Feb 9, 2018 - has also provided training on the policy and developed guidelines for .... project management manuals and
KING COUNTY AUDITOR’S OFFICE February 9, 2018
Second Follow Up on Small Construction Contracts Performance Audit
TO:
The Finance and Business Operations Division (FBOD) has fully implemented all but one of the recommendations made in our July 2015 audit. This follow up addresses the eight recommendations that were either in progress or open as of the 2016 follow up. Of the eight recommendations, FBOD has implemented seven and has made progress on one.
Metropolitan King County Councilmembers
FROM: Kymber Waltmunson, County Auditor
Implementation of these seven recommendations has helped ensure agencies have the information they need to select the most appropriate contracting methods for their small construction projects, which helps ensure the county gets the best price for the work it bids out. It has also improved the rigor of analysis and documentation by agencies in their bid review work, which helps ensure a fair bidding process and helps mitigate the risk of the county unnecessarily paying more for construction. Finally, FBOD has increased awareness of the small works roster methods among local small contractors and suppliers and, in turn, helped provide opportunities to those businesses.
Of the eight audit recommendations:
7 DONE Fully implemented Auditor will no longer monitor.
1 PROGRESS
0 OPEN
Partially implemented Auditor will continue to monitor.
Remain unresolved Auditor will continue to monitor.
Please see below for details on the implementation status of these recommendations.
KING COUNTY AUDITOR’S OFFICE Recommendation 1
PROGRESS
The County Executive should develop and implement a plan to monitor the use of work order contracts by requiring agencies comply with construction work order contracts policy (CON 719) and align with state law.
STATUS UPDATE: In June 2017, the Executive published an update to the CON 7-19 policy and has taken numerous steps to educate agencies on the contents of the updated policy and to provide additional guidance on how to implement the policy (see recommendations two through three and six through nine). The County has also taken steps to develop proposed changes to state law. The Executive has drafted legislation that, if enacted, would explicitly allow the use of work order contracts. The proposed legislation will be considered by the Executive for inclusion in the 2019 legislative session. To complete implementation this recommendation, the Executive should put forward the proposed legislation for consideration by the state legislature.
Recommendation 2
DONE
Finance and Business Operations Division should develop, document, and disseminate decision-making guidance for divisions to use for selecting the optimal delivery method for small construction projects.
STATUS UPDATE: The Finance and Business Operations Division (FBOD) has completed the decision matrix that was in draft form at the time of our last follow up. FBOD has also worked with the Prosecuting Attorney’s Office to develop boilerplate language for limited public works projects that implementing agencies can use in contracts. The decision guidance and boilerplate language have both been provided to implementing agencies. By implementing this recommendation, FBOD has helped ensure that implementing agencies will have the information they need to select the most appropriate contracting methods for the delivery of small construction projects.
Recommendation 3
DONE
The County Executive should update the construction work order contracts policy (CON 7-19) to clarify intended use of work order contracting and require agencies to document justification for each individual work order based on eligibility criteria established in the policy.
STATUS UPDATE: In June 2017, the Executive published an update to the CON 7-19 policy. FBOD has also provided training on the policy and developed guidelines for departments and divisions to use in applying the new policy. The policy requires that each individual work order file contain an independent estimate or critical estimate review to ensure that the work order is valued at less than $150,000. If the estimate is close or over $150,000 the agency must look at alternative procurement methods to complete the work. By implementing this recommendation, the Executive has provided important clarifying information on the intended use of work order contracts and has improved standards of documentation that will allow the Facilities and Business Operations Division to provide feedback to implementing agencies on their use of this contracting method.
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KING COUNTY AUDITOR’S OFFICE Recommendation 5
DONE
Finance and Business Operations Division should use procurement reform phase II to remove the barriers, especially for the limited public works method, and provide incentives for implementing agencies to use methods other than work order contracting for small construction.
