King County Auditor Cheryle Broom presented her recommendations and findings to today’s meeting of the Council’s Committee-of-the-Whole. Her audit evaluates the management of contracting processes, including contract amendments, for Brightwater design engineering services by the county’s Wastewater Treatment Division (WTD) of the Department of Natural Resources and Parks. The audit also assesses the cost effectiveness of WTD’s contracting methods for design and preconstruction services.
“The audit recognizes WTD’s proactive efforts to identify significant cost savings during value engineering,” wrote Broom. “However, the audit also found opportunities to improve contract management and that WTD’s management of the final design contract amendments and associated change notices did not fully comply with countywide policies, internal WTD procedures, or industry best practices.”
Among the Auditor’s findings:
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Contracting methods used for the final design phase of Brightwater did
not contain provisions to control design project costs, or maximize
opportunities to control costs, consistent with industry best practices.
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WTD could not ensure that the county received the most cost-effective
design engineering services for Brightwater, leading to design costs
that were $13.4 million over the initial contract amount of $41.5 million.
The 32 percent increase exceeds the project’s 10 percent contingency
and exceeds industry averages. The audit findings related to design
costs exceeding industry averages are consistent with earlier conclusions
reached by R.W. Beck, the Council’s Brightwater Oversight Management
Consultant.
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Some extensive and costly design additions and modifications contributed
to the higher design costs and to a 10 month delay of the scheduled
completion of the treatment plant’s final design.
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WTD’s practice of amending the contract to provide engineering
services for non-treatment plant design work also contributed to higher
costs. This practice also makes it difficult to track actual project
costs as well as to measure and report actual project performance to
elected officials, who will ultimately be held accountable for the Brightwater
Project.
- WTD could improve the cost effectiveness of its contract amendment practices by adhering to county policies, its internal procurement procedures, and best practices for capital project management, monitoring and reporting. County policies could also be strengthened to incorporate recognized industry best practices and to promote improved agency compliance.
The Auditor noted that the design of the Brightwater treatment plant is a particularly complex project that has been managed by a highly-experienced and diligent WTD project team, and that many cost drivers are not under WTD’s control.
The Auditor also made seven recommendations to promote cost-effectiveness and accountability for the treatment plant contracting practices, including:
- WTD
project managers should adhere to all county policies and procedures
for managing capital project contracts and contract amendments, in particular
the review and approval of contract amendments over $150,000 and/or
10 percent of the original contract value or work that outside the scope
of the original scope and project budget.
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Management should ensure that work on contractual design additions or
revisions to the original scope of work does not proceed without fully
executed and authorized contract amendments.
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Collaboration between Wastewater Treatment and the Procurement and Contracting
Services Section in the Department of Executive Services to strengthen
county policy to include recognized industry best practices, and to
allow for potential adjustments or limited exceptions.
- Development of county guidelines for the use of unique contracting methods to maximize opportunities for cost-effective design and construction of capital projects.
In a written response to the audit, the County Executive’s office generally concurred with the Auditor’s recommendations, while disagreeing with some of the audit findings. The Auditor reported that WTD and the Procurement and Contracting Services Section have already begun implementing a number of the recommendations, including refining countywide capital procurement and contracting policies to improve the efficiency and cost effectiveness of capital project implementation.
“Brightwater is the largest public works project in the history of King County, and it is vital we keep an eye on the bottom line,” said Councilmember Larry Gossett, chair of the Committee-of-the-Whole. “If there is an increase in cost, we have a responsibility to the ratepayers of King County to find out why and to ensure that the increases were justified and could not be avoided.”
“Oversight is one of the primary roles of the legislative branch,” said Council Chair Larry Phillips. “Cheryle Broom and her staff have identified opportunities to strengthen the management and oversight of this project to make it more cost effective. Our current wastewater treatment system is near capacity, and we need to ensure that Brightwater comes in both on time and on budget.”
This performance
audit is the second study of the Brightwater project performed by the
office of the King County Auditor, an independent agency that reports
to the King County Council. The first focused on procurement practices
for professional design engineering services. Brightwater will be King
County’s third wastewater treatment plant, and is expected to be
operational in 2010.
Phone: (206) 296-1000 | Fax: (206) 296-0198 | TTY/TDD:
(206) 296-1024 | Toll Free: (800) 325-6165
Mailing Address: King County Courthouse, 516 Third Avenue, Room 1200,
Seattle, WA 98104-3272