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Monday, January 31, 2011

Reflections on the Construction Management Audit

Charlie posted the district's news release on the audit. I always enjoy the minimizing that goes on in these things. One of the most clearly called out issues of the audit was lack of Board oversight of BEX spending to the point where the Board was not even being told about spending. What does the press release call it ( in the middle of a paragraph):

"...communications with the Board..."

Like staff forgot to send the Board an e-mail.

So what did the Board have to say? At first, when Steve asked for comments or questions, there was dead silence. That wasn't a good sign. He then handed the microphone over to Michael DeBell, noting that Michael was the only current Board member who was on the Board serving during the audit time period. Michael pointed out that there were 3 different Boards over the time period. Then Michael started something I thought I would see from other Board members but not him.

He started the CYA period.

He asked the auditors to expand on the challenges the district had because of inflation, etc. One auditor pointed out a story where a contractor had refused to do any more work (for 3 months) because the contract negotiated wasn't fair because construction inflation had gone up so much. They also mentioned how the problem of bedrock found under Cleveland was exacerbated by the bad weather that year. But the auditors really were not taking the bait on the question.

(One thing I find so deeply troubling about BEX is that when they encounter problems with historic building remodels, they never think of scaling back. Why, if you are out a couple of million early on, do you not figure out how to scale back? It never happens.)

Michael then went on to explain how multi-layered the work is to get to Board approval so there is a time lag.

Really? Okay, then the solution is to find out how - for capital projects - to speed up that approval work chain, NOT to sluff off Board oversight responsibility.

Peter asked, "Stepping back, did you find sufficient cooperation with staff?" The answer was "Absolutely." Of course, the auditors were gracious enough not to add "cooperative but slow" which is what it looks like from their audit report.

Betty asked a question about the amount of modifications and money "wasted." The auditor stated that these construction modifications are normal and happen in every project. But she said that they need to be monitored and, of course, since it involves money, there should be oversight.

Sherry asked a good question about the terms that the auditors use like "findings, issues, etc." She asked if they were "structurally" different. The auditors smiled and said sometimes the terms are interchangeable and they are trying to standardize them.

Steve asked about the issue that since 2008, the district has stepped up to changing some of its policies. The auditor said that it is great the district is being proactive but this audit doesn't cover them so they have no comment on them.

DeBell asked about other districts and how we compare on this audit. He referenced the Port of Seattle (!) audit. The SAO wasn't buying what he was selling. They said this was really the first school district construction audit done. She said there were no obvious comparables and that in these fiscally challenging times "every single dollar matters." This seems to be lost on our district.

There was some CYA from Don Kennedy about blah, blah following the Council of Great City Schools recs and the Superintendent thanked the SAO.

That's was it.

Do I think the staff will never again try to hide, minimize or put off telling the Board about BEX issues? I do not. It's not their way and all the "changes" put it place won't change that.

I am deeply disappointed at the Board's reaction. For one, it was about covering the district. "We're not so bad." "We'll do better." (Read the district's response to some of what the auditor put forth and ask yourself if this sounds like people who want to change what they are doing.) It's up to the district to cover it actions itself.

The Board is supposed to represent the parents of SPS students and the taxpayers of Seattle. The Board is supposed to be looking out for the money. The Board is supposed to say something like this:

I am deeply disappointed to learn that staff has not been clearly communicating in a complete and timely manner with the Board on issues that are our fiscal duty. It is my intention to communicate to the Superintendent and appropriate staff that this is unacceptable because of my oath of office and my duty to those who I serve. Going forward I will not accept it happening again.

That's it. No chest pounding, no finger wagging, no name calling. Just a pronouncement of disappointment and a clear expectation that in the future, none of that will be tolerated.

So who is it that is in our corner, watching out for the taxpayers?

Judging from their questions to the audit staff, it's not the Board.

8 comments:

cascade said...

Linda Shaw of the Seattle Times has gotten a bit less passive in her recent SPS coverage. Her audit story is not a regurgitation of the happy SPS press release.

Kate Martin said...

We need to look at the 2x (or more) factor when it comes to the unknowns of remodeled schools. We don't have another $50M to throw at change orders for these projects. For the SAO to say only $1M was mishandled in capital projects doesn't communicate accurately that a single project, Garfield, went sideways over budget - 2nd most expensive high school in the state according to Wikipedia. I was testifying during that period to the lack of accountable CM as the massive number of change orders rolled in. That gym floor deal was foreseeable completely. The vintage of that building did portend many of the problems. A lot of the building happened ca. 1929. My understanding is that it was caught in a riptide as the bottom fell out thus many corners were cut. Everyone apparently knew that going into the remodel, so the change orders were sort of a wink and a nod - gee this happened - yet everyone kinda knew it would so there were no authentic surprises, just feigned ones.

Jan said...

Kate: very interesting post. I had no idea that had happened in the original GHS building.

It seems to me that a big chunk of this is "culture" stuff -- the same sorts of corporate culture problems that Boeing dealt with last year, where the "culture" rewards the "yes" men. The ones who say -- we can make it happen, when their better judgment tells them -- no, it won't. It is a common problem, but one that has to be addressed if the Board and the Supe want better results. At Boeing, when the Dreamliner fell off the 2010 delivery schedule altogether, they hired a firm that specializes in "reteaching" a new culture. Obviously, that is not in the District's budget, but they need to do the "dollar store" version of that. No one person can turn this kind of a culture problem around. It takes total group buy in, reteaching of those who "input" the data (to tell the hard truths -- and to have confidence they won't be fired for it) and reteaching of the management, so they don't punish truthtellers, and don't set up a system where they plug the number, and then just "demand" that the staff get them there -- because they will, but it will all be lies and "wishful thinking."

