HomeMy WebLinkAbout2008-01-AU Limited Scope Performance Audit Report Department of Public Works CIP Contract Change Orders and Supplements for FY 2006-2007CASEY JARMAN
County Clerk
Mailing Address:
(Former County Building)
25 Aupuni Street
Hilo, Hawaii 96720
County of Hawai `i
Office of the County Clerk
Telephone: (808) 961 -8255 Facsimile: (808) 961 -8912
KENNETH G. GOODENOW
Deputy County Clerk
COLLEEN SCHRANDT
Legislative Auditor
Business Address:
333 KFlauea Avenue, Second Floor
Ben Franklin Building
Hilo, Hawaii 96720
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MEMORANDUM -
Date: June 4, 2008
To: Pete Hoffmann, Chairperson
and Council Members — ry
Hawaii County Council
From: Colleen Schrandt, Legislative Auditor IN
Subject: Limited Scope Performance Audit of Department of Public Works.CIP Contract
Supplements and Change Orders for Fiscal Year 2006 -2007
Enclosed please find the Office of the Legislative Auditor's Limited Scope Performance Audit
of Department of Public Works C'IP Contract Supplements and Change Orders. for Fiscal )'Ear
2006 -2007.
We request that the audit report be placed on the first available meeting of the appropriate
Council Committee. Thank you for your kind attention.
Enclosure
CMS Jec
(Note: The "Limited Scope Performance Audit Report Department of Public
Works CIP Contract Change Orders and Supplements for FY 2006 - 2007" is on
file in the Office of the County Clerk.)
Gomm. No„
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Serving the Interests of the People of Our /-land
Hawaii County is an Equal Opportunity Provider and Entplover
Limited Scope Performance
Audit Report
Department of Public Works
CIP Contract Change
Orders and Supplements for
FY 2006 -2007
Legislative Auditor's Office
Report No. 01 -08
June 2008
LIMITED SCOPE PERFORMANCE
AUDIT REPORT
DEPARTMENT OF PUBLIC WORKS
CIP CONTRACT CHANGE ORDERS
AND SUPPLEMENTS FOR
FY 2006 -2007
A Report to the
Hawaii County Council Committee on Public Works &
Intergovernmental Relations
Conducted and Submitted
by
Legislative Auditor's Office
County of Hawaii
Colleen Schrandt
Lane Shibata
Joan Castberg
Report No. 01 -08
June 2008
TABLE OF CONTENTS
EXECUTIVE SUMMARY ................................................................... ..............................1
CHAPTER 1 AUDIT STANDARDS AND PLAN
Government Auditing Standards — The Yellow Book ..................................................... ............................... 3
RiskAssessment and Audit Plan ..................................................................................... ............................... 3
AuditScope and Methodology ........................................................................................ ............................... 3
AuditObjectives .............................................................................................................. ............................... 4
AuditMethodology .......................................................................................................... ............................... 5
Internal/Managerial Controls ........................................................................................... ............................... 5
CHAPTER 2 PROCUREMENT LAWS AND RULES
State................................................................................................................................. ............................... 7
County............................................................................................................................. ............................... 7
FederallyFunded Projects ............................................................................................... ............................... 7
CHAPTER 3 DEPARTMENT OF PUBLIC WORKS
DUTIESAND FUNCTIONS .......................................................................................... ............................... 8
ORGANIZATIONAL STRUCTURE ............................................................................. ............................... 9
DEPARTMENT INTERVIEWS ..................................................................................... .............................11
CHAPTER 4 CONTRACT SUPPLEMENTS AND CHANGE ORDERS
ContractDocumentation .................................................................................................. .............................14
ContractSupplements and Change Orders ...................................................................... .............................15
CHAPTER 5 SPECIFIC AUDIT FINDINGS: AUDIT OBJECTIVES
AuditObjective No. 1 ...................................................................................................... .............................16
AuditObjective No. 2 ...................................................................................................... .............................16
AuditObjective No. 3 ...................................................................................................... .............................17
AuditObjective No. 4 ...................................................................................................... .............................18
AuditObjective No. 5 ...................................................................................................... .............................19
AuditObjective No. 6 ...................................................................................................... .............................19
AuditObjective No. 7 .................................................................................................... ...............................
23
CHAPTER 6 GENERAL AUDIT FINDINGS: INTERNAL CONTROLS
GeneralAudit Findings No. 1 ........................................................................................ ............................... 26
GeneralAudit Findings No. 2 ........................................................................................ ............................... 26
GeneralAudit Findings No. 3 ........................................................................................ ............................... 26
GeneralAudit Findings No. 4 ........................................................................................ ............................... 28
CHAPTER 7 RECOMMENDATIONS ......................................... ............................... 30
CHAPTER 8 CONCLUSION ......................................................... .............................35
Listing of Tables & Exhibits
Table 1.1: Audit Population — Active CIP Type "C" Contracts FY 2006 -2007
Table 1.2: Audit Sample — FY 2006 -2007 Professional Services Contracts and
Supplements Greater Than + or — 10%
Table 1.3: Audit Sample — FY 2006 -2007 Construction Contracts and Change Orders
Greater Than + or — 10%
Table 5.1: Audit Sample — Contracts and Modifications
Table 5.2: Variance Between County Construction Estimate, Lowest Bid and Revised
Contract
Table 5.2a: Variance Between County Professional Services Estimate, Negotiated Fee and
Revised Contract
Table 5.3: Audit Sample — Construction and Professional Services Contracts — Time
Analysis
Exhibit 1.1: Legislative Auditor's Office Transmittal Letter
Exhibit 1.2: Department of Public Works Response Letter
Executive Summary
The primary goals of construction contract management are to ensure that capital improvement
projects are delivered efficiently, effectively, equitably and with accountability. This is
accomplished through communication and implementation of and adherence to clearly defined
internal controls. As outlined in the FY 2007 -2008 CIP budget, the County of Hawaii proposed
approximately $748,675,000 in capital improvement projects to repair, improve and construct
County -owned facilities over the next six years. Of this six -year CIP projection, $323,669,000 is
estimated for completion of Department of Public Works projects. Professional services
contracts and construction contracts will account for most of these DPW expenditures, with
contract supplements and change orders representing a significant portion thereof if current
trends continue.
While contract supplements and change orders are routine components of construction
management and cannot be completely avoided, the accepted industry average is between + or -
10% of original contract values. Of the 16 professional services contracts active during the FY
2006 -2007 audit period, contract supplements issued to date represent a 90% increase over
original contract amounts. Of the 60 construction contracts active during the FY 2006 -2007 audit
period, change orders issued to date range from -6% to +114% of original contract amounts. Of
the 14 professional services contracts and 14 construction contracts meeting our audit sample
criteria of greater than + or — 10% of original contract values (or outside the accepted industry
average), 64% remain open and exceed their original contractual completion dates and 50%
remain open and exceed their current contractual completion dates.
The Legislative Auditor initiated this limited scope performance audit to evaluate the
Department of Public Works' practices, policies and procedures for minimizing the need for and
controlling the timing and cost of professional services contract supplements and construction
contract change orders. While we did not find contract supplements or change orders issued for
unnecessary work, departmental policies and procedures and internal controls were found to be
inadequate resulting in contract supplements and change orders arising from avoidable or
foreseeable circumstances such as insufficient identification of user needs prior to project design
and construction (scoping), inadequate site assessment, errors or omissions in design plans and
specifications, and under- or over - estimation of project costs by professional services
consultants, construction contractors and /or County engineers. We also noted instances of
contract supplements and change orders issued for work outside the scope of original contracts.
While in certain instances, a cost savings may have been realized by the County when a
contractor already in the project area did not charge mobilization costs for additional work,
contract supplements and change orders need to be examined in light of their compliance with
procurement law and fair competition and impact on public perception and confidence. It is also
imperative that DPW develop, implement and adhere to sufficient internal control policies and
procedures to provide reasonable assurance that the possibility of undetected abuse relating to
supplements and change orders is kept to an acceptable level.
While the Department of Public Works' practices, policies, and procedures for monitoring and
control of contract supplements and change orders were the focus of this limited scope
performance audit, the Legislative Auditor also determined that several extra - departmental and
County -wide deficiencies impacted DPW's ability to exercise managerial control. Among them
is the absence of a County -wide CIP master plan process whereby the input of all stakeholders
(County departments, the Mayor, the Council and the general public) is utilized to create a long-
term prioritized CIP schedule that includes timelines for major project activities and resource
allocations. Another deficiency is the lack of an automated information systems application for
construction project management that includes a finance module or interfaces with the County's
FRESH accounting system. While County executives have expressed their belief in the need for
public accountability, effectiveness, equity and efficiency in the expenditure of public funds,
these management principles have not been translated into mandates or plans to revise, develop
and implement the systems, policies and procedures necessary to accomplish such goals. The
implementation of standardized reporting requirements and relevant performance measures and
the provision of adequate resources and information systems necessary to efficiently gather data
and report outcomes would greatly assist the Department of Public Works and other County
departments to better exercise managerial and fiscal controls and improve their delivery of
services to the public.
2
CHAPTER I AUDIT STANDARDS AND PLAN
Government Auditing Standards — The Yellow Book
In his introductory letter issuing the July 2007 revision of "Government Auditing Standards"
(commonly referred to as the "Yellow Book "), U. S. Comptroller General David Walker stated:
"The principles of transparency and accountability for the use of public resources are key to our
nation's governing processes. Government officials ... are responsible for carrying out public
functions efficiently, economically, effectively, ethically, and equitably, while achieving desired
program objectives. High- quality auditing is essential for government accountability to the
public and transparency regarding linking resources to related program results. Auditing of
government programs should provide independent, objective, fact - based, nonpartisan
assessments of the stewardship, performance and cost of government policies, programs, and
operations. Government audits also provide key information to stakeholders and the public to
maintain accountability; help improve program performance and operations; reduce costs;
facilitate decision making; stimulate improvements; and identify current and projected
crosscutting issues and trends that affect government programs and the people those programs
serve."
Risk Assessment and Audit Plan
In accordance with the foregoing Yellow Book standards, the Legislative Auditor initiated a
County -wide risk assessment process in FY 2006 -2007. The risk assessment process included
input from County executives and department managers and County Council members on more
than 30 risk criteria. The purpose of the risk assessment was to provide a standardized, objective
mechanism to determine which specific County departments, programs or activities present the
greatest "business risk," or the likelihood that events or circumstances will occur that will
prevent departments, programs or activities from attaining their purpose, goals and objectives in
an effective and efficient manner. The purpose of this limited scope performance audit is to
provide an independent objective opinion as to whether "business risks" relating to CIP contract
modifications are being managed or reduced to an acceptable level.
Based on results of the FY 2006 -2007 County -wide risk assessment, the Legislative Auditor
developed an audit plan that was presented to the County Council on August 1, 2007, as
Communication No. 580, which ranked the Department of Public Works first for review.
Audit Scope and Methodology
When considering which DPW responsibilities and activities should be reviewed, we considered
risks common to public works projects such as significant reliance on third -party contractors,
insufficient segregation of duties of government staff, and recent industry -wide scrutiny of
abuse, collusion and /or fraud in the award and management of public works contracts.
Based upon this preliminary analysis, the Legislative Auditor's Office conducted a limited scope
performance audit of the Department of Public Works' practices, policies, and procedures
3
relating to professional services contract supplements and construction contract change orders
for capital improvement projects in progress during FY 2006 -2007. Specifically, the audit team
reviewed Type "C "i professional services and construction contracts for which contract
supplements and change orders totaled greater than + or - 10% of original contract values (or
outside the accepted industry standard). As a result, of the 16 professional services contracts in
progress during FY 2006 -2007, the audit team reviewed 14 contracts and 26 related supplements,
and of the 60 construction contracts in progress during FY 2006 -2007, the audit team reviewed
14 contracts and 51 related change orders.
Please see Appendix for:
Table 1. 1, Audit Population — Active CIP Type "C" Contracts FY 2006 -2007.
• For the 16 professional services contracts active during FY 2006 -2007, the aggregate cost
of supplements issued to date represent a 90% increase over original contract amounts.
• For the 60 construction contracts active during the FY 2006 -2007, change orders issued
to date range from -6% to +114% of original contract amounts.
Please see Appendix for:
Table 1.2, Audit Sample — FY 2006 -2007 Professional Services Contracts
and Supplements Greater Than + or —10%
• Of the 14 professional services contracts in our audit sample, 5 contracts or 36% include
supplements issued to date that have exceeded original contract amounts by more than
100 %.
Please see Appendix for:
Table 1.3, Audit Sample — FY 2006 -2007 Construction Contracts
and Change Orders Greater Than + or —10%
Of the 14 construction contracts in our audit sample, only one contract includes change
orders issued to date that in the aggregate exceed the original contract amount by more
than 100 %, with reinstated deductives accounting for a significant portion of these
change orders.
Audit Objectives
1. Determine reasons for professional services contract supplements and construction
contract change orders.
' Type "C" refers to the letter designation preceding contract numbers in the County's FRESH accounting system.
The "C" designation represents contracts issued subsequent to conversion to FRESH. The "R" designation indicates
purchase orders rather than construction - related contracts. The "X" designation indicates contracts for which
information transferred to FRESH from the County's previous accounting system was insufficient to allow the
auditors to readily discern whether entries relate to original contracts, contract supplements or change orders.
Therefore, auditors included only Type "C" contracts in the audit population.
11
2. Determine whether adequate procedures and controls exist to keep contract supplements
and change orders to a minimum.
3. Determine the extent to which contract supplements and change orders could have been
avoided.
4. Determine whether adequate procedures exist to resolve and recover any disputed
charges.
5. Determine whether contract supplements and change orders are in compliance with legal
requirements and applicable policies and procedures.
6. Determine whether contract supplements and change orders were properly reviewed,
authorized, and approved.
7. Determine whether examination of additional issues arising during the limited scope
audit is warranted.
Audit Methodology
In conducting this limited scope performance audit, the audit team reviewed pertinent provisions
of the Hawaii Revised Statutes (HRS), Hawaii Administrative Rules (HAR), Hawaii County
Charter, Hawaii County Code, and County of Hawaii Department of Public Works General
Requirements and Covenants. The auditors reviewed departmental policies and procedures,
information systems and management controls to assess their existence and adequacy in ensuring
DPW's ability to fulfill departmental goals and responsibilities in an effective and efficient
manner. Additionally, the auditors reviewed departmental and contractor files and interviewed
departmental personnel and contractors.
While the foregoing audit objectives did not encompass an assessment of the effectiveness
and /or efficiency of the Department of Public Works as a whole, several audit findings address
broader management issues as they affect DPW's ability to exercise managerial control over its
professional services and construction contracts. Consideration was also given to extra -
departmental and County -wide issues relating to strategic planning, budget prioritization,
information systems, and process improvement and control as they impacted DPW's project and
overall management activities.
Internal/Managerial Controls
Section 7.15(c) of "Government Auditing Standards — July 2007 Revision" (Yellow Book)
defines "Internal Control" as follows:
"Internal control, sometimes referred to as management control, in the broadest
sense includes the plan, policies, methods, and procedures adopted by
management to meet its missions, goals, and objectives. Internal control includes
the processes for planning, organizing, directing, and controlling program
operations. It includes the systems for measuring, reporting, and monitoring
program performance. Internal control serves as a defense in safeguarding assets
and in preventing and detecting errors; fraud; violations of laws, regulations, and
provisions of contracts and grant agreements; or abuse...."
