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Audit: Public Works skipped quality controls

Tuesday, October 3, 2017 by Jo Clifton

The Public Works Department, which oversees the city’s capital projects, like the new Central Library and Water Treatment Plant 4, has failed to “consistently follow processes designed to contain costs and ensure the quality” of such projects, according to a report released by the Office of the City Auditor on Wednesday.

City Council’s Audit and Finance Committee received and accepted the report at its Wednesday meeting.

Mary Dory, the auditor who directed the audit, said that “the thread that runs through” the audit’s findings is that although Public Works has many controls in place to prevent bad things from happening, the department’s staff is not enforcing those controls.

Auditors found that although projects were supposed to be reviewed at three separate stages of completion, Public Works regularly bypassed those reviews. At 30 percent completion, auditors found that only four out of 12 projects were reviewed.

According to the audit, “If Public Works bypasses its quality management process, the city may pay for the decision in avoidable project cost increases. Many of the change estimates (and accompanying cost increases) we reviewed for the new Central Library stemmed from missing, and unclear, or conflicting items in the new Central Library designs that a quality review may have caught.”

However, auditors noted “both internal and external pressures appear to affect the integrity of the quality management process. For example, Public Works employees stated that management authorized staff to overlook comments from the Quality Management Division” on designs for the new library. In some cases, project managers told auditors that they appeal to city “executives to bypass the quality management process when it caused burdensome delays.”

The audit provided two relatively small examples from the new Central Library project. Designs for the new library did not initially include power to certain areas of the building, an oversight that cost $14,557. The designs also failed to include elevator guide rail posts, which when added created an additional cost of $18,115, auditors said.

Auditors said that after learning about the lack of power conduits, “the city initially argued that the designs did specify the required power.” However, the city and the designer “did ultimately agree that the designs were deficient,” and agreed to pay the additional costs.

Auditors said they noted “many similar examples” in their review of the new library’s project files but they did not say that was the only reason for the library’s ballooning costs.

As the Austin Monitor noted earlier this year, Austin voters approved $90 million in bond money to construct a new Central Library in 2006. “But years later, a ‘revisioning’ of the project made it clear that more money would be needed – so in 2010, Council approved an additional $30 million. Last year, Council signed off on another $5 million, bringing the total project cost to $125 million.”

Stakeholders within Public Works told auditors that the quality management process was a significant source of delays, “which is the primary reason why management does not always enforce the policy,” requiring quality management reviews. Quality Management Division staff members told auditors that they did not have sufficient resources to meet their department’s expectations.

Auditors also found that during the time period studied Public Works “did not consistently follow its change order process on any of the nine projects that we reviewed.” On each of the projects, auditors reported that “the project manager allowed the contractor to complete at least some work before management approved the relevant change order,” in violation of the department’s written policy and commitment to Council.

“We also received testimony from project managers, sponsor departments, and the Capital Contracting Office that the change order process is routinely circumvented,” the audit said.

For example, on the Waller Creek Tunnel project, “management approved a $66,500 change order as a ‘mutually agreed upon lump sum for the completed to date work on the erosion control wall.’ Because the work was completed before it was approved, the change order process was not followed,” with the change order being signed five months after management “asserted to Council that they would follow Public Works’ change order process.”

Richard Mendoza, director of Public Works, told the committee the new library project was a particularly complex and unique project and should not be used to judge how the department deals with quality management. Mendoza pointed out that he has only had his position for eight months, which means that he was not at the department when most of the audited projects were being built.

Mendoza said his department is working to review its entire capital project delivery operation, specifically recognizing that the current Quality Management Division’s process is “cumbersome and inefficient.” Restructuring to what is called Total Quality Management will take about six months, according to management’s written response.

In the same response, Public Works’ management also promised to work with the Capital Contracting Office to “update as necessary, and enforce a risk-based change order process that is realistic for project needs and protects the city from unnecessary costs.”

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