Review of Professional Consultant Services Agreement for South County Neighborhood Improvement Projects

Transcription

1 Review of Professional Consultant Services Agreement for South County Neighborhood Improvement Projects February 9, 2007 Report No Office of the County Auditor Evan A. Lukic, CPA County Auditor

2 EXECUTIVE SUMMARY The Office of the County Auditor conducted a review of the Professional Consultant Services Agreement between Broward County and Craven Thompson & Associates, Inc. (Consultant) for the South County Neighborhood Improvement Project. This review was initiated by our Office as a part of a comprehensive approach to evaluate Water and Wastewater Engineering Division s (WWED) construction related activities and processes. Our examination focused on the contract deliverables provided by the Consultant for the original agreement and its eleven amendments for pay applications through September 30, Our goal was to ensure that an internal control environment exists that is conducive to safeguarding and preserving the County s assets, improving the general effectiveness of operations, and maintaining compliance with applicable laws, rules and regulations. The size and scope of the original project expanded significantly over the thirteen years during which this agreement has been in effect. While the project was designed in phases, delays, contractor defaults, and increases in the scope of services contributed to eleven contract amendments. Our primary concern regarding this project is the lack of sufficient control exercised by WWED during the invoice review process. This has resulted in the absence of sufficient documentation to support the Consultant s hourly charges and the payment of mileage costs not allowable by contract. An additional procedural concern exists regarding WWED s creation of a conflict of interest in contracting with the Consultant to establish a needs assessment for an area/project that they ultimately designed, managed, administered and inspected. We summarized our observations below: 1. WWED did not establish a comprehensive process to verify payments made to the Consultant for services rendered. (page 5) 2. A potential conflict of interest was created when the Consultant was contracted for multiple responsibilities within the SCNIP. (page 7) We would like to thank Water and Wastewater Engineering Division, the County Attorney s Office, and all other County employees who aided in the completion of this review. Office of the County Auditor 1

3 SCOPE AND OBJECTIVES Our examination focused on the contract deliverables provided by the Consultant for the original agreement and its eleven amendments. The primary objective of the review was to determine if the Consultant complied with contract terms and provisions regarding: Contract deliverables and services Insurance and MWBE requirements Invoice and payment application requirements Our secondary objective was to assess the administration of this agreement as performed by the Public Works and Transportation Department, Water and Wastewater Services regarding: General contract administration Quality assurance monitoring of work performed Invoice review and approval METHODOLOGY To accomplish our objectives we reviewed the following documents for the indicated time frames: Professional Consultant Services Agreement and s (March February 2006) Design reports, plans and drawings (December September 2006) Certificates of Insurance (February March 2006) MWBE Reports (January September 2006) Purchase Orders and Notices to Proceed (May December 2000) Consultant pay applications and supporting documentation (January September 2006) In addition to the review of the documents listed above we: Conducted interviews with Water and Wastewater Engineering Division staff Applied other auditing procedures as deemed necessary BACKGROUND Water and Wastewater Services (WWS) is within Public Works and Transportation Service Department. WWS operates a water utility service for several areas of Broward County and its residents. Within WWS, Water and Wastewater Engineering Division (WWED) manages the utility s one billion dollar capital improvement program. This budget includes $658 million for nine Neighborhood Improvement Projects (NIP). 1 The focus of this review is the professional consultant/design services provided by Craven, 1 Source: Comprehensive Neighborhood Improvement Program Status Report, dated July 31, 2006 Office of the County Auditor 2

