Contract Management Procedures Transportation Services Division, Works & Emergency Services Department

Transcription

1 STAFF REPORT March 19, 2001 To: From: Subject: Audit Committee City Auditor Contract Management Procedures Transportation Services Division, Works & Emergency Services Department Purpose: To review the adequacy of contract management procedures in the Transportation Services Division, Works & Emergency Services Department, and report to management on any opportunities for improvement, as well as recommended corrective action. Financial Implications and Impact Statement: While there are no financial implications resulting from the adoption of this report, the implementation of the recommendations in this report could strengthen the City s control over contract costs and work quality of private contractors on city projects. Recommendations: It is recommended that: (1) the Commissioner of Works & Emergency Services, take the necessary action to strengthen quality assurance over projects by: developing a harmonized quality assurance program, for implementation by the 2001 construction season, which includes inspection and quality testing guidelines and standards to effectively manage road maintenance contracts. The program should take into account the need for more frequent, independent verification of truckload weights and regular material quality testing; designing a form for documenting and reporting on the completion of required lab tests and related results on each project for review by district road operation managers and supervisors;

2 - 2 - (c) (d) (e) providing staff training to ensure that all inspectors are aware of the Transportation Services Division s inspection, testing and documentation requirements, as well as management expectations in this regard; regularly monitoring staff adherence to the harmonized quality assurance program; considering the rotation of inspectors, as appropriate; (2) the Commissioner of Works & Emergency Services, take the necessary action to improve expenditure control over contracts by: enhancing supervision of inspection staff through periodic review of daily inspection reports, sample verification of measurements reported and on-site observation; seeking clearance from the Fair Wage & Labour Trades Office before releasing the statutory holdback amount; and (3) this report be forwarded to the Works Committee for information. Background: The Works Committee, in awarding a contract for the resurfacing of Toronto roads in District 4 of the Transportation Services Division, Works & Emergency Services Department, expressed concerns that the low bidder was in violation of the City's Fair Wage Policy. At its meeting of July 12, 2000, the Works Committee requested that the City Solicitor, in consultation with the Commissioner of Works & Emergency Services, the City Auditor, and the Manager, Fair Wage and Labour Trades Office, submit a confidential report directly to City Council on the determination of fair wage adherence by contractors and their subcontractors, as well as the implications of applying prior performance and quality assurance adherence standards in contract awards. The City Solicitor s report on these matters was received by Council on August 1, Further to the City Solicitor s report, my office performed a review of the policies and procedures of the Fair Wage and Labour Trades Office in enforcing the Fair Wage Policy, and a separate report has been submitted to the Audit Committee on this matter. To address concerns expressed by the Works Committee relating to the management of City contracts, a preliminary review was conducted by my office on the control procedures exercised by the Transportation Services Division over its road repairs and maintenance contracts in The review included areas such as compliance with corporate policies, adherence to the terms, conditions and specifications of contracts, quality assurance, the payment certification process, and the efficiency and effectiveness of the overall contract management process.

3 - 3 - A comprehensive review of major capital projects and contracts in the City will be conducted by my office later this year. Such review will also address the issue and implications of applying prior performance in contract awards. Our observations, conclusions and recommendations, along with the Transportation Services Division s response to each of the recommendations are provided below. Comments: The Transportation Services Division is responsible for the management of projects that relate to asphalt resurfacing work on roads and associated sidewalk paving. The value of these resurfacing projects totalled approximately $38.5 million in Contracts that relate to the reconstruction of roads and resurfacing work on major arterial roads, however, are administered by the Technical Services Division of the Works & Emergency Services Department. Work Quality Assurance We have reviewed the current level of quality assurance inspection and monitoring of contracted projects. Inspection staff generally monitor the quantity and quality of work performed, as well as equipment and staff availability on a daily basis. In districts that are short staffed, the inspector who is responsible for the respective projects, communicates on a regular basis with contractors and strives to be on-site at strategic stages of construction. Co-operative engineering students are used to supplement the inspection workforce during the busy construction season. While current procedures are for the most part adequate, control over the following areas needs to be strengthened. - While one inspector normally stays at the job site to collect truckload tickets, verification of sample truckload s gross and tare weights by an independent source such as cityoperated transfer stations was infrequent, normally done at the inspector s discretion. Weights of shipments should be validated more frequently since random confirmation of truckload weights helps to detect overcharges for materials delivered. - Transportation Services staff have indicated that quality assurance on road maintenance projects was almost non-existent in some former municipalities prior to the amalgamation. Even now, district management has acknowledged that quality testing is not conducted as frequently as required because testing guidelines are only casually observed, in part due to staff limitations. It is important that quality assurance tests be conducted regularly.

