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HomeMy WebLinkAboutS21 - Civic Center Audit - Status Report - PowerPoint (Consultant)CIVIC CENTER PROJECT CLOSE-OUT AUDIT - City Council Presentation June 28, 2016 40 i d RW Block Consulting, Inc. •Allyson Gipson •Vice President Harris &Associates Inc. Harris & Associates City of Newport Beach, CA I June 28, 2016 2 Overview of Presentation • Brief Recap The Audit Process Challenges Preliminary Findings Recommendations City of Newport Beach, CA I June 28, 2016 3 • RFQ released September 2015 • 12 submittals received October 2015 RW Block contract approved November 2015 • RW Block contract signed December 2015 •Project kick-off with Harris &Associates and RW Block January 2016 City of Newport Beach, CA I June 28, 2016 4 Review of how the project grew in cost, time and scope Determine whether contracts and amendments complied with CA law Analyze project compliance with industry standards Review effectiveness of value engineering process Analyze the quality of the City's management of the project City of Newport Beach, CA I June 28, 2016 5 Determine the merits of the Construction Manager at Risk delivery method Determine if the parking structure cost was comparable to similar projects Review the change order process Compare the cost impacts of change orders to similar projects Analyze the cost impact of delays and plan alterations Review the total project cost compared to other similar projects City of Newport Beach, CA I June 28, 2016 6 Overview of Presentation Brief Recap • The Audit Process Challenges Preliminary Findings Recommendations City of Newport Beach, CA I June 28, 2016 7 The first stage of the audit process is to gather all project documents available to facilitate the review. Documents were collected from the City's files, from the PM and from the Architect. Based on the documents detailing the project scope, budget and schedule, RW Block: Reviewed the available documentation Prepared independent analysis of specific items, such as estimates and schedules Compared independent analysis to documentation provided City of Newport Beach, CA I June 28, 2016 8 Overview of Presentation Brief Recap The Audit Process • Challenges • Preliminary Findings • Recommendations City of Newport Beach, CA I June 28, 2016 9 Audit Documents Timeline January 11, 2016 —Review of City documentation March 2, 2016 —1st documents from C.W. Driver received March 14, 2016 —Last documents from C.W. Driver received April 28, 2016 — BCJ (Architect) documents received June 10, 2016 —Initial RWBC draft report provided for comment June 17, 2016 — RWBC draft report issued City of Newport Beach, CA I June 28, 2016 10 While the documents provided by the Architect, 130, were complete (design bulletins, Requests for Information and submittal logs), there were other issues: Challenge 1— Missing documentation City procurement documents for selection of the Program Manager (PM) and Construction Manager at Risk (CMAR) Monthly reports only exist for 1/3 of the project Payment applications were provided by the CMAR, not from City files, and contain no supporting information from subcontractors or vendors 20 of the 62 subcontractor procurement files were missing, as was detail in some subcontractor change order files City of Newport Beach, CA I June 28, 2016 11 Challenge 2 — Incomplete documentation With no supporting information or value engineering analysis, the value engineering data was insufficient to determine efficacy of the effort Project budget details are typically updated monthly, but the budget tracking information was incomplete and did not extend through the project's full duration. Some change order requests were not fully executed, leading to inconsistency in project accounting Minimal schedule information was provided, prohibiting a full evaluation of the cost impacts of delays and plan alterations City of Newport Beach, CA I June 28, 2016 12 ® Challenge 3 — Conflicting documentation Schedule information that was provided was contained mainly in the eleven monthly reports, and formats varied resulting in inconsistent information Documents provided as "correct" documents from the CMAR differed from the City's approved versions Cost estimates were provided from various sources, but the "final" versions were indeterminable NOTE: The City Attorney's office, Harris & Associates and R.W. Block all requested documents from C.W. Driver, BCJ Architects and the City departments, and each indicated that they had provided all responsive documents. As the City does not have a complete set of documents, we must rely on the contractors to supply project documentation. City of Newport Beach, CA I June 28, 2016 13 Overview of Presentation Brief Recap The Audit Process • Challenges • Preliminary Findings Recommendations City of Newport Beach, CA I June 28, 2016 14 Of the eleven (11) identified goals of the audit, no significant findings were found in the following: Item (2) — no issues were found with the forms of contracts and amendments; potential issues with the procurement process will be discussed later Item (6) —Construction Manager at Risk was an appropriate delivery method for the project Item (7) —the Parking Structure was delivered for a good value compared to similar structures Item (9) —the cost impact of change orders was in line with similar projects City of Newport Beach, CA I June 28, 2016 15 The City's decision to hire a Program Manager (PM) to support the City's staff on such a complex project was well advised. However, electing to have the same firm act as PM as well as Construction Manager at Risk (CMAR) creates an inherent conflict of interest, deviating from industry standards. As a result, many areas of the project where the PM should have maintained control were lacking. For example: • Project status reporting is non-existent for 2/3 of the project City of Newport Beach, CA I June 28, 2016 16 The design documents had a number of errors that were undetected by constructability review, illustrated by: A. 40 design bulletins which revised approximately 92 specification sections and 1,891 drawings (averaging two revisions per sheet) B. 1,724 Requests for Information (RFIs) The invoices provided by the CMAR did not contain typical supporting documentation (i.e. subcontractor invoices, time summaries for T&M staff, invoices