Controller Audit Findings

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1 AIRPORTS DEVELOPMENT GROUP Controller Audit Findings Z, f li(fingtiïi,/,.,, Board of Airport Commissioners Meeting 15 October 2015 Presented by: Roger A. Johnson, Deputy Executive Director

2 nn :AIRPORTS DF.t I Or tfnt GROUP Today's Agenda 1. City Controller's Audit Recommendations 2. Bradley West Construction Costs 3. Future Bradley West / Midfield Satellite Concourse (MSC) Projects

3 AIRPORTS DEVELOPMENT GROUP City Controller's Audit Recommendations

4 MiPORîS DEVELOPMENT GROUP Purpose "The objective of this audit was to determine the causes or reasons for change orders and determine whether they were necessary, reasonable, and adequately supported." Background Four City departments audited (LAWA) Port of (POLA) Department of Water and Power (DWP) Department of Public Works /Bureau of Engineering

5 AIRPORTS DEVELOPMENT GROUP Audit Findings All of the audit recommendations are related to the development and management of formal change order policies and procedures Total of 15 audit recommendations Four were Citywide recommendations One was LAWA specific recommendation Six were LAWA and other department recommendations Four remaining were only applicable to other departments

6 ommendations AIRPORTS DEVELOPMENT GROUP Audit Recommendations LAWA Response Status The City should develop a Citywide standard for departmental tracking and reporting of change orders Departments should develop consistent change order logs and monthly change order reports based on Citywide standardized requirements The City should establish a formal committee on lessons learned and knowledge sharing of best practices between City departments. LAWA will work the other City departments on addressing these recommendations. Pending Citywide collaboration Departments should establish formal knowledge sharing of lessons learned, project risks, and best practices of change orders.

7 l I WA Specific Recom mendations M T mairports DEVFI OPMENT GROUP Audit Recommendation LAWA Response Status 1.1 LAWA should develop formal policies and procedures for change order management that includes all critical elements of the process LAWA was in the process of formalizing our change management policies and procedures prior to the Controller's audit. The formal policies and procedures have been completed and, where required, updates have been made to address the Controller's audit recommendations. Implemented Aug 14, me Change Order policies and procedures P.dnnaMmwel I.0 M1.x1es W.R Alnra aueepmmt2na ITEa1RNEöRER. 2R.2ARA Ns CRAPIERé CwlnM1etlan PMere. i 633. CHANGE ORDERS Cmm IM IAwApeat.4t3en.s.Let g3.n. VNwI. emmbrl M >ri.lo-lsav-f erate 1 Iaeen2M212e6u.R2..0 Orcleasi Yr. No, Yes NA R1RID L 9gHgg NA r.t prcprl.. L7anV Ogp. m.as cum mm Yon new teks rae rdwwgawrvp+4o,ay,: a Rcl.dexrmt9uotr/PWOeIIce Rre services toácwertdfy oreer b. PmmuNUrin,cymkolcaduWnux[wtinwll, xegaixec she l.tmge Oehr wivr tá conia [m doi ral. dyreed opal lore m,medi.w sheen. 2 If Ne rvnnuctar rnunuad lm1e WwnRe rn ante yet en 22A th Q engn Ushr nrrv'm sure L. the Inlmm.ion M1u áen ertetea un lm1e Cmm.mo.R<ge.n.ss(Lmµe lag -Olepalelnm.. a nnrrraet ww x eml,ewmt.c,rw Y h. nrollrmwswette<uemqueerpacale(e,g..rfl ncl. 3. If Mange for am1wyors me preps-mg ue[.3ungeal.ì. one L4WA M1wpapmd..o.ae P mpoxd CnenRd Lag. Ile lwlowiog key column em1wld hrwam m No IceIlse nemár w the l.oevad cáo. IcACh erlequed mrynu eru IM1e Ersi one ieenmlá]nmnemer.dy1. `. MeppwlNU- NeR Jdle_datr. à np.e+.wgnetaene Loe 0.0 1{beld Aerywa`, ADG - CHANGE MANAGEMENT FLOW CHART 20, nee OWNER DIRECTED ress. Ia. Conerance PIEEMI 4 Cun qes ICONTRACTORGENERATEDI NEI MI EMI change Nalca h mötr-i2yei 'avoided.m esse Wbrld Airpoelru Chong. Men.Remeet2ry,á.m peterreeeaaew.edayr PRRGIRAM Olt nory MANUAL 2me.dde Na.: 7.11 eunnese Tli.pee.tlnerellpre.W 9u4ag_ NTrdrntlh.lbese4 rg d.gmpeeweyeag.p.mienemml.re/rue/on loeagnatl Ws (GBRI w en.11) -GmNrLm Mona. al Rbk 1CM4H) or omen.úla 1oBk man Melq.we le,18.5 metlfraeone kia o Rye,Me a amw VI GRllm mwanw, viw. wrvada.,2 to_.n.m.amp.mwauw..le.mm.e.e warw.ynnyend marmo... ad_._ b wtemoom W agaev ne erriec.1.1 nmerel fnrlti emlad W W eanvarvy a..nmpnmn0 e nigh gushy pesi. Rot.con..eaRg.. pap pec.atre etpatr_r l Inc.* cant.d«rrvowee pa Gmw a,.:.ba t..e arw IrmlaR MORO. wed reem_ery empe le se.. ceetrr_ Ns S. all.r el Lee World k'pd..iiawn ]l. elrem,ótxioaptdyraetweoy.d>re.nwurpmt 22. Clbf/+mbEmna.,EbmMAA.vRme,ReledtRYneOera.qgnEnRMewR Ieµrtlde.na32.4ea A]. CantreGS.tqwrva.Rl.nRer. CalRnnqaMwaw,caaeMasnlnaeeuae, o.rqe dmrsr.ev, E_mamte edl.ettw.. Cesso E^Rtl.v..re ael.rm. putc ] l b....el. serbir3 mu. L. Arse. Wald NtpeN' piiwai em+.m1 r.ea.au.cwn. a1.1. n.. mmn wm.rete when rn.traeremecem.a alda. g1.t ro Mehl scmmnwaynyfla0gw.tpeewmeeons. d.en for v.rm R_bbn aw Pop d 31 y June 2, 2005 Januar 28, 2010 Au ust 14,