4 There is no project summary document that outlines the nature and timing of all required quality assurance tests conducted on a project. Test results were either noted by inspectors on daily inspection reports or by test consultants through lab reports. It is, therefore, difficult for district management to ascertain that proper quality assurance tests were conducted at the critical stages of construction. Clear definition of quality assurance procedures, adequate staff training and effective management oversight would support Transportation Services in ensuring that contract specifications and quality standards are met. - District offices still apply different contract management policies and procedures of the former municipalities, although Transportation Services staff have advised us that a harmonized contract management process would be implemented by the 2001 construction season. It is important that all contracted projects are managed in a consistent and effective manner. In addition, the rotation of inspectors, such that they are not continually working with the same contractor, should be considered. Recommendation: 1. The Commissioner of Works & Emergency Services take the necessary action to strengthen quality assurance over projects by: (c) (d) (e) developing a harmonized quality assurance program, for implementation by the 2001 construction season, which includes inspection and quality testing guidelines and standards to effectively manage road maintenance contracts. The program should take into account the need for more frequent, independent verification of truckload weights and regular material quality testing; designing a form for documenting and reporting on the completion of required lab tests and related results on each project for review by district and project managers; providing staff training to ensure that all inspectors are aware of the Transportation Services Division s inspection, testing and documentation requirements, as well as management expectations in this regard; regularly monitoring staff adherence to the harmonized quality assurance program; and considering the rotation of inspectors, as appropriate.

5 - 5 - Management Response to Recommendation #1 Transportation Services has implemented newly harmonized inspection procedures for the 2001 construction season. Inspection staff training is ongoing to upgrade staff skills and to better identify management expectations. Over the last couple of years, many senior inspectors have retired. The current complement of inspectors is, on the average, relatively young and require additional training and experience. Inspectors will be rotated as often as operationally feasible, probably once every 12 to 18 months. Expenditure Control Based on our discussions with staff and a review of selected project files, Transportation Services staff have exercised due care to keep their projects within budget. However, our review did identify a payment error of approximately $8,600 in one of the four district offices. This was due to an inspector recording certain service units to a wrong activity code which charges a higher unit price. In the same project file, weight slips were not attached to daily inspection reports to support payment for materials received. Additionally management control, particularly at the supervisory level, is required to mitigate the risk of overpayment. District management has since taken corrective action and agreed to more closely supervise inspection staff through random review of submitted reports and verification of measurements reported. In addition, we noted that in releasing the 10 percent statutory holdback, district staff did not consult the Fair Wage & Labour Trades Office to determine whether an amount should be withheld to address unresolved fair wage related concerns. Recommendation: 2. The Commissioner of Works & Emergency Services take the necessary action to improve expenditure control over contracts by: enhancing supervision of inspection staff through periodic review of daily inspection reports, sample verification of measurements reported and on-site observation; and seeking clearance from the Fair Wage & Labour Trades Office before releasing the statutory holdback amount. Management Response to Recommendation #2 Transportation Services has recently implemented a new computerized contract management system as part of the division s maintenance management system. This system helps to track contract expenditures and requires inspectors to report quantities in a specific manner. The new computer system, plus new inspection procedures for 2001, will allow supervisors to better able to monitor contract expenditures and inspection quality.

6 - 6 - Conclusions: In managing road repairs and maintenance contracts, it is important that project costs are closely monitored to prevent a cost overrun, and that an effective quality assurance program is established through independent validation of material quantity, as well as the conduct of regular lab tests to ensure adherence to City standards as stipulated in the contract. While district management has demonstrated due diligence in controlling project costs, the Transportation Services Division must strive to harmonize its contract management practices across its four district offices. This would include the establishment of a quality assurance program, as well as project inspection and quality assurance guidelines/standards for implementation by the 2001 construction season. The implementation of the recommendations in this report would assist the Transportation Services Division to more effectively manage the costs and quality of its contracted road maintenance and repair services, and ensure the City s interests are protected in this regard. Contact: Tony Veneziano, Director, Audit Services Anne Cheung, Senior Audit Manager Tel: (416) , Fax: (416) Tel: (416) , Fax: (416) tvenezia@city.toronto.on.ca acheung1@city.toronto.on.ca Jeffrey Griffiths City Auditor cg/dl C:\DATA\audit\2001\Reports\Works and EMS\Transportation\Contract Management Procedures Mar doc