For multiple years, San Marcos employees have raised concerns about how the city does business with a local construction company, which has been paid more than $4 million for work since 2013.

The Fence Lady Inc., a Boerne-based construction company, was awarded $3.2 million in contracts between January 2013 and February 2019. But through change orders approved by the city, The Fence Lady’s earnings increased by $922,309—or 28.85%, according to an analysis of thousands of pages of city records examined by Community Impact Newspaper.

The city of San Marcos changed its purchasing policy last year after a review of those concerns found instances where the administration of some contracts did not comply with city policy, according to a statement from the city.

But some concerns remain.

The competitive bidding process on public construction projects is regulated by state law since it involves taxpayer money. Legal experts told Community Impact Newspaper that these regulations are meant to hold local governments accountable for use of public funds.

A review of documents shows that the city bypassed the competitive bidding process through the use of change orders on some of the 120 contracts awarded during this time to The Fence Lady, which is owned by local contractor Rebecca Dean.

The city declined to comment on questions about these specific projects. It did, however, state that the policy changes were made to “improve procurement practices to ensure compliance with state law.”

Documents and emails obtained by Community Impact Newspaper through a public information request show that city employees, including members of the finance and purchasing staff, indicated concern as early as 2016 about the city’s history of awarding The Fence Lady with contracts that were often followed by change orders.

“There is quite a bit of history of The Fence Lady significantly undercutting the competition and many times she delivers her quote mere minutes before the deadline,” Procurement Program Administrator Veronica Bradshaw stated in a February 2017 email. ”Almost without fail, contracts with her for those very low amounts come with sizable change orders to increase the final contract amount.”

Bradshaw wrote that this pattern caused outside vendors to question the city’s integrity and “how the city conducts its operations.”

Documents show the city awarded The Fence Lady a construction contract as recently as February. The city declined to comment on whether it has any active contracts with the company.

“The Fence Lady has continued to earn city business and has followed the bid and procurement process established by the city’s purchasing department,” the city stated.

Dean declined to respond to specific questions for this story but provided a written statement.

“We are a reputable, sought after 100% women owned company, with multiple state contracts,” Dean stated. “We adhere to and abide by all the contracting policies established by the City and our other clients. We have no control over the rumors, opinions, perceptions and assumptions of City employees or citizens. We however, are grateful for the relationship we have fostered with the City over the years, and look forward to working for them now and in the future.”

The city declined to confirm whether staff ever informed the San Marcos City Council of internal concerns about the city’s competitive bidding processes.

City employee speaks out

Rebecca Ybarra, who has served as director of the San Marcos Convention and Visitor Bureau for 21 years, said she first brought up her concerns about The Fence Lady around the end of 2017 or the beginning of 2018.

The city awarded Dean’s company a $45,012 contract for repairs and renovations at the CVB at the end of 2017. Included in the contract were the installation of 1,865 square feet of flooring, the removal of wallpaper, a paint job on the interior walls and the purchase and installation of new aluminum storefront doors.

Jason Pence, the city’s construction project manager, approved a change order from The Fence Lady that reduced the overall cost by eliminating the new doors and buying instead an additional 2,180 square feet of flooring.

Ybarra said she believed there was something “off” about the change order because the bureau got more than double the new flooring called for in the original contract but never received new doors. She said she believed the new doors were needed.

She said she raised her concerns with Pence and Oscar Hairell, San Marcos’ assistant director of community service, who was Pence’s supervisor at the time and has since retired. Pence and Hairell gave her “many different responses,” including one where they stated the square footage listed in the contract was wrong, she said.

“One of the responses I recall vividly is they said, ‘Well, we don’t measure the building—that’s up to finance and the purchasing department.’ And I found that odd,” Ybarra said.

Ybarra said she also followed up with the finance and purchasing departments and was told they were not responsible for measuring the square footage.

According to Ybarra, she was later told by Pence and Hairell that the change order added flooring so extra could be kept in storage for future use, she said.•The city declined to confirm that the flooring was put in storage.

Ybarra said she believed Pence and Dean acted improperly on the project and took her concern to City Manager Bert Lumbreras. He directed the staff to do a financial audit on the project, according to a city statement.

The San Marcos Community Services Department management team, which includes Pence, provided explanations for all variances in the project, according to the city.

