TxDOT Internal Audit ROWAPS Contracts Audit (1104-1) Statewide Report

Transcription

1 ROWAPS Contracts Audit (1104-1) Statewide Report Introduction This report has been prepared for the Transportation Commission, TxDOT Administration, and Management. The report presents the results of the Right-of-Way Acquisition Professional Services (ROWAPS) Contracts Audit which was conducted as part of the Fiscal Year 2005 Audit Plan. The objective of the audit was to determine if the ROWAPS contracts comply with state and federal laws and regulations and to determine if the ROWAPS contracts are developed and administered in a manner to improve the efficiency and effectiveness of the monitoring and acquisition of property. Scope Audit team members included Craig Easley and Dennis Olson with Paula Bishir providing oversight for the audit. The audit work was conducted during the period of January through June, All work was performed in accordance with the International Standards for the Professional Practice of Internal Auditing of The Institute of Internal Auditors. Audit work included reviews of the executed contracts and interviews with Right-of-Way Division (ROW) personnel and fieldwork in seven districts. The fieldwork performed consisted of interviews with applicable district personnel and reviews of district files. Background ROW started issuing ROWAPS contracts in The ROWAPS contracts are Professional Service indefinite delivery contracts with a two year term. Work is assigned using project specific Work Authorizations. The intent of the ROWAPS contracts was to provide the districts with an efficient and effective process to acquire right-of-way due to an increased volume of work. The services to be provided by these contracts include title and closing services, appraisal, appraisal review, negotiation, relocation, condemnation support, and disposal of property. Work Authorizations may or may not include all of the above services. Currently there are thirty indefinite delivery contracts and one project specific indefinite delivery contract for the I-10 Katy Freeway project. The thirty indefinite delivery contracts are valued between one and two million dollars and expire on various dates between June 2005 and January The Katy Road contract was originally executed for $10 million for a two year term and was set to expire on June 4, It has been amended to $15.5 million and was recently extended six months to expire on April 4, These contract costs are for the services associated with acquiring the right-of-way and do not include the cost of the property and damages to the remainder, relocation assistance, or utility adjustments. Opinion Report of 5 August 29, 2005

2 Overall, the Right of Way Acquisition provider contracts comply with state and federal laws and regulations. The Right of Way Acquisition provider contracts could be improved in the development and administration to improve the efficiency and effectiveness of the monitoring and acquisition of property. Detailed Finding and Recommendation No. 1: Improvements are needed in the overall management of the ROWAPS contracts in all seven of the districts reviewed. Condition: Improvements are needed in the overall management of the ROWAPS contracts in all seven of the districts reviewed. An additional review of an eighth district by a district auditor had the same conclusion. Examples where improvements are needed include: a lack of supporting documentation for payments and other activities such as negotiator reports, the providers were using personnel that are not listed on the work authorizations, no on-site verification of additional displacees was occurring, no standardized file process had been developed, the signature delegation was outdated, and documents provided by the providers were not always date stamped when received. Established written guidance provides for consistency and ensures the districts are meeting all of the requirements as referenced in state and federal rules and regulations. The guidance should use the Communications Manual to be in conformity with policy for on-line manuals. Currently the Districts are utilizing the contracts but no formal policy and procedure exists and no contract administration training is provided by the Division. Effect: There are two distinct effects for this condition. The first effect is the districts are not consistently monitoring the contracts. The Districts monitor as they believe necessary but the focus is the acquisition of property and not the administration of the contract. The second effect is in the Division. By not training the Districts properly the Division has to complete a detailed review of the contract payments. This effort prevents the Division from potentially looking at areas the division needs to monitor and making improvements to the process. Recommendation: The Division needs to establish written guidance on managing and monitoring the ROWAPS contracts and provide training to the districts. This guidance should contain the responsibilities of both the Districts and the Division with specifics such as but not limited to: Contract management of the ROWAPS contracts or other related subjects to assist the employees in accomplishing the tasks required. Establish metrics in the work authorizations to assist the districts in managing the contract by defining timeframes and other requirements. Clarify to the districts that they can choose to obtain the Title Commitments themselves prior to the start dates for the work authorizations. This would prevent having to pay for administrative fees to the consultants while the provider was waiting on the title company. Report of 5 August 29, 2005