5
Section 7.19 of "Government Auditing Standards — July 2007 Revision" (Yellow Book)
discusses the principal types of internal control objectives, in pertinent part, as follows:
,,a. Effectiveness and efficiency of program operations: Controls over program
operations include policies and procedures that the audited entity has
implemented to provide reasonable assurance that a program meets its objectives,
while considering cost - effectiveness and efficiency...."
"b. Relevance and reliability of information: Controls over the relevance and
reliability of information include policies, procedures, and practices that officials
of the audited entity have implemented to provide themselves reasonable
assurance that operational and financial information they use for decision making
and reporting externally is relevant and reliable and fairly disclosed in reports...."
"c. Compliance with applicable laws and regulations and provisions of contracts
or grant agreements: Controls over compliance include policies and procedures
that the audited entity has implemented to provide reasonable assurance that
program implementation is in accordance with laws, regulations, and provisions
of contracts or grant agreements...."
A unique challenge in governmental units is a lack of administrative continuity due to
changes in elected and appointed officials that increases the need for effective internal
controls. Therefore, it was necessary for the auditors to include a determination of the
existence, sufficiency and effectiveness of internal controls significant to the audit
objectives set forth above and the audited entity's ability to meet its mission, goals and
objectives.
31
CHAPTER 2 PROCUREMENT LAWS AND RULES
State
The State Procurement Office (SPO) serves as the central authority on procurement statutes and
rules for all governmental bodies of the State and its counties. The State of Hawaii is
decentralized in its procurement of goods, services, and construction, each jurisdiction having
authority to purchase; however, the State Procurement Office remains the central source on
matters of procurement policy.
All Hawaii government procurements must comply with Hawaii Revised Statutes (HRS)
chapter 103D, Hawaii Public Procurement Code, as further delineated in Hawaii
Administrative Rules (HAR), title 3, Department of Accounting and General Services, subtitle
11, Procurement Policy Board, chapters 120 to 132. In addition, all public works contracts must
comply with HRS chapter 103, Expenditure of Public Money and Public Contracts.
County
The County of Hawaii Finance Department's Purchasing Division provides a centralized
purchasing function to procure services, supplies, materials and equipment in support of all
County agencies and programs. The Purchasing Division conducts competitive bids and requests
for proposals for all competitive purchases with the exception of Department of Public Works
construction projects . 3
The Department of Public Works' procurement of professional services consultants and
construction contractors for County capital improvement projects must comply with HRS
chapters 103 and 103D and HAR chapters 3 -120 to 3 -132 as discussed above and with the
County of Hawaii Department of Public Works — General Requirements and Covenants.
Federally Funded Projects
The federal government provided funding for certain professional services and construction
contracts within the scope of this audit. In construction contracts for accessibility improvements,
the County Office of Housing and Community Development (OHCD) obtained Community
Development Block Grant (CDBG) funding, filed required federal reports and conducted overall
project management; the Department of Parks and Recreation conducted project scoping and
prepared plans and specifications; and DPW conducted contract procurement and administration,
day -to -day project management and project inspection. In federal -aid highway projects, the
State Department of Transportation (DOT) reviewed required project documentation (including
site sampling reports, daily construction ledgers and change orders) and conducted project
inspections.
2 Excerpted from the Hawaii State Procurement Office website hlW: / /www.SPO.hawaii.gov.
s Source: Hawaii County FY 2007 -2008 Operating Budget Proposal, Part I, Volume II, Page 84.
7
CHAPTER 3
DUTIES AND FUNCTIONS
DEPARTMENT OF PUBLIC WORKS
The Department of Public Works is established under the Hawaii County Charter, article VI,
chapter 7. The powers, duties and functions of the Department are set forth in section 6 -7.3 as
follows:
"Section 6 -7.3. Powers, Duties and Functions. The powers, duties and functions
of the department of public works shall be prescribed by ordinance and shall be
exercised and performed by the department."
The duties of the Director of Public Works are prescribed under the Hawaii County Code
section 2 -39 as follows:
"Section 2 -39. Duties of director of public works.
The director of public works shall be charged with the supervision,
direction, and control of:
(1) The construction, repair, maintenance and operation of all County
buildings, structures, and grounds, not otherwise delegated to any
other department of the County;
(2) The administration and enforcement of the building code, electrical
code, housing code, plumbing code, and all ordinances and statutes
related to the responsibilities assigned to the department of public
works; and
(3) The administration, control, and operation of all divisions and
bureaus of the department of public works and the appointment,
transfer, promotion, demotion, or dismissal of all necessary
personnel."
The duties and functions of the Department of Public Works are prescribed under the Hawaii
County Code section 2 -40 as follows:
"Section 2 -40. Duties and functions of department.
The department shall be responsible for:
(1) The performance of all matters relating to engineering;
(2) Public and private building construction and inspection;
(3) Public improvements;
(4) Construction, inspection, and maintenance of public highways,
bridges, streets, and sidewalks;
(5) Acquisition of public and private property for public purposes;
(6) Design and maintenance of a system of traffic control and devices;
and
(7) Construction and inspection of all other County projects, except for
matters relating to the department of water supply."
ORGANIZATIONAL STRUCTURE
The Department of Public Works is comprised of six functional divisions — Administration,
Engineering, Building, Highway Maintenance, Traffic Services and Automotive — of which the
Administration, Engineering and Building Divisions are pertinent to this audit . 4
The Administration Division is specifically responsible for:
• General direction, supervision, coordination and control of the administration and
operation of the Engineering, Building, Highway Maintenance, Traffic Services and
Automotive Divisions.
• Administration and enforcement of all applicable chapters of the Hawaii County Code
and the Building, Electrical and Plumbing Codes, and all ordinances and statutes related
to these areas.
• Coordination of the fiscal, procurement and personnel activities of the department and
construction and consultant contract procurement, administration and reimbursement,
when applicable.
The Administration Division has 23 budgeted positions for FY 2007- 2008, including the
Director and Deputy Director positions.
The Engineering Division is divided into the following areas of functional responsibility:
• Administration Section:
• General supervision and administrative /clerical support for the Division.
• Implementation of civil engineering (non - building) projects and programs using
county, state and federal funds.
• Supervision and coordination of all land acquisition activities for the Department.
• Land Surveying Section:
• General land surveying services including topographic and boundary studies,
production of parcel maps and descriptions for the County, and review of
privately generated survey maps and descriptions.
• Inventory /file maintenance of all County road and drainage right -of -ways and
DPW parcels.
• Inventory /file maintenance of all survey records generated by the County.
• Resolution of survey issues and complaints related to County facilities such as
road encroachments.
• Provision of County mapping and survey information to the public.
• Regulatory Review Section:
4 Source: Hawaii County FY 2007 -2008 Operating Budget Proposal, Part I, Volume II, Pages 260 -273.
9
• Implementation and enforcement of regulatory requirements under Hawaii
County Code chapters 10 (Erosion and Sedimentation Control), 22 (County
Streets) and 27 (Flood Control).
• Provision of comments /opinions to the Planning Department on land use related
matters such as subdivision, rezoning and variance applications and SMA, use
and special permits.
• Investigation and resolution of regulatory complaints.
• Review and approval of all private construction plans (except building permit
plans), traffic reports, flood studies, environmental documents, etc. related to the
interests and regulatory authority of the Department.
• Design and Investigation Section:
• Planning, design and construction for civil engineering (non - building) County
capital improvement projects.
• Investigation and resolution of roadway, drainage and other related complaints.
• Drafting services for County projects.
• Construction Inspection Section:
■ Inspection services for civil engineering (non - building) County capital
improvement projects, private subdivision and development construction, and the
following regulated activities and programs:
• Grading, grubbing and stockpiling work (Hawai`i County Code chapter
10).
• Construction within the County rights -of -way (Hawai`i County Code
chapter 22).
• Federal Highway Administration (FHWA) National Bridge Inspection.
The Engineering Division has 37 budgeted positions for FY 2007- 2008:
CivilEngineering ..............................................
.............................15
EngineeringAides ...........................................
............................... 2
Engineering Drafting .........................................
............................... 3
Construction Inspection ......................................
.............................11
LandSurveying ...............................................
............................... 3
PermitClerks .................................................
............................... 3
The Building Division is responsible for:
• Planning, design, procurement and construction management of County facilities.
• Administration and enforcement of building, plumbing and electrical codes, sign and
outdoor lighting ordinances, and energy efficiency standards.
• Residential and commercial plan reviews for all building, electrical and plumbing
permit applications for compliance with current applicable standards and codes.
• Janitorial and grounds maintenance of County facilities.
• In -house building maintenance services including routine carpentry, electrical,
painting and plumbing for County facilities.
• Assistance to the Highway Maintenance Division for repair of timber bridges.
10
• Administration of utility service agreements /billings and property rental /insurance for
various County lands, buildings and offices.
The Building Division has 71 budgeted positions for FY 2007- 2008:
Architectural Drafting .........................................
..............................3
Chief/Deputy Chief .............................................
..............................2
Inspection........................................................
.............................28
Maintenance................................................... ...............................
3
Permitting.......................................................
............................... 8
Plans Examination ............................................ ...............................
3
ProjectCoordinator ........................................... ...............................
6
Carpentry, Electrical, Plumbing ..............................
.............................14
Parking Control ( Temporary) ............................... ...............................
1
Security......................................................... ...............................
1
Custodial........................................................
............................... 2
DEPARTMENT INTERVIEWS
CIP Projects —Planning
Capital Improvement Projects encompass all procurement, design, construction and significant
repair of County infrastructure and facilities. The primary goals of CIP contract management are
to ensure that capital projects are delivered efficiently, effectively, equitably and with
accountability. The Construction Industry Institute has concluded that the greatest impact on
cost occurs during the planning and design stages of a project and that the ability to favorably
influence project cost and quality diminishes as a project moves beyond planning into design and
then constructions
During audit interviews, DPW administrators indicated that for all CIP - related construction
projects (with the exceptions noted in Table 3.1 below), DPW engineers provide project scoping
through meetings with "end user" agencies to identify user needs. Once user needs have been
identified, DPW may contract with a professional services consultant, who is responsible for
development of design plans and specifications, surveys or environmental studies; preparation of
bid documents; and /or consultation on issues related to project management and inspection that
may arise during construction. Using design plans and specifications and bid documents
prepared by DPW engineers or professional services consultants, construction projects are put
out to bid and contracts are awarded in accordance with State procurement laws and rules and
DPW general requirements and covenants. Thereafter, broad project management, coordination
and oversight are the responsibility of the designated DPW project engineer or coordinator, while
day -to -day verification duties relating to conformance with contract specifications (such as
material types and quantities and weather contingencies) and labor and safety regulations are the
responsibility of the designated DPW project inspector.
5 Source: Construction Industry Institute, Publication 3 -1, July 1986.
11
Table 3.1 Responsibility Matrix for Non -DPW CIP Projects during Audit Period
During audit interviews, DPW section chiefs expressed some frustration with construction
projects budgeted by other County departments that were submitted to DPW for procurement
and contract administration before they had been sufficiently scoped and all necessary
governmental permits and environmental studies had been obtained. This lack of planning has at
times caused significant project delays and potential escalation of consultant and contractor fees
and necessitated extensive design and bid revisions. When the auditors inquired whether DPW
provides other County departments with a checklist of required permits, studies and other items
needed prior to submittal of projects to DPW for procurement, DPW staff responded "No, but
that's probably a good idea." Subsequently, DPW administrators informed the auditors that the
Department of Parks and Recreation is considering assuming procurement, contract
administration, and project management and inspection responsibilities for its own budgeted
construction projects. Upon review of the draft of this audit report, DPW personnel expressed a
desire to have the appended report tables show which supplements and change orders were
actually initiated by "user" agencies. It was our intent to include such an analysis under
Objective No. 1 of the audit scope; however, the lack of documentation provided to the auditors
relating to "cause" and "responsibility" for supplements and change orders precluded
presentation of said analysis at this time. This information is crucial to a continual scoping
improvement process that will enable minimization of the issuance of supplements and change
orders for foreseeable conditions by all County departments.
CIP Projects —Monitoring and Reporting
During interviews with DPW administrators, the auditors requested information or copies of any
and all written or verbal policies and procedures relating to CIP construction and contract
management and were informed that the department does not have policies beyond those
delineated in Hawaii Revised Statutes, Hawaii Administrative Rules, and its own General
Requirements and Covenants (which have not been updated since 1972). DPW administrators
12
Department of Water
Supply
Department of
Environmental
Management
Parks & Recreation
CDBG Funds
Parks & Recreation
Non -CDBG Funds
Scoping
DWS
DEM
P &R
P &R
Design and Specifications
DWS
DEM
P &R
P &R
Procurement
DWS
DPW
DPW
DPW
Contract Administration
DWS
DPW
DPW
DPW
Project Management
DWS
DEM
Overall: OHCD
Day -to -Day: DPW
DPW
Project Inspection
DWS
DEM
DPW
DPW
During audit interviews, DPW section chiefs expressed some frustration with construction
projects budgeted by other County departments that were submitted to DPW for procurement
and contract administration before they had been sufficiently scoped and all necessary
governmental permits and environmental studies had been obtained. This lack of planning has at
times caused significant project delays and potential escalation of consultant and contractor fees
and necessitated extensive design and bid revisions. When the auditors inquired whether DPW
provides other County departments with a checklist of required permits, studies and other items
needed prior to submittal of projects to DPW for procurement, DPW staff responded "No, but
that's probably a good idea." Subsequently, DPW administrators informed the auditors that the
Department of Parks and Recreation is considering assuming procurement, contract
administration, and project management and inspection responsibilities for its own budgeted
construction projects. Upon review of the draft of this audit report, DPW personnel expressed a
desire to have the appended report tables show which supplements and change orders were
actually initiated by "user" agencies. It was our intent to include such an analysis under
Objective No. 1 of the audit scope; however, the lack of documentation provided to the auditors
relating to "cause" and "responsibility" for supplements and change orders precluded
presentation of said analysis at this time. This information is crucial to a continual scoping
improvement process that will enable minimization of the issuance of supplements and change
orders for foreseeable conditions by all County departments.
CIP Projects —Monitoring and Reporting
During interviews with DPW administrators, the auditors requested information or copies of any
and all written or verbal policies and procedures relating to CIP construction and contract
management and were informed that the department does not have policies beyond those
delineated in Hawaii Revised Statutes, Hawaii Administrative Rules, and its own General
Requirements and Covenants (which have not been updated since 1972). DPW administrators
12
further indicated that they do not conduct regular project status meetings6, nor do they have
standardized documentation or reporting requirements for many phases or areas of project
management. They indicated that "most of Management has come up through the ranks and has
not been trained as managers... we don't have the time to follow the good documentation
procedures of DOT as an example."
