Sweetwater Union High School District. Proposition O Performance Audit. March 20, 2012 Board of Education and Citizens Bond Oversight Committee

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1 Sweetwater Union High School District Proposition O Performance Audit Board of Education and Citizens Bond Oversight Committee

2 Outline of Performance Audit Presentation All parties, District staff and SGI staff have been very helpful and cooperative in conducting this performance audit Introduction Scope Work Plan Management Performance Cost Performance Communication Performance Conclusion Questions Sweetwater UHSD Board & CBOC Presentation 2

3 Introduction Background on Eric Hall & Associates Audit initiated in October 2011 Audit required over 600 hours of review, analysis, and report writing Last meeting of CBOC and Board on this topic was November 29, 2011 Sweetwater UHSD Board & CBOC Presentation 3

4 Introduction Purpose of the performance audit Not a fiscal audit or fraud audit Comprehensive review Covering summer 2006 to June 2011 Audit performed within guidelines Proposition 39 Generally Accepted Government Accounting Standards (GAGAS) Designed to provide taxpayers a review of the efficiency and effectiveness of the bond program Sweetwater UHSD Board & CBOC Presentation 4

5 Introduction Report components Management Performance Cost Performance Communication Performance Findings and recommendations References other studies and material for information and use Sweetwater UHSD Board & CBOC Presentation 5

6 Scope Audit objectives provided in the SUHSD RFP for services: Management program and plan Design and construction timelines Project budgets Best practices and technology Payment procedures and time Program & construction management services Management program and plan Construction delivery methods and performance Best practices for procurement Compliance with contract code Public outreach, communication program Overall transparency of bond program Prevailing wage, labor compliance Performance of independent CBOC Sweetwater UHSD Board & CBOC Presentation 6

7 Our Work Plan We reviewed and analyzed Construction transactions Southwest Middle School Chula Vista High school Hilltop High School Pay requests and documentation Change orders and documentation Board actions and documents Selection process for contractors and consultants Program & construction management contracts Best practices by program manager and SUHSD (District) Sweetwater UHSD Board & CBOC Presentation 7

8 Our Work Plan We reviewed and analyzed Data in computerized document management systems (Laserfiche and Prolog) Interviewed District and SGI staff, CBOC, community members Site visits User survey Independent studies West Ed San Diego County Office of Education, survey on PM fees San Diego County Tax Payers Association School Facility Bond Programs in San Diego County Association of California Contraction Managers Project Delivery Handbook Office of Public School Construction, State School Facility Handbook Sweetwater UHSD Board & CBOC Presentation 8

9 Management Performance Strengths DSA plan reduced processing time by over 50% Energy and environmental design (LEED) Certification Designs likely to bring savings in operational costs Timely payment process Robust record keeping system Purchasing department involvement in bid and award Maintenance department involvement in designs Low labor compliance and contractor claims rates Sweetwater UHSD Board & CBOC Presentation 9

10 Management Performance Recommendations District wide standards to provide continuity across periods of time as staff changes occur Contingency for owner directed changes Board policy and administrative regulation for selection of consultants and contractors Qualifications Based Selection process Criteria for selection based on merit Role of paper screening and interview panel Ranking process and priority of recommendations Staff, superintendent and Board role Continue with prequalification of contractors Sweetwater UHSD Board & CBOC Presentation 10

11 Management Performance Recommendations Reorganize the mix of internal resources and outsourced staff District staff was limited, high turnover, less involved Increase District involvement, decrease reliance on PM Employ more District staff as project managers and owners representatives Chief Facility Executive Contracts Administrator Saves resources, less expensive Builds internal capacity Increases transparency Sweetwater UHSD Board & CBOC Presentation 11

12 Cost Performance Strengths Construction delivery methods Traditional Design-Bid-Build Contemporary Lease Leaseback Goal of 70% hard costs exceeded, results were 73% Best practices followed Prequalification of bidders Bid and award process involved District staff Construction change orders Low change order rate for all projects is 5.4% Design Bid Build change order rate = 9.6% Lease Leaseback change order rate = 2.8% 10% change order limit exceeded in one project (Hilltop MS) Detailed and organized process for approvals Approvals at multiple levels make false paid change order claims unlikely Board items contain appropriate detail Sweetwater UHSD Board & CBOC Presentation 12

