Finding - Metro listed different evaluation criteria in RFPs than what it used to evaluate consultants' proposals.
Finding - Metro significantly and materially altered the scopes of work of two of the 52 contracts reviewed by using change orders to add new work.
Finding - Metro overused the sole source contracting process and often awarded sole source contracts retroactively.
Finding - Metro awarded seven contracts without clearly defined scopes of work, possibly to overcome the appearance of a conflict of interest.
Finding - Metro lacked well-documented processes to support consultant selection and to determine whether increased contract amounts were justified.
Finding - Certain procedures were inadequate to ensure that consultants performed work only under legally executed contracts.
Finding - Certain procedures were inadequate to ensure reasonable and accurate expenditures for professional services contracts.
Finding - Metro did not fully comply with a resolution specifying minimum criteria for evaluating professional services contracts proposals.

INTRODUCTION AND BACKGROUND

Metro used professional services contracts to acquire expert, technical, and professional services when work could not be performed by Metro staff on a timely basis, was not routine, or required specialized expertise that was not available among Metro staff.

The audit was limited to a review of a sample of 52 active professional services contracts awarded by Metro between April 1987 and June 1994. The sample was stratified by four categories:

1. contracts under $35,000;
2. contracts over $35,000;
3. sole source contracts; and
4. contracts reserved for minority or woman-owned business enterprises (MWBE).

The audit did not include a determination of the need for the services procured.

Audit staff found that Metro inconsistently evaluated consultants' proposals for professional services. This deficiency resulted from:

• using different evaluation criteria than what was specified in the RFP;
• inconsistently using weights and numerical scores or adjective ratings (e.g., outstanding, above average, average, below average, unsatisfactory) for the evaluation and selection criteria;
• not requiring consultant selection board members to perform independent evaluations of each proposal received; and
• using a subjective balloting system to select consultants.

The audit recommended that the Department of Finance develop and implement policies and procedures for the authorization, selection and use of consultants which:

• require RFPs to specify the proposal evaluation criteria and their corresponding weights;
• identify the maximum amount of weight to be allotted to the oral presentation process or the process to use for adjusting written proposal scores affected by the oral presentation;
• require selection board members to independently complete evaluation forms for each proposal using numerical scores supported by written comments; and
• require consultant rankings to be based upon mathematically-calculated scores resulting from the independent evaluations performed by the selection board members.

Finding II-B. Metro significantly and materially altered the scopes of work of two of the 52 contracts reviewed after they were awarded, thereby compromising the fair/ open competition and equitable/economical contract award objectives of the public procurement process.

Although Metro's project management guidelines for using change orders required that change orders be issued only when the changes were within the scope of work of the contract, audit staff identified two instances where change orders significantly and materially altered the original scopes of work. In one instance, the initial contract amount was increased by over 64%, from $942,000 to $1.54 million, due to a change in scope and the need for additional similar services. In the other instance, the initial contract amount was increased by over 2100%, from $4.5 million to $97 million, primarily due to changes in the scope of work.

These changes allowed Metro to bypass the competitive procurement process by using existing contracts to procure new work. Additionally, Metro routinely set aside a 10% contingency to contracts awarded that was used for unanticipated and additional services. These contingencies effectively established a procedure for bypassing the competitive procurement requirements for additional new work.

The audit recommended that the Department of Finance develop policies and procedures to disallow change orders that add services outside the original scope of work, establish criteria for determining when a change order may be issued and when resolicitation is necessary, establish responsibility for enforcement of the policies and consequences for willful violations of the policies, and disallow the practice of automatically setting aside contingencies for contracts or establish guidelines for appropriate use of contingencies. The audit also recommended that managers and/or supervisors be provided training regarding the established policies.

Finding II-C. Metro overused the sole source contracting process, often awarded sole source contracts retroactively, and did not adequately justify using sole source as required by the Metro guidelines for selecting consultants.

Metro's procedures generally discouraged the use of sole source contracts and stated that they should only be used when the service to be provided was of such a unique nature that only one person or firm was clearly and legitimately available to provide the service. However, audit staff found that Metro awarded sole source contracts more than any other contract type, with 153 (34.5%) out of 444 contracts awarded being sole source contracts. Metro frequently awarded sole source contracts retroactively, and the justification for awarding sole source contracts did not meet the criteria established in Metro's guidelines for 66% of the contracts reviewed. These deficiencies caused Metro not to meet the objective of open and fair competition for public procurements.

The audit recommended that the Department of Finance establish policies and procedures to disallow retroactive awards of sole source contracts, develop a sole source checklist to justify using sole source contracts according to the established criteria, and establish consequences for willfully entering into sole source agreements without first obtaining the required approvals.

Finding II-D. Metro awarded seven contracts without clearly defined scopes of work, in what appears to have been an attempt to overcome the appearance of a conflict of interest.

