KPMG billed $425 for rail work assigned to $35 roles, report finds

KPMG charged $425 an hour for thousands of hours of California high-speed rail work assigned to roles it had priced at $35 in its winning proposal, according to a CBS California review of task orders and invoices. The difference between those two rates is $390 an hour. ¹

Over four months, CBS estimated, the firm billed roughly $2 million more than its winning cost proposal indicated. The findings, disclosed October 23, 2026, have prompted California High-Speed Rail Authority Board Chair Steve Kawa to promise an independent review—but not yet secured confirmation that one has opened. The reported difference is not an audit finding, a proven taxpayer loss or a determination that KPMG broke its contract. ²

The question is more fundamental than whether consultants are expensive: did the prices that helped KPMG win public business actually constrain the bills that followed?

After publication, Kawa told CBS he would formally ask the Office of Inspector General to examine the contract, billing practices and the authority’s oversight procedures. The office is led by Ben Belnap. No formal request, acceptance, opening date or timetable for this specific review has been established in the available evidence. A promise to seek scrutiny is an accountability step, not the scrutiny itself. ^{2 19}

The agreement is a four-year, $24 million financial-advisory contract. KPMG’s winning proposal offered an average hourly rate of roughly $200; its billed average was more than twice that, CBS reported. Nearly half the contract’s value had already been spent in its first year. That pace leaves less room for the remaining work, though it does not establish that the contract ceiling was exceeded or spending was unauthorized. ²

The proposal inverted the usual relationship between seniority and price. Managing Directors, Managers and Senior Associates—classifications that had cost hundreds of dollars an hour under the earlier agreement—were priced at $35. The lowest-experience Associate classification went the other way: from $45 under the previous agreement to $425 in the new proposal. The older $45 figure is a historical comparison, not a current rate. ³

A strangely shaped price schedule does not, by itself, prove misconduct. But it makes the choice of classification exceptionally consequential. Here, billing an hour as an Associate rather than a Manager meant charging more than twelve times the proposed Manager rate.

Across seven task orders CBS examined, the authority assigned more than 9,000 hours to Managers and Senior Associates. Thousands of hours assigned to those roles appeared on invoices at the $425 Associate rate. CBS found no staff hour billed at $35 in the invoices it reviewed. ^{1 3}

Those figures need to stay separate. The more-than-9,000 hours were assignments, not a verified count of hours all invoiced at $425. Multiplying that entire assignment total by the $390 spread would misstate the evidence rather than reproduce the roughly $2 million estimate. ¹

The estimate compares billing with the winning proposal. The complete invoice-by-invoice calculation, exact service months and underlying records have not been independently reproduced here. Nor has a matching payment ledger established whether every disputed charge was paid, adjusted, partially paid or left outstanding. That is why “billed above proposal prices” is warranted, while “taxpayers lost $2 million” is not. ²

This was not an entirely unforeseen risk. CohnReznick Advisory, the competing bidder, scored higher on technical qualifications but lost by two points because of pricing, according to CBS. Its protest alleged that KPMG offered artificially low prices for senior positions it never intended to staff, planning instead to bill personnel under different, more expensive classifications. That was an allegation by a disappointed competitor, not an established finding of bid manipulation. ³

The protest also highlighted Thierry Prate, the KPMG Managing Director who signed the contract. He was proposed as a Partner at $460 an hour rather than under the $35 Managing Director classification. A corporate title and a state-contract classification are not necessarily interchangeable; the difference alone does not establish that his designation was improper. ²

The authority’s evaluators had flagged budget concerns and noted that KPMG assigned no employees to the three $35 classifications. The authority nevertheless awarded the contract. Defending the award, it maintained that the proposed staffing and classifications met bidding requirements and that there was no evidence KPMG would fail to honor its prices. ^{1 2}

California’s Department of General Services denied the protest. Its hearing officer called the argument that KPMG intended to charge more than it bid, or substitute someone at a higher classification rate, “mere speculation.” That procurement decision addressed the evidence then before the reviewer; it was not a clearance of the invoices now under scrutiny. ²

The distinction matters. DGS told CBS that its role concerns procedural compliance with procurement law and requirements, not supervision of what agencies pay after signing. Checking the work, its appropriate classification and the allowable rate remained the rail authority’s responsibility. Passing a procurement review did not relieve it of managing the contract. ²

A second discrepancy makes the signed agreement essential to any conclusion about improper billing. CBS reported that the winning bid reviewed by the state listed Managers at $36.05 an hour in years three and four, while the signed contract listed $453.20. These later-year figures are separate from the central $35-versus-$425 comparison. ²

According to CBS’s account, using the higher later-year Manager rate in the bid would have reversed the procurement outcome. But the full scoring table, executed rate schedules, any amendments and the reason for the difference have not been independently reconciled. The discrepancy is serious; it is not, on its own, proof of an unauthorized contract change. ²

That explanation makes the state’s classification definitions central, but it does not reconcile the assignments with the invoices. Disclosure of a staffing plan is relevant to what officials knew; it does not by itself explain why work assigned to one classification was billed at another’s much higher rate.

Authority CEO Ian Choudri and Prate did not answer CBS’s emailed questions. Choudri also declined to answer questions in person after a board meeting, and the authority did not provide CBS a substantive explanation of the billing differences before publication. Their nonresponse proves no wrongdoing. It leaves the agency’s approval and payment decisions unexplained. ²

An independent examination would need to connect the staffing definitions, binding rate schedules, task orders, invoices and actual payments. That is how it could distinguish a disclosed, permitted arrangement from misclassification, an improperly changed bargain or recoverable overbilling. Until then, the roughly $2 million remains a reported billing difference—not a proven loss. The authority still owes an answer to the question the invoices raise: what practical value did the winning prices have once the work began?