It is one thing to not know (either because no one would, or because you aren't good enough at your job to ask the right questions and get the right data). It is something else when the staff/contractors really DO "know" -- and just don't tell.

Anonymous said...

Not to be argumentative Jan, but I think you just lop off some heads and the rest of the "group" buys in real quick. I think most people want to work in an ethical workplace.

Yes, unfortunately the SAO accepted too quickly the "perfect storm" of inflating costs and remodeling money pits. I was working on a project about six times the size of Garfield around that time frame. Certain commodities were escalating, but well written contracts provide for some renegotiation based on % increases in industry cost indices.

Frankly, we did not get our money's worth. Hiring CMs PLUS GC/CMs is a bit of overkill. Get some quality plans and specs and hard bid the straightforward jobs next time. Or do as some districts have, develop some off-the-shelf designs/performance criteria and go design-build. I want my child to have an experienced caring teacher in a safe school, not in the Taj Mahal.

grumpy

cascade said...

Phyllis Fletcher calls it like she sees it!

Seattle School Superintendent Maria Goodloe–Johnson says it was "unacceptable" when school district staff broke policy to pay cost overruns in school construction projects. The Washington state auditor's office broke the news to the Seattle School Board Monday night. KUOW's Phyllis Fletcher reports.

TRANSCRIPT

Auditors for the state presented a draft report on district management of construction projects from 2005 to 2008.

Stewie Griffin from the TV cartoon "Family Guy" would call it:

Griffin: "The 'compliment sandwich.' Where I say something good, then talk about where you need improvement, and then end with something good. OK! Um, oh, let's see, something good, something good, something good."

Adams: "Overall, we found that the district had appropriate construction management practices."

That was Lou Adams with the state auditor's office.

Griffin: "Where you need improvement."

Adams: "Although we did find that the policies and procedures were generally sound, we did identify some opportunities to strengthen those policies and procedures."

District staff avoided asking the school board to approve big–ticket changes by divvying them up into smaller ones, 31 times. They told the school board about other multi–million dollar construction problems after money had already been spent to fix them. They signed contracts they should not have signed without board approval. All in violation of district policy, and it cost the district $1.2 million.

The auditor says the district could have saved another $1.2 million on interior design work that was not put out for competitive bid.

Griffin: "Something good, something good."

A board member asked how to make sure the district doesn't waste money this way again.

Adams: "The district has taken a very proactive approach to that already."

With new policies, and a training session the auditor called "lessons learned." This report follows an audit last year that dumped on the district. That was when the state auditor first said the board had to make sure the district followed the law. The tone of this report was different, but it demonstrated a pattern. That staff repeatedly avoided board approval of large–ticket expenditures on construction projects paid for by Seattle property owners.

I'm Phyllis Fletcher, KUOW News.

© Copyright 2011, KUOW

cascade said...

So does The Stranger.

Audit Says Seattle Schools Could Have Managed Construction Projects Better
Posted by Riya Bhattacharjee on Tue, Feb 1, 2011 at 6:30 AM

After the thrashing it received from the state Auditor's Office for mismanaged finances last year, a new audit released Monday (.pdf) says the Seattle Public Schools needs stronger oversight over its school construction projects.

The audit found that although the district had proper policies and procedures in place to manage its capital construction projects, there were times when more rigorous monitoring would have resulted in less tax dollars being wasted. For example, the audit found that district staff sometimes bypassed required approvals, didn't adequately justify change orders, overpaid invoices, and kept incomplete records. Consequently, the audit says, the district ended up spending $1.2 million more than it should have for seven different projects out of the $38 million that was audited.

Surprise discoveries like a glacial erratic (referred to as bedrock in the audit report) under a construction site at Cleveland High School didn't help either. Dismantling and removing this rather large chunk of rock cost over a million dollars and delayed construction by months, said School Board Director Michael DeBell.

Principal Auditor Lou Adams said that it was difficult to pinpoint what the lack of oversight might have cost the school district because of the effect of inflation on construction budget and timeline. The audit recommended that the superintendent provide the school board with contract modifications and change orders and inform them about major project changes in a timely manner. In its response to the audit, the school district said that it had already taken some steps to address the audit's concerns. "We still have more work to do," Superintendent Maria Goodloe-Johnson said at a meeting with staff from the State Auditor's Office yesterday, adding that it was unacceptable that district staff had failed to follow district practices.

The audit, which spanned three years (2005 to 2008) is the first construction-management audit carried out by the Auditor's Office. Community members will get a chance to comment on it Feb. 16. The school district is expected to report on the status of the audit's recommendations by July.

Patrick said...

When the Supt. says "unacceptable" does that mean she has not accepted it, i.e. the person responsible is no longer employed by the district?

I don't think a reprimand would cut it for deliberately circumventing the Board.

mirmac1 said...

She says alot of things she doesn't really mean, like everyone accountable blah blah