3 Minimal documentation standards to support activities, approvals, and other decisions made concerning each parcel. Require supporting documentation must be received and in the district files prior to the district approving payment for milestones. Require the districts to physically verify the existence of any additional displacees before adding any to the contract. Require the district to evaluate and approve in writing provider personnel substituted for the personnel listed on the work authorization to ensure equality of skills and experience in replacement. Clarify the signature information on the A-10. The review appraisers statement on the A- 10 is not applicable on the ROWAPS contracts as it states the reviewer is determining the value independently of the appraiser. Also, there is no place for the district administrative reviewer to indicate they have reviewed the appraisal. Require that the districts send letters to owners to introduce the contractor rather than have the contractor send it. Clarify record retention requirements and determine who is keeping the file of record. Clarify the responsibilities for monitoring the HUB/DBE activities. Relay that it is a conflict of interest for a negotiator to notarize a property owner s signature where the negotiator is related to owner of the company under contract or has an interest in that company. Management s Response to Finding #1 Right of Way (ROW) provides continuous guidance during procurement development and serves as the facilitator to the District and the Provider in determining the date and time for a work authorization kick-off meeting and provides the detailed agenda of discussion items. The kickoff meeting is used to discuss specific issues related to all tasks authorized under the work authorization, as well as, the results of the performance based professional service contract. Emphasis is placed on the role of District staff in terms of oversight and monitoring responsibility. All work tasks have detailed scopes of work specified in the contract document and each work task has a specific milestone on which the payment is based. Districts are responsible for receipt and maintenance of files on all documents related to the work authorization as it pertains to verification of the completion of payment milestones. In addition to individual kick-off meetings ROW conducts a pre-proposal, procurement and contract administration meetings for all ROWAPS providers for every round of request for proposals and award of new contracts. Contract training and information was developed and continues to be updated and offered to all Department staff through the Contract Services Section (CSS) of OGC. The course entitled Contracting with Private Section Entities offers knowledge and insight into the difference between contract management and administration, fundamentals of contracts, procurement, coordination and communication, managing contracts with work authorizations, negotiations of fee schedules, project schedules and the analysis of the scope of work involving performance based contracts. Report of 5 August 29, 2005

4 The completion of the procedural guide book by ROW will provide specific guidance to District staff in the form of templates and philosophy of the program. ROW will utilize the guide to develop an on-the-shelf workshop that will enhance the training provided by CSS. The workshop will be conducted by ROW staff members and will be conducted as requested by the Districts, on a regional basis, or as a determined need. The program was designed and remains committed to provide the flexibility Districts need to choose and customize the services provided by the ROWAPS companies. This flexibility enables the Districts to add staff capacity based on their current needs. ROW concurs with the finding and will provide Districts with an in-depth procedural guide book of best practice scenarios for all aspects of the ROWAPS program in the Spring of FY06. No. 2: The standard ROWAPS contract and WA language is incomplete or unclear. Condition: The standard ROWAPS contract and WA language is incomplete or unclear. The contract and WA should completely and clearly define the expectations of TxDOT and the provider. The standard contract and WA used by the ROW Division has not been revised to take into account real life experience in the districts. Effect: Incomplete and unclear language in the contracts and WAs allows for various interpretations by each party of the contract for their own benefit. This could lead to claims, unfinished or unacceptable work, or a difficult working relationship with the provider. Recommendation: The standard ROWAPS contract and WA language should be reviewed with OGC to help facilitate better contract management. It should be an evolving document being reviewed prior to each RFP cycle to incorporate lessons learned from the actual use by the division and the districts of the previous version. At minimum: The contract should identify the contractor personnel and prices since the experience and cost of the contract is a determining factor in being awarded a contract. At minimum this information should be available to the districts prior to the district selecting a vendor. This would facilitate the districts knowing who is supposed to be working for the contractor and help them select which contractor to execute a work authorization with. The contract milestones could be better defined so the districts know what all is included in the milestone before approving the payment. For example, the 90-Day Notice milestone could list that a housing or rental supplement had been received and approved. The contracts should include metrics so that the provider and the district know the expectations on timeliness to accomplish the milestones. The contract currently states that the beginning of work is the date John Campbell signs the contract when it probably should state that the beginning work date is the date executed by the state. Schedule D of the contract states relocation fees per parcel but actually should be per displacee. Please change column headings to reflect per displacee. The contract termination language needs clarification. Report of 5 August 29, 2005

5 Specify in the contract that the provider will follow TxDOT s ROW Policy and Procedure. Clarify in the work authorization the amount to pay on appraisal update services and appraisal update reviews. Use consistent titles for the personnel listed in the contract and work authorization. Define the functions of each title. For example negotiation versus acquisition, and project manager. Clarify the language on determining the calculation of the 25% startup fee. As an example, is the 25% based on the annual amount or the total amount of the project administration fee. Management s Response to Finding #2 ROW concurs with finding #2 and has actively engaged OGC in both development of the procurement process and selection of the ROWAPS providers. All internal audit points of recommendation will be incorporated into the procedural guide book as appropriate. The CSS of OGC has been an active participant at every step of the development of the ROWAPS program and the contract documents. All statutory aspects were taken into consideration and specific verbiage of the documents were developed utilizing standard legal considerations. The documents will continue to be refined as business needs, laws and regulations require. Closing Comments The finding and recommendations were discussed at an exit conference with John Campbell, ROW Director, on July 21, 2005 and with Amadeo Saenz, Assistant Executive Director for Support Operations on July 20, Report of 5 August 29, 2005