HONORABLE ALAN B. HANDLER
KENNETH D. MERIN, ESQ.
WALTER F. TIMPONE, ESQ.

June 8, 2000

The Panel's Charge and the Scope of the Investigation

This is the Report of the Panel constituted by Attorney General John J. Farmer, Jr., at the request Governor Christine Todd Whitman, following the trouble-plagued implementation of New Jersey's Enhanced Inspection and Maintenance Program. On December 13, 1999, the system went mandatory and over the next several weeks it failed.

The Governor charged the Panel to investigate the implementation of the program to determine why warnings of serious deficiencies in the system, including those made by retained independent consultants, were not made known to her Office.

In accordance with that directive, the Panel has sought to identify the key design and construction concerns that were raised in the course of the development of the system. In that process, the Panel has also sought to determine the deficiencies in the supervision and oversight of the project that contributed to the failure to bring substantial problems and explicit warnings to the attention of the State's Chief Executive.

Consistent with the focus of its charge, the Panel has not examined in depth the governmental policies resulting in the decision to develop and implement a so-called clean air enhanced emissions inspection system with a combination of central or state facilities and private facilities and to carry out that decision through "privatization," or the circumstances surrounding the procurement and award of the contract to Parsons Infrastructure and Technology Group Inc. to design, build, operate and maintain the system.

While the Panel has examined in some detail the circumstances surrounding the performance of the contract, it has not evaluated that performance from an engineering, technical or legal perspective to determine whether that performance was substantial or adequate under the express or implied terms of the contract.

Further, the Panel has not extended its inquiry into, nor does it mention, current efforts to rectify and implement the Enhanced I/M system, although occasional references to such ongoing developments were made during the hearings.

Finally, the Panel has not attempted to determine whether the warnings concerning actual or anticipated deficiencies issued by consultants and State employees were correct on engineering or technical grounds. Rather, as will be explained, several consultants and State employees forecast profound problems leading up to the project's implementation. The Panel has concentrated on the many problems and warning signs that arose in the performance of the contract and during the course of the development and implementation of the system and on the lack of corrective action taken in response, including the failure to make that information known to cabinet-level officers and the Governor's Office.

The Conduct of the Investigation

The Panel, constituted at the direction of the Governor, originally consisted of Attorney General John J. Farmer, Jr., as its Chair, Kenneth Merin, an attorney-at-law and former Deputy Chief Counsel, Chief of Policy and Planning and Commissioner of the Department of Insurance under Governor Kean, and former member of the State Commission on Investigation, and Walter F. Timpone, an attorney-at-law and former Assistant United States Attorney in Charge of the Special Prosecutions Division. Thereafter, the Attorney General determined to recuse himself because of his prior service as Chief Counsel to the Governor. Alan B. Handler, former Associate Justice of the New Jersey Supreme Court, was designated as Chair of the Panel at the request of the Attorney General and with the approval of the Governor. The Office of the Attorney General, Division of Law, provided support staff for the Panel. That staff included Assistant Attorney General Jeffrey J. Miller, Director of the Division of Law, and Deputy Attorneys General William C. Brown and Harlan I. Ettinger, as well as other legal, paralegal and investigative personnel.

On January 27, 2000, the Panel wrote to Commissioner James Weinstein of the Department of Transportation, Commissioner Robert C. Shinn, Jr., of the Department of Environmental Protection, Chief Counsel to the Governor, Richard Mroz, Treasurer Roland M. Machold and Director of the Division of Motor Vehicles, C. Richard Kamin, requesting them to "cooperate fully" with Panel staff and make available:

in the form and order in which they have been maintained, all documents pertaining to the enhanced motor vehicle emissions inspection program, including correspondence, reports, calendars, diary entries, memoranda, notes, computer generated matter and e-mails.

The Panel assembled over 115,000 documents. It conducted extensive preliminary interviews with dozens of witnesses. Following those interviews, twenty-one witnesses appeared to testify before the Panel. Their statements, given in response to questioning, were transcribed by a court reporter. In addition, Panel staff interviewed an additional twelve witnesses. The statements of six of those witnesses were taken before a court reporter. A list of witnesses is included in the Addendum.