During interviews, the auditors inquired whether the department has a CIP prioritization and
ranking process and were informed that CIP prioritization and ranking are handed down from the
mayoral administration and is thus "a continually moving target" particularly when mayoral
administrations change. DPW administrators also expressed some frustration with the current
CIP process that allows budgeting of projects regardless of whether funding is available, which
often results in public dissatisfaction with the department when projects cannot be implemented
due to lack of monetary and /or non - monetary resources.
Specifically regarding professional services contract supplements and construction contract
change orders, DPW administrators indicated that while they are aware that certain contract
supplements and change orders could be avoided with more thorough scoping procedures,
current staffing levels require that project managers oversee multiple projects at the same time
and do not permit sufficient time to train engineers and inspectors or implement procedures that
would result in an optimal level of project scoping.
6 Per Nancy Crawford, Deputy Director, Department of Finance: "Finance does hold a monthly CIP status meeting;
however, the meeting doesn't go into any detail on project status ... the purpose is solely to look at project financing
perspective and more specifically timing and amount of `bond' issuance."
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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,
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specifically October 24, 2007, December 3, 2007, December 28, 2007, January 8, 2008, and
March 24, 2008. DPW was prompt in providing files that contained executed contracts, awarded
proposals, executed contract supplements and change orders, progress payment requests, and
departmental contract accounting spreadsheets. However, after receiving five written requests
and being granted two time extensions, DPW did not consistently provide auditors with files that
fully documented the professional services candidate selection or ranking process; the
construction bid proposal correction and revision process; the contract management process
(including project engineer design and construction estimations, time -cost estimations and
negotiations of contract supplements and change orders, and decisions not to pursue separate
competitive procurements for additional work); and the project management process (including
project inspector log books or notes documenting site, weather and contractor issues and
providing support documentation for time extensions or force account work).
Contract Supplements and Change Orders
Contract modifications need to be prepared in accordance with underlying contract terms,
Hawaii Revised Statutes, Hawaii Administrative Rules and the County Department of Public
Works General Requirements and Covenants. The necessity and reasons for contract
modifications and any negotiations preceding them also need to be properly documented to
support compliance with procurement and contract laws and procedures. Support documentation
should include a description of each specific change in contracted work and materials; its impact
on time for contract performance, if any; where and why the departure from original scope of
work is occurring; the method of verification of work performed, time billed and materials used;
and the amount and method of compensation.
However, the auditors found that the Department of Public Works does not adequately document
its contract modifications. For the contract modifications reviewed, DPW did not consistently
provide justification for either the contract change or the specific fee adjustment for each change.
Most contract modifications were not supported by documentation specifying who initiated the
change, why the change was necessary, DPW's internal estimate of reasonable time and costs
associated with the change, or negotiations of the change with the service provider or contractor.
DPW personnel interviewed indicated that requests for changes are usually verbal.
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CHAPTER 5 SPECIFIC AUDIT FINDINGS: AUDIT OBJECTIVES
Audit findings are divided into two subject areas. Chapter 5 addresses specific findings relating
to the audit objectives outlined in Chapter 1. Chapter 6 presents general findings relating to
internal controls and the broader goals of contract management. In combination, Chapters 5 and
6 report specific and general audit findings that materially impact the Department of Public
Works' efforts to deliver capital improvement projects that sufficiently meet public needs in a
timely and economically prudent manner. These audit findings are followed by
Recommendations in Chapter 7 and our Conclusion in Chapter 8.
Audit Obiective No. 1: Determine reasons for professional services contract supplements
and construction contract change orders.
• The Department of Public Works lacks adequate documentation to assess responsibility for
and identify specific reasons why contract supplements and changes orders are necessary.
Many times supplements simply state "additional design work" with no indication as to what
the work is, whether the additional work relates to the "end user" not realizing a need at the
time of scoping, or if it was an oversight on the part of the project engineer or consultant.
While change orders may delineate specific work to be performed, they often lack sufficient
documentation to determine whether the work may have been included in the originally
contracted scope, whether the work relates to an error or omission in site assessment or
design, or if it was due to an unforeseeable condition.
Please see Appendix for:
Table 5. 1, Audit Sample — Contracts and Modifications.
Audit Obiective No. 2: Determine whether adequate procedures and controls exist to keep
contract supplements and change orders to a minimum.
• The Department of Public Works lacks adequate procedures and controls to keep
contract supplements and change orders to a minimum.
o Of the 14 professional services contracts in our audit sample, 10 or 71% reflect a current
contract amount in excess of 110% of the County's original estimated project costs.
o Of the 14 construction contracts in our audit sample, 12 or 86% reflect a current contract
amount in excess of 110% of the County's original estimated project costs.
Please see Appendix for:
Table 5.2, Variance between County Construction Estimate,
Lowest Bid and Revised Contract
Table 5.2a, Variance between County Professional Services Estimate,
Negotiated Fee and Revised Contract
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o Of the 28 professional services and construction contracts in our audit sample, 18
contracts or 64% remain open and exceed their original contractual completion dates, and
14 contracts or 50% remain open and exceed their current contractual completion dates.
Please see Appendix for:
Table 5.3, Audit Sample — Construction and Professional Services Contracts —
Time Analysis.
o With regard to escalation fees:
Change Order C.000056.1 for $136,238 was issued for escalation fees relating to the
County's delay in executing a $375,000 construction contract for planning, design
and construction of a new warehouse addition for Ka`u baseyard improvements.
Change Order C.000056.2 in the amount of $17,068 for additional escalation fees has
been approved by the County and is pending approval by funding source U.S.D.A. If
approved, the combined escalation change orders will reflect a 41% increase in
contract price.
Change Order C.000641.1 (which totaled $1,131,225) included $147,848 directly
related to escalation fees due to delayed execution of a $6,409,034 construction
contract for the East Hawaii Regional Sort Station. The change order reflects a 2%
increase in contract price. However, delay in contract execution was attributable to
lack of available funding and not within the direct control of the Department of Public
Works.
Audit Obiective No. 3: Determine the extent to which contract supplements and change
orders could have been avoided.
• Contract supplements and change orders could have been avoided, or significantly
reduced in number and dollar value, with additional project scoping.
Based on project documentation provided by the Department of Public Works, the auditors
determined that a significant number of contract supplements and change orders issued for
the audit period related to work that could have been foreseen during the initial scoping of a
professional services contract or the initial scoping and design phases of a construction
project, and should have been included in the original procurement. Among them were:
o Contract Supplement No. C.000045.2 for $178,248 for structural engineering services to
develop multiple sites considered for a West Hawaii Traffic Building.
o Change Order Nos. 000644.1 to 000644.4 totaling $99,758 for additional work related to
site assessment and plan deficiencies in large capacity cesspool conversion projects in
Ka`u and North and South Kona.
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o Change Order Nos. 000652.1 and 000652.2 totaling $49,035 for replacement of
deteriorated ballfield elements, bleachers and fencing at Hualani Park.
o Contract Supplement No. 000737.2 for $100,000 for standby costs relating to weather
delays for aerial LIDAR mapping of the Puna Tax Map District. The original contract
contained no provisions for weather contingencies and currently exceeds its original
completion date by 582 days and original contract amount by $177,250.
Audit Obiective No. 4: Determine whether adequate procedures exist to resolve and
recover any disputed charges.
• The Department of Public Works does not sufficiently document its identification,
resolution and recovery of disputed charges.
The auditors were unable to obtain satisfactory documentation to determine whether
"advance payments" are being made or if "disputed charges" are accurately identified,
resolved and recovered. We did note instances in which billings were returned to contractors
for revision before payment was authorized. However, minor uncorrected mathematical
errors in processed progress payments were also noted.
In Contract No. 000737 for LIDAR mapping discussed above, the DPW project engineer
advised the auditors that the vendor's most recent estimate of project completion was 75 %,
but the DPW contract accounting spreadsheet indicated progress payments totaling 91% of
the budgeted contract amount.
The Department of Public Works does not consistently include and enforce liquidated
damages clauses in contracts, contract supplements and change orders.
DPW does not consistently assess liquidated damages when professional services and
construction contracts are past their contractual completion dates. DPW administrators
informed the auditors that it has generally been departmental policy to forgo assessing
liquidated damages in construction contracts because the department has not always been
able to document damages (as advised by the Corporation Counsel) and it is concerned that
contractors will increase time and costs in future bid proposals to include a contingency for
liquidated damages. DPW administrators also informed the auditors that liquidated damages
clauses are generally not included in professional services contracts because delays in plan
reviews or permit issuances are often caused by governmental agencies including the County.
The Department of Public Works does not consistently enforce retainage clauses in
contracts, nor does DPW communicate or document decisions to alter retainage being
withheld or determinations to release retainage.
In interviews with DPW administrators, the auditors were informed that the department and
the County are updating retainage policies pursuant to passage of the "Prompt Payment Act"
by the State Legislature in 2006 (codified as HRS §103- 10.5), which delineates specific
In
deadlines for payment of subcontractors meeting performance and documentation
requirements.
Audit Obiective No. 5: Determine whether contract supplements and change orders are in
compliance with legal requirements and applicable policies and
procedures.
And
Audit Obiective No. 6: Determine whether contract supplements and change orders were
properly reviewed, authorized, and approved.
• The Department of Public Works lacks formal policies and procedures to determine
whether changes in work should be handled via contract supplement /change order or
new procurement.
Among the contract supplements and change orders determined to be outside the scope of
work of original contracts were:
o Contract Supplement No. C.000962.1 for $24,180 for mechanical design of a humidity
control system for the Police Evidence Warehouse.
o Change Order Nos. C.000964.2 and 000964.4 totaling $169,079 for four South Hilo
intersections requiring ADA curb ramp improvements.
o Contract Supplement No. 001031.1 for $15,000 for construction management services for
an unrelated traffic intersection added to a contract for three island -wide bridge
improvement projects.
HRS §103D-501, Contract clauses and their administration, provides in pertinent part:
"(a) The policy board shall adopt rules requiring the inclusion of contract
clauses providing for adjustments in prices, time of performance, or other
contract provisions, as appropriate, and covering the following subjects:
(1) The unilateral right of the governmental body to order in writing:
(A) Changes in the work within the scope of the contract; and
(B) Changes in the time of performance of the contract that do not
alter the scope of the contract work." [emphasis added]
HAR §3- 122 -13, Development of specifications, provides in pertinent part:
"(a) A specification should provide for the following:
(1) Identify minimum requirements;
(2) Allow for competition;
(3) List reproducible test methods to be used in testing for compliance with
specifications; and
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(4) Provide for an equitable award at the best value."
• Contract supplements and change orders are routinely issued after completion of the
requested work and, at times, after completion of the entire project.
Written approved orders (such as an "Advance Notice to Proceed ") may precede formal
issuance of contract supplements and change orders, but were seldom included among
documentation provided to the auditors for review.
DPW General Requirements and Covenants Section 4, Scope of Work, at §4.2, Changes,
provides in part:
"Any such changes will be set forth in a change order which will specify, in
addition to the work to be done in connection with the change, adjustment of
contract time, if any, and the basis of compensation for such work. All detailed
cost breakdowns shall be submitted to the Engineer within ten (10) consecutive
working days from the date of such written requests ... A change order will not
become effective until approved by the Engineer, Director of Finance and the
Mayor." [emphasis added]
DPW General Requirements and Covenants at §4.2(c), Additional Work, further provides in
part:
"The Contractor shall do such additional work and furnish material and
equipment therefore upon receipt of an approved change order or other approved
written order of the Engineer; and in the absence of such approved change order
or other approved written order of the Engineer, he shall not be entitled to
payment for such additional work. Where such additional work is ordered by a
written order other than a change order, the Engineer will as soon as practicable
issue a change order therefor." [emphasis added]
• Contract supplements and change orders do not consistently address completion dates
for work performance.
DPW General Requirements and Covenants at §8.8, Contract Time, provides in part:
"The total contract time allowed for the performance of the work shall be the
number of working days shown in the contract as awarded, plus any additional
working days authorized in writing ..." [emphasis added]
Contract supplements and change orders issued for adjustments in time are not
consistently supported by documentation verifying causes of project delays.
The auditors noted that numerous contract supplements and change orders were issued for
weather delays for which no documentation was provided to independently substantiate
claims. The auditors also noted that many change orders were issued for projects
20
substantially exceeding contracted completion dates and were, in fact, issued after actual
completion dates. Generally, documentation of work commencement and completion dates
was lacking in the project files provided for review.
DPW General Requirements and Covenants at §8.8(b), Contract Time, provides in pertinent
part:
"For increase or decrease in the scope of work caused by alterations, additional or
decreased work made under Subsection 4.2 "CHANGES" ... Contract time
extension will not be granted for changes which the Engineer determines
unjustifiable due to lack of supporting evidence or the change is of such nature
that the final completion date will not be affected. In any case, for all time
extensions or reductions, the Engineer shall ascertain the facts and extent of the
time involved and his findings of the facts shall be final and conclusive...."
DPW General Requirements and Covenants at §8.8(c), Contract Time, provides in pertinent
part:
"For delays caused by acts of God, or of the public enemy, fire, floods, epidemics,
quarantine restrictions, strikes or walkouts, and freight embargoes, the Contractor
may be granted an extension in working days provided that the Contractor notify
the Engineer in writing of such delays within ten (10) consecutive working days
... The Engineer shall evaluate all time extension requests and shall ascertain the
facts and extent of the time involved and his findings of the facts thereon shall be
final and conclusive." [emphasis added]
DPW General Requirements and Covenants at §8.8(d), Contract Time, further provides in
pertinent part:
"The Engineer will prepare for each estimate made under the provisions of
Subsection 9.6 "PARTIAL PAYMENTS" a statement of the working days
charged during the period, the number of working days in the contract, the
working days' extension granted for reasons stated herein and the number of
working days remaining to complete under the contract."
Contract supplements and change orders issued for adjustments in price are not
consistently supported by documentation verifying computation of costs.
In particular, a change order issued for increased material cost due to a delay on the part of
the County was not supported by documentation relating to computation of the price
adjustment. Generally, internal estimations of material costs were lacking in project
documentation provided to the auditors and indicate a heavy reliance on contractor
estimations of unit prices.
HRS §103D-501, Contract clauses and their administration, provides in pertinent part:
21
"(b) Adjustments in price permitted by rules adopted under subsection (a) shall
be computed in one or more of the following ways:
(1) By agreement on a fixed price adjustment before commencement of
the pertinent performance;
(2) By unit prices specified in the contract or subsequently agreed upon
before commencement of the pertinent performance;
(3) By the costs attributable to the events or situations under such clauses
with adjustment of profit or fee, all as specified in the contract or
subsequently agreed upon before commencement of the pertinent
performance;
(4) In any other manner as the contracting parties may mutually agree
upon before commencement of the pertinent performance; or
(5) In the absence of agreement by the parties:
(A) For change orders with value not exceeding $50,000 by
documented actual costs of the work ...
(B) For change orders with value exceeding $50,000 by a unilateral
determination by the governmental body of the costs
attributable to the events or situations under clauses with
adjustment of profit or fee, all as computed by the
governmental body in accordance with applicable sections of
the rules adopted under section 10313-601 [Cost principles
rules required] and subject to the provisions of part VII [Legal
and Contractual Remedies] ..." [emphasis added]
The Department of Public Works lacks a contract management system to ensure that
contractors maintain insurance coverages through project completion. Contract
supplements and change orders are not consistently accompanied by renewals of
certificates of insurance from contractors.
