Public Works Oversight of External Architectural & Engineering Design Work Follow-up Report

Transcription

1 Public Works Oversight of External Architectural & Engineering Design Work Follow-up Report June 2014 Office of the Auditor Audit Services Division City and County of Denver Dennis J. Gallagher Auditor

2 The Auditor of the City and County of Denver is independently elected by the citizens of Denver. He is responsible for examining and evaluating the operations of City agencies for the purpose of ensuring the proper and efficient use of City resources and providing other audit services and information to City Council, the Mayor and the public to improve all aspects of Denver s government. He also chairs the City s Audit Committee. The Audit Committee is chaired by the Auditor and consists of seven members. The Audit Committee assists the Auditor in his oversight responsibilities of the integrity of the City s finances and operations, including the integrity of the City s financial statements. The Audit Committee is structured in a manner that ensures the independent oversight of City operations, thereby enhancing citizen confidence and avoiding any appearance of a conflict of interest. Audit Committee Dennis Gallagher, Chair Maurice Goodgaine Leslie Mitchell Rudolfo Payan Robert Bishop Jeffrey Hart Timothy O Brien, Vice-Chair Audit Staff John Carlson, Deputy Director, JD, MBA, CIA, CRMA, CGAP Chris Wedor, Audit Supervisor, MBA Katja Freeman, Lead Internal Auditor, MA, MELP Manijeh Taherynia, Senior Internal Auditor, CPA, CFE, CRMA You can obtain copies of this report by contacting us at: Office of the Auditor 201 West Colfax Avenue, Department 705 Denver CO, (720) Fax (720) Or download and view an electronic copy by visiting our website at:

3 City and County of Denver 201 West Colfax Avenue, Department 705 Denver, Colorado FAX Dennis J. Gallagher Auditor June 11, 2014 Mr. Jose Cornejo; Executive Director Department of Public Works City and County of Denver Re: Audit Follow-Up Report Dear Mr. Cornejo: In keeping with professional auditing standards and the Audit Services Division s policy, as authorized by D.R.M.C , our Division has a responsibility to monitor and follow-up on audit recommendations to ensure audit findings are being addressed and to aid us in planning future audits. This report is to inform you that we have completed our follow- up effort for the Public Works Oversight of External Architectural and Engineering Design Work audit issued July 19, Our review determined that the Department of Public Works (Public Works) has adequately implemented four of the six recommendations made in the audit report. Additionally, this review determined that the two remaining audit recommendations related to developing and tracking performance measures applicable to architectural and engineering design work on capital constructions projects and formally evaluating such work for use in subsequent consultant selection were not implemented. For your reference, this report includes a Highlights page that provides background and summary information on the original audit and the completed follow-up effort. Following the Highlights page is a detailed implementation status update for each recommendation. This concludes audit follow-up work related to this audit. I would like to express our sincere appreciation to you and to Public Works personnel who assisted us throughout the audit and follow-up process. If you have any questions, please feel free to contact me at or Chris Wedor, Internal Audit Supervisor, at Sincerely, KRM/mt Kip Memmott, MA, CGAP, CRMA Director of Audit Services cc: Honorable Michael Hancock, Mayor To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services that provide objective and useful information to improve decision making by management and the people. We will monitor and report on recommendations and progress towards their implementation.

4 Honorable Members of City Council Members of Audit Committee Ms. Cary Kennedy, Deputy Mayor, Chief Financial Officer Ms. Janice Sinden, Chief of Staff Mr. David P. Edinger, Chief Performance Officer Ms. Beth Machann, Controller Mr. Scott Martinez, City Attorney Ms. Janna Young, City Council Executive Staff Director Mr. L. Michael Henry, Staff Director, Board of Ethics To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services that provide objective and useful information to improve decision making by management and the people. We will monitor and report on recommendations and progress towards their implementation.

5 City and County of Denver Office of the Auditor Audit Services Division REPORT HIGHLIGHTS Public Works Oversight of External Architectural & Engineering Design Work Performance Audit Follow-up Report: June 2014 Public Works has implemented four of the six recommendations made in the July 2012 audit report. Background The Department of Public Works (Public Work) is responsible for the design, construction, operation, maintenance, and repair of public infrastructure in the City and County of Denver including roads, bridges, storm and sanitary sewers, and public buildings. Capital Projects Management (CPM) within Public Works manages the design and construction of capital projects. When architectural engineering (A/E) design work is conducted in-house, it is performed by the CPM Design Section. When A/E design work is contracted out, CPM manages consultant agreements. City project managers oversee the associated design work. Public Works procures outside A/E design services using a Request for Proposals (RFP) process. The RFP process includes public solicitation for A/E design services, evaluation of proposals by a selection committee, selection of at least three firms for interview, and contract price negotiation with the top ranked firm. The audit assessed the Department of Public Works policies and processes related to outsourcing A/E design work and the impact of these practices. Highlights from Original Audit Improve Accountability and Transparency of Public Works Architectural Engineering (A/E) Design Consultant Selection Process: To solicit each A/E design service through the RFP process, a new Selection Committee (SC) is formed to evaluate submitted proposals and recommend the most qualified applicant to Public Works management. Several weaknesses in this process could hinder transparency and accountability. First, Public Works had not formalized procedures and criteria guiding the SC-member selection process. Second, Public Works did not use detailed procedures or formal criteria to guide SC decisions instead of reliance only on institutional knowledge and verbal instruction from the project manager. Third, Public Works did not consistently maintain adequate documentation of SC activities and communications such as scoring and comment sheets completed by SC members during the consultant evaluation and interview process, and records of SC members deliberations and discussions. Fourth, with the exception of project managers, other SC members were not included in the stream of communications from SC to the Manager of Public Works for final approval on an A/E consultant s selection. Any potential Public Works management disagreements and overrides of SC decisions were not documented. Develop Comprehensive A/E Performance Measurements and Additional Practices: Public Works evaluated the quality of work on a capital construction project only based on whether the project was completed on time and within budget. This approach did not measure the quality or efficiency of A/E design work performed. Additionally, the lack of a formal evaluation of A/E design consultant work at the conclusion of each project limited Public Works ability to incorporate the previous performance when considering a consultant for a future project. Findings at Follow-up Our follow up review determined that Public Works has implemented four of the six recommendations made by the audit. These recommendations related to enhancing architectural engineering (A/E) design consultant selection process for more accountability and transparency. Although Public Works has taken steps to develop performance measures for evaluating outside A/E design consultants, such measures and evaluations, as had been recommended by the audit, have not yet been implemented. For a complete copy of this report, visit Audit Contact Person: Chris Wedor chris.wedor@denvergov.org

