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Audit questions city contract process

Cozy relationship with consultants linked to construction overruns

A city of Portland audit is raising questions about whether cost overruns on city construction jobs could be better controlled if officials with the city’s Facilities Services Division were less cozy with a pool of preapproved consultants and contractors who figure heavily into city contracts. The audit, released this week, showed that officials with Facilities Services routinely put construction jobs out to bid before they know what they want. The practice leads to construction changes and late-stage design work, which escalates costs and causes delays, the audit said. Inadequate planning, incomplete designs and payments that are inconsistent with contract requirements were noted in four projects reviewed by auditors. Facilities Services, which has a 2007-08 budget of $21 million and manages 3.5 million square feet of buildings, frequently relies on a labor pool of preapproved consultants for technical drawings and advice on city construction work. Referred to as professional, technical and expert consultants, some are pre-approved for on-call work based on prior competitive screening while others compete for projects one at a time. The audit showed that the four project managers who oversee contracts in Facilities Services often delegate some of their responsibilities to the consultants to save time or because they want a person with specific skills at the helm of a construction job. But in a bureau that takes pride in having trusting relationships between its public employees and its consultants, those relationships figured heavily into some of the problems noted in the audit. In two of the projects reviewed, consultants for the city drafted their own work requirements when the scope of remodeling plans wasn’t defined for them. During construction in all of the jobs, consultants often were asked to take notes and maintain records of what happened on work sites. Those responsibilities weren’t spelled out in their contracts. “Anybody involved in this kind of contract on a regular basis understands that things can go wrong, and you want to have that documentation in place. You don’t want to rely on verbal communication,” said Beth Woodward, a management auditor for the city who worked on the audit of Facilities Management. But because those duties never were laid out, auditors found that sloppy record-keeping plagued all four projects they analyzed. In some cases, according to the audit, record-keeping simply dropped off as projects neared completion or records were available only in handwritten form. Because contract changes often began with consultant visits to job sites, the reasons for many construction change orders never were tracked. Facilities Services managers eventually signed off on them, sometimes months after decisions were made, the audit found. Changes that affected how their consultants were paid were frequently not documented at all. “There are different models of contract oversight. In a typical model the city would establish clear goals and deadlines and the vendor would be judged based on how closely they adhere to the deadlines and deliverables,” said Drummond Kahn, director of Audit Services. “Any of the examples in the audit indicate a structure that could have been more clearly defined and more specifically managed.” Many of those events led to increased spending in each project studied. All four projects analyzed by auditors were over budget, some by hundreds of thousands of dollars. Costs for two of the projects jumped more than 200 percent. Meanwhile, of the four consultants involved in the jobs, only one billed according to the rules of the contract. The other consultants billed for higher amounts and were paid, two of them exceeding the $50,000 they were preapproved to earn. Some billed higher rates for labor than allowed by the contracts and failed to bill subconsultant labor hourly. The changes were paid by Facilities Services, with approval from the City Council for one of the changes, which exceeded a 25 percent markup. Auditors questioned whether consultants and contractors who are familiar with the city’s tendency to allow contract changes could successfully underbid projects, knowing they could increase fees later. Bureaus take some heat Staff members at Facilities Management say the city’s bureaus are at least partly to blame. They say those bureaus tend to order projects before they know what they want and push to get them done quickly. While Facilities Services supervises most of the jobs, they do so without any authority over what bureaus pay. They can’t tell bureaus to control their costs or discourage them from making changes once work already is begun. “Bureaus don’t have to use Facilities Services for their projects if they choose not to,” said Ken Rust, director of the Office of Management and Finance, which includes the Facility Services Division. “It’s not really our job to say ‘No you can’t.’ Where I think we can do a better job is to work with them to understand what they’re trying to do so it’s done with fewer changes during the course of the job.” Records from some projects do note the frustration project managers and consultants face on some of these jobs. Earlier this year, when several Police Bureau employees made late changes to plans for remodeling at the Justice Center, the city’s detention facility, a consultant fired off an angry e-mail, exasperated that what was supposed to be a routine meeting led to more changes. “From what I can see in the attached markups, these are fairly extensive revisions. I would assume that the next person to review the lab plans will do an additional redesign if we continue the pattern. I apologize if I sound harsh, but this seems like a potential unending process that we need to head off …” she wrote. The Police Bureau’s changes to the project accounted for $30,000 in cost overruns, which were up 21 percent and were 241 days behind schedule when auditors stopped tracking the job in July 2007. Those delays were partly to blame for increases to consultant fees. Woodward said Facilities Management should have clear contracts in place and make clear amendments to the contracts when things change. Instead, auditors noted, the department’s culture takes pride in trust, leaves much to verbal communication and documents little. While auditors say the four projects aren’t a statistical representation of contracts handled by Facilities Management, auditors say the practices noted in the audit are representative of the department’s usual patterns. Sampling called unfair Rust thought the four projects selected by auditors — in particular those eyed for the number of cost overruns — cast an unfair shadow over the work generally done by Facility Services and wasn’t representative of the division’s work overall. He noted that in one of the projects audited, the contractor on the job went out of business, accounting for many of the related problems. Overall, he said, in seven years and $24 million in projects, change orders averaged 3.3 percent and cost increases were at 13 percent, lower than the 15 percent expected for such projects. “I think there are some legitimate issues, there’s no question about that. But it’s not statistically representative of the bureau,” he said. He did say, however, that some recommendations would be implemented, including better filing protocols and file management on projects. He also said Facilities Services would improve change order tracking, clarify consultant billing issues and more thoroughly review billing for compliance with contracts. But key to the agency’s improvement plans is simply taking more time to plan, Rust said. “It’s a real balancing act to be able to satisfy all of the things that the auditor pointed out. But I think that it did point out that if we can spend more time with the bureaus on the front end, helping them through the planning part of it, we should be able to have a faster, ultimately, outcome, and one that doesn’t have as much change involved with it,” Rust said. This email address is being protected from spambots. You need JavaScript enabled to view it.