4 Thompson and Associates (Consultant) for the South County Neighborhood Improvement Project (SCNIP). WWS Neighborhood Improvement Project (NIP) program began in 1993 and presented a comprehensive approach to infrastructure improvements within eight County communities, encompassing twenty five neighborhoods. The scope of each individual NIP project varies dependent upon the specific needs of the communities involved, but typically include infrastructure improvement services such as: storm water drainage, sanitary sewers, roadway improvements, sidewalks and landscaping. The goal of each project design is to provide local area residents with greater fire protection, new sanitary sewer systems (replacing septic tanks) and improved drainage. 2 I. South County Neighborhood Improvement Project Overview The scope of the SCNIP project encompasses 1,362 acres, 16,300 people, 4,670 homes, 5,000 septic tanks, 94 miles of pipeline, 83 miles of sidewalk and 48 miles of roadway. 3 The project site is located within the boundaries of State Road 7 to Interstate 95 and Pembroke Road to Countyline Road. Much of this area was constructed in the 1940 s and 1950 s, prior to development requirements for sanitary sewers and drainage. As part of the overall design process, each NIP area is divided into sub-sections referred to as Bid Packages (BP). These divisions form the basis for various phases of work which are then bid to contractors who perform the actual site construction. As construction is typically a lengthy process involving significant disruption to local residents and roadways, work is completed in phases in order to minimize the impact to affected neighborhoods. In the case of the SCNIP, the project area was divided into twelve sections and ten Bid Packages. 4 Three additional bid packages were later awarded for further infrastructure improvements, lift stations and force mains. It is important to note that the initial implementation and construction phases of the SCNIP were significantly delayed due to permitting challenges encountered while coordinating several County and governmental agencies. 5 Additional project delays and costs were incurred as a result of the default of two contractors and complications in negotiating a settlement with the surety company. Ultimately, construction began in January Currently, construction for the project is 99% complete, at a cost of $75,173,118 6 (total project costs inclusive of design fees is $91,325,455). At the time of 2 Source: Water and Waster Services Neighborhood Improvement Project webpage 3 Source: Comprehensive Neighborhood Improvement Program Status Report, dated July 31, Sections 1 through 8 were individually bid, Sections 9 and 10 and Sections 11 and 12 were bid together in pairs. 5 Coordination was required of several County agencies including the Broward County Engineering Division, Traffic Engineering, the Department of Planning and Environmental Protection, Office of Budget, Planning Services Division and Community Development Division. Several state agencies including Florida DOT, Florida Department of Environmental Protection, and South Florida Water Management required permitting and coordination for utility, roadway and drainage construction. American Public Works Association Reporter Online, June 2004, Broward County s Comprehensive Neighborhood Improvement Program, by Alan Garcia, Director, Environmental Engineering Division. 6 As of September 30, 2006, total construction budget is $75,652,619. Office of the County Auditor 3

5 this report, the remaining work is primarily for landscaping services and is anticipated to be finished by spring II. Consultant Services Contract History On March 30, 1993, the Board approved the initial agreement between the County and Craven Thompson & Associates, Inc. as the Consultant for $305, The original scope of work focused on the development of a conceptual master basin wide study 8, culminating in a Basis of Design Report (BODR), which is a detailed assessment evaluating the project area, its existing conditions, available facilities and identified needs. Completion of the BODR was the first phase of a multiphase integrated drainage / recharge project. Following completion of the BODR, the Consultant was authorized (via contract amendments) to provide additional services for project design and implementation. Throughout the course of this agreement, contract deliverables have varied across each amendment, but have typically included tasks such as: surveys and site investigation, design and review, permitting, bidding assistance, preparation of construction documents and specifications, services during construction, testing, inspections, public awareness and additional services as determined by the Contract Administrator. 9 From March 1993 through February 2006, a total of eleven contract amendments were executed, increasing the contract value from $305,191 to $15,672,836. This final amount represents 17% of total project costs. 10 The contract and its amendments have utilized lump-sum 11 and maximum-not-to-exceed 12 contract methodologies, with respective total values of $6,771,688 and $8,901,148. Appendix A on page 9 displays a history of the original and amended contract values. The Consultant s contract is over 99% complete, with a total of $15,589,659 invoiced as of September 30, Remaining services are primarily payable to subconsultants for final inspection services and as-built drawings. 7 Professional Consultant Services Agreement between Broward County and Craven Thompson & Associates, Inc. for Storm Drainage, Water, Sewer, Sidewalks and Landscaping Improvements to Miami Gardens, Utopia, Carver Ranches, and Lake Forest in Broward County, Florida, OES Project No. 1148, CTA Project No #1 expanded the study to include the Lake Forest area for an additional fee of $120, The contract specifies the Director of the Environmental Engineering Division to be the Contract Administrator. 10 As of September 30, 2006, the total budget (construction and consultant services) for the project is $91,325, In a lump sum contract, the contractor agrees to perform a stipulated job of in exchange for a fixed sum of money. Clough, R.H. & Sears, G.A. (1994). Construction Contracting (sixth edition). Canada: John Wiley & Sons, Inc. 12 In maximum not to exceed or guaranteed maximum cost contracts, the contractor guarantees to the owner that the project will be completed for an amount that does not exceed an assured maximum price. Clough, R.H. & Sears, G.A. (1994). Construction Contracting (sixth edition). Canada: John Wiley & Sons, Inc. 13 Information obtained from Consultant s Pay Application #157 Office of the County Auditor 4