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7 Recommendations: Status of Implementation Recommendation Auditee Action Status Finding 1: Public Works Architectural and Engineering Design Consultant Selection Process Can Be Enhanced to Increase Accountability and Transparency 1.1 Selection Committee Guidance - Public Works should develop formal guidelines for appointing Selection Committee members. Such guidance should include a requirement for documentation of any changes to the Selection Committee members during the selection process. Public Works has formalized a guideline for professional services procurement that contains provisions related to the formation of the Selection Committee and requires the documentation of any changes affecting Selection Committee members. Implemented 1.2 Selection Committee Procedures - Public Works should develop formal procedures to guide Selection Committee activities, including selection and interview criteria, proposal reviews and scoring, and interviewing and ranking of shortlisted firms. 1.3 Selection Committee Documentation - Public Works should maintain documentation of Selection Committee activities. The documentation should include scoring sheets related to proposal reviews, interview ranking and comment sheets completed by the Selection Committee members, minutes of Selection Committee meetings, and communications from the Selection Committee to Public Works management regarding any selection-related matters. Public Works formalized guideline on professional services procurement details the steps in the selection process including but not limited to Selection Committee activities. Public Works formalized guideline on professional services procurement contains provisions requiring documentation of Selection Committee activities to be retained in the project file. Implemented Implemented Page 1 Office of the Auditor

8 Recommendations: Status of Implementation Recommendation Auditee Action Status 1.4 Selection Committee Management Changes - Public Works should require and maintain documentation of all management changes to recommendations made by the Selection Committee. Public Works formalized guideline on professional services procurement states that any changes to the recommended Selection Committee members by the management shall be documented. Implemented Finding 2: Performance Measurement and Additional Practices Will Enhance Public Works Management and Oversight of Architectural and Engineering Design Consultants 2.1 Performance Measures - Public Works should develop and track performance measures to enable it to formally evaluate architectural and engineering design work on capital construction projects, which could include outputs, efficiency, and quality of capital projects, ensuring that all align with the mission of the organization. Based on the measure types developed, Public Works should determine which measures best apply to different phases in the construction process, including design. Public Works has tracked hard bid construction change order (CO) data on capital construction projects through mid In this tracking database, Public Works has captured each CO amount, amount as a percentage of the original contract amount, and amount associated with each CO cause, such as City request, unforeseen circumstances, or errors and omissions by the project s design firm. However, this data has not yet been used to develop performance measures. Specifically, in its audit follow-up response dated April 24, 2014, Public Works stated that specific performance measures would be developed when a sufficient amount of data has been gathered to identify relevant and beneficial metrics. Agree/ Not Implemented City and County of Denver Page 2

9 Recommendations: Status of Implementation Recommendation Auditee Action Status 2.2 Formal Performance Evaluation - Public Works should conduct formal performance evaluations of architectural and engineering design work on capital construction projects, and incorporate the information obtained into the design consultant selection process for subsequent projects. Public Works reported that it has developed auditing procedures to be used in evaluating design firms that are considered for working on City capital construction projects. Public Works indicated that design firms are selected using a risk-based methodology, taking into consideration historical data on Errors & Omissions based on change order data. However, the only sample report of such audits provided by Public Works related to a construction contractor for a capital construction project and did not contain an evaluation of the design and engineering work of the project. Additionally, a quarterly report titled Audit Trends for the second quarter of 2013, did not contain an evaluation of any design and engineering work used for capital construction projects. Agree/ Not Implemented; Page 3 Office of the Auditor

10 Conclusion While Public Works has implemented four of the recommendations made in the Public Works Oversight of External Architectural & Engineering Design Work performance audit report, the remaining two audit recommendations have yet to be fully implemented. Despite Public Works efforts, auditors determined that the risk associated with the audit team s initial findings related to developing performance measures and evaluating external A/E design work has not been mitigated. As a result, the Audit Service Division may revisit these risk areas in future audits to ensure appropriate corrective action has taken place. This concludes our follow-up work related to the performance audit of Public Works Oversight of External A/E Design Work issued in July On behalf of the citizens of the City and County of Denver, we thank Public Works leadership and staff for their cooperation during our follow-up effort and their dedicated public service. City and County of Denver Page 4