Specifically, 50% of contracts reviewed by the auditors did not document renewals of
contractor insurance.
DPW General Requirements and Covenants at §7.12, Insurance, provides in pertinent part:
"The Contractor shall not commence any work under contract until he has
obtained from responsible insurance companies all insurance as required herein,
and the Contractor shall maintain this insurance in full force and effect until the
work to be performed has been accepted by the Engineer. These policies shall be
executed and delivered to the Chief Engineer." [emphasis added]
The Department of Public Works does not consistently conduct independent
verification of work completed and relies on contractor assessments for progress
payments.
Other than progress payment requests that were stamped and approved by project engineers
and /or inspectors, few project files provided to the auditors included independent verification
22
of billings and work performed in the form of inspector's log books or project engineer's
progress reports. Often the only regular assessments of percentages of project completion
were statistics provided by contractors /vendors in their billing statements.
Audit Obiective No. 7: Determine whether examination of additional issues arising during
the limited scope audit is warranted.
• The Department of Public Works' lack of standardized project documentation,
reporting and communication has contributed to delays and increased costs in its
delivery of services to the public.
Standardized documentation, reporting and communication of project progress and oversight
are lacking in project files provided to the auditors. In interviews with DPW administrators
and section chiefs, the auditors were told that project inspectors keep daily log books or
notebooks documenting daily work progress including manpower, material and equipment
usage, project delays due to inclement weather, other natural events or unanticipated site
conditions, and contractor performance or contract compliance issues. However, the auditors
only consistently found such documentation for projects funded by federal dollars and
overseen by another department or agency such as the County Office of Housing and
Community Development for its Community Development Block Grant (CDBG) projects
and the State Department of Transportation (DOT) for federal -aid highways projects. DPW
managers stated that the State DOT inspector log book is standardized to be of a particular
size, color and binding. However, DPW does not require a particular type of inspector's log
book, nor do DPW managers verify the existence of or review inspector's log books or notes.
Project inspection logs provide an indispensable record of verbal requests for additional work
or corrections to work; contemporaneously documented reasons and responsibility for work
delays; daily on -site statistics relating to personnel, material and equipment; and
documentation of performance and compliance issues essential for contract enforcement and
resolution of disputed charges as well as protection of the County against unwarranted claims
by contractors or vendors.
• The Department of Public Works' practice of bundling work has contributed to a
concentration of work with a relatively small number of professional services
consultants and construction contractors.
While it is understandable that the Department of Public Works bundles or groups necessary
work in order to gain economies of scale and reduce time and costs for bid preparation and /or
contract negotiation, this practice can be harmful to the County in a number of ways. The
practice raises concerns of compliance with HAR §3- 122 -13 (a) (2) and (4) cited above,
which require that project specifications allow for competition and provide for an equitable
award at the best value. The argument has been offered that being an island economy,
Hawaii County has access to only a limited number of contractors and consultants who can
qualify and perform the work required. However, if this is the case, it is even more important
for the County to consider the impacts of bundling when scoping a project. For example,
while grouping several roadway improvement projects into one contract may be less costly in
23
terms of procurement and design, the practice severely reduces the ability of small
contractors to participate due to bonding requirements and mobilization costs. There are
other factors that need to be considered as well such as negative public perception of
preference to a few larger contractors and consultants, higher long -term costs due to
decreased competition, and limiting economic growth and distribution of wealth to a smaller
segment of the island population.
• The Department of Public Works does not have adequate CIP accounting and
reporting capabilities under the County's current FRESH accounting system.
Pursuant to HRS § 10313-309 below, funds were duly certified for all contracts, contract
supplements and change orders without exception. However, the auditors did note that on
various occasions, after funds had been certified and payments had been made to
contractors /vendors from "certified account(s)," accounting entries were made to "move" or
charge payments to different fund accounts. Currently, no detailed report is submitted to the
Council to document these changes to the appropriated CIP budget at the project level.
While this practice may not be problematic when proper controls, authorizations and
oversight are in place, it does raise issues about the lack of accountability for CIP project
accounting and reporting capabilities at both the departmental and County -wide levels under
the current FRESH accounting system.
HRS § 10313-309, Contract not binding unless funds available, provides as follows:
"(a) Contracts awarded pursuant to section 10313-302 [Competitive sealed
bidding], 10313-303 [Competitive sealed proposals], or 10313-306 [Sole source
procurement], shall neither be binding nor have any force and effect of law
unless the comptroller, the director of finance of a county, or the respective
chief financial officers of the department of education, the judiciary, or the
legislative branches of the State or county, as the case may be, endorses thereon
a certificate that there is an appropriation or balance of an appropriation over
and above all outstanding contracts, sufficient to cover the amount required by
the contract; provided that if the contract is a multi -term contract, the
comptroller, director of finance, or chief financial officer shall only be required
to certify that there is an appropriation or balance of an appropriation over and
above all outstanding contracts, that is sufficient to cover the amount required to
be paid under the contract during the fiscal year or remaining portion of the
fiscal year of each term of the multi -year contract; provided further that the
administrator of the state procurement office shall attest in writing to any
recommendation or solicitations. This section shall not apply to any contract
under which the total amount to be paid to the contractor cannot be accurately
estimated at the time the contract is to be awarded, or to any contract for which
consideration is in kind or forbearance, or to any contract awarded pursuant to
section 10313-306 [Sole source procurement] that is a one -time payment through
a purchase order.
(b) In any contract involving not only state or county funds but supplemental
funds from the federal government, this section shall be applicable only to that
24
portion of the contract price as is payable out of state or county funds. As to the
portion of the contract price as is expressed in the contract to be payable out of
federal funds, the contract shall be construed to be an agreement to pay the
portion to the contractor, only out of federal funds to be received from the
federal government. This subsection shall be liberally construed so as not to
hinder or impede the State in contracting for any project involving financial aid
from the federal government."
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CHAPTER 6 GENERAL AUDIT FINDINGS: INTERNAL CONTROLS
General Audit Findings No. 1: The County lacks a systematic mechanism for long-
term or strategic planning, resulting in inefficient and
ineffective use of monetary and non - monetary
resources.
• Material amounts of time and money have been expended on CIP design and
specifications only to have CIP priorities change. CIP projects for which design and
specifications are ongoing or completed may or may not be pursued at a later date. If
pursued at a later date, expenditure of additional monies is routinely required to update
plans and specifications.
General Audit Findings No. 2: The County lacks an information technology (IT)
system capable of providing administrators with
necessary CIP- related data and reports in an efficient,
regular and timely manner.
• The County's FRESH accounting system has no capability to report on CIP project
budget -to- actuals on cost and timing. FRESH has no capability to group multiple
contracts or multi -year contracts and report on actual total project expenditures. While
FRESH does have a "project accounting" module, County departments have generally
not found it to be user - friendly and therefore, it remains under - utilized.
• This decentralized data tracking system creates a high level of inefficiency, redundancy
and potential for error. DPW users interviewed indicated that FRESH and the "project
accounting" module do not provide sufficient benefit to warrant the time expended to
input data. DPW users also report that too large a portion of data required to track a CIP
project must be maintained "outside" of FRESH, and therefore, DPW personnel use their
own individually devised system (manual, electronic or both) to track project data.
• DPW administrators have no relevant, timely and accurate database and reporting system
to facilitate their proactive management of CIP projects.
General Audit Findings No. 3: The Department of Public Works lacks sufficient
policies, procedures and internal controls to consistently
plan, schedule, procure, monitor and control capital
improvement proiects and deliver them in an efficient
and cost - effective manner.
• DPW has no master CIP plan or schedule to monitor progress and resource allocations.
26
• DPW administrators fully admit that current project management and communication are
problem- oriented and reactive and that the department lacks uniform practices and
policies and clarity of roles, leaving project engineers and coordinators to make policy
decisions on a case -by -case basis. DPW administrators and section chiefs also indicated
that regular monthly and quarterly meetings to discuss CIP project status and
performance issues have been discontinued due to staff shortages and time constraints
and that decision - making is conducted on an ad hoc basis with little long -term strategic
planning.
• DPW lacks formal policies and procedures in the areas of:
o Project scoping, permitting, planning and management.
■ DPW does not have a standard project scoping process whereby user needs,
expected outcomes and deliverables, critical elements of design, and
regulatory requirements and potential problems are addressed.
■ DPW does not sufficiently train personnel responsible for project scoping and
management regarding user needs, legal and permitting requirements, risk
management, and documentation and oversight necessary for successful
outcomes.
o Contract estimation, negotiation and issuance.
■ DPW does not document its consideration or analysis of whether necessary
work and /or materials are contained within original contract agreements and
whether issuance of contracts, contract supplements and change orders are
compliant with State procurement law and County policy.
■ The auditors could find no consistently applied policy or procedure requiring
independent verification of time and material estimates in contracts and
contract modifications to determine the reasonableness of contractor
proposals. Inconsistent documentation of internal time and cost estimations by
DPW engineers may indicate an over - reliance on contractor or vendor
assessments.
o Document and file management.
■ While DPW administrators and section chiefs indicated that project engineers
and /or inspectors keep records and log books to document project activity and
decisions, such documentation was not consistently provided for our review.
• DPW does not use standardized checklists, report forms or other
documentation to ensure a consistent and sufficient level of project monitoring
and reporting.
27
■ DPW and the County have no system in place to document, update and
communicate contractor /vendor performance for consideration in future
procurements.
o Intra- and inter - departmental reporting and communication.
■ DPW administrators confirm that the department lacks a policy, procedure or
internal control for determining and avoiding possible conflicts of interest
between staff and the professional service contractors they are assigned to
rank and select. While all professional services contracts reviewed were
awarded to consultants on the County approved vendor list, documentation of
their ranking and selection was minimal and inconsistent.
■ DPW does not have performance measures or benchmarks in place that
provide a basis for an effective and efficient internal review process. For
example, in discussions with DPW personnel, the auditors learned that the
same scoping deficiency is currently an issue in three separate CIP projects.
■ DPW does not analyze, document and report causes of and responsibilities for
contract modifications and incorporate such information into a quality control
system to minimize foreseeable contract modifications and improve the
contract management process.
General Audit Findings No. 4: The Department of Public Works fails to sufficiently
document its activities and decision - making processes
related to contract supplements and change orders.
• Project engineers and coordinators rely on past experience to determine whether a
proposed change order is necessary and priced appropriately. There is insufficient
documentation to show how a price or time extension was determined to be reasonable,
or what negotiation activity (if any) was conducted. Industry best practices require that an
internal independent estimation of time and costs be compared to contractor /vendor
proposals for purposes of negotiation and determination of reasonableness and best price.
For all practical purposes, in the absence of such documentation, it is impossible to
conduct a management or audit review to determine whether negotiations were successful
and best prices were obtained.
• Contract supplements and change orders were routinely processed after commencement
of additional work. The industry best practice of issuing a written change request that
documents the problem, cause, additional work requested, and method of cost and time
calculation prior to obtaining a contractor quote or vendor proposal (and issuing a
contract supplement or change order) was seldom found in project documentation made
available to the auditors. Contract supplements and change orders often did not address
extension of completion dates even when originally contracted completion dates had
already been exceeded. In addition, support documentation for time and material charges
and force account work and independent verification to support additional work days
were not consistently noted.
29
CHAPTER 7 RECOMMENDATIONS
1. We recommend that the County develop and implement a long -term CIP master plan
following current best practices implemented by other governmental jurisdictions to
include input from all key stakeholders (including the Council and general public) that
provides clearly defined goals and priorities to County departments charged with CIP
responsibilities.
• At a minimum, the CIP master plan should include a comprehensive listing of capital
improvement projects with prioritized rankings and timelines for completion.
• The CIP master plan development process should incorporate public input, coordination
with State and Federal agencies and funding sources, and investigation of public - private
partnerships.
• The CIP master plan development process needs to be supported by an information
technology (IT) system capable of capturing and reporting accurate, relevant and timely
financial and project management data.
• The CIP master plan development process should include standardized and regular
reporting and review of project timing and estimation, cost and resource allocations, and
budget -to- actual analyses.
2. We recommend that the Department of Public Works develop comprehensive policies,
procedures and controls for management of capital improvement projects, including,
but not limited to:
Project Scoping
Develop policies and procedures that specifically address project scoping and
negotiation strategies to obtain best values and promote equity and fair competition
among professional services consultants and construction contractors. Included should
be a process to document the consideration, analysis and determination of the costs and
benefits related to bundling or separating the work required.
Perform more pre - project planning with client agencies and end users to better define
scope of work and deliverables for incorporation into professional services contracts to
ensure that design proposals (and subsequent construction bids) can be more
competitive, contracts can more clearly delineate responsibilities and compensation for
each segment of work, and contract supplements and change orders can be minimized.
30
• Develop checklists for various phases of project compliance to ensure that all
prerequisites are completed before submittal to contract procurement, including a pre -
design procurement checklist and a pre - construction bid checklist.
Project Tracking
• Develop a CIP master schedule to establish and track project timelines and prioritize and
monitor funding and resource allocations (including personnel).
• Implement a process for regular and frequent review of project financial and physical
status by DPW administrators and project engineers, coordinators and inspectors.
Project Documentation and Control
• Documentation Requirements. Implement minimum documentation, authorization,
action and reporting requirements for all phases of CIP management, including, but not
limited to: project scoping and estimation; consultant ranking and selection; construction
contract procurement and award; governmental permitting, insurance and bond
requirements; internal estimation of contract supplements and change orders; project
inspection; verification of progress billings; resolution of disputed charges; and project
closeout. Special attention should be given to initial project scoping, as it appears that a
significant portion of contract supplements and change orders reviewed during the audit
period was due to insufficient front -end scoping.
• Standardized Forms. Develop internal procedures, checklists and report forms relating
to project scoping, permitting, procurement, management, inspection, payment and
closure as well as external procedures, checklists and report forms for use by other
County agencies prior to submittal of projects to DPW for procurement. Where possible,
standardized processes and forms should be developed to ensure adequate and consistent
project documentation.
• Routing and Retention. Develop policies and procedures for report preparation, routing
and retention to include all DPW personnel involved in capital improvement projects and
specifically address what documentation is expected to be completed and /or maintained
by whom, to whom it should be communicated, how, when and in what format.
• Conflict of Interest/Related Parties. Develop policies and procedures that address
"conflicts of interest" and "related party" issues between consultants /contractors and
DPW personnel, including defining "related party ", requiring written related party
disclosures, and specifying additional documentation and control procedures required in
related party situations. At a minimum, policies and procedures should comply with
provisions of Hawaii County Code §2 -84, Conflicts of interest, and §2 -91.1, Financial
disclosures and disclosures of interest.