Audit staff identified an instance where Metro awarded a contract to each of the seven firms that submitted proposals, including four firms that were not finalists and had not participated in the oral presentation process, after some Metro staff questioned the propriety of awarding a contract to the top-ranked firm due to a possible conflict of interest. At the time of the contract awards, Metro did not have a conflict of interest policy; however, the question of a possible conflict of interest arose because a senior vice-president for the top-ranked firm had resigned as Metro's Director of Technical Services approximately five months prior to the proposal submittal date.

Audit staff also question the award of the seven contracts because:

• Metro staff stated that they did not know what their "real need" was;
• the scopes of work for each of the contracts were not defined until two months after the contracts were awarded;
• the scope of work for one of the contracts was essentially identical to that developed by one consultant in an unsolicited proposal submitted to Metro approximately five months prior to the contract awards; and
• one contract was awarded to a firm that was already providing the same services for the same project through another contract.

The audit recommended that the Department of Finance establish policies and procedures to require all contracts to include language prohibiting former Metro or County employees from working on any contract or subcontract with King County for 12 months after terminating their employment, require RFPs to clearly define the tasks to be performed, and require procurement staff review of scopes of work or proposed changes to the tasks to be performed prior to issuing RFPs or change orders.

Finding II-E. The lack of well documented consultant evaluation, selection, and negotiation processes made it difficult to determine if the consultants selected were the most qualified or whether change orders to increase contract amounts were justified.

Audit staff found that the consultant evaluation, selection, and negotiation processes were not well documented. The required proposal evaluation forms were seldom used, and in those instances where they were used, they were usually incomplete, making it difficult to determine the basis for ranking the consultants' proposals. Minutes of the consultant selection board meetings and oral presentations were not prepared.

Additionally, the contract price negotiation process was generally not well documented; and in several instances where the RFP file indicated that negotiations for hourly rates had taken place, those rates were not specifically incorporated into the contracts awarded. This deficiency made it difficult to determine whether subsequent contract change orders were justified.

The audit recommended that the Department of Finance develop policies and procedures to require:

• selection board members to independently complete evaluation forms for each written proposal and oral presentation and substantiate each numeric score with written comments, and that these completed forms be retained in the official contract file;
• that minutes of selection board meetings and consultants' oral presentations be prepared and retained in the official contract file; and
• that the contract negotiation process be documented and retained in the official contract file and the basis for contract payments be included in the professional services agreement for each contract.

Finding II-F. Metro's procurement administration procedures were inadequate to ensure that consultants performed work only under legally executed contracts.

Audit staff found that the sequence of events outlined in Metro's guidelines for awarding contracts was not followed. This resulted in contracts not being signed until after the contract effective dates and change orders to extend contract performance periods being issued after contracts had already expired. These activities can create uncertainties regarding legal risks and liabilities by allowing consultants to perform services without legally binding contracts.

The audit recommended that the Department of Finance develop policies and procedures to specifically disallow the establishment of contract effective dates that precede contract approval dates, require change orders extending contract performance periods to be issued prior to the existing contract expiration date, and establish consequences for willful violations of the policies and procedures.

Finding II-G. Metro's procedures for awarding contracts and reviewing invoices were inadequate to ensure that expenditures for professional services contracts were reasonable and accurate.

Audit staff found that many of Metro's professional services contracts were awarded on a cost-reimbursement basis without built-in incentives for consultants to control costs. This resulted in consultants being reimbursed for expenses, such as travel and meal costs, that exceeded the amounts that would have been allowed for Metro employees under the same conditions.

Additionally, audit staff found that the procedures for reviewing contract invoices were inadequate to ensure that billing errors were identified prior to payment of invoices containing such errors. This resulted in Metro paying inaccurate invoices without identifying the billing errors.

The audit recommended that the Department of Finance establish procedures to monitor and disapprove claims for excessive consultant costs on professional services contracts and that boiler plate language be included in all contracts awarded on a cost-reimbursement basis to limit travel and other personal expenses to the amounts allowed for King County employees. The audit also recommended that employees responsible for paying invoices be trained regarding the types of expenses allowed and how to verify the accuracy of invoices, and that Audit Services conduct invoice audits for professional services contracts after receipt of the final invoice to ensure that contract overpayments are identified and recovered.

Finding II-H. Metro was not fully in compliance with resolution 6215 which specified minimum criteria to be considered in the evaluation of proposals received for professional services contracts.

Audit staff found that the proposal evaluation criteria listed in Metro Resolution 6215 were not always used to evaluate consultants' proposals. In an audit staff review of 12 contracts for which the seven evaluation criteria listed were required to be used, three criteria were always used, one of the criteria was never used, and three of the criteria were sporadically used.

The audit recommended that the Department of Finance develop a list of evaluation criteria to be used to evaluate consultants' proposals received in the future, and that it develop evaluation forms containing the required evaluation criteria along with policies and procedures requiring the forms to be used for evaluating all proposals received for professional services contracts.

Updated: 06/24/02