Money-saving consultants have cost SEPTA $2.8 million, invoices show

Looking for ways to save money, SEPTA has paid about $2.8 million to a Boston-based consulting firm, including payments of more than $500 an hour to some specialists.

In the process, FTI Consulting Inc. has used 24 of its staffers, some of whom have collected more from SEPTA than the transit agency's highest-paid official, general manager Joseph Casey, who makes $273,000 a year.

The meter is still running, with additional payments expected to continue through the end of the year.

SEPTA hired FTI in February 2013 through a no-bid contract to help the transit agency reduce legal costs arising from injury claims.

FTI's work has expanded to include advice on managing legal files and gathering real estate expertise from SEPTA executives before they retire.

FTI consultants collected a much higher hourly rate than SEPTA allows for lawyers, whose fees are capped at $250 an hour.

The decision to hire FTI was not voted on by the SEPTA board of directors or done through SEPTA's usual bidding process. By state law, SEPTA is not required to seek bids for "professional services" contracts.

The money to pay FTI comes from SEPTA's operating budget, primarily funded by transit riders and state and local taxpayers.

SEPTA officials say FTI's work has more than paid for itself by generating significant savings on legal claims and other costs.

The transit agency said it expected to pay about $2 million less in legal claims this year than the $29 million paid last year, and about $15 million less than the $42 million spent in fiscal 2013.

"I don't think we'd be where we are today, saving $15 million, without their help," said SEPTA chief counsel Gino Benedetti. "I think we got an excellent return on our investment."

In addition to the reduction in claims payouts, the number of claims and lawsuits filed against SEPTA for personal injury have fallen from 5,000 a year to 3,500, said Benedetti, who became SEPTA's top lawyer last year, after FTI was hired.

Benedetti said FTI also provided case-management procedures and computer software that would yield additional savings in the future. "It's made a sea change in our claims management," he said.

Some of the reduction in legal costs was due to other causes: State law was changed in June 2011 to limit the liability of deep-pocket defendants like SEPTA, and SEPTA has installed more than 17,000 video cameras in buses, subways, and train stations to help defeat fraudulent claims.

FTI's guidance has allowed SEPTA's legal department to destroy more than 75,000 obsolete files and avoid storage charges, Benedetti said. And SEPTA can better track files because each is bar-coded, he said.

Based on manpower-efficiency recommendations made by FTI, the legal division is saving about $582,400 per year and will save an additional $249,600 next year, SEPTA spokeswoman Jerri Williams said.

Since February 2013, invoices show, SEPTA has paid FTI about $2.5 million in hourly fees and about $300,000 in expenses.

Invoices also show that:

The lead FTI staffer on the SEPTA account, senior director Marc Lanzkowsky, collected $383,816 from SEPTA in 2013 and $316,507 in 2014, plus expenses. He was paid $459 an hour.

Another, director Jaylynn Peck, collected $304,335 in 2014, plus expenses. She was paid $348.50 an hour.

Another, director Richard Caldwell, was paid $280,263 in 2013 and $147,399 in 2014. He was paid $416.50 an hour.

The top hourly rate went to senior managing director Sheila Kindig, who was paid $648 an hour. She was paid $13,608 for 21 hours of work in 2013.

Another senior managing director, Wendy Shapss, was paid $595 an hour, collecting $35,820 for 60 hours of work in 2013 and 2014.

"I know we got our money's worth," Benedetti said. "They are a nationally renowned firm who does this day in and day out. Their rates are competitive.

"The results speak for themselves."

FTI's Lanzkowsky declined to comment, citing confidentiality provisions in the contract with SEPTA.

The firm was hired in February 2013 by then-general counsel James Jordan, who had taken over as SEPTA's top lawyer in 2012 with instructions to overhaul the legal division.

Before selecting FTI, Jordan got advice from officials of Conner, Strong & Buckelew, the insurance and consulting firm hired by SEPTA for $325,000 in 2012 to help reshape the legal department, Benedetti said. Conner Strong's executive chairman is George E. Norcross III, the South Jersey Democratic power broker.

Jordan also consulted with board Chairman Pasquale T. "Pat" Deon Sr., other board members, and Casey before hiring FTI, Benedetti said.

"Jim didn't want to spend time" going through the usual procurement process, Benedetti said, because he wanted to move quickly to address problems in the legal department. "He had leeway to do that . . . and he felt the department was out of control and out of touch.

"He felt that he needed some outside help," Benedetti said, "and I think I would have done the same thing."

Jordan retired from SEPTA last year. He could not be reached for comment.

FTI's contract calls for the company to be retained on a month-to-month basis with no end date, subject to termination at any time.

Benedetti said he expected FTI to finish its work for SEPTA by the end of the year.

Seven consultants have been paid at least $100,000 since 2013. See how their pay compares with that of SEPTA's general manager. Graphic, A10.

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