13 Cost Performance Recommendations Architect agreements fair fee in initial contracts 8% initial fee was below market levels 6 firms decreased to 3 2 firms confirmed they withdrew because of the low fee Fees increased over time to 11.8% Project budget performance Budgets for all projects increased 40% Budgets changed by project from -2% to +122% between 2008 and 2011 District and program manager budgets differed Variance due to additional funds received and project changes Review budgets regularly with staff and Board Reallocation of funds between projects should be carefully considered and reviewed publicly Sweetwater UHSD Board & CBOC Presentation 13

14 Cost Performance Recommendations Program schedule review Time savings with DSA agreement Projects required more time in other phases that originally planned Baseline schedules extended by 6.5 months District should monitor schedules and press for keeping on track Schedule adherence helps to avoid additional costs Sweetwater UHSD Board & CBOC Presentation 14

15 Cost Performance Recommendations PM fees - Board agenda items and contracts Some Board agenda items do not specifically reference fee amounts Most contract documents and Board agenda items are not specific about the authorization and costs of reimbursable expenses PM staffing plan which governs costs not referenced in Board agenda items Board agenda items should Adequately explain the financial commitment Correspond and be consistent with the contracts Be prepared by the Chief Facility Executive Be prepared with input from purchasing, contracts and fiscal staff Contracts should Specify dollar amounts, percentages, not-to-exceed amounts, and specify payments at percent complete or stages of work Be prepared by District legal counsel Sweetwater UHSD Board & CBOC Presentation 15

16 Cost Performance Recommendations PM fees staffing plan and pay structure Monthly payment to PM based on staffing and reimbursable amounts in invoice Maximum not-to-exceed fee for recent PM/CM agreement based on 8.6% of first bond sale plus 8% reimbursable amounts This method does not provide the District with a measure of efficiency, accountability, progress or performance Payments based upon a staffing plan of those who have worked in any given month makes it difficult to measure progress Establish a pay structure similar to architects and contractors who are paid based upon a percentage of completion Sweetwater UHSD Board & CBOC Presentation 16

17 Cost Performance Recommendations PM fees staffing plan and pay structure District should establish & pay a fee for separate services performed programming planning design pre-construction construction and closeout District and PM/CM officials should agree on fees authorized and tracked Further audit should be conducted to review all program management contracts and Board approved material and invoices against fee caps Sweetwater UHSD Board & CBOC Presentation 17

18 Communication Performance Strengths Public outreach Contractor and civic outreach Web site Groundbreaking & ribbon cutting ceremonies CBOC members knowledgeable and dedicated Sweetwater UHSD Board & CBOC Presentation 18

19 Communication Performance Recommendations The Citizens Bond Oversight Committee Vacancies should be filled as soon as possible Can play a critical role to help increase transparency and community confidence Should be staffed by the Chief Facility Officer Information should be provided to increase capacity and understanding of the program Reports should be in a user friendly format Program manager should have a minimal role Sweetwater UHSD Board & CBOC Presentation 19

20 Communication Performance Recommendations The Board made a commitment to not influence the selection of vendors, as stated on February 12, 2012 Build on the Board s commitment Work with legal counsel to draft a policy and an administrative regulation Be explicit, define gifts and donations Be explicit, define to whom this policy applies Address banning gifts before, during, after contracts Incorporate this regulation into qualifications based selection process and the prequalification of contractors process District communications department should be responsible Save resources, less expensive Build the District s internal capacity Increase transparency in Proposition O Additional outsourcing if necessary Sweetwater UHSD Board & CBOC Presentation 20

21 Summary and Conclusions Proposition O program has made substantial progress The new facilities are constructed with state of the art technology and energy and environmental design features The facilities make a statement about the importance of the teaching and learning environment by the Board and Superintendent Progress has been made with the efforts of many consultants, contractors, program managers and District staff under the leadership of the Board and Superintendent Sweetwater UHSD Board & CBOC Presentation 21

22 Summary and Conclusions Realities are acknowledged Positive practices and strengths are noted Efficiency improvements are recommended Significant detail is provided in the report Report was conducted in the spirit of improving the efficiencies and effectiveness Presentation is a summary - many pages of information and exhibits and figures and details are provided in the report Sweetwater UHSD Board & CBOC Presentation 22

23 District is welcomed to comment and reply to the recommendations to be incorporated into the final report We appreciate the opportunity to be of service to the Sweetwater UHSD, the CBOC and the community which you serve. Thank You!! Sweetwater UHSD Board & CBOC Presentation 23

24 Questions and Discussion