It did turn out to be a performance audit which meant they were not looking for anything illegal but rather asking was the district doing its job for construction management of BEX projects.
There's an awful lot I could report but I think I'll just give the highlights for now and a separate thread on Board reaction and reflections. The audit is not yet available to the public but I will post it when it does.
All the Board, except Kay Smith-Blum, were in attendance along with the head of Facilities, the Superintendent, the COO, two district legal counsels and the head of BEX Oversight Committee (the volunteer committee made up of construction and property management professionals - they tend to be less about oversight and more about basic questioning).
This audit was done in support of Initiative 900 which gives the State Auditor the authority to conduct performance audits of government agencies. They look for:
- identification of cost savings
- services that can be reduced or eliminated
- programs or services that can be transferred to the private sector
- analysis of gaps or overlaps in programs/services and recommendations
- technology issues
- analysis of roles and functions of the entity and recommendations
- recommedations for statutory or regulatory changes that may be necessary
- Analysis of the entity's performance data, performance measures and self-assessment
- identification of best practices
Did the Seattle Public School establish and follow sound processes to effectively
manage the BEX construction projects?
manage the BEX construction projects?
The answer comes in two parts (but not in the same place so you have to read the audit carefully to catch it). This answer completely follows Charlie's thoughts on the fact that the district says they "create, establish, form" etc. which are non-action words. So the audit says in one place:
The District developed sound policies and procedures for guiding the management of these projects that addressed most of the leading practices of the construction industry.
Note that word "developed". So yes, the district, according to the objective, did "establish" processes. Now, did they actually follow all those processes?
In another place it states "However, the district did not always follow its policies and procedures, which increased the risk of cost increases and time delays." They continue by saying:
"It is difficult to determine the precise impact of these weaknesses on the overall cost and timeliness of the BEX program. The inherent difficulty of renovating old and historically significant buildings and rapid inflaiton during the construction period also affected the District's ability to keep the projects on time and within budget. However, we believe the failure to fully comply with internal processes to control and manage the construction effort negatively affected BEX costs and results."
Scope: It covered from July 2005-June 2008 and they selected 7 projects and 15 contracts to examine.
"Altogether we audited $38.3M of the $280.9M the district spent on the seven projects as of June 30, 2008. More than 62% of the activities we audited were contract modifications and change orders."
Some of the district's contention in the audit is that since 2008, they have instituted some changes that addresses issues in this audit. They may have but the Auditor said that while their office acknowledges that the district has said this, they did not cover those changes in this audit and so have no comment.
The projects covered were Roosevelt, Garfield, Cleveland, Denny/Sealth, South Lake, Hamilton and Hale. (Keep in mind that some of these were not finished by the end of 2008 and so their costs - and mistakes - are not final. For example, the Garfield costs stop at $108.9M which we all know is far below the district's stated $120M. One good thing the audit does include is the original levy estimate for Garfield that was in the levy statement; $60.9M.)
The Auditor generously acknowledged that during the time period of the audit that there was severe construction inflation coupled with BEX's ambitious construction costs. There were also challenges in renovating historic buildings. (This district, unlike most other districts, moves students out to interim buildings. Most districts build on-site as they are doing at Hale. It takes longer and can be hard on a school but then you don't run into what SPS runs into which is a "get it done, no matter what" because they need the interim building for the next school.)
- There was one large point that seems to be quite the bone of contention between the Auditor's office and the district (although the meeting was quite genteel so no one really challenged each other on this one in public). That is that the Auditor's office (on page 8) goes into detail to explain how the district did NOT provide all the documents and records requested, the district, in their response, says they did. What makes this interesting is that the Auditor explains, in detail, how the district was slow in getting documents out, didn't give all the documents requested, subjected the Auditor's office to delays as the district had extensive technical reviews of early audit findings and got threatened with a lawsuit by one of the district's contracted construction management firms. Nothing like a lawsuit to slow things down. The issue here is that some documents were not in the hands of the district and getting them from other companies was an issue.
- The Auditor lauded good things the district did on page 15 like establishing guidelines for managing projects,hiring a qualified, experienced construction manager, using standard contracts and evaluation and selection procedures for architect/engineer proposals.
- Hilarious irony. The audit says that the district doesn't have a way to "maximize opportunities for minority and women-owned businesses to compete for public contracts." That's true but hey, remember the audit from July 2010? It turns out after the scope of this audit the district DID establish a program like that but ended up screwing it up so badly that they and just had to return $2M from the General Fund back to Capital. So I guess it's back to the drawing board.
- There are not formal performance evaluations and measures for architects and engineers and with the construction manager. The district says that the district and BEX managers met with them weekly so they didn't think formal evaluations were necessary (and their meetings not documented). "Such provisions help ensure that contractors have a clear understanding of what they are expected to accomplish and what actions will be taken if they do not meet those expectations."
Here's where you see a pattern of recommendations:
- we recommend the Superintendent provide the School Board all contract modifications and change orders the School Board is required to review under Board policy.
-management should monitor change orders/contract mods to ensure they have not been split into smaller amounts.* Management should deny approval of those that have been split to avoid management or School Board scrutiny.
* Board policy says anything over $250K, the Board has to approve. But how annoying is it to have to go to the Board - why not just split them into separate items that are less per item and it's not over $250k? Yes, that's what BEX staff had been doing - multiple times. The district says they stopped and all BEX staff know now not to do this. Oh. Staff told the Auditor staff about going to the Board that it 'was not considered an effective use of the Board's time." Minding the money? Yes, it is.
- We recommend the Superintendent provide the School Board with fully negotiated contracts for review and approval, including complete information of the work to be performed. Staff entered into 3 contracts without approval (for sums between $80k and $212k). Staff called these "interim contracts" which I'm not even sure is legal.
- We recommend the Superintendent provide the Board with timely communication of major project changes and other cost increases to allow the Board to consider and act on them. This was particularly egregious.
Item: BEX Management did not inform the School Board of $1.7M in additional work to excavate bedrock from Cleveland High School until eight months after BEX management was notified by GCCM and after the district had spent $954,395 on the effort.
Item: BEX management did not tell the Board of the nearly $2M in additional costs for the Roosevelt HVAC until four months after the construction manager notified BEX management. The district admits this ended up costing a lot more money when it was supposed to save money. (And the HVAC at RHS never worked properly from Day One and yet we still had to pay to fix it AND pay a $454k settlement.)
Item: There were at least $919k worth of changes at Garfield because of a lack of an architectural contract clause about added work (and that's only by the end of 2008).
It was difficult to figure out how much money (both in time and resources) was lost but looking over what was cited, it looks like about $2M. That's just out of the $38M they audited, not the entire BEX II program.