• Segregation of Duties. Develop policies and procedures that address segregation of
duties among DPW personnel, including, but not limited, to: project scoping, internal
31
estimation, ranking and selection of professional services consultants, bid and award of
construction contracts, inspection and acceptance of projects, and approval of progress
payment requests. At a minimum, policies and procedures should comply with
provisions of the County Department of Finance's Accounting Manual, Part I (June 7,
1999), at Page 103.11, which provides in part: "Any system of internal control should
include, as a minimum, the following elements: 1. Systems of authorizations, approvals,
and recording procedures adequate to provide reasonable accounting control over assets,
liabilities, revenues, and expenditures. 2. Separation of duties concerned with record
keeping and accounting reports from those concerned with operations or asset
custody... "
• Contract Supplements and Change Orders. Develop quality control measures
specifically relating to contract supplements and change orders, including:
• Minimum documentation requirements.
• Standardized decision criteria to determine whether a proposed change is within the
original project scope or requires a separate procurement.
• Identification of specific causes necessitating the change.
• Identification of specific responsibility for the change.
• Independent internal estimation of time and costs relating to the change.
• Comparison of internal estimations to vendor /contractor estimations.
• Development of a negotiation strategy.
• Documentation of negotiations.
• Review, approval and documentation of agreed -upon time and costs.
• Documentation of comparison and verification of agreed -upon time and costs to
vendor /contractor invoices.
Quality Control
• At a minimum, the quality control process should include a mechanism to review project
status and communicate "lessons learned" to appropriate DPW staff as well as a
mechanism to review vendor and contractor performance with outcomes reported back
into the procurement ranking process at the departmental and County -wide levels.
• At a minimum, the quality control process should include a mechanism to regularly and
frequently report CIP status to the County Council, including specific dollars and dates
related to original budget, original contract, adjusted contract, actual expenditures
(current year and project to date), and estimates to complete on both time and cost for
every proj ect.
32
3. We recommend that the Department of Public Works evaluate and incorporate
industry best practices relating to staffing levels and information systems applications.
Best Practices - Staffing
• The Department of Public Works should evaluate and compare its staffing levels to
industry best practices to ensure that they are sufficient to meet program demands.
o Develop departmental and division "process maps" to clearly delineate roles and
responsibilities and evaluate the adequacy of staffing levels and resources to carry out
duties.
o Conduct a cost - benefit analysis of hiring additional County personnel versus
continuing to outsource capital improvement project design and construction work.
o Develop written policies and procedures as recommended above and implement
training programs to ensure that new policies and procedures are clearly and
consistently communicated to appropriate staff.
o If the department determines that it cannot make significant progress in the foregoing
areas within the next six months, it should consider procuring a private consultant to
assist in the development of process maps, improvement of policies and procedures,
and training of its personnel.
Best Practices — Information Technology (IT) Applications
• The Department of Public Works should evaluate and compare its information systems
applications to industry best practices to ensure that they are sufficient to meet program
demands.
o Assess informational needs against capacities of current County information systems
applications and conduct a cost - benefit analysis relating to implementation of
necessary IT applications to address any critical deficiencies. Implement an integrated
computer application to provide report capability for project management on a regular
and frequent basis in a standardized and useful format. Increase capability for
proactive project monitoring and control to replace current record - keeping of
unstandardized data by different project personnel in various manual and electronic
formats in order to eliminate inefficiency, redundancy and potential of error.
o If the department determines that it cannot identify a compatible information systems
application within the next six months, it should consider procuring a private public
works consultant with IT expertise.
33
4. We recommend that the Department of Public Works, in consultation with the Finance
Department, develop and implement formal policies and procedures for authorization,
documentation, and systematic recordation and reporting of changes to contract fund
accounts.
34
CHAPTER 8 CONCLUSION
This limited scope performance audit focused on the Department of Public Work's management
controls over capital improvement projects to assess whether professional services contract
supplements and construction contract change orders are limited to reasonably unforeseeable
work necessary to complete the original intent of projects. While our review of CIP- related
professional services and construction contracts active in FY 2006 -2007 determined that most
contract supplements and change orders were necessary to complete original project intent, we
also determined that the majority could have been avoided through the implementation of clearly
defined and communicated departmental policies, procedures and quality controls for project
scoping, management and reporting.
As of the conclusion of audit fieldwork on May 16, 2008:
• 88% of professional services contracts active in FY 2006 -2007 included total contract
supplements greater than the accepted industry standard of + or -10% of original contract
amounts (and were specifically reviewed as part of our audit sample).
• 23% of construction contracts active in FY 2006 -2007 included total change orders
greater than the accepted industry standard of + or — 10% of original contract amounts
(and were specifically reviewed as part of our audit sample).
• 71% of professional services contracts in our audit sample reflected contract values in
excess of 110% of original County estimated project costs.
• 86% of construction contracts in our audit sample reflected contract values in excess of
110% of original County estimated project costs.
• 64% of all professional services and construction contracts in the audit sample remain
open and exceed their original contractual completion dates, and 50% remain open and
exceed their current contractual completion dates.
While contract supplements and change orders cannot be completely eliminated due to
unforeseen site conditions, weather and other natural events, and /or new governmental
regulations, proper project scoping should enable the Department of Public Works to minimize
their issuance and, at the same time, maximize the amount of work submitted to the competitive
procurement process to ensure fair competition. Standardized decision criteria and
documentation requirements will also help ensure County compliance with State procurement
law, which, among other requirements, provides that contract modifications be limited to
changes in work within the scope of a contract and changes in time for performance of a contract
that do not alter the scope of contract work.
On a broader level, the Department of Public Works needs to develop internal action plans and
performance measures to ensure that monetary and non - monetary resources are efficiently and
effectively allocated to facilitate the delivery of capital improvement projects that meet public
35
needs in a timely and cost - effective manner. Given current shortages in staffing levels and time
constraints, procurement of a private public works consultant may be advisable to assist the
department in developing project management and quality control procedures and implementing
information systems applications to meet its immediate program demands and overall mission,
goals and objectives.
This being said, it is also important to consider how overall management controls and systems in
County government impact the Department of Public Works' ability to plan and manage its
resources and meet public expectations. Internal controls based on performance -based outcomes
have only been implemented in the last 15 to 20 years even by those governmental jurisdictions
now considered models of efficiency. Recent progress made in the areas of public involvement
and openness in County government is a good step in this evolutionary process toward public
accountability. Implementation of a project management database to interface with the County's
accounting system will assist all County departments in better managing their resources and
tracking their projects. Commitment to a long -term strategic plan for capital improvement
projects, with appropriate cost - benefit analyses and performance measures, will require an
investment of time and money, but will reap significant cost - savings through greater efficiency,
less redundancy, and better risk management in future operations. Policies and procedures and
internal controls that survive changes in Mayoral and Council administrations and stakeholder
groups are also imperative to ensure that public resource planning and fiscal management are
foremost in the goals of government leaders and can be relied upon by the voting public.
36
Audit Population - Active CIP Type "C" Contracts FY 2006 -2007
Table 1.1
Job
Contract
Contract Title
K
Dept.
Original
# of
Total C/O $
%
#
No
Type
Contract $
C /O's
C.000007
Kinoole Corridor Traffic Signal Upgrade, T- 30008, STP- 1930(1)
C
$1,391,094.86
2
(1,305.88)
-0.09%
C.000010
Job 5 -3682A Hilo WWTP - Replace Grit Classifiers
C
$515,200.00
1
41,450.00
8.05%
3685
C.000045
Structual ENG SVCS -West Hawaii TRF BLDG
PS
$155,200.00
2
178,248.00
114.85%
B3656
C.000056
B -3656 New Warehouse Kau Hwy Bsyd Impry
C
$375,000.00
2
153,306.05
40.88%
C.000125
P -3278, #STP- 0110(1)Kuakini Hwy (P -H)
C
$11,953,345.00
4
287,336.12
2.40%
Scotty White Bridge Replacement and Moaula Culvert
C.000134
C
$1,605,031.00
3
123,675.40
o
7.71 /o
Replacement
B
C.000154
Hoolulu Park Accessibility Improvements
C
$2,589,000.00
8
2,941,969.61
113.63%
3574
C.000156
ARCH /ENG Pros Atty Office - Aupuni CTR
C
$329,695.00
1
14,918.00
4.52%
C.000160
Alii Drive Short Lateral Extensions
C
225,268.00
1
20,222.01
8.98%
3674
C.000168
Planning, Design and Construction of the Hardening of Essential
C
$904,665.20
0
0.00%
Facilities
C.000175
Pahoa Fire Station - Architectural Srvcs
C
$290,366.00
2
7,292.00
2.51%
C.000261
PROG Manager SVC -W HI Civic Center
C
$821,586.00
1
25,960.00
3.16%
Waimea Courthouse Site and Nutrition Program Center
C.000262
C
$885,471.00
4
68,502.00
7.74%
Improvements
C.000328
Roof RPR /REMVL ENCP Asbestos -HI Cty Bld
PS
$264,477.00
I0
2
2,241,818.00
847.64%
Report Analysis sheets 2006 -2007
K type C
Audit Population - Active CIP Type "C" Contracts FY 2006 -2007
Table 1.1
Job
Contract
Contract Title
K
Dept.
Original
# of
Total C/O $
%
#
No
Type
Contract $
C /O's
C.000329
Mamalahoa Hwy - Kawaihae Connector RD
C
$383,500.00
2
16,100.00
4.20%
13-
3681
C.000340
North Kohala Senior Center Re -Roof
C
$159,926.25
1
(7,843.75)
-4.90%
3696
C.000354
Lincoln Park Tennis Court Improvements
C
P
$181,750.46
2
2,492.06
1.37%
C.000363
Professional Land Agent Services for Palani Road Traffic
PS
5,937.47
1
11,249.93
189.47%
Improvements (TMK: (3) 7 -4- 008:065 portion of)
s
3682
C.000368
Improvements to Aupuni Center Conference Room
C
$94,000.00
2
18,690.18
19.88%
C.000377
Hilo SPS Underground Injection Well Closure
C
$69,600.00
1
4,400.00
6.32%
C.000448
Mamalahoa Highway Improvements, Captain Cook, South
PS
129,500.00
3
73,500.00
56.76%
Kona, Hawaii, Job No. P -3684A
3680
C.000457
Mamalahoa Highway / Hina -Lani Street Traffic Signals
C
T
489,284.41
2
14,891.22
3.04%
C.000469
Mamalahoa Highway Improvements, Kealakekua, South Kona,
PS
60,200.00
3
187,575.00
311.59%
Hawaii, Job No. P -3684B
Environmental Assessment for the Acquisition of Existing Flood
C.000503
Channel & Basin for the Mohouli Housing Project
C
50,000.00
0
0.00%
13-
3658
C.000505
Piilani Elderly Complex Accessibility Improvements
C
B
305,000.00
3
84,488.00
27.70%
P_
3678
C.000518
Palani Road /Highway 190 Intersection Improvements
C
P
1,071,530.00
7
126,428.24
11.80%
3660
C.000579
Large Capacity Cesspool Conversion Projects Segment No. 1
C
B
1,498,000.00
1
41,285.00
2.76%
C.000586
Land Agent Services for Roadside Improvements for Various
C
77,159.56
1
4,899.56
6.35%
South Hilo Roads
Report Analysis sheets 2006 -2007
K type C
Audit Population - Active CIP Type "C" Contracts FY 2006 -2007
Table 1.1
Job
Contract
Contract Title
K
Dept.
Original
# of
Total C/O $
%
#
No
Type
Contract $
C /O's
B-
3708
C.000603
KCAC Pool Pump System Repairs
C
B
115,230.00
2
17,463.26
15.16%
3487
C.000608
Kalapana Road Realignment
C
P
1,522,010.81
2
(67,115.88)
-4.41%
3692
C.000613
Office of the Prosecuting Attorney at Aupuni Center
C
B
3,989,161.00
3
56,533.87
1.42%
3639
C.000622
Hilo Senior Center (Kamana) Accessibility Improvements
C
B
355,185.00
2
22,085.07
6.22%
3729
C.000630
Kailua Park - Parking Lot Light Pole Replacement
C
B
84,490.00
2
1,885.00
2.23%
3711
C.000631
Transfer Station Repairs / Enhancements, Phase is
C
S
372,348.00
2
3,478.34
0.93%
3634
C.000635
Keaau Community Center Accessibility Improvements
C
B
275,432.00
2
4,281.27
1.55%
s
3722
C.000641
East Hawaii Regional Sort Station
C
S
6,409,034.20
4
1,389,302.74
21.68%
3661
C.000643
Large Capacity Cesspool Conversion Projects Segment No. 2
C
B
520,400.00
3
43,729.76
8.40%
B-
3663
C.000644
Large Capacity Cesspool Conversion Projects Segment No. 4
C
B
685,420.00
4
99,758.00
14.55%
Architectural Services for Replacement of Existing Built -Up
C.000650
Roofing at Hawaii Public Safety Building A and Building B and
PS
162,624.00
1
16,170.00
9.94%
Renovation of Pistol Range Repairs
B-
3637
C.000652
Hualani Park Accessibility Improvements
C
B
282,279.00
2
49,035.00
17.37%
3662
C.000656
Large Capacity Cesspool Conversion Projects Segment No. 3
C
B
1,268,000.00
2
22,659.00
1.79%
3740
C.000657
Large Capacity Cesspool Conversion Projects Segment No. 5
C
B
3,770,500.00
1
36,276.00
0.96%
Report Analysis sheets 2006 -2007
K type C
Audit Population - Active CIP Type "C" Contracts FY 2006 -2007
Table 1.1
Job
Contract
Contract Title
K
Dept.
Original
# of
Total C/O $
%
#
No
Type
Contract $
C /O's
C.000664
Civil Engineering Services for Laiopua Connector Road Project
C
250,000.00
1
21,080.00
8.43%
(Portion of Keanalehu Drive & Manawaea Street)
C.000698
Environmental Assessment and Permit Services for Waikoloa
PS
27,900.00
2
16,400.00
58.78%
Emergency Access Road
ww
3714
C.000712
Hilo Wastewater Treatment Plant Boiler Replacement
C
WW
139,830.00
1
18,068.66
12.92%
3679
C.000713
Laupahoehoe Point Gym Re- Roofing & Improvements
C
B
835,000.00
1
30,380.84
3.64%
3700
C.000720
Pahoa Neighborhood Facility Roofing, Repairs and Site
C
B
1,151,000.00
6
47,177.04
4.10%
Improvements
3733
C.000721
Edith Kanakaole Multi- Purpose Stadium Perimeter Fence
C
B
81,900.00
1
790.67
0.97%
3734
C.000724
Central Fire Station - Roof Repairs
C
B
350,000.00
1
19,816.96
5.66%
P
C.000730
Mamalahoa Highway Improvements, Honalo to Captain Cook
C
P
2,696,506.00
8
177,061.97
6.57%
3684A
(Captain Cook Intersections)
3618
C.000732
Coconut Island Accessibility and Wastewater Disposal System
C
B
1,656,000.00
3
28,204.97
1.70%
Improvements
C.000737
Light Detection and Ranging (LiDAR) - Puna LiDAR for
PS
221,000.00
2
177,250.00
80.20%
Development of Flood Insurance Rate Maps
3576
C.000755
ADA Compliance Projects - West Hawaii, Kailua Park (Old
C
B
1,948,510.00
2
68,141.77
3.50%
Airport) Improvements
ww
3743
C.000784
Hilo Recycling Improvements
C
SW
395,805.00
2
52,624.90
13.30%
C.000854
Planning and Civil Engineering Services for Laaloa Avenue
PS
1,124,150.00
4
406,755.00
36.18%
Extension
3728
C.000856
Pahoa Fire Station
C
B
4,800,000.00
1
1,252.00
0.03%
Report Analysis sheets 2006 -2007
K type C
Audit Population - Active CIP Type "C" Contracts FY 2006 -2007
Table 1.1
Job
Contract
Contract Title
K
Dept.
