (Chapter 40-16; Section 16.0315) says internal estimates are confidential: “This estimate is prepared by the Estimating Branch and is privileged information and will be released only to those persons authorized by the State Highway Engineer.”

And FBI Special Agent Clay Mason said in an affidavit preceding the indictments of Lawson, Nighbert and Billings, “It is the policy of the KTC to reject as too high any bid that exceeds 107 percent of the KTC engineer’s estimate.”

But there is no such written policy.

“There is nothing by written policy that is an iron-clad rule that has to be followed,” said Todd Shipp, KTC special assistant. “But be assured we have been following that standard for years.”

Not always.

KTC spokesman Chuck Wolfe said bids are evaluated by an Awards Committee made up of department engineers and chaired by the Chief Highway Engineer. A federal highway engineer is added to the committee when projects will utilize federal funding.

“No one seems to know how (the 7 percent standard) originated,” Wolfe said. “It’s just a number that seemed to work for the cabinet. It’s an important consideration, but it’s not the only consideration when the evaluation committee decides which bid to accept.”

Wolfe said small projects might have overruns which exceed bid estimates by 7 percent but represent inconsequential dollar amounts and rebidding some projects is unlikely to yield a lower price. The contracts Lawson’s companies won through the alleged bid rigging total almost $130 million.

According to a 2003 cabinet review by Dye Management Group, “special justification is not required to accept a bid that is either much higher or lower than the final engineer’s estimate” and “there are no written policies, procedures or business rules for bid award analysis.”

Shipp said the cabinet recently began writing policies regarding the 7 percent standard.

“It’s in the process of being written right now,” Shipp said.

Lawson’s attorney Larry Mackey said the standard has often been ignored for years.

“For years, and long before the Fletcher administration, the cabinet has routinely awarded work to dozens of road contractors at prices that exceed 107 percent of the cabinet’s engineer estimates,” Mackey said. “The cabinet is the steward of public funds and presumably they had good reasons for that practice, including the reality that their estimates are often simply wrong.”

The Dye Management Group report also concluded internal estimates are often wrong and recommended changing how they are calculated.

Wolfe said Gov. Steve Beshear and Transportation Secretary Joe Prather are trying to hold down bid prices. All but nine of 44 projects in a recent bid letting attracted more than one bidder, he said.

“When we added up all the apparent low bids, they were 20 percent below bid estimates,” Wolfe said.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. He can be reached by e-mail at rellis@cnhi.com.