An audit of a selected construction contract was included on the Council-approved FY 2020/21 Audit Plan. The audit of Fire Stations Construction Contracts reviewed a series of construction projects funded by the voter-approved 2015 Bond, were selected for this year’s audit. Specifically, these contracts related to construction of fire stations 603 in McCormick Ranch, 613 in Desert Foothills, and 616 in Desert Mountain. At the time of the audit, Stations 613 and 603 had been completed, and Station 616 was still in progress.
The Public Works division’s Capital Project Management (CPM) department, in collaboration with the Fire Department, managed these projects. CPM used a Design Bid Build project delivery method, contracting with an architect to design the fire stations and produce construction documents that were then used to request competitive contractor bids. The construction contracts were structured as lump sum contracts, awarded to the lowest qualified bidder.
Overall, the audit found that the CPM inspection team was thorough in monitoring construction quality and progress. However, some aspects of contract and construction administration could be improved.
First, construction-phase service contracts could be more consistently managed to minimize unnecessary costs. After design, the architect is also contracted to provide construction-phase services such as reviewing contractor submittals, providing clarifications about the construction plans and specifications, and performing field inspections. The scope of work for these contracts varied from project to project and some included tasks may be unnecessary or may duplicate work performed by CPM staff. Additionally, these construction-phase services were typically added on to the design contract as change orders, but City Manager approval was not obtained as required by Procurement Code. And, in one instance, the change was split into a separate smaller contract, avoiding the threshold requiring additional authorization. The audit also noted that including these services in design contract negotiations would improve transparency and may more effectively control costs.
Second, the audit found that updated and more complete policies and procedures would help ensure contract terms are consistently applied. For example:
- Construction contracts and CPM policies and procedures do not define the “Force Account” contingency amounts added to the contractors’ bid amounts nor the process for using these funds. As a result, inconsistencies were observed in how the use of these funds was authorized and documented.
- Substantial Completion certificates were not issued, and actual practices for project completion and closeout differed from the requirements described in the contract.
- Contractor time extension requests were not required to be submitted when delays occurred.
- In the design phase, design process monitoring activities may not have been performed or were only partially performed.
The audit recommended that these procedures be clarified or enforced to more consistently monitor design quality and timeliness. The audit also made recommendations to update outdated policies and procedures manuals and more consistently maintain project documentation.
The department agreed with most recommendations and plans to implement changes by December 31, 2021.