Original
# of
Total C/O $
%
#
No
Type
Contract $
C /O's
36848
C.000872
Mamalahoa Highway Improvements (Honalo to Captain Cook)
C
P
1,246,645.00
4
(78,611.44)
-6.31
1
Kealakekua — Phase I
C.000890
Pahoa Complex Off -Site Improvements
PS
134,570.00
1
20,430.00
15.18%
C.000896
Kona Coastview /Wonder View Subdivisions W/S Improvements
C
5,436,224.00
cp
3
857,587.00
15.78%
C.000899
Kaumana Drive Flood Protection Project, Wailuku - Alenaio
PS
418,900.00
1
® -
0.00%
Watershed
3677
C.000913
Hawaii County Building Asbestos Abatement and Roof Repairs
C
B
2,830,000.00
2
79,730.45
2.82%
B
3760A
C.000923
Puainako Center Temporary Office Relocation
C
B
88,541.00
2
24,504.08
243,500.00
27.68%
C.000939
Keopo - Hienaloli Streams Flood Damage Reduction Project
PS
465,750.00
>K
1
52.28%
Feasibility Study
3533C
C.000955
ADA Curb Ramp Compliance Program, Phase II, Part B
C
P
607,232.00
2
2,500.00
0.41%
B
C.000962
Structural Engineering Services for Police Evidence Warehouse
PS
155,820.00
1
24,180.00
15.52%
3749
Mezzanine Addition, Job No. B -3749
P
3550A
C.000964
ADA Curb Ramp Compliance Program, Phase II, Part A
C
P
879,115.00
4
173,455.23
19.73%
36848
C.000975
Mamalahoa Highway Improvements, Honalo to Captain Cook
C
P
1,873,996.00
1
(74,778.04)
- 3.99%
z
( Kealakekua — Phase II)
3550D
C.000984
ADA Curb Ramp Compliance Program, Phase II, Part D
C
P
2,106,056.54
1
14,771.00
0.70%
3769
C.000989
Kalopa Sand Gulch Road Slope and Safety Repairs
C
P
271,000.00
1
4,100.00
1.51%
C.000995
Architectural Services for Makalei Fire Station
PS
$567,953.00
9
0
0.00%
Report Analysis sheets 2006 -2007
K type C
Audit Population - Active CIP Type "C" Contracts FY 2006 -2007
Table 1.1
Job
Contract
Contract Title
K
Dept.
Original
# of
Total C/O $
%
#
No
Type
Contract $
C /O's
3772
C.001030
Lincoln Park Playground Safety Surfacing
C
B
76,900.00
1
4,711.30
6.13%
Construction Management Services for Reed's Island Bridge,
C.001031
Ka'ahakini Bridge and Kahului Bridge Improvements
PS
$40,000.00
2
55,000.00
137.50%
3R;
C.001091
Aupuni Center Parking Lot Improvements
C
B
3,700,000.00
2
191,510.00
5.18%
3766
C.001094
Restroom Improvements for Waiakea -Uka Park
C
B
211,200.00
1
17,084.14
8.09%
Charles "Sparky" Kawamoto Swim Stadium Pool Filters
3756
C.001110
C
B
373,610.00
1
29,103.91
7.79%
Replacement and Repairs
3152
C.001291
Civil Engineering Services for Kalopa Sand Gulch Bypass Road
PS
$42,806.00
1
10,140.00
23.69%
Contracts
76
# C /o's
$83,896,820.76 161
'% Total C /O's of Total Original K's
$ 11,041,010.59
13.16%
® C/O #1 issued for $ 109,000, however work was anticipated and included in original contract, contingent upon securing funding which was subsequently obtained.
K) C/O scope was actually submitted to a separate professional services procurement ranking process, the same vendor was ranked number one. DPW determined
it was in the County's best interest, and would save time and resources by issuing a supplement to the existing contract rather than draft and route a new
contract related to the "new" scope.
cp Contract not included in audit sample. Water Supply project, DPW involvement only for c/o for repaving of road after installation of water line.
>K Contract not included in audit sample. 50/50 County and Federal cost share, project managed by Army Corps of Engineers.
9 Contract not included in audit sample. Coding of accounting system entries appeared to be c /o, upon review both accounting entries pertain
to recertification of original contract amount, no change orders issued at end of field work.
Audit Sample is comprised of the shaded contracts.
C = A Contract Issued for Construction
PS + A Contract Issued for Professional Services
Report Analysis sheets 2006 -2007
K type C
Audit Sample - FY 2006 -2007 Professional Services Contracts and Supplements Greater Than + or - 10%
Table 1.2
Job
Contract
Contract Title
K
Dept.
Original
Original K
# of
Total C/O $
%
Final /Closed
#
No
Type
Contract $
Date
C /O's
3685
C.000045
Structual ENG SVCS -West Hawaii TRF BLDG
PS
DPW
$ 155,200.00
7/2/2004
2
$ 178,248.00
114.85%
Open
C.000328
Roof RPR/REMVL ENCP Asbestos -HI Cty Bld
PS
DPW
264,477.00
5/16/2005
2
10 2,241,818.00
847.64%
Open
Professional Land Agent Services for Palani Road Traffic
C.000363
PS
DPW
5,937.47
6/29/2005
1
11,249.93
189.47%
Open
Improvements (TMK: (3) 7- 4- 008:065 portion of)
Mamalahoa Highway Improvements, Captain Cook,
C.000448
PS
DPW
129,500.00
8/31/2005
3
73,500.00
56.76%
Open
South Kona, Hawaii, Job No. P -3684A
Mamalahoa Highway Improvements, Kealakekua, South
C.000469
PS
DPW
60,200.00
9/12/2005
3
187,575.00
311.59%
10/31/2007
Kona, Hawaii, Job No. P -3684B
Architectural Services for Replacement of Existing Built -
C.000650
Up Roofing at Hawaii Public Safety Building A and
PS
DPW
162,624.00
3/29/2006
1
16,170.00
9.94%
Open
Building B and Renovation of Pistol Range Repairs
Environmental Assessment and Permit Services for
C.000698
PS
DPW
27,900.00
5/11/2006
2
16,400.00
58.78%
Open
Waikoloa Emergency Access Road
Light Detection and Ranging (LiDAR) - Puna LiDAR for
C.000737
PS
DPW
221,000.00
6/7/2006
2
177,250.00
80.20%
Open
Development of Flood Insurance Rate Maps
Planning and Civil Engineering Services for Laaloa
C.000854
PS
DPW
1,124,150.00
7/25/2006
4
406,755.00
36.18%
Open
Avenue Extension
C.000890
Pahoa Complex Off -Site Improvements
PS
DPW
134,570.00
9/1/2006
1
20,430.00
15.18%
Open
Kaumana Drive Flood Protection Project, Wailuku-
C.000899
PS
DPW
418,900.00
9/8/2006
1
® -
0.00%
Open
Alenaio Watershed
8
Structural Engineering Services for Police Evidence
3749
C.000962
Warehouse Mezzanine Addition, Job No. B -3749
PS
DPW
155,820.00
12/18/2006
1
24,180.00
15.52%
Open
Construction Management Services for Reed's Island
C.001031
Bridge, Ka' ahakini Bridge and Kahului Bridge
PS
DPW
40,000.00
2/2/2007
2
55,000.00
137.50%
Open
Improvements
C.001291
Civil Engineering Services floor Kalopa Sand Gulch Bypass
PS
DPW
$ 42,806.00
6/26/2007
1
$ 10,140.00
23.69%
Open
3P52
Contracts
14
# C /o's
$ 2,943,084.47 26 $ 3,418,715.93
% Total C /O's of Total Original K's 116.16%
0 C/O #1 issued for $ 109,000, however work was anticipated and included in original contract, contingent upon securing funding which was subsequently obtained.
=Contract included on DPW response to auditors request for "audit population ", during review auditors noted that this contract was funded through the
general fund, rather than CIP. As contract met audit sample criteria and related to audit findings auditors did not remove from sample data.
®C /O scope was actually submitted to a separate professional services procurement ranking process, the same vendor was ranked number one. DPW determined
it was in the County's best interest, and would save time and resources by issuing a supplement to the existing contract rather than draft and route a new
contract related to the "new" scope.
Report Analysis sheets 2006 -2007
K type C, Prof. Svcs.
Audit Sample - FY 2006 -2007 Construction Contracts and Change Orders Greater Than + or - 10%
Table 1.3
Job
Contract
Contract Title
K
Dept.
Original
# of
Total C/O $
%
#
No
Type
Contract $
C /O's
B3656
C.000056
B -3656 New Warehouse Kau Hwy Bsyd Impry
C
DPW
$ 375,000.00
2
$ 153,306.05
40.88%
open
B-
C.000154
Hoolulu Park Accessibility Improvements
C
P &R
2,589,000.00
8
2,941,969.61
113.63%
open
3574
B-
C.000368
Improvements to Aupuni Center Conference Room
C
DPW
94,000.00
2
18,690.18
19.88%
4/20/2006
3682
B-
C.000505
Piilani Elderly Complex Accessibility Improvements
C
P &R
305,000.00
3
84,488.00
27.70%
7/11/2006
3658
P -3678
C.000518
Palani Road /Highway 190 Intersection Improvements
C
DPW
1,071,530.00
7
126,428.24
11.80%
4/11/2007
B-
C.000603
KCAC Pool Pump System Repairs
C
P &R
115,230.00
2
17,463.26
15.16%
1/29/2007
3708
S -3722
C.000641
East Hawaii Regional Sort Station
C
DEM
6,409,034.20
4
1,389,302.74
21.68%
open
B-
C.000644
Large Capacity Cesspool Conversion Projects Segment No. 4
C
DPW
685,420.00
4
99,758.00
14.55%
open
3663
B-
C.000652
Hualani Park Accessibility Improvements
C
P &R
282,279.00
2
49,035.00
17.37%
11/1/2006
3637
ww
C.000712
Hilo Wastewater Treatment Plant Boiler Replacement
C
DEM
139,830.00
1
18,068.66
12.92%
12/18/2006
3714
P
Mamalahoa Highway Improvements, Honalo to Captain Cook
C.000730
C
DPW
2,696,506.00
8
177,061.97
6.57%
6/22/2007
3684A
(Captain Cook Intersections)
ww
C.000784
Hilo Recycling Improvements
C
DEM
395,805.00
2
52,624.90
13.30%
9/22/2006
3743
e
C.000923
Puainako Center Temporary Office Relocation
C
DPW
88,541.00
2
24,504.08
27.68%
1/2/2007
3760A
P
C.000964
ADA Curb Ramp Compliance Program, Phase II, Part A
C
DPW
$ 879,115.00
4
$ 173,455.23
19.73%
open
3550A
# Contracts # C /o's
14 $ 16,126,290.20 51 $ 5,326,155.92
% Total C /O's of Total Original K's 33.03%
Report Analysis sheets 2006 -2007
K type C
Table 5.1
Audit Sample - Contracts and Modifications
Contract No
Contract Title
Change Order Description
C/O
or
Supp
Original Contract
Amount
C/O Amount
C.000045 Structual ENG SVCS -West Hawaii TRF BLDG
C.000045.1
C.000045.2
Professional Services Contract
$155,200.00
Additional engineering /design services
S
_
Scope and necessity of supplement unclear
S
178,248.00
C.000056 Planning, Design and Construction of the New
Warehouse Addition for Kau Highway Baseyard
Improvements
C.000056.1
C.000056.2
Construction Contract
$375,000.00
Delay in contract execution
C
136 238.00
Increased costs of labor /equipment /materials due to delay in
contract execution
C
17,068.05
C.000154 Ho'olulu Park Accessibiilty Improvements
C.000154.1
C.000154.2
C.000154.3
C.000154.4
C.000154.5
C.000154.6
C.000154.7
C.000154.8
Construction Contract
$2,589,000.00
Deductive #2 + Other Reinstated Contract Work
C
1,007,181.00
Drainage /gas /electrical /building modifications
C
33 604.00
Deductive #1 + Other Reinstated Contract Work
C
1 421 348.00
Parking pavement + drainage connections
C
61 631.00
Carpentry + painting + ADA /fire installations
C
82 111.00
Repair /replace unexpected damage
C
51 367.00
Repair /replace unexpected damage
C
117 665.61
Repair /replace unexpected damage
C
167 062.00
C.000328 Roof RPR /REMVL ENCP Asbestos -HI Cty Bld
C.000328.1
C.000328.2
Professional Services Contract
264 477.00
Amend Scope to include Renovation Phase II
S
1,886,840.00
Amend Design to accommodate Council offices
S
354 978.00
C.000363 Land Agent Services for Palani Road Traffic
Improvements
C.000363.1
Professional Services Contract
5,937.47
Appraisal /acquisition of 4 additional TMK parcels
S
11,249.93
C.000368 Improvements to Aupuni Center Conference Room
C.000368.1
C.000368.2
Construction Contract
94,000.00
Remove concrete apron /replace with new slab
C
4 518.56
Construct new ADA accessible path
C
14 171.62
C.000448 Mamalahoa Highway Improvements, Captain
Cook, South Kona, Hawaii
C.000448.1
C.000448.2
C.000448.3
Professional Services Contract
129,500.00
Additional topographical survey work
S
7 000.00
Additional design services for road improvements
S
46 000.00
Additional design services for drywells + survey
S
20 500.00
Table 5.1
Audit Sample - Contracts and Modifications
C.000469 Mamalahoa Highway Improvements, Kealakekua,
South Kona, Hawaii
C.000469.1
C.000469.2
C.000469.3
Professional Services Contract
60,200.00
More Phase 1 road design + Phase 2 bid package
S
145 375.00
Parking lot design and EA + Phase 1/2/3 bid pkg
S
32 500.00
Prep NPDES and Phase 3 engineering /landscaping
S
9,700.00
C.000505 Piilani Elderly Complex Accessibility Improvements
C.000505.1
C.000505.2
C.000505.3
Construction Contract
305,000.00
Relocate water /hook sewer /decommission cesspool
C
46-1425.00
Punch list items
C
37 286.00
Omitted punch list item - restroom partitions
C
777.00
C.000518 Palani Road /Highway 190 Intersection
Improvements
C.000518.1
C.000518.2
C.000518.3
C.000518.4
C.000518.5
C.000518.6
C.000518.7
Construction Contract
1,071,530.00
Backfill lava tube
C
17 959.74
Additional bank excavation
C
25 102.00
Additional work at Hina Lani Street
C
67 460.00
Additive #2: 2 loop detectors at Mamalahoa Hwy
C
41 560.00
Additive #2: short supply material adjustment
C
3,379.76
Substitution of materials
C
(3,379.76)
Reduction in work scope
C
25 653.50
C.000603 KCAC Pool Pump System Repairs
C.000603.1
C.000603.2
Construction Contract
115 230.00
Remove /replace technocheck valve
C
3,950.19
Remove /replace circuit breaker and reducers. Repair pump
leak.
