Please see below for details on the implementation status of these recommendations. Page 2. Metropolitan King County Cou
The audits of its overall
DATE:
December 16, 2016
TO:
Metropolitan King County Councilmembers
FROM:
Kymber Waltmunson, King County Auditor
SUBJECT:
Follow-up on Small Construction Contracts Performance Audit
The Finance and Business Operations Division (FBOD) has made progress on eight of nine audit recommendations made by our office in July 2015. As a result, FBOD and implementing agencies can make more informed decisions on the use of Work Order Contracts (WOC). Full implementation of our recommendations will help agencies ensure a fair bidding process and mitigate the risk of paying more for construction projects. Additional actions are needed, however, to fully implement recommendations related to updating policies related to work order contracts, training of agency staff, documentation and tracking of work order contract expenditures, and improving internal controls within implementing agencies. Of the nine audit recommendations:
DONE
1
PROGRESS
7
OPEN
1
Recommendation has been fully implemented Auditor will no longer monitor Recommendations are in progress or partially implemented Auditor will continue to monitor Recommendation remains unresolved Auditor will continue to monitor
Please see below for details on the implementation status of these recommendations.
Metropolitan King County Councilmembers December 16, 2016 Page 2 of 6
Implementation Status as of December 2016
#
1
2
Quick Status
Recommendation
Status Detail
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 7-19) and align with state law.
FBOD has completed a ‘Work Order Contracts Compliance Review Work Plan’ that describes the roles and responsibilities of implementing agency project control officers and the Finance Project Control Officer (PCO). The work plan is divided into four categories: Identify, Review, Report, and Train. The Finance PCO has made it part of its work plan to review a construction work order contract each quarter for agencies that use work order contracts. This quarterly review began in third quarter 2015. Since implementation of this work plan, FBOD has reviewed 20 WOC projects, covering seven agencies. FBOD has not taken specific steps to further ensure that its approach to work order contracts aligns with state law. To fully implement this recommendation, we would look for efforts by the County to have state law on the use of work order contracts more explicitly defined in code. FBOD worked with implementing agencies to develop a ‘decision matrix’ to assist with selecting the best procurement method. This document resides on the Construction Cross Collaboration SharePoint site, accessible to all agencies. FBOD should complete the decision guidance document, including any areas still under legal review and provide the guidance document to all agencies.
PROGRESS
PROGRESS
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.
Metropolitan King County Councilmembers December 16, 2016 Page 3 of 6 #
3
4
5
Quick Status
PROGRESS
DONE
PROGRESS
Recommendation
Status Detail
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.
FBOD met with a representative group of agencies to discuss making revisions to the policy. The group identified the definition of work orders and made several additional revisions to the policy. The group will be meeting again in January 2017 to continue discussions. FBOD is currently working to format the new draft WOC policy to meet new guidelines on policies, with the intent to have the new policy signed and in place by first quarter 2017.
Finance and Business Operations Division should develop mechanisms to monitor and document expenditure trends for work order contracts and use this information to inform decisions about size of future work order contract procurements.
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.
We will review the adopted policy when it is complete to determine if this recommendation has been fully implemented. FBOD has developed a report available in Oracle that shows the expenditures to date on a work order contract. This report is used by agencies and FBOD to inform the next procurement of similar work. The decision-makers compare the total awarded contract amounts of specific WOCs with actual expenditures over the life of the contract. Future contract values are adjusted to reflect the historical expenditures. FBOD reviewed the current small works roster list of firms, removed outdated information, and contacted firms with incomplete registration records in mid2015. In 2016, FBOD assembled a workgroup including agency participants and procurement staff to work on improving the small works roster and developing a limited public works roster.
Metropolitan King County Councilmembers December 16, 2016 Page 4 of 6 #
6
7
Quick Status
PROGRESS
OPEN
Recommendation
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.
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 Detail
This work is on hold until FBOD completes the process to choose a new online bid management system. The new system will include improved functionality for the small works roster. FBOD is undertaking legal review to determine what changes need to be made to the current system to enable a limited public works roster. FBOD anticipates completion in second quarter 2017. We will request additional documentation showing increased usage of limited public works and small works contracts to consider this recommendation complete. FBOD has determined that in order to address this recommendation, guidelines and standard procedures must be developed and placed in agency project management manuals. This topic is included on the Interdepartmental Forum work group agenda The work group will continue to draft the guidelines and standard practices. A new target completion date is second quarter 2017. We will request verification of updated policies and guidelines and evidence of agency documentation being completed to consider this recommendation complete. FBOD considers this recommendation closely tied to Recommendation 8, below. Therefore, completion of this recommendation will not occur until implementation of the revised procedural document and correlating guidelines. Once FBOD completes the new
Metropolitan King County Councilmembers December 16, 2016 Page 5 of 6 #
Quick Status
Recommendation
Status Detail
guidelines, it will provide new training for implementing agencies. The new estimated date for completion is first quarter 2017.
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. 8
9
PROGRESS
PROGRESS
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
We will request evidence of trainings offered through FBOD on bid price review for WOCs and a guidance document provided to agencies on bid review and risk assessment to be completed prior to award of any WOC. FBOD believes the best mechanism for guidelines regarding reviewing bid prices and risk assessment is via a procedural document and not by policy. The policy is currently being revised and the requirement for bid review is being considered. The work group will continue to work on developing the procedural document through first quarter 2017. The remaining forms and guidelines will also be addressed with completion in second quarter 2017. We will review the revised policy and procedural document when they are complete and require evidence of risk assessment efforts by agencies. We will also require documentation of any mitigation efforts identified and provided to FBOD for review. FBOD conducted an informal survey of agencies at the January 2016 meeting to determine if training on these topics was being provided to staff. FBOD indicates that all agencies responded in the affirmative. FBOD offers policies and
Metropolitan King County Councilmembers December 16, 2016 Page 6 of 6 #
Quick Status
Recommendation
Status Detail
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.
procedures training on a quarterly basis and the WOC policy is a covered topic. Finance PCO will continue to check project management manuals for the policy updates, as well as any guidelines that may be developed to document negotiations. There is a current work group convened to develop guidelines on the documentation of negotiations – its work product was shared at the October 27, 2016 Interdepartmental Forum meeting. Comments from the agencies are due November 4. This work will be completed by first quarter 2017.
Jane Vandenberg, Capital Projects Oversight Analyst, conducted this review. Brooke Leary, Senior Principal Management Auditor, was the project supervisor. Please contact Jane at 4777579, if you have any questions about the issues discussed in this letter. cc:
Dow Constantine, King County Executive Fred Jarrett, Deputy County Executive Rhonda Berry, Assistant Deputy County Executive Dwight Dively, Director, Office of Performance, Strategy and Budget Ken Guy, Director, Department of Executive Services (DES), Finance & Business Operations Division (FBOD) Eunjoo Greenhouse, Deputy Director, DES, FBOD Danielle Hinz, Chief Procurement Officer, DES, FBOD Christy Trautman, Project Control Officer, DES, FBOD Melani Pedroza, Acting Clerk of the Council Shelley Harrison, Administrative Staff Assistant, King County Executive Office
