2008-01-AU Limited Scope Performance Audit Report Department of Public Works CIP Contract Change Orders and Supplements for FY 2006-2007

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CHAPTER 4 CONTRACT SUPPLEMENTS AND CHANGE ORDERS Construction contract supplements and change orders are written orders for changes to an original contract that are issued subsequent to contract award. Contract supplements relate to changes in work scope, specifications, price or time in a professional services contract such as a contract for architecture and engineering, survey and mapping, environmental or traffic studies, and project management or inspection. Change orders relate to changes in work scope, specifications, price or time in a construction contract such as a contract for constructing, altering, repairing or improving new or existing buildings, structures, roadways, floodways, and other facilities or infrastructure. Contract supplements and change orders may increase, decrease or have no effect on total contract dollars or time of contract performance. In theory, they should relate only to unforeseeable circumstances or events such as delays due to inclement weather, unrecorded site conditions or archaeological features, geological or other natural events, or regulatory changes in environmental, safety and public access requirements. However, in reality, contract supplements and change orders also arise from foreseeable circumstances such as inadequate site assessment, insufficient identification of user needs prior to design and construction, errors or omissions in design plans and specifications, or under- or over- estimation of project costs by professional services consultants, construction contractors, and /or County engineers. While it is unrealistic to expect that all contract supplements and change orders can be eliminated and impractical to devote most of contract dollars and time to the scoping component of a project, management systems and processes should be in place to communicate, implement and monitor adherence to clearly defined internal controls to ensure that contract supplements and change orders can be kept to minimum numbers and contract dollars. Contract Documentation The auditors requested that the Department of Public Works provide a list of all CIP- related professional services and construction contracts in progress during Fiscal Year 2006 -2007 (the "audit period "). DPW personnel indicated that this information was not readily available and initially provided only a list of construction contracts issued during the audit period. However, upon further request from the auditors, DPW provided several other contract lists that the auditors compiled for use as an "audit population ". The auditors reconciled this audit population with the County's FRESH accounting system on a test basis in order to establish that the contract list was complete. Several errors and omissions were noted, researched and communicated to DPW personnel, and the contract list was updated. The auditors determined that the "audit sample" to be reviewed would be comprised of those professional services and construction contracts in progress during FY 2006 -2007 for which contract supplements and change orders represented an increase or decrease greater than + or — 10% of original contract amounts (or outside the accepted construction industry average). The auditors provided DPW with a list of contracts contained in the audit sample and requested that DPW provide all project documentation relating to the audit sample on five separate occasions, 14