C
13,513.07
C.000641 East Hawaii Regional Sort Station
C.000641.1
C.000641.2
C.000641.3
C.000641.4
Construction Contract
6,409,034.20
Scope change + 2% cost escalation due to delay.
C
1,131,225.84
Design fee for modified facilities + NPDES permit.
C
107 812.00
Install waterline + regrade truck area + upgrade hose reels,
sumip and ipurnip
C
90,496.83
Allowance forelectrical and water main piping, meter and
service.
C
59,768.07
C.000644 Large Capacity Cesspool Conversion Projects,
Segment No. 4
C.000644.1
C.000644.2
C.000644.3
C.000644.4
Construction Contract
685,420.00
Kona Magic Sand +Keauhou Fire Station changes
C
8,108.00
Konawaena Swimming Pool + additional materials
C
32 250.00
Kau Baseyard + Milolii Park + Keauhou Fire Station +
Naalehu Community Center
C
32,650.00
Add work at Naalehu Community Center + Delay for private
connections
C
26,750.00
Table 5.1
Audit Sample - Contracts and Modifications
Replacement of Existing Built -Up Roofing at Hawaii
Public Safety Buildings A and B and Renovation of
C.000650 Pistol Range Repairs
C.000650.1
Professional Services Contract
162,624.00
Amend scope to include repair waterproofing of main
entrance deck
S
16,170.00
C.000652 Hualani Park Accessibility Improvements
C.000652.1
C.000652.2
Construction Contract
282,279.00
Replace /reinforce fencing + change bleachers
C
31 403.00
Replace ballfield elements + driveway reconstruct
C
17 632.00
C.000698 EA and Permit Services for Waikoloa Emergency
Road
C.000698.1
C.000698.2
Professional Services Contract
27,900.00
Scope expanded from upper portion to entire road
S
9 400.00
Scope changes to alternate route
S
7,000.00
C.000712 Hilo Wastewater Treatment Plant Boiler
Replacement
0.000712.1
Construction Contract
139,830.00
Replace failed Boiler 1 with temporary boiler while Boiler 2
being replaced.
C
18,068.66
C.000730 Mamalahoa Highway Improvements, Honalo to
Captain Cook (Captain Cook Intersections)
0.000730.1
C.000730.2
C.000730.3
C.000730.4
0.000730.5
C.000730.6
C.000730.7
C.000730.8
Construction Contract
2,696,506.00
Special public outreach meetings.
C
10 000.00
Traffic control device - electronic message board
C
49 561.14
Night work construction + Phone pole excavation
C
188 738.00
Construction time adjustment + Pole excavation
C
3,000.00
Install concrete pipe + catch basin w /swale grate
C
28 546.00
Adjust intake box /grate /swale + construct curb
C
4,060.00
Adjust intake box /grate /swale at other intersection
C
3,300.00
Final /Balancing C/O for inclement weather
0
110 143.17
C.000737 Puna Digital Elevation Model (DEM) Project
C.000737.1
C.000737.2
Professional Services Contract
221 000.00
Increase scope for northern half of Puna District
S
77,250.00
Weather contingency not provided in contract
S
100,000.00
C.000784 Hilo Recycling Improvements
0.000784.1
0.000784.2
Construction Contract
395,805.00
Clear trees + Add gravel ramp +striping +asphalt
C
71 197.00
Short supply material adjustments by contract
C
18 572.10
Table 5.1
Audit Sample - Contracts and Modifications
Panning and Civil Engineering Services for the
C.000854 La'aloa Avenue Extension
C.000854.1
0.000854.2
C.000854.3
C.000854.4
Professional Services Contract
1,124,150.00
Add advisory group member and meetings, revise
standards, add traffic calming demo project
S
148,790.00
Revise environmental assessment, add 1 meeting, changes
to traffic calming demo project.
S
84,310.00
Add traffic calming demo project
S
21,000.00
Additional archaeological services necessitated by final road
alignment selected
S
152,655.00
C.000890 Pahoa Complex Off -Site Improvements
C.000890.1
Professional Services Contract
134,570.00
Traffic impact analysis + Special permit application
S
20,430.00
C.000899 Kaumana Drive Flood Protection Project, Wailuku-
Alenaio Watershed
C.000899.1
Professional Services Contract
418,900.00
Not supplement: additional 109,000 subject to funding
rovided for in contract
None
-
C.000923 Puainako Center Temporary Office Relocation
C.000923.1
C.000923.2
Construction Contract
88 541.00
Additional utility connections + replace fan /lamp
C
14 399.98
More utility connections + lamp replacements
C
10 104.10
C.000962.1 Police Evidence Warehouse Mezzanine Addition,
C.000962.1
Professional Services Contract
155 820.00
Mechanical design of humidity control system
S
24,180.00
C.000964 ADA Curb Ramp Compliance Program Phase II,
Part A
C.000964.1
C.000964.2
C.000964.3
C.000964.4
Construction Contract
879,115.00
Item /work substitution - No change in cost or time.
C
-
3 additional intersection (inadvertently omitted)
C
93 058.00
Add pushbotton pedestal + 300 LF of striping
C
4,376.23
1 more intersection
C
76 021.00
Construction Management Services for Reed's Island
C.001031 Bridge, Ka'ahakini Bridge Improvements
C.001031.1
C.001031.2
Professional Services Contract
$40,000.00
Per supplement: "Assist in programming and managing the
Mohouli - Kumukoa intersection design of a traffic light
system."
S
15, 000.00
Reactivate /update /rescope bridge design /bid docs.
S
40,000.00
Civil Engineering for Kalopa Sand Gulch Bypass
C.001291 Road
C.001291
Professional Services Contract
$42,806.00
Survey of additional 2,600 LF
S
10,140.00
$19,069,374.67 8,744,871.85
Percent Increase Total Modifications to Total Original Contract 45.86%
C.0005051 Pi'ilani Elderly Complex
B -3658 Accessibility Improvements
C.0005181 Palani Road /Highway 190
P -3678 Intersection Improvements
C.0006031 KCAC Pool Pump System
B -3708 Repairs
C.0006411 East Hawaii Regional Sort
S -3722 Station
C.0006441
Large Capacity Cesspool
B -3663
VARIANCE BETWEEN COUNTY CONSTRUCTION ESTIMATE, LOWEST BID AND REVISED CONTRACT
C.0006521
Hualani Park Accessibility
B -3637
Improvements
Table 5.2
197,958
38,000 Additive #1
119.80%
126,428
80,000 Additive #2
19.80
60,000
$ Variance
% Variance
115,230 55,230
17,463
19,720 Additive #1
121.16
6,200,000
SW Div.
9,338,285 Corrected Bid Tabulation; 1
$ Variance
% Variance
Revised K
Revised K
$ Variance
% Variance
Contract No.
Proiect Name
County
710,803 Additive #
Contract
Estimate
Estimate
Revised
to Original
to Original
Revised K
Revised K
44,135 Deductive #5
Estimate
Estimator
Lowest Bid
Award
to Bid
to Bid
K Amount
Estimate
Estimate
to Ong. K
to Ong. K
C.0000561
New Warehouse Addition For
$ 200,000
Bldg. Div.
$ 367,700 F
$ 375,000
$ 175,000
87.50%
528,306
$ 328,306
W 264.15%
$ 153,306
140.88%
B -3656
Kau Highway
153,306
164.15%
40.88%
Baseyard Improvements
C.0001541
Ho'olulu Park Accessibility
3,500,000
Parks Consul.
5,028,529 +
2,589,000 ro
- 911,000
- 26.03%
5,530,970
2,030,970
W 158.03%
2,941,970
213.63%
B -3574
Improvements
1,079,752 Deductive #1
2,941,970
58.03%
113.63%
892,216 Deductive#2
C.0003681
Improvements toAupuniCtr.
65,000
Bldg. Div.
88,800 Ti
94,000 i#
29,000
44.62%
112,690 A
47,690
W 173.37%
18,690
119.88%
B -3682
Conference Room
48,000 Additive #1
18,690
73.37%
19.88%
5,200 Additive #2
5,000 Additive #3
C.0005051 Pi'ilani Elderly Complex
B -3658 Accessibility Improvements
C.0005181 Palani Road /Highway 190
P -3678 Intersection Improvements
C.0006031 KCAC Pool Pump System
B -3708 Repairs
C.0006411 East Hawaii Regional Sort
S -3722 Station
C.0006441
Large Capacity Cesspool
B -3663
Conversion Project
C.0006521
Hualani Park Accessibility
B -3637
Improvements
350,000
Parks Consul.
305,000 +
305,000 - 45,000
1,000,000
Engr. Div.
953,530 Basic Bid
1,071,530 71,530
1,197,958 A
197,958
38,000 Additive #1
119.80%
126,428
80,000 Additive #2
19.80
60,000
Bldg. Div.
115,230 Ti
115,230 55,230
17,463
19,720 Additive #1
121.16
6,200,000
SW Div.
9,338,285 Corrected Bid Tabulation; 1
6,409,034 N( 209,034
1,389,303
Additives: 251,170 Additive#
91,891 Deductive #1
648,539 Additive #
60,034 Deductive #2
710,803 Additive #
16,792 Deductive #3
211,626 Additive#
41,986 Deductive #4
1,038,876 Additive#
44,135 Deductive #5
2,041,014 Additive#
24,809 Deductive #6
1,517,497 Additive#
178,710 Deductive #7
41,880 Deductive #8
654,000
Bldg. Div.
685,420 Three Bids
685,420 31,420
125,000 Parks Consul. 320,500 � 282,279
38,221 Deletion before award
-12.86
7.15%
92.05
3.37
4.80
157,279 125.82
389,488 A
39,488
W
111.28%
84,488
206,314 W 265.05%
49,035
11.28%
1,197,958 A
197,958
W
119.80%
126,428
19.80
132,693
72,693
W
221.16%
17,463
121.16
7,798,337
1,598,337
W
125.78%
1,389,303
25.78
785,178
131,178 W 120.06%
99,758
20.06
331,314
206,314 W 265.05%
49,035
165.05
84,488
126,428
17,463
1,389,303
127.70
27.70
111.80%
11.80%
115.15%
15.15%
121.68
21.68
99,758 114.55%
14.55
49,035 117.37
17.37
C.007121
Hilo Wastewater Treatment
200,000
WW Div.
139,830 Ti 139,830 - 60,170 - 30.09% 157,899 - 42,101
78.95%
18,069
112.92%
WW -3714
Plant Boiler Replacement
18,069
- 21.05%
12.92%
C.0007301
Mamalahoa Highway
1,750,000 #
Engr. Div.
2,666,506 Ti 2,696,506 0 946,506 54.09% 2,873,568 ,q 1,123,568 W
164.20%
177,062
106.57%
P -3684A
Improvements, Honalo to
30,OOO Additive #1 177,062
64.20%
6.57%
Captain Cook, (Captain Cook
389,877 Additive #2
Intersections)
178,238 Additive #3
C.0007841
Hilo Recycling Improvements
550,000
SW Div.
395,805 395,805 - 154,195 - 28.04% 448,430 - 101,570
81.53%
52,625
113.30%
SW -3743
52,625
-18.47%
13.30%
C.0009231
Puainako Center Temporary
50,000
Bldg. Div.
88,541 88,541 38,541 77.08% 113,045 ,q 63,045 W
226.09%
24,504
127.68%
B -3760A
Office Relocation
24,504
126.09%
27.68%
C.0009641
Program Phase II,
800,000
Engr. Div.
847,115 879,115 Jr 79,115 9.89% 1,052,570 252,570 W
131.57%
173,455
119.73%
B -3550A
Program Phase 11, Part A
173,455
31.57%
19.73%
$ 15,504,000
$
21,340,791 $ 16,126,290 $ 622,290 4.01% $ 21,452,446 $ 5,948,446
138.37%
$ 5,326,156
133.03%
38.37%
33.03%
5,836,791
0.376470008
F Single Bidder
Ti Two Bidders
ro Indicates that K was issued to the lowest bidder but not for the sealed bid amount.
# Internal estimate was given as a range of $1,500,000 to $2,000,000. For analytical purposes used the average of $1,750,000
A Project has been finaled and accepted, Revised K represents final cost.
i1 Contract issued for Base Bid $88,800 plus Additive #2 $5,200 for a total original contract of $94,000.
0 Contract issued for Base Bid $2,666,506 plus Additive #1 $30,000 for a total original contract of $2, 696,506.
Federally Funded project Administered by OHCD, Procured and Managed by DPW, Scoped by Consultant through
contract with P &R
Jr Difference between bid and contract due to mathematical error in bid proposal, still low bid with correction.
W Contracts in excess of 110% of County's original estimated cost.
VARIANCE BETWEEN COUNTY PROFESSIONAL SERVICES ESTIMATE, NEGOTIATED FEE AND REVISED CONTRACT
Table 5.2a
$ Variance
% Variance
$ Variance
% Variance
Contract
Revised K
Revised K
Revised K
Revised K
No.
Project Name
County
Negotiated
Contract
$ Variance
% Variance
Revised
to Original
to Original
to Original
Amt. to
Estimate
Estimator
Fee
Award
Estimate to Fee
Estimate to Fee
K Amount
Estimate
Estimate
K
Orig. K
C.000045
Structual Engineering Services-
$ 98,000
Bulding Division
$ 155,200
$ 155,200
$ 57,200
58.37%
$ 333,448
$ 235,448 0
340.25%
$ 178,248
214.85%
West Hawaii Traffic Building
178,248
240.25%
114.85%
C.000328
Roof Repairs and Removal of
120,000
Building Division
264,477
264,477
144,477
120.40%
2,506,295
2,386,295 0
2088.58%
2,241,818 K)
947.64%
Encapsulated Asbestos at
2,241,818
1988.58%
847.64%
Hawaii County Building
C.000363
Profess. Land Agent Svcs. For
6,000
DPW Administration
5,937
5,937
(63)
-1.05%
17,187
11,187 0
286.46%
11,250
289.47%
Palani Rd. Traffic Improvements
11,250
186.46%
189.47%
(TMK:(3) 7-4- 008:065 portion of)
C.0004481
Mamalahoa Highway
120,000
Engineering Division
129,500
129,500
9,500
7.92%
203,000
83,000 0
169.17%
73,500
156.76%
P -3684A
Improvements (Captain Cook)
73,500
69.17%
56.76%
C.0004691
Mamalahoa Highway
50,000
Engineering Division
60,200
60,200
10,200
20.40%
247,775
197,775 0
495.55%
187,575
411.59%
P -3684B
Improvements Project
187,575
395.55%
311.59%
(Kealakekua)
C.000650
Replace Existing Built -up
300,000
Building Division
162,624
162,624
(137,376)
- 45.79%
178,794
(121,206)
59.60%
16,170
109.94%
Roofing at Bldg.