6 Observations and Discussion The following sections of this report provide detailed information regarding observations made during our review. As necessary, additional information is provided in referenced appendices. 1. WWED did not establish a comprehensive process to verify payments made to the Consultant for services rendered. WWED did not request additional detailed supporting documentation to validate the Consultant s hourly project charges. As work progresses on the project, the Consultant submits monthly invoices to WWED for payment of reimbursable expenses and hourly costs (including overhead multiplier) for personnel such as Project Engineers, Secretary, Principal, Designers, and Technicians. Documentation included with invoices typically consists of the staff member s name, total hours by date, and brief descriptions of daily activities. The number of hours spent in each activity is not specifically identified in the invoices, nor did the Consultant s staff members submit complete detailed daily logs recording their on or off site activities. The majority of hourly charges are for Project Engineer staff performing Construction Observation Services. To validate these services, our Office completed a comparative analysis of the Consultant s invoiced charges, density reports and the Inspector s Daily Logs. These Daily Logs were completed by a subconsultant as part of the Inspection Services component of the contract. In the absence of comprehensive documentation from submitted invoices, the Daily Logs were reviewed as a secondary source to verify the Consultant s billings. The Daily Logs typically contained information such as: date, site location, weather conditions, contractors and number of workers present, general construction activities and notes. Logs also contained a section to record any visitors to the site (including staff performing Construction Observation services or WWED employees), times present, the agency represented and additional relevant comments. Information contained in this section of the log was cross referenced with the Consultant s hourly charges. Although the Daily Logs were generally found to be useful, we noted that visitor times were not properly recorded on a consistent basis; several entries stated only AM or PM, or included the visitor s arrival or departure times only. However, in several instances, the available visitor information contained in the Daily Logs did not support the total number of hours invoiced by the Consultant s staff. In the absence of sufficient support and/or validation of the hourly charges, we are unable to make a determination of the accuracy of the Consultant s invoices, or the cost effectiveness of the services provided. We also note that additional funding amounts were provided to the Consultant in s 5 through 9 for Construction Observation Services. Original funding Office of the County Auditor 5

7 amounts were based upon lump sum and not to exceed methodologies which establish maximum fixed prices for services. In these types of contracts, the consultant typically assumes a portion of financial risk should their expenses exceed the original projections utilized to establish the project cost. In these instances, additional monies were provided by the County, thus reducing, if not eliminating the Consultant s assigned level of risk throughout the course of the Agreement. This practice is contrary to the original intent of the contract. Therefore, it is unclear if supplemental costs for these same services should have been awarded to the Consultant by WWED. Without a comprehensive review of current and projected staffing utilization rates, a determination that the increases were justifiable cannot be made by our Office. It is recognized that due to contractor defaults and complications during construction, additional Construction Observation and Inspection services may have been warranted; however, in the absence of sufficient supporting documentation, we are unable to assess the appropriateness of WWED s actions. WWED did not request and review the documentation necessary to conduct adequate monitoring and oversight of the Consultant s invoices and staffing levels which may have resulted in additional unjustified project costs. WWED incorrectly approved payment applications to the Consultant containing local mileage expense reimbursements. The original contract permitted the Consultant to invoice the County for transportation expenses in connection with the project, subject to the limitations of Section , Florida Statutes 14 However, #5, executed March 24, 1998, modified the agreement to state Mileage, parking fees and toll expenses within the Dade-Broward- Palm Beach County area are specifically excluded as a reimbursable. 15 Our review of thirteen sampled invoices from the time frame of January 2001 through August 2006 indicated that in nine instances, the Consultant was reimbursed for mileage expenses occurring within the tri-county area. The charges were included in the submitted invoices as part of a subconsultants bill, primarily under Public Awareness services. WWED s invoice review process did not identify and exclude the incorrectly invoiced amounts prior to authorizing payment to the vendor. Appendix B on page 10 displays information regarding the amounts paid as a result of this oversight. Recommendations We recommend that the Board of County Commissioners direct the County Administrator to ensure that WWED: Strengthen standard contract language to include documentation requirements for hourly based services. 14 Article 5.3 Reimbursables, Section a 15 Item 9 amended Article 5 Section a to add Section 5.5.4, prohibiting the reimbursement of local mileage expenses. Office of the County Auditor 6

