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By Kenric Ward | Watchdog.org Virginia Bureau

RICHMOND, Va. — A confidential audit found that the Virginia Department of Transportation wasted millions of tax dollars by failing to fine a nonperforming contractor, Watchdog.org has learned.

The Office of the State Inspector General concluded "at least $3 million" was "wasted" by VDOT management for not holding Serco Inc. accountable for allegedly incomplete or undone work.

Serco holds a $335 million contract to provide roadside assistance and other logistical service to VDOT. The six-year contract, which took effect July 1, 2013, was designed to provide more services at current costs, VDOT spokeswoman Marshall Herman said.

Last year, anonymous complaints to the State Employee Fraud, Waste and Abuse Hotline alleged Serco wasn't fulfilling the contract. The state's audit substantiated one charge: VDOT failed to fine Serco for incidents of nonperformance. The auditors didn't confirm claims that Serco's contract was being renegotiated for additional funding, or that Serco employees were taking "excessive breaks" from work.

The OIG audit, obtained by Watchdog through a Freedom of Information Act request, recommended VDOT "resolve potential conflicts regarding responsibility for contract administration."

The confidential report — which cost $14,089 to conduct and was issued five months after its expected release date — also recommended "determining the need for corrective action against select employee(s)." No names were made public.

Herman said the "liquidated damages" (fines) portion of the contract was "established to incentivize the contractor to transition services within six months of the contract award."

"However, Serco made very clear their strong disagreement about collecting liquidated damages at all due to diligence. On advice of legal counsel, VDOT determined to provide addition time. … We also received legal counsel about past practices that limit agency ability to collect liquidated damages without defining a direct impact to motorists, which did not apply," Herman said.

A Dec. 30 VDOT memo, obtained by Watchdog, stated that identified deficiencies were corrected or are in the process of being fixed. In an email statement, Serco spokesman Alan Hill said, "We are enormously honored to serve Virginia motorists and support VDOT's innovative transportation operations.

"The IG report did not find that the contract was renegotiated to provide additional funding, nor did it find that Safety Service Patrols were taking excessive breaks.

"At all times, systems and processes were in place to ensure the safety of the motoring public was never compromised. The report did not identify any 'outstanding fines' nor did it recommend fines," Hill noted.

"We take performance seriously and continue to work with VDOT to improve overall contract administration with a common goal to implement enhancements that promote safety and make the Virginia transportation system 'best in class' for the nation."

Watchdog reported last summer that the Georgia Department of Transportation canceled its $21 million contract with Serco after discovering a GDOT employee who helped approve the pact had secretly done side work for the company.

Kenric Ward is chief of Watchdog.org's Virginia Bureau. Contact him at kenric@watchdogvirginia.org or at (571) 319-9824. @Kenricward