Among the witnesses interviewed by the Panel were the State employees with direct responsibility for supervising and monitoring the project and their immediate superiors. In addition, high-ranking departmental officials were interviewed, including the Commissioner of the Department of Environmental Protection, the Commissioner of the Department of Transportation, the Deputy Commissioner of the Department of Transportation, and the Director of the Division of Motor Vehicles. The Panel extended its inquiry into the Governor's Office, interviewing officials and staff, including the Governor's Chief of Staff, Chief Counsel, and Chief of Policy and Planning.

The transcripts of these interviews together with 185 exhibits comprise the record underlying the Panel's report. That record is reproduced in the appendices that accompany this report.

History and Background

The contract for the implementation of New Jersey's Enhanced Emissions Inspection and Maintenance program was executed in August 1998, with a goal of full project implementation by December 13, 1999. That deadline had been set by a federal Environmental Protection Agency mandate that New Jersey comply with federal clean air requirements. In that period of time, a complex and novel system for enhanced testing and reduction of automobile emissions had to be designed, built and installed.

Following the award of the contract, efforts were made to formulate and clarify contract specifications and to develop working protocols among all involved in the implementation of the project. It became evident over the ensuing months that the contractor, Parsons Infrastructure and Technology Group, Inc. was failing to meet development and testing deadlines. Critical components of the machinery long remained in a developmental stage and critical tests could not be conducted. Adverse evaluations and stern warnings of these failures were issued by the State's consultant, Parsons Brinckerhoff-F.G., Inc. and its retained expert, Sierra Research. The State's project director, Carl Passeri, and other State officials did not fully accept or act on these warnings. In fact, commencing in the Summer of 1999, the oversight role of the retained experts in supervising the project was reduced by the project director. Later, in the Fall of 1999, consultants and State employees continued to note the failures of the contractor to meet necessary deadlines. Virtually every deadline that was set for the project was missed or discarded. By the time the project went on-line, there had been insufficient testing of a new and complex system that involved highly sophisticated and computerized equipment.

During this process, experts retained by the State to oversee the contractor, as well as certain State employees, provided their superiors and senior project managers with specific and strongly worded warnings about significant problems with the project. Despite their urgency, these predictions of failure were not passed up the chain of command. In addition, senior project managers repeatedly portrayed the project as being on track for an effective December 13 startup.

Enhanced I/M was implemented and became operational on the December 13 deadline, even though the system had not been subjected to the minimum amount of testing necessary to determine whether it was efficient, reliable and durable. The enhanced inspection system failed when it went mandatory.

Conclusions

The Panel has concluded that there are, at least, five reasons for the failure of the system and why the Governor and her cabinet-level officials were not warned of the serious deficiencies in the system and the risks posed by putting it on-line.

First, senior project managers and key staff in State government believed that the December 13, 1999 deadline could not be extended or deferred. They believed that, pursuant to federal law, failure to meet that deadline would jeopardize one billion dollars of federal highway funding for New Jersey and would inhibit economic development. This mindset contributed to a tunnel vision that hampered senior project managers from objectively and appropriately managing the project.

Second, senior project managers failed to adequately supervise the contractor implementing the Enhanced I/M system. The contractor was repeatedly able to extend deadlines and defer elements of the program that were required under the contract.

Third, senior project managers failed to alert those above them in the chain of command to the severity of the problems with the system leading up to December 13. That extraordinary breakdown in communication prevented critical information from reaching the cabinet-level officers, the Governor's Office, and the Governor herself. As a result, vital policy issues could not be raised and examined at the highest levels of government, including whether the December 13 deadline could have been extended or contingency plans could have been developed.

Fourth, the Commissioners of the Departments of Transportation and Environmental Protection did not effectively supervise the implementation of the Enhanced I/M system. Their ineffective supervision, particularly after reports and warnings of defects in the system were reported in the press, contributed to their lack of information about serious deficiencies in the system and their inability to take corrective action.

Fifth, the Governor's Office did not effectively monitor the progress in the implementation of the Enhanced I/M system. That ineffective monitoring contributed to a lack of information reaching the Governor's Office. As a result, the Governor was not warned about the serious deficiencies in the system and was denied the opportunity to make public policy decisions concerning the implementation of the system.

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