8 Enforces contract provisions requiring consultants to track hourly costs in manner sufficient to support invoices and work effort for all individuals and tasks performed. Utilizes such supporting documentation to assess the appropriateness of staffing levels on an on-going basis, particularly in instances when considering the provision of additional funding for already negotiated contract prices and deliverables. Conducts a thorough review of Consultant invoices submitted after March 24, 1998 to identify all incorrectly reimbursed mileage expenses. Seeks repayment from the Consultant for all inappropriately paid expenses identified in the analysis. Strengthens invoice review procedures to ensure future payments are in accordance with contract terms. 2. A potential conflict of interest was created when the Consultant was contracted for multiple responsibilities within the SCNIP. Throughout the course of this project, WWED engaged the Consultant to perform a variety of overlapping services. As a result, a potential conflict of interest was created due to a lack of separation of responsibilities and oversight. Services the Consultant was contracted to provide include: Creation of the Basis of Design Report (BODR) which established a baseline needs assessment for entire SCNIP area Design services for pump and lift stations, water and wastewater services, drainage, sidewalks, roadways, and landscaping construction related activities based on the recommendations made in the BODR Inspection of work completed Oversight of selected contractors, including observation services Several of these activities are interrelated, and to varying degrees, are typically performed by separate consultants and multiple contracts to ensure quality oversight. Although some benefit may exist through the continuity of services (an in-depth understanding of project requirements) on a complex project such as the NIP program, the practice of creating conflicting roles within the contractual relationship should be avoided. Model regulations such as Federal Acquisition Regulation (FAR) charge government contracting officers to (1) identify and evaluate potential organizational conflicts of interest 16 as early in the acquisition process as possible; and (2) avoid, neutralize, or mitigate significant potential conflicts before contract award. FAR further describes the underlying principle of Preventing the existence of conflicting roles that might bias a contractor s judgment. Conflicts of interest entailing impaired 16 The Code of Federal Regulations (23 CFR ), defines organizational conflict of interest to mean that because of other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the owner, or the person's objectivity in performing the contract work is or might be otherwise impaired Office of the County Auditor 7

9 objectivity typically arise when government contract work involves contractor selfevaluation, or reviews of affiliates, customers or competitors. A presumption exists that individual loyalty to an employer responsible for salary, benefits or stock options conflicts with contractual obligations to render impartial advice to the government. 17 Although no improprieties by the Consultant were identified in the course of this review, potential conflicts of interest and opportunities for impaired objectivity were created by WWED when: The Consultant was contracted to prepare a baseline assessment determining the scope of projects which they later designed. The contract required the Consultant to inspect the same construction work which they designed and managed. Inspections of the Consultant s services were completed by a subconsultant who relied upon the Consultant (i.e. entity whose work they were inspecting) for payment. Recommendations We recommend that the Board of County Commissioners direct the County Administrator to ensure that WWED: Takes proactive measures to ensure that potential conflicts of interest are mitigated in the future through the increased separation of duties and responsibilities within the project scope. This may be accomplished through: Establishing contract guidelines requiring an evaluation, on a case by case basis, of the efficacy of using a single consultant throughout the course of a (deliberately) phased project agreement. This evaluation should include, but is not limited to criteria such as: Ability of qualified in house staff to conduct independent monitoring Determining if inspection work should be performed by an independent consultant. 17 National Defense Magazine, Ethics Corner, April 2006 Office of the County Auditor 8

