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Questions surround Napa Valley Wine Train project contractor
The Napa Valley Wine Train passes over a bridge near downtown Napa, where construction is underway for a new bridge associated with flood control measures on Sunday, January 17, 2010.
CHRISTOPHER CHUNG/ PDPublished: Sunday, January 31, 2010 at 3:00 a.m.
Last Modified: Friday, January 29, 2010 at 2:49 p.m.
NAPA — The corporate shareholders live in tribal villages in the outback of western Alaska.
Facts
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California Watch is a project of the Center for Investigative Reporting with offices in the Bay Area and Sacramento.
The CEO is in South Carolina, where his prior multimillion-dollar venture — a dot-com for sailboaters — collapsed in bankruptcy.
But the main action today is in Napa, where, without competitive bidding, this unusual construction company won a $54 million federal contract that provides a new railroad bridge and other structures for the famed Napa Valley Wine Train.
This is the world of Anchorage, Alaska-based Suulutaaq Inc. Because the company was founded by Alaska Natives, it enjoys special access to federal contracts.
That's how it obtained one of the biggest federal stimulus contracts in California — a key segment of a U.S. Army Corps of Engineers' flood-control project on the Napa River.
Army and Napa city officials say they're pleased with Suulutaaq's work on what they describe as an environmentally friendly project to curtail devastating winter flooding. It's an ideal stimulus project, said Napa Mayor Jill Techel: "shovel-ready, green and it provides jobs."
But in December, Sens. John McCain, R-Ariz., and Tom Coburn, R-Okla., issued a report listing the Wine Train among 100 stimulus projects that they derided as "silly and shortsighted" and a waste of money.
The lawmakers also suggested the construction wasn't doing much for the economy. According to a report submitted by Suulutaaq late last year, the $54 million project had created 12 new jobs. Officials involved with the project say that more recently there have been days when more than 40 workers have been on the scene, and they hope the project could ultimately create up to 200 jobs when work ramps up.
A Walnut Creek construction executive whose firm built a prior phase of the flood-control project said the government likely overspent by millions when it negotiated a contract with Suulutaaq rather than seeking competitive bids.
Meanwhile, investors aggrieved over the bankruptcy of the South Carolina dot-com called Sailnet said they were surprised to learn of former CEO Samuel Boyle's new job as CEO of Suulutaaq.
Boyle did not mention having construction experience or ties to Alaska tribes, they told California Watch. Some said Boyle's involvement in Suulutaaq boded ill for the Alaska firm.
"My comment to anybody connected to this thing — if Sam Boyle is involved, watch out," said Arizona venture capitalist Kent Mueller, who said he lost more than $1 million in Sailnet. Based on that experience, he said, "I would not invest a nickel with this guy."
Suulutaaq officials declined to be interviewed. In response to written questions, the company issued a statement saying that taxpayers were getting a "fair and reasonable" price on the Wine Train project. The statement said that although Boyle lacked "specific construction experience," he had "invaluable business experience" to make the Napa project a success.
The company declined to answer most questions about the project, saying the information was confidential. It rebuffed a query about whether Suulutaaq employed lobbyists by asserting that the question "has potential undertones of a race-based presumption."
Boyle also declined to be interviewed.
Emerging players
Suulutaaq is one of dozens of Alaska Native corporations that have emerged as players in federal contracting via measures crafted in the 1980s and 1990s by former Republican Sen. Ted Stevens, a powerful Alaska lawmaker whose career ended with a contracting scandal.
For decades, the Small Business Administration has run a preferential contracting program to aid disadvantaged businesses. Qualifying firms can get federal contracts worth up to $5.5 million by negotiation, rather than competitive bidding.
The Stevens measures gave corporations that were set up by Alaska Natives special access to the program — with no cap on the size of contracts they can obtain. Alaska Native corporations' share of federal contracts has grown rapidly, from $508 million in 2000 to $5.2 billion in 2008, records show.
Advocates say the program has provided crucial economic development for impoverished Alaskan tribes. It's a way of redressing centuries of wrongs against them, they say.
But critics have complained that the no-bid contracts provide relatively few jobs and little investment income to the tribes while costing taxpayers a fortune.
"Alaska Native corporations don't have to prove that they're socially or economically disadvantaged," Sen. Claire McCaskill, D-Mo., said at a 2009 hearing. "They don't have to be small businesses. And they can receive no-bid contracts worth billions of dollars."
The companies employ few Alaska Natives and "rely heavily on non-Native managers," McCaskill said. Thus the firms create relatively few jobs for the people they are supposed to benefit, she argued.
Remote tribe
Suulutaaq is a subsidiary of the Kuskokwim Corp., also called TKC, which was formed in 1977 by Yupik Eskimos and Athabaskan Indians on the remote Kuskokwim River, 350 miles west of Anchorage.
Suulutaaq is a Yupik word for gold, and the company was initially formed to develop a nearby goldfield. Soon it began competing for federal contracts.
In 2006, Suulutaaq obtained a $14.1 million, no-bid contract to rebuild meat lockers in Honolulu for the U.S. Defense Commissary Agency, which runs supermarkets on military bases. Records show Suulutaaq had earned about $45 million in federal contracts by 2008, the year the company won the Wine Train job. Most of the projects were outside Alaska.