STATUS UPDATE: The Facilities and Business Operations Division (FBOD) has taken steps to encourage the use of alternative delivery methods for small construction contracts. For instance, FBOD developed vendor training offerings to help increase the number of vendors on the small works roster. By expanding the roster, more agencies will be able to find responsive bidders through that process. In addition, FBOD developed and received approval for new small works roster boilerplate language for use in limited public works contracts. Availability of this boilerplate language will assist in expanding use of that method by implementing agencies. As a result of implementing this recommendation FBOD has seen increased use of the small works roster since 2014. In 2017, 12 small works roster contracts were executed, compared to three in 2014. This has helped reduce the County’s reliance on work order contracts and has also improved opportunities to small contracts and suppliers.
Recommendation 6
DONE
The County Executive should revise the construction work order contracts policy (CON 7-19) to require implementing agencies to document analysis to support the bid items and quantities for proposed work order contract bidding schedules. The policy should include a process for Finance and Business Operations Division to verify an agency’s analysis and evaluate its adequacy as conditions for starting procurement.
STATUS UPDATE: The Executive published an update to the CON 7-19 policy in June 2017. In addition to updating the policy, the Finance and Business Operations Division provided agencies with new language for their project management manuals on how to document their analysis to support bid items and quantities for proposed work, along with guidance on when a record of negotiation is required. Implementing this recommendation helps ensure a fair bidding process and helps mitigate the risk of the county unnecessarily paying more for construction.
Recommendation 7
DONE
Finance and Business Operations Division should provide training and guidance to implementing agencies on bid price review for work order contracts, including how to assess risk and consider actions to take when identifying imbalanced bid prices.
STATUS UPDATE: In response to this recommendation, the Finance and Business Operations Division (FBOD) is offering a training on unbalanced bid identification and review. The training is open to all county employees and will be offered for the first time in March 2018. FBOD has also developed guidance tools for use by project managers who are performing bid price review on work order contracts. Implementing this recommendation has helped improve agencies’ ability to evaluate bid price imbalance and to make deliberate decisions about how to manage the risk posed by imbalanced prices.
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KING COUNTY AUDITOR’S OFFICE Recommendation 8
DONE
The County Executive should revise the construction work order contracts policy (CON 7-19) to require implementing agencies to conduct bid price review, assess risk of proceeding with award, and identify mitigating actions for Finance and Business Operations Division’s review and advice.
STATUS UPDATE: The Executive published an update to the CON 7-19 policy in June 2017. In addition to updating the policy, the Finance and Business Operations Division (FBOD) is requiring bid review and provided agencies with language for the project management manuals on this topic. FBOD has also developed a tool for implementing agencies to use to assist in their implementation of bid price review. Implementing this recommendation has helped ensure the fairness of the competitive bidding process and increased the likelihood that the County will pay a reasonable price for work orders.
Recommendation 9
DONE
Implementing agencies should update internal controls to ensure compliance with the construction work order contracts policy (CON 7-19) on the topics of conducting independent engineer’s estimates, review of contractor estimates proposals, and documentation of negotiation of individual work order agreements. Agencies should train relevant employees on the implementation of CON 7-19 and updated internal controls.
STATUS UPDATE: The Finance and Business Operations Division has developed a record of negotiation guidance tool for agencies to use in review of contractors’ estimates and in their documentation of the negotiation of individual work order agreements. Agencies are updating their project management manuals and training relevant employees on the implementation of the new policy and updated internal controls. As a result of implementing this recommendation, improved internal controls will provide greater accountability in the negotiation of work orders. Brooke Leary, Senior Principal Management Auditor, conducted this review. Please contact Brooke at 206-477-1044 if you have any questions about the issues discussed in this letter. cc:
Dow Constantine, King County Executive Casey Sixkiller, Chief Operating Officer, King County Executive’s Office (KCEO) Dwight Dively, Director, Office of Performance, Strategy & Budget, KCEO Rachel Smith, Chief of Staff, KCEO Caroline Whalen, Director, Department of Executive Services (DES) Ken Guy, Division Director, Finance & Business Operations Division (FBOD), DES Danielle Hinz, Chief Procurement Officer, DES, FBOD Christy Trautman, Project Control Supervisor, DES, FBOD Melani Pedroza, Clerk of the Council, King County Council Julie Long, Executive Assistant, DES Shelley Harrison, Administrative Staff Assistant, KCEO
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