“To complete the review process, city staff reported to the city manager that while some procurements did raise concern, it did not appear that there was cause for employee discipline or criminal proceedings,” the city stated.

Pence did not respond to questions about the change order.

Ybarra said her concern only deepened after she learned that Dean and Pence had an extensive personal and professional history together before Pence became a full-time city employee.

Pence became the city’s construction project manager in May 2014 after starting as a temp contract employee in September 2013, according to the city.

As the city’s construction project manager, Pence is charged with managing construction projects, approving change orders, and monitoring and authorizing expenditures related to city construction projects, according to a job description provided by the city.

Pence is also responsible for evaluating construction proposals and work by general contractors from the time the city solicits bids and awards a contract until the project is finished.

Before Pence worked for the city, documents show he worked for Wimberley-based Harris Road Co. until at least 2012.

Pence told Community Impact Newspaper that as an employee of Harris Road Co., he collaborated with Dean’s company on multiple construction projects for the city of San Marcos.

“I’ve known [Dean] for probably 15-16 years—probably one of the best women I’ve ever met in my life,” Pence said.

The city declined to comment on whether Pence ever disclosed his past professional relationship with Dean since becoming a city employee.

“There is no reason to disclose it because they hired me from Harris Road Company in which she was one of the main contractors who worked for us, and that’s how the city knew her as well,” Pence said.

He said he has never acted improperly as the city’s construction project manager.

“I’ve always carried the best interest of the city and the best interest of the taxpayers first,” Pence said.

This is not the first time Pence has faced scrutiny in the construction industry. Court records show that in addition to multiple construction-related civil suits filed against Pence from 2008 to 2019, he was also indicted on two third-degree felony charges of theft by check in 2009, one in Hays County and the other in Comal County.

Records show that at least one of the checks was signed by Pence and issued by J. Pence Construction LLC, a company Pence owned. The charges in both cases were dismissed.

Pence said he provided the city with all of the necessary information about his background when he was hired, including whether he had any felony convictions, which he does not. He added that J. Pence Construction dissolved around 2008.

The city stated that all new hires are subject to a criminal history check by the Texas Department of Public Safety.

An internal audit

The financial audit prompted by Ybarra’s concerns was not the first time the city re-examined change orders from The Fence Lady.

A May 2016 internal audit reviewed 38 contracts awarded to The Fence Lady from Oct. 13, 2014, to Feb. 19, 2016.

The cost of those projects increased from the initial number, $1.2 million, to $1.8 million due to change orders, according to the audit performed by Contract Administrator Jose Davila and other records. Davila, who did not respond to requests for comment, no longer works for the city.

There were change orders on 29 of the 38 projects, records showed.

Three change orders were the result of the city not specifying all of the work that needed to be done, Davila stated in the audit.

Notes in the audit state that several other change orders from The Fence Lady increased costs either to account for materials and services that should have been included in Dean’s initial bid or for work outside of the scope of the original contracts.

In one instance, The Fence Lady was awarded a $14,500 contract in November 2015 for flood damage repair to the city’s ranger station. Davila flagged a $34,230 change order in his audit.

“Even though this was flood related, a lot of the additions on the change order should have been part of the original scope,” Davila stated in the audit.

Another contract awarded in January 2016 called for the installation of a rock backsplash on a wall in the city’s nature center and trash cleanup after the project was completed, according to documents. The original contract was for $4,468.

Less than a month later, Pence and the city’s purchasing manager, who retired in 2017, signed off on a change order from The Fence Lady.

The change order removed the $4,468 alloted for the installation of the rock backsplash—which, •aside from project cleanup, was the only task listed in the contract. It also added the demolition of offices and the addition of walls, countertops, flooring, four new doors, frames and offices as well as 18 feet of desk and granite counters, bringing the final cost of the project to $19,773.

This means the change order increased the final cost of the project by about 342.55%.

Pence said what started out as minor remodeling turned into the relocation of four people to the San Marcos Discovery Center.

“I make decisions based upon what I am being directed to do,” Pence said. “These are decisions that are made above and beyond me.”

The city declined to answer questions about this project.

Adjusting a project through change orders to the point that the work completed is entirely different than what the original contract called for is legally referred to as a “cardinal change,” said Arizona State University professor Kenneth Sullivan. Sullivan has a doctorate in civil and environmental engineering and specializes in the study of procurement, solicitations, best-value contracting and accountability systems.