16,170
-40.40%
9.94%
C.000698
Envirn. Assess&
30,000
DPW Administration
27,900
27,900
(2,100)
-7.00%
44,300
14,300 0
147.67%
16,400
158.78%
for Permit Svcs.
16,400
47.67%
58.78%
Waikoloa Emerg. Access Rd.
C.000737
Light Detection and Ranging
100,000
Engineering Division
221,000
221,000
121,000
121.00%
398,250
298,250 0
398.25%
177,250
180.20%
(LIDAR) -Puna for Development of
177,250
298.25%
80.20%
Flood Insurance Rate
C.000854
Laaloa Avenue Extension
500,000
Engineering Division
1,124,150
1,124,150
624,150
124.83%
1,530,905
1,030,905 0
306.18%
406,755
136.18%
406,755
206.18%
36.18%
C.000890
Pahoa Complex Off -Site
150,000
Building Division
134,570
134,570
(15,430)
- 10.29%
155,000
5,000
103.33%
20,430
115.18%
Improvements
20,430
3.33%
15.18%
C.000899
Kaumana Drive Flood Protection
200,000
Engineering Division
418,900
418,900 @
218,900
109.45%
418,900
-
0.00%
-
0.00%
Proj. Wailuku- Alenaio Watershed
-
0.00%
0.00%
C.000962 Evidence Warehouse Mezzanine &
80,000
Building Division 155,820 155,820 75,820 94.78% 180,000 100,000 0 225.00% 24,180
115.52%
Office Additions
24,180 125.00%
15.52%
C.001031 Construction Mgmt. Svcs for
40,000
DPW Administration 40,000 40,000 - 0.00% 95,000 55,000 0 237.50% 55,000
237.50%
Reed's Island Bridge, Ka'ahakini
55,000 137.50%
137.50%
Bridge and Kahului Bridge
Improvements
C.001291 Civil Engr. Svcs. for Kalopa Sand
100,000
Engineering Division 42,806 42,806 (57,194) - 57.19% 52,946 (47,054) 52.95% 10,140
123.69%
Gulch Bypass Road
10,140 -47.05%
23.69%
$ 1,894,000
$ 2,943,084 $ 2,943,084 $ 1,049,084 55.39% $ 6,361,800 $ 4,467,800 335.89% $ 3,418,716
216.16%
3,418,716 235.89%
116.16%
5 Contract # C000939 not included as the project is a 50150 cost share between County and U.S. Army Corps of Engineers for Kaunama Drive Flood
Protection and Wailuku- Alanaio Watershed, and is federally scoped, procured and managed.
$109,000 Additive Scope - included in orignal procurement dependent on securing funds. $309,900 base + $109,000 additive
200,000 Federal + 109,900 County +$109,000 Federal funds for additive
LL{ Contract included on DPW response to auditors request for "audit population ", during review auditors noted that this contract was funded through the
general fund, rather than CIP. As contract met audit sample criteria and related to audit findings auditors did not remove from sample data.
K) C/O scope was actually submitted to a separate professional services procurement ranking process, the same vendor was ranked number one. DPW determined
it was in the County's best interest, and would save time and resources by issuing a supplement to the existing contract rather than draft and route a new
contract related to the "new" scope.
0 Contracts in excess of 110% of County's original estimated cost.
Audit Sample - Construction and Professional Services Contracts - Time Analysis
Table 5.3
Job
Contract
K
Original
Original K
Original Date
Revised K
Actual Date
Date of
Final
Days over
No.
No
Contract Title
Type
Contract $
Date
for
Date of
of
Acceptance
Payment
contract
Completion
Completion
Completion
Date
at 5/16/08
3685
C.000045
Structual ENG SVCS -West Hawaii TRF BLDG
PS
155,200.00
7/2/2004
11/5/2004
4/30/2007
open
open
open
382
B3656
C.000056
B -3656 New Warehouse Kau Hwy Bsyd Impry
C
375,000.00
8/21/2007
11/19/2007
none
open
open
open
179
8 -3574
C.000154
Hoolulu Park Accessibility Improvements
C
2,589,000.00
9/28/2004
4/20/2005
6/30/2007
open
open
open
321
C.000328
Roof RPR /REMVL ENCP Asbestos -HI Cty Bld
PS
264,477.00
5/16/2005
1/9/2007
12/10/2008
open
open
open
Professional Land Agent Services for Palani
C.000363
Road Traffic Improvements (TMK: (3) 7 -4-
PS
5,937.47
6/29/2005
1/10/2006
8/31/2006
open
open
open
624
008:065 portion o
8 -3682
C.000368
Improvements to Aupuni Center Conference
C
94,000.00
6/27/2005
1/18/2006
3/30/2006
4/20/2006
7/7/2006
7/17/2006
21
x
Room
C.000448
Mamalahoa Highway Improvements, Captain
PS
129,500.00
8/31/2005
6/2/2006
none
open
open
open
714
Cook, South Kona, Hawaii, Job No. P -3684A
Mamalahoa Highway Improvements,
C.000469
Kealakekua, South Kona, Hawaii, Job No. P-
PS
60,200.00
9/12/2005
1/31/2006
10/31/2006
10/31/2007
no
3/18/2008
365
3684B
documentation
Piilani Elderly Complex Accessibility
8 -3658
C.000505
C
305,000.00
9/30/2005
4/3/2006
6/30/2006
7/11/2006
12/4/2006
6/28/2007
11
x
Improvements
P -3678
C.000518
Palani Road /Highway 190 Intersection
C
1,071,530.00
12/1/2005
10/25/2006
10/30/2006
4/11/2007
9/1/2006
6/7/2007
163
x
Improvements
8 -3708
C.000603
KCAC Pool Pump System Repairs
C
115,230.00
2/14/2006
10/31/2006
1/29/2007
1/29/2007
3/9/2007
3/21/2007
0
S-3722
C.000641
East Hawaii Regional Sort Station
C
6,409,034.20
3/10/2006
4/10/2007
10/13/2008
open
open
open
8 -3663
C.000644
Large Capacity Cesspool Conversion Projects
C
685,420.00
3/16/2006
10/27/2006
4/26/2007
open
open
open
386
Segment No. 4
Report Analysis sheets 2006 -2007
K type C
Audit Sample - Construction and Professional Services Contracts - Time Analysis
Table 5.3
Job
Contract
K
Original
Original K
Original Date
Revised K
Actual Date
Date of
Final
Days over
No.
No
Contract Title
Type
Contract $
Date
for
Date of
of
Acceptance
Payment
contract
Completion
Completion
Completion
Date
at 5/16/08
Architectural Services for Replacement of
C.000650
Existing Built -Up Roofing at Hawaii Public
PS
162,624.00
3/29/2006
6/15/2006
9/25/2006
open
open
open
599
Safety Building A and Building B and
B -3637
C.000652
Hualani Park Accessibility Improvements
C
282,279.00
3/29/2006
6/12/2006
10/31/2006
11/1/2006
11/1/2006
10/9/2007
1
x
Environmental Assessment and Permit
C.000698
Services for Waikoloa Emergency Access
PS
27,900.00
5/11/2006
11/11/2006
none
open
open
open
552
Road
ww
C.000712
Hilo Wastewater Treatment Plant Boiler
C
139,830.00
4/21/2006
10/14/2006
11/25/2006
12/18/2006
12/11/2006
3/6/2008
23
x
3714
Replacement
Mamalahoa Highway Improvements, Honalo
C.000730
to Captain Cook (Captain Cook Intersections)
C
2,696,506.00
5/12/2006
6/18/2007
6/22/2007
6/22/2007
10/8/2007
12/14/2007
0
x
Light Detection and Ranging (LiDAR) - Puna
C.000737
LiDAR for Development of Flood Insurance
PS
221,000.00
6/7/2006
10/12/2006
none
open
open
open
582
Rate Maps
VAV-
3
C.000784
Hilo Recycling Improvements
C
395,805.00
6/14/2006
9/19/2006
9/23/2006
9/22/2006
9/22/2006
6/29/2007
-1
x
C.000854
Planning and Civil Engineering Services for
PS
1,124,150.00
7/25/2006
1/15/2008
none
open
open
open
122
Laaloa Avenue Extension
C.000890
Pahoa Complex Off -Site Improvements
PS
134,570.00
9/1/2006
4/15/2007
5/15/2007
open
open
open
367
Kaumana Drive Flood Protection Project,
C.000899
Wailuku - Alenaio Watershed
PS
418,900.00
9/8/2006
9/17/2007
9/16 /2008
open
open
open
3760A
C.000923
Puainako Center Temporary Office Relocation
C
88,541.00
10/17/2006
11/14/2006
1/2/2007
1/2/2007
3/8/2007
3/19/2007
0
x
Structural Engineering Services for Police
B -3749
C.000962
Evidence Warehouse Mezzanine Addition,
PS
155,820.00
12/18/2006
7/31/2007
none
open
open
open
290
Job No. B -3749
P
C.000964
ADA Curb Ramp Compliance Program, Phase
C
879,115.00
11/20/2006
5/14/2007
4/30/2008
open
open
open
16
3550A
II, Part A
Report Analysis sheets 2006 -2007
K type C
Audit Sample - Construction and Professional Services Contracts - Time Analysis
Table 5.3
Job
Contract
K
Original
Original K
Original Date
Revised K
Actual Date
Date of
Final
Days over
No.
No
Contract Title
Type
Contract $
Date
for
Date of
of
Acceptance
Payment
contract
Completion
Completion
Completion
Date
at 5/16/08
Construction Management Services for
C.001031
Reed's Island Bridge, Ka'ahakini Bridge and
PS
40,000.00
2/2/2007
6/29/2007
12/31 /2008
open
open
open
Kahului Bride Improvements
p -3152
C.001291
Civil Engineering Services for Kalopa Sand Gulch
PS
42,806.00
6/26/2007
10/7/2007
none
open
open
open
222
Bypass Road
19,069,374.67
x C/O or Supplement issued on or after project date of completion
Fb Project Acceptance preceeded date of completion
Report Analysis sheets 2006 -2007
K type C
CASEY JARMAN
County Clerk
Mailing ,Qures's'
(Former C oun[v llviklingi
25 : I upunl Nfree?
Hilo. Hau -ai'i 96720
May 23, 2008
Ilia Hand Delivery
Bruce McClure, Director
Department of Public Works
County of Hawaii
141 Pauahi Street, Suite 7
Hilo, Hawaii 96720
Dear Bruce:
ip e, r+
OF
County of llawai 'i
Office of the County Clerk
Telephone: M08) 961 -8255 har:sinrile: 6'iA MI -13912
IiL•'NNET1I Co. C(H) D U NO H'
lkpulk ('"Info•(krk
COL LEEW SC'HR /IND7'
I.reislrm i�• , t r�rli/rrr
lirr.xinr.xs.l i n•,,x
333 Kilauea. I n-nue. Se,-id I h o
!ten 1•m)Ai n Hialding,
INo. Ihokivi'i 4('21)
Enclosed for your review are two copies, numbered 1 to 2, of our confidential draft report. ol• the
limited performance audit of the Department ol'Public Works ('11' contract change orelers and
supplements for the fiscal year 2006- 2007. If you choose to submit a written response to our
recommendations, your comments will generally be included in the final report. We respecllully as l.
that you notify us by Wednesday, May 28, 2008, whether or not you intend to submit comment~. I r
you wish your comments to be included in the final report, please submit them net later [Ilan I:rida }.
May 30, 2008, at 4 :00 p.m.
The Mayor, Managing Director and Department of Finance have also been provided copies of the
confidential draft report-
Since this report is not in final form and changes may be made to it, access to this draft report should
be restricted to those assisting you in preparing your response. Public release ol'the report will be
made solely by our office and only after the report is published in its final firm.
Very truly yocs,
COI LEEN SCHRAN D I-
Legislative Auditor
Enclosures
xc wlenclosure: Mayor Harry Kim
Managing Director Dixie Kaetsu
Department of Finance
Serving the Inimses of file People of Our lrk nd
Ilawui'l County is an EpalOpp(m -nodiv Provider and limp /user
Exhibit 1.1
Thank you for providing us an advance draft copy of your audit report of the contracts
from our Engineering and Building Divisions provided us on May 23, 2008. We are
reviewing your findings and recommendations and will provide detailed comments as
soon as possible. After a cursory review, we would like to thank you and your staff in
identifying several ways we can improve how we deliver projects. We are always open
to finding better ways to serve the public.
Your staff's four month detailed review of our contracts has identified some interesting
findings. We wish to respect their hard work by not rushing through a five day response
so we can fully consider all their recommendations. We will be prepared to address
some of your recommendations when the audit report is presented to Council and will
submit a full response in the coming weeks.
We look forward to meeting with you and your staff on June 4, 2008 at 2:00 p.m. to
clarify a few issues we have questions about. Based on our initial review, there may be
further research needed to provide a clearer picture of our programs and procedures to
Council. We recommend that we discuss these issues before you formally submit your
report so as not to create any undue confusion about requirements of the State
Procurement Law and construction industry standards.
cc: Mayor Harry Kim
William Takaba, Finance Department
Lincoln Ashida, Corporation Counsel
Engineering Division
Building Division
Administration Division
County of Hawci i is an iqual Opportunity Providur and Employer.
Exhibit 1.2
Harry Kim
Bruce C. McClure
Nayw
D,wlvr
Jiro A. Sumada
L �
(gaut1ty ❑fPuftlail
� ty1)necrar
DEPARTMENT DE PUBLIC WORKS
Aupuni Center
101 Pauahi Street, Suite 7 • Hilo, Hawaii 967204224
(808)961 -8321 Fax (808)96] -8630
www.co.hawaii.hi.us
e-a
r�
DATE:
June 1, 2008
TO:
Colleen Schrandt
Legislative Auditor
}'
r�
r
FROM:
/Lce C. McClure, P.E.
Director
SUBJECT:
DRAFT AUDIT REPORT OF PUBLIC WORKS CONTRACTS,
CHANGE ORDERS AND SUPPLEMENTS FOR FY 2006 - 2001
Thank you for providing us an advance draft copy of your audit report of the contracts
from our Engineering and Building Divisions provided us on May 23, 2008. We are
reviewing your findings and recommendations and will provide detailed comments as
soon as possible. After a cursory review, we would like to thank you and your staff in
identifying several ways we can improve how we deliver projects. We are always open
to finding better ways to serve the public.
Your staff's four month detailed review of our contracts has identified some interesting
findings. We wish to respect their hard work by not rushing through a five day response
so we can fully consider all their recommendations. We will be prepared to address
some of your recommendations when the audit report is presented to Council and will
submit a full response in the coming weeks.
We look forward to meeting with you and your staff on June 4, 2008 at 2:00 p.m. to
clarify a few issues we have questions about. Based on our initial review, there may be
further research needed to provide a clearer picture of our programs and procedures to
Council. We recommend that we discuss these issues before you formally submit your
report so as not to create any undue confusion about requirements of the State
Procurement Law and construction industry standards.
cc: Mayor Harry Kim
William Takaba, Finance Department
Lincoln Ashida, Corporation Counsel
Engineering Division
Building Division
Administration Division
County of Hawci i is an iqual Opportunity Providur and Employer.
Exhibit 1.2