Two other TKC subsidiaries have also sought federal contracts. In 2007 and 2008, API Inc. won contracts for Army uniforms that totaled $94.7 million. The uniforms were sewn at plants in Puerto Rico, records show. In 2007, a subsidiary called TKC Aerospace, with an office on Daniel Island, S.C., began obtaining no-bid contracts from the Air Force. Its CEO was Boyle, the former CEO of Sailnet.
Boyle told Sailnet's investors he was a marketing expert with a background in Air Force logistics. He said he began selling sailing gear online in Detroit in the 1990s, then moved to South Carolina to be near the sea.
Under Boyle, Sailnet burned through more than $13 million in venture capital, company documents show, but it never made a profit. Boyle was terminated in 2004, according to a former director and published reports. The company went bankrupt the following year. Meanwhile, Boyle went to work as a consultant at TKC Aerospace and in 2005 became CEO.
In all, TKC Aerospace has obtained $117 million in contracts. In 2009, the State Department paid the company $9 million to retrofit light-wing aircraft for use in the war in Afghanistan.
By then, Boyle also was working as the CEO of Suulutaaq.
A history of flooding
For decades, the Napa River has been prone to disastrous flooding. In the 1980s, the Corps of Engineers proposed forcing the river into a concrete channel to control floods, but the idea met local resistance.
Then, in 1998, environmentalists proposed what they called a "living river" project to manage floods. Floodwater would be absorbed and diverted through a system of wetlands and a bypass channel. Napa County voters agreed to tax themselves $6 million per year for 20 years to help pay for the project.
The rest is being paid with federal funds. The total price has ballooned from $250 million to more than $400 million.
The price tag might have been significantly lower but for the Wine Train, a private rail line established by the late Vincent DeDomenico, the wealthy creator of Rice-A-Roni.
About a dozen times each week during peak season, the train carries tourists on a five-hour round-trip from Napa to St. Helena aboard restored dining cars. A champagne dinner on the Vista Dome car costs $129 per person. More than 100,000 people ride the Wine Train each year.
The Wine Train's rail bridge in downtown Napa was too narrow for the wider river channel proposed, so it's being replaced. A new floodwall will also be built to protect the train's Napa station. Tracks are being relocated as well.
The added expense of accommodating the Wine Train was politically necessary, said Chris Malan, manager of the Living Rivers Council environmental group and a proponent of the tax measure. Without the support of the politically influential DeDomenico, the tax measure would never have passed, she said.
The Corps of Engineers solicited bids for the early phases of the project. In 2005, a Walnut Creek engineering firm, R&L Brosamer Inc., won a $25 million contract to build floodwalls and a promenade in Napa. Brosamer's work was honored by the American Public Works Association as Northern California "project of the year."
President Robert Brosamer planned to bid on the Wine Train job as well. But in 2008, he said he learned that no bids were being sought. The project "was a done deal with an ANC," as he put it, using contractors' jargon for an Alaska Native corporation.
"It was very frustrating," he said. "Particularly because the job we did was a tough thing, and the community loved us — and then we didn't even get a shot."
In September 2008 the Corps of Engineers awarded a $6.2 million contract to Suulutaaq to begin work on the Wine Train segment. The flood control project was already years behind schedule, said Bert Brown, the corps' project manager. "One of the mechanisms to expedite (a project) is to use qualified firms and go to them and negotiate a price," he said.
Brown, who said he was not yet involved in the project, said he doesn't know who contacted Suulutaaq on behalf of the Corps of Engineers.
A corps official said that someone on the project design team had recommended the company. But this official, who spoke only on condition of anonymity, said that no one could recall who made the recommendation. California Watch sought documents on this point via the Freedom of Information Act, but the corps said the information was exempt from disclosure.
A few months later, the federal stimulus program was announced. The corps recommended the Wine Train project, hoping to further speed its completion. With the support of Rep. Mike Thompson, D-St. Helena, $54 million in stimulus funds also went to Suulutaaq. That puts the company in the top 10 of largest stimulus contract recipients in California, records show.
Paying a premium
Brosamer, the Walnut Creek contractor, contends the public is paying a premium for the Wine Train project. "It would have been a hell of a lot cheaper if they had put it out to bid," he said.
But the quality of the construction is first rate, Brosamer said, because Suulutaaq subcontracted much of the job to the giant Peter W. Kiewit & Co. engineering firm, which is also a contractor on the Bay Bridge.
"The reality is, Suulutaaq isn't doing much," Brosamer said, "They've got some staff on the job, and they're running some subs, but Kiewit is doing the work."
Federal records show that Suulutaaq is paying Kiewit $28.1 million — 53 percent of the total stimulus contract. Suulutaaq is keeping about $20.4 million, or 38 percent of the total. The rest, about $4.7 million, goes to other subcontractors, all from the lower 48 states.
(California Watch is a project of the Center for Investigative Reporting with offices in the Bay Area and Sacramento. California Watch reporter Agustin Armendariz contributed to this report, which was edited by Mark Katches and copy edited by William Cooley.)
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