“You can’t hire someone to put in some type of wall with backsplash on it and then change-order it and get rid of that, and then add work for unrelated work.” Sullivan said. “That would be, in my experience, difficult to defend the justification for that in [a] court of law and how that work was related to the original contract.”

Sullivan said a local government might be inclined to examine its processes if it discovers that a particular contractor has been allowed to consistently depart from or exceed the original scope of a contract on multiple projects through change orders.

“It would be something that would be very inconsistent with well-held norms of good public procurement and construction practice,” Sullivan said.

He added, however, that it would be difficult to make conclusions about “anything malicious” based on the handling of a single project.

One of the largest change orders Davila flagged in his May 2016 audit involved a $7,150 contract awarded in December 2014 for a municipal building renovation. The Fence Lady submitted two change orders, which brought the final project cost to $48,350—a 576.22% increase.

Davila stated in the audit that the work in this change order was part of the original contract.

“The change order lists items that should have been part of the bid price,” Davila stated.

R. Carson Fisk, an Austin-based attorney for the firm Andrews Meyers who has been practicing construction law for 15 years, said that although change orders are not uncommon in the construction industry, an extended pattern of questionable change orders could be an issue.

Sullivan said such a trend could indicate improper behavior.

“So, on its face, it’s not necessarily illegal behavior, but [it is] unethical behavior,” he said. “Those things may indicate that something is happening that isn’t what’s best for the public good.”

Emails from March 2016 showed that the finance department questioned Rodney Cobb—the executive director of community services at the time of the May 2016 audit—about some of the projects flagged by Davila. Cobb has since retired.

“Does someone want to explain these change orders to me?” Cobb stated in an email to some of his staff. “Apparently we did not bid out items and then just added them to her contract. Now I am getting calls from [Director of Finance] Heather [Hurlbert] wanting to know why and how this happened. She said there are others that are similar.”

The city declined to respond to questions about Davila’s audit.

Questions from elected officials

Some elected officials also questioned The Fence Lady’s ability to complete projects for low bids without significant change orders, emails showed.

Mayor Jane Hughson and Lisa Prewitt—who were both City Council members at the time—emailed in June 2016 about staff’s recommendations to award contracts for two projects to The Fence Lady.

Dean submitted a bid for $93,285 on a biofiltration pond project. M2 Federal—the only other contractor to bid on the project—sought $245,220.

The second bid Hughson and Prewitt questioned was on a city sidewalk project, for which The Fence Lady bid $14,246. Five other construction companies submitted bids ranging from $33,298 to $77,892.

“How [can The Fence Lady] justify such a low bid compared to the other bids?” Prewitt stated in the email, which was sent to Cobb and former City Manager Jared Miller. “I am gravely concerned about the gap of low bid to the medium/high bid. I understand we typically are required to go with low bids, but there is such a huge gap in the proposals that the workmanship quality, materials as well as potential change orders may end up costing us more in the long haul.”

Prewitt requested in her email that Miller provide an explanation about the “large gap” in bids, adding that the situation “really raise[d] a red flag.”

“In this case, I am not too concerned because of the proven track record of the low bidder on city projects and also on her projects with the university,” Cobb replied.

Prewitt was not alone in her concern.

“Not meaning to disparage any staff or potential vendors, but isn’t it worrisome when one vendor comes in so much cheaper than other vendors?” Hughson stated in the email. “This is in reference to The Fence Lady, Inc. about whom I know nothing more than the bids in the meeting packet.”

Cobb offered a response similar to his first, noting he was comfortable with The Fence Lady’s bid and Dean had a proven track record of doing quality work.

City Council ultimately voted to approve the staff’s recommendation to award both contracts to The Fence Lady at its meeting on June 6, 2016.

Dean later put in two change orders on the city sidewalk project—one for $15,562 and another for $18,417. This brought the total price of the contract to $48,225, which was higher than two other competing bids, records showed.

Community Impact Newspaper was unable to reach Prewitt, who no longer serves on City Council.

Hughson told Community Impact Newspaper she was unaware of the change orders. She said she was also unaware of any other concerns regarding the city’s business dealings with The Fence Lady.