for reimbursable items) Estimated costs from the Guaranteed Maximum Price (GMP) Amendments appeared to have been invoiced without providing actual cost information CMAR subcontracts included over $1.2 million of contingencies and allowances which were not generally incorporated into change orders with the City City of Newport Beach, CA I June 28, 2016 17 Change Order Control was insufficient Unallowable costs were present in a number of change orders tested Unallowable costs identified were less than 2% of the sample's total Supporting documentation for material costs was generally missing Over 60% of the change orders, and 71% of the change order value, were approved after the construction was complete, reducing the City's leverage to negotiate The result of this lack of document and cost control is potentially $1.2 million in overbilling by CMAR City of Newport Beach, CA I June 28, 2016 18 Other issues affecting how the project grew in cost, time & scope center on budget control. Key elements of the project's cost were over budget since conceptual design �Jdl $400/sf - $450/sf $570.51/sf $592.62/sf $640.34/sf $15/sf - $20/sf $56.34/sf $43.75/sf $47.71/sf $20,000 — $25,000 /space $32,738/Space $17,144/space $18,430/space The Design Competition's recommendation for an independent review of the cost estimates did not appear to have been performed City of Newport Beach, CA I June 28, 2016 19 Major scope elements of the City Hall building were exceeded beginning with the initial design phase (sf) I parking space (sf) 80,000 450 600,000 96,184 450 562,294 Estimate was not provided 101,680 450 524,948 102,255 450 619,078 102,656 450 619,078 22,656 0 19,078 28.32% 0.00% 3.18% City of Newport Beach, CA I June 28, 2016 20 $3.6 million of total project costs were excluded from the City's total reported project costs due to other funding mechanisms that supplemented project funds. $ 17,324,980 $ $ 17,324,980 3,186, 611 3,186, 611 3,276,406 3,276,406 23,787,997 - 23,787,997 114,466,752 2,399,430 116,866,182 259,411 - 259,411 114,726,163 2,399,430 117,125,593 161,184 - 161,184 2,784,724 474,012 3,258,736 156,087 734,412 890,499 2,702,235 2,702,235 5,804,230 1,208,424 7,012,654 144,318,390 3,607,854 147,926,244 4,806,192 4,806,192 $149,124,582 $3,607,854 $152,732,436 City of Newport Beach, CA I June 28, 2016 21 Based on the initial budget: The final design estimates of the City Hall and Park areas resulted in a $10.5 million increase over budget (at the target unit price costs) from the Design Competition's construction budget. The unit price overruns for the construction of the City Hall and Park resulted in a $29.3 million cost overrun. City of Newport Beach, CA I June 28, 2016 22 Another area of focus centers on procurement practices. For example: The cost evaluation from the Design Competition did not compare similar scopes of work $36,000,000 $11,250,000 $12,000,000 $36,763,102 $11,250,000 $12,000,000 $32,375,549 $20,819,329 $10,747,980 Detail not provided. Only the total. $38,799,209 $13,323,719 $19,603,284 $59,250,000 $60,013,102 Excludes site preparation costs $63,942,858 Includes site preparation $69,000,000 Includes site preparation $71,726,212 Includes $3.47M for site preparation Excludes $1.89M in $37,143,000 $15,165,000 $22,571,000 $74,879,000 planned bridges. Includes $5.6M for site preparation and soil export City of Newport Beach, CA I June 28, 2016 23 It appears the CMAR award may have been based using the Program Manger procurement, though the CMAR scope was not included in the Program Manager's RFQ. • No procurement data exists for two contracts (Plan Check &Inspection Services, and Geotechnical Exploration &Consulting). Information available indicates that they may have been sole sourced for contracts exceeding $75,000 ($1.3M and $214K respectively, with amendments included) City of Newport Beach, CA I June 28, 2016 24 The procurement of subcontractor bids raised the following concerns: Information was provided for only 42 of 62 subcontracts Six (6) bids packages received less than three (3) bidders A number of large (in both value and percent basis) bids had "normalization" values — bids adjusted after bid dates City of Newport Beach, CA I June 28, 2016 25 The value engineering process could not be evaluated due to insufficient information The cost impact of delays and plan alterations could not be evaluated due to lack of sufficient schedule data • Although the project exceeded the original budget, the final cost of the Project as ultimately designed was of fair value City of Newport Beach, CA I June 28, 2016 26 Overview of Presentation Brief Recap The Audit Process Challenges Findings • Recommendations City of Newport Beach, CA I June 28, 2016 27 In preparation for future construction projects, the City should: Develop comprehensive program/project management policies and procedures Determine the roles of participants and level of authority at the outset of a project Separate the oversight role of the project manager or program manager from any project participant in conflict (i.e. from the same firm) Conduct procurement processes within established industry standards City of Newport Beach, CA I June 28, 2016 28 Establish contract terms for all project participants to specify responsibilities and avoid conflicts • Manage design firms to the established budget Establish fiscal controls to direct the level of detail required prior to payment of invoices Disallow the use of estimates and allowances in subcontract bids as a basis of payment • Close out change orders as they occur, as opposed to holding them until the end of a aroiect Conduct periodic performance audits at project milestones, as well as perform close-out audits City of Newport Beach, CA I June 28, 2016 29 The City should maintain a complete set of project records, including, but not limited to: Procurement files for all vendors Detailed budget records, noting all changes and the authorization for said changes Detailed accounting records of all payment applications, with full supporting documentation Value engineering recommendations and dispensation of suggested changes Monthly reports and meeting minutes Project logs and details (RFIs, submittals, change orders, etc.) City of Newport Beach, CA I June 28, 2016 30 RW Block Consulting, Inc. 4 �f 1 ff n Ll L RW Block Consulting, Inc.