8 LAWA & Other Departme ions AIRPORTS DEVi'.I.OPMENf' GROUP Audit Recommendation LAWA Response Status 2.1 Departments' documented procedures should indicate when an independent estimate should be used to evaluate pricing for change orders; for example, by setting a change order dollar value threshold. LAWA has revised our procedures to indicate when an independent estimate should be used. Implemented Aug 14, Departments should consistently utilize a standard Record of Negotiation document containing a clear description of all negotiations and final cost estimate. LAWA has added an additional level of review to all change orders to ensure Records of Negotiations are accurate and complete. Implemented Aug 14, Departments should clearly reference pricing sources and state assumptions in their independent estimates. LAWA updated our procedures to ensure reference pricing sources and 10 Implemented estimate assumptions are Aug 14, 2015 documented.

9 Department Ree mmen AIRPORTS DEVi'.I.OPMENf' GROUP Audit Recommendation LAWA Response Status 7.1 LAWA and DWP should develop policies and procedures to include all critical elements for emergency change orders and for work starting prior to change order execution. LAWA had not used the term "Emergency Change Orders" prior to the audit. We have updated our procedures to include this terminology and detail the steps required to execute an Emergency Change. 10 Implemented Aug 14, Change orders do not consistently contain sufficient documentation presented in an orderly manner to adequately facilitate an efficient and effective evaluation of the change order. LAWA has a formal process for routing change orders for signature and added to its policies and procedures the documents required to support change orders. Implemented Aug 14, LAWA, DWP, and POLA should formalize the process for estimating the construction contingency on projects. LAWA concurs with this recommendation and we are in the process of drafting the procedure and will have it completed by December 31, Underway - Complete by Dec 31, 2015

10 Ongoing Process Improv JRPORîS DEVELOPMENT GROUP Airports Development Group (ADG) Ongoing Process Improvements 1. Updating Comprehensive Program Delivery Manual 2. Conducting ADG Project Manager Training ADG Project Managers Certification Training Program Schedule Session Schedule Training Modules Month /Year Group 1 Group 2 1 Kick Start & Introduction (Overview) Oct th 29th 2 Project Human Resource Management 3 Organization And Staffing The Project Team 4 Project Planning & Initiation 5 Contracts & Procurement Nov 15 18th 19th Dec 15 2nd 3rd 6 Project Admin. & Contract / Change Management Jan th 14th 7 Project Estimating & Budget Jan th 28th 8 Design Management Feb th 11th 9 Planning & Scheduling Feb th 25th 10 Program & Project Controls Mar -16 9th 10th 11 Project Risk Management Mar rd 24th 12 Quality Assurance & Quality Control 13 Safety & Security During Construction 14 Tenant Improvements - Acquisitions 15 Customer Experience 16 Capstone & Graduation Apr 16 6th 7th Apr st 21st

11 417ii GR«,P Bradley West Construction Costs

12 ..01 Bradley West Construction Costs AIRPORTS DEVELOPMENT GROUP Bradley West Project was delivered via three separate construction contracts using the Construction Manager at Risk (CMAR) delivery method COMPLETED PROJECTS DA Gates Walsh Austin Joint Venture (WAJV) DA Core Walsh Austin Joint Venture (WAJV) UNDER CONSTRUCTION DA Renovation, Aprons, and Concourse Demolition (Renovation) Clark McCarthy Joint Venture (CMJV)

13 Bradley West Construct on Costs AIRPORTS DEVPI OPMENT GROUP Bradley West Gates and Core Change Orders Only Gates and Core change orders were included in the audit since Renovation project had no approved changes during the audit period Total amount of change orders under Gates and Core contracts were $414,689,013 Bradley West changes orders were classified into five categories Not typical for projects using traditional Design- Bid -Build delivery method: 1. Design Evolution Changes related to bidding documents being less than 100% complete. LAWA anticipated these changes and included them in the original contract value. 2. Owner Betterment Changes made by LAWA for new or changed scope items that enhance the project or take advantage of opportunities that present themselves during project delivery. $287 million associated with Design Evolution and Owner Betterment o Integrated Environmental Media System o Concessions Program Infrastructure o Front Door