10 Appendix A Professional Consultant Services Contract Value History Agreement Date of Execution Primary Scope Agreement Amount Total Contract (Amended) Original 03/30/93 Conceptual Master Basinwide Study for Miami Gardens, Utopia, Carver Ranches, SR 7 (Countyline Rd. to Pembroke Rd.), Pembroke Rd. (SR 7 to I-95), Lake Forest (Limited to ground control and aerial photography). $ 305,191 $ 305, /20/93 Addition of unincorporated Broward County (known as Lake Forest) to Master Basinwide Study for drainage, water, sewer, sidewalk and landscaping improvements. $ 120,000 $ 425, /21/93 Installation of approximately 12,000 lineal feet of off-site force main and infrastructure improvements to Phase 1 (Sections 1, 2, and 3) of the study area totaling approximately 368 acres. $ 2,600,000 $ 3,025,191 12/20/94 Infrastructure Improvements to Phase 2 (Sections 4, 5 and 6) and Phase 3 (Sections 7 and 8) of the study area totaling approximately 539 acres. $ 3,759,888 $ 6,785,079 11/07/95 Infrastructure Improvements to Phase 1 (Sections 1, 2, and 3), Phase 2 (Sections 4, 5, and 6) and Phase 3 (Sections 7 and 8) of the study area totaling approximately 907 acres. $ 347,073 $ 7,132,152 03/24/98 Provide complete storm drainage, water, sewer, sidewalks, streets paving, landscaping, signage, final design plans and obtain all necessary permit approvals required for Phase 4 and 5 of SCNIP (including Lake Forest area). $ 5,996,129 $ 13,128,281 06/23/98 Additional inspection services in Phase 1 and coordination with Bonding Company for Sections 2, 3, and 5 as a result of Coastal Utilities default. $ 49,000 $ 13,177,281 12/15/98 Additional inspection services in Phase 1 and 2, coordination with Bonding Company for Sections 2, 3, and 5 as a result of Coastal Utilities default. $ 624,079 $ 13,801,360 01/04/00 Additional inspection services and coordination with Bonding Company in Phases 1 and 2 as a result of Coastal Utilities default, revise Volumes I and II of the contract documents for Section 7, renew expiring permits and coordinate rebidding of Section 7, and provide additional inspection services for the replacement of sod within the public right of way in Phase I of the SCNIP. $ 563,841 $ 14,365,201 11/21/00 Additional inspection services and coordination with Bonding Company in Phases 1 and 2 as a result of Coastal Utilities default, conduct three months of additional inspection services for Section 7 for a total of 21 months, provide additional inspection services for the complete Master Pump Station, provide additional inspection services and coordination related to Section 8 and Snake Warrior Island, prepare as-built record drawings from contractor provided as-built information for Sections 1 through 12. $ 1,307,635 $ 15,672,836 06/14/05 Redistribution of funds approved in s 2, 3, 4, 5 and 9 for additional construction observation services for Phase 5. 02/20/06 Redistribution of funds approved in s 3 and 5 for additional construction observation services for Phase 5. No Additional Monies $ 15,672,836 No Additional Monies $ 15,672,836 Source: Office of the County Auditor analysis Total $ 15,672,836 Office of the County Auditor 9

11 Appendix B Summary of Mileage Expenses Overpayments # of Invoice# Date Miles Rate Amt Paid Invoice Category Subconsultant 99 1/17/01 64 $ 0.29 $ Reimbursables Dickey Consulting 106 8/12/ $ 0.29 $ Reimbursables Dickey Consulting 113 3/13/03 0 $ -- $ -- N/A N/A 128 6/18/ $ 0.29 $ Public Awareness Dickey Consulting 129 7/27/04 0 $ -- $ -- N/A N/A /27/04 0 $ -- $ -- N/A N/A 136 2/17/05 28 $ 0.36 $ Public Awareness Dickey Consulting 139 6/2/ $ 0.36 $ Public Awareness Dickey Consulting 140 6/27/05 0 $ -- $ -- N/A N/A 149 2/24/06 84 $ 0.37 $ Public Awareness Dickey Consulting 150 3/16/06 55 $ 0.37 $ Public Awareness Dickey Consulting 151 4/24/ $ 0.37 $ Public Awareness Dickey Consulting 155 8/22/ $ 0.37 $ Public Relations Dickey Consulting Total $ Source: Office of the County Auditor analysis Office of the County Auditor 10