“The staff response is that they were comfortable with the bid and the company, so I wasn’t concerned about issues with the process,” Hughson said in a written statement.

Public procurement policies are intended to ensure that municipalities make value-based decisions rather than choosing contractors based off of relationships, said Cathy Altman, a construction law attorney with Dallas-based law firm Carrington Coleman Sloman & Blumenthal.

“If you have a situation where, based on relationships, someone is regularly winning particular projects and then through change orders those projects are ending at or above the price of other bidders who say that change order work was included in the price of their bids, that would make a city want to look at the process potentially,” Altman said.

A protest from a competitor

Questions about the city’s business dealings with The Fence Lady also came from beyond the walls of local government.

In November of 2017, construction company M2 Federal filed a protest with the city on a contract on which the company bid but lost to The Fence Lady.

The protest, dated Nov. 17, 2017, was over a project that required the relocation of some bollards from a city park. A bollard is a sturdy, short post often stationed throughout parking lots. The Fence Lady won the contract for $13,800. M2 Federal bid $26,861.

M2 Federal owner Mike Scheiern stated in his protest that it would be impossible for The Fence Lady to meet the city’s quality standards without later submitting a change order on the project.

Scheiern, who declined to comment for this story, stated in the protest that the project could not be done without a “significant change in scope” or “the city of San Marcos providing a number of resources where the city bears the costs of these resources.”

Pence and the city’s purchasing manager later approved a $5,096 change order from The Fence Lady that increased the project’s cost by 37.92%, documents showed.

A change order violation

In 2018, Pence approved a change order from The Fence Lady that violated not only the city’s purchasing policy and the terms of the original contract, but also state law, according to city emails and internal memos.

When a contract costs $50,000 or more, a change order must not exceed 25% of the original contract price, according to the Texas Local Government Code. Projects that cost $50,000 or more must be approved by City Council.

The apparent violation occurred when Pence approved a $13,830 change order on a $45,509 contract, documents showed.

Dean’s change order form incorrectly stated the changes increased the original contract price by 18.7%. The change order actually increased the cost of the project by 30.38%, according to documents.

The change in price bumped the project up over the $50,000 threshold, which triggered the TLGC’s 25% rule. The project, which ultimately cost $59,339, was never approved by San Marcos City Council, documents showed.

“The purpose of the statutory regulation [Local Government Code 252.048] for which this provision is based is to prevent abuse and to comply with the presumption of competition,” Hurlbert, the director of finance, stated in a March 2018 internal memo. “It also provides a measure of accountability as a governmental entity.”

The change order did not get final approval from the finance and purchasing departments before the work was completed, emails stated.

Hurlbert’s memo also stated that the city was not legally obligated to pay The Fence Lady for the unauthorized work.

“We are aware that this work has been completed and the contractor performed the work without an authorized change order, and the city is in the unfortunate position of paying for this work,” Hurlbert stated. “I will contact the contractor directly so this situation does not occur in the future.”

Purchasing Manager Lynda Williams notified Dean, owner of The Fence Lady, in a March 2018 letter that the city was aware of the violation but still planned to pay her. Both Dean and the city declined to say whether the payment was made.

Despite the city’s letter, Dean was never paid for the change order work, Pence said.

“To me,” Pence said, “once you tell somebody that you’re going to do something, you do it.”

Response to growing concerns

Soon after the city reviewed its processes in response to Ybarra’s concerns, it made a series of changes to its purchasing policy to ensure compliance with state law. The city also hired Williams as the new purchasing manager at the beginning of 2018 to fill a position vacated by retirement.

All formal and informal bids and proposals on construction contracts are now submitted directly to the purchasing and contracting departments.

Among other new practices, the city stated that the purchasing manager now questions contractors in writing when bids come in substantially lower than the estimated construction cost, and the contractor is permitted to withdraw their bid if an error was made.

Ybarra said she is happy that the city has improved its purchasing practices. However, she said she is still concerned that Pence has a “conflict of interest” when it comes to his authority to approve change orders submitted by The Fence Lady, given his past professional history with Dean.

While Pence is responsible for approving change orders, final authorization rests with the purchasing department, according to city policy.

“To this day, I feel that Jason Pence and The Fence Lady are stealing from the city of San Marcos and the taxpayers,” Ybarra said.