14 Bradley West Construct on Costs AIRPORTS DEVPI OPMENT GROUP Bradley West Gates and Core Change Orders Traditional changes for all projects regardless of delivery method: 3. Document Correction Errors or Omissions in the plans and specifications that create a change to the contractor. 4. Field Conditions Unforeseen conditions discovered during construction that were not shown on the contract documents. 5. Code Requirement Change in code requirements that affect construction after award. $128 million was a combination of Document Correction, Field Conditions, and Code Requirements 14

15 tnge Bradley West Constructio 7tA AIRPORTS DEVELOPMENT GROUP July 2015 Executive Management Program Status Report to-401 r_t 41.1,14, L-1. TERMINAL ELEMENT PROJECTS IN DELIVERY Bradley West Core Renovation /East Ramp and Concourse Demo Project Project Description LAX Project Cost This project enables the operation and use of the east gates at Bradley West, improves customer service and convenience within the existing Tom Bradley International Terminal (TBIT) core building and improves the terminal's infrastructure to better meet current and future demand_ This project represents the last phase of construction associated with the new Bradley West facility_ The overall project scope of work includes: Existing TBIT core renovation, which includes temporary and permanent passenger security screening checkpoints (SSCP); apron and concourse demolition and the construction of apron paving; and Bradley West Connection between the existing TBIT Core to the new Bradley West Core Cost To Date: $254.19M Cost Remaining: $115.25M Total Cost: $369.44M Construction Cost As of: August Y, 2015 BW Core Renovation & Concourse Demo Project iconsll uclion} Budget Status This project is currently over budget, as reflected by the negative contingency value. The project budget is being closely monitored and mitigation strategies are being developed and reviewed. Schedule Status Milestones related to work inside the building are forecast behind schedule- The contractor has submitted time impacts for these milestones and those impacts are being reviewed_ The project team is working with the contractor to develop and I implement mitigation strategies_ Stews Completion Pate Variance to Base Line Finish Mays) WID Incurred Cost: $195.09M 0 Cost Remaining: $ 78.11M Const. Cost Total; $273.21M Construction Duration ID Days Elapsed: Days Remaining: 108 Days Total: 734 Contingency awcorerenouvaenáconcoursedemoprojert-msa30t4tefrartnaltunnel;southi.oadlnadoa;t4cnnneelar I7-Aug BWCoreRenovallon&ConeeurseDemoProjel.t-MSP3C5ournEIWSSCPILPls3&4):SEEJpess;C8I53pa[eL-N3 al 13-Aut_ av/cerarrnevatlan&caneeursoonernprnjaetmspssscpopareticnal(acrttl;rlerlaantla,cornphta dil 21134I-15 LN mxmrerenmelwn&[9reciurxpernoprw[cl-msleibvlvly2.3lá&9:ur111e.ttpt3boaunasl ID r WCaleRenwatlnn&Carcourse Puma P Men MSe4 Gates l7l&133 d 31AuIC17-5 awcore aenoweuon & concourse E... Reject - MINA Meth Liladikg Deck xermander of work al 17-IAer-16 -]]8 411 OmTFe Q Bow asnl6dne el RequiresWilidah6P 100!. Allocated Contingency: $14.9M Pending Trends: $25.8M IM Remaining: ($113M)

16 lir Bradley West C nstruction Costs AIRPORTS DEVELOPMENT GROUP Board Approved Bradley West Construction Contract Value Total Construction Value approved by Board is approximately $1.7 billion Gates Bradley West Contracts Contract DA -4337, WAJV Core Contract DA -4382, WAJV $ Renovation Contract DA -4849, CMJV Initial Value of Construction Contracts Board Amendments to Add Contract Value Owner's Contingency Total Value of Construction Contracts 545,550,000 S 76,000,000 $ 69,010,000 S 690,560, ,200,000 S 38,400,000 $ 66,710,000 S 689,310,000 Subtotal $ 1,129,750,000 $ 114,400,000 $ 135,720,000 PS 1,379,870,000 ' 260,654,155 S _ =, 23,825,000 _ 289,479,155 Total $ 1,390,404,155 $ 114,400,000 $ 164,545,000 $ 1,669349,155 16

17 AIRPORTS DEVELOPMENT GROUP Future Bradley West / MSC Projects

18 Future Bradley West / MSC Projects AIRPORTS DEVELOPMENT GROUP Potential Projects Bradley West / MSC Outbound Baggage Screening and Make -Up Ticket Counter Redevelopment Meeter Greeter Lobby Expansion Additional Automated Passport Control Kiosks Bradley West Improvements Pre -cleared Passenger Path of Travel Pre -cleared Passenger Baggage Claim