Port of Seattle State Auditor Report Responses And Action Plan
July 7, 2008 The table below addresses 51 recommendations submitted to the Port of Seattle following the Washington State Auditor s Office report focusing on Port ’ construction practices. The first two recommendations, shown in blue (OA1, OA2), are overarching for the Port in general, and others, numbered 1 49, are specific to construction and contracting practices. The latest activities, listed under Action Steps, will be shaded orange, and then green as they are completed. Use the search feature to navigate through the document. Overarching Recommendations Latest Activity Action Completed
RECOMMENDATION PORT RESPONSEACTION PLANNEDESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS OA1. The Port should Strout 6/1/08The Port agrees this Port Chief Executive Officer (CEO) directed LindaOA1.a. In November 2007 the Port obtained the services of an outside establish a senior-levelrecommendation has merit. A Deputy CEO Port staff to review options and best practicesextensive procurement expertise who led a planningfacilitator with Chief Procurement and work is lace,team is in stems, s rocurement for and recommend onsibilities,rocess that defined roles, res osition and related Officer (CPO) position.already underway to identify organizational and process change to CEOdescriptions for the new Central Procurement Office. In addition, CEO This official should reportand evaluate procurement March 15, 2008. byTay Yoshitani began the process of establishing a Capital Development directl to the Port CEO anizationsmodels in other or to desi nedDivision to oversee the Central Procurement Office a ste and be res onsible for a e in ma orthat en in a more robust manner than rocurement racticesovern the Port’s managing and overseeing facilitator with extensive Outside OA1.a the Withconstruction projects.what is included in the recommendation. all rocurement-related ertise hired inhel of an outside facilitator rocurement ex activit . This official in caex erienced 2007. ro ital November ect hOA1.b. December 20, 2007 throu March 8, 2008 the Internal should have authority todelivery, the team is reviewingProcurement Team was assembled by the Deputy CEO. hire trained andand analyzing several options OA1.b Internal Procurement inde endent rocurementfor mission, role, ersonnel, Recommendation Team assembled March 8, 2008 the Internal hOA1.c. December 20, 2007 throu officials who will be December 2007. Team includes in and location,re ortinProcurement Team met weekl . charged with reviewing from majorstructure of a Chief representatives and a rovin all centers within the Port. orProcurement Office rocurement similarOA1.d. On March 15, 2008 the Central Procurement Office functions, rocurement-relatedfunctional unit over the next sufficientl defined and a ob descri tionres onsibilities, and staffin were transactions. Current Recommendation Team Procurement OA1.c Port’s Theseveral weeks.for a Chief Procurement Officer was prepared. delegations of authorityCEO has asked the team to meets weekly. related to rocurement rovide him with an outline of interim ChiefOn March 19, 2008 Dwa ne Lee was a ointed contract awards, a rovalo tions and a referred Im functional centralized lement rocurementProcurement Officer and the Central Procurement Office was made of contract changes and office.recommendation within 90functionally active on March 20, 2008. amendments, and related necessar eriodda s. A of activities involvin advertise, tion, descri are ob Pre OA1.d lannin willim lementation and advertised for osted was tion descri ositionOn March 21, 2008 the expenditure of publicfollow, but the CEO anticipates and select Chief Procurement Officer.a permanent Chief Procurement Officer. funds related tothat the new unit or construction andde artment erational can be o Com OA1.e necessar lete or anizationalOn Ma rocess of interviewin 7, 2008 the for a Chief Procurement construction management logistics. working Theby June 1, 2008.Officer was completed. should be rescindedteam includes representatives and re-assi ned to thefrom the Port’s executive,On June 12, 2008 the new Director of the Central Procurement Office, CPO and her or his staff.legal, project management, A licensed attorney, Ms. Huey hasNora Huey, was announced. engineering, and purchasing Her firstsignificant experience in contracting and procurement practices. staffs.da of work will be June 30, 2008. 0A1.e. On February 28, 2008, CEO Yoshitani announced the creation of the Ca ital Develo ment Division to oversee the Central Procurement Office as well as existin en ineerin and construction functions with in the organization. On March 20, 2008 the Port functionall established a Central Procurement Office and consolidated procurement functions and activities within this new organization. A ril 7, 2008 throu h Ma 5, 2008 the or anizational lo istics, roles and responsibilities of the Central Procurement Office were announced Port wide via email.
RECOMMENDATION PORT RESPONSEACTION PLANNED
OA2. The [Port] On CommissionersJanuary 8, 2008, the Port CommissionResolution 3181 is the Commission should re-structural framework a subcommittee to review the established Davis/Tarleton evaluate the current currentl relationshi dele ation of Commission authoritunderl in the Dele ation of Authorit to in Resolution 3181. describedbetween the Port Commission the [Port] CEO Resolutionand the CEO. encom assed in Davis and Tarleton OA2.a Commissioners in 1994. It3181 was ado ted Resolution 3181 and will serve on the subcommittee.has remained substantiall develop and issue a newunchanged for the past 13 Delegation of Authority may retain outside Subcommittee OA2.b only one ofyears. However, resolution that more erts. exthe five Commissioners who clearly defines thevoted on and signed Commission’s intent withResolution 3181 remains in OA2.c Subcommittee will report back to full res ect to construction Commission of CEO ro withoffice. A e chan osed mana ement and b June ear. amendments 30, 2008.occurred earlier this reporting to theGiven these circumstances, it Commission and the that the riate rois a rovide directed Port staff to review and CEO ublic concernin to the es recommendations for chan detailedCommission and the CEO construction activities.review the provisions of this Resolution 3181 provisions related to bedrock document. Ultimatel , construction mana ement and construction the Commission, in activit re ortin b March 15, 2008. conversation with the CEO, will strike the balance between OA2.d Internal team assembled and olic direction and meetin to review s ecific rovisions im lementation, as well as and rocesses. other matters concerning the sco e of the CEO’s authorit . To advance that effort, the CEO has asked members of his executive team, led by the General Counsel, to rovide him with recommendations for updating, clarifying and stren thenin a variet of rovisions in Resolution 3181 within 90 days. The CEO has directed the team to give s ecific attention to the results of this performance audit and the 49 resulting recommendations. In particular, the team is charged
ESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS rd As of June 3 the Ca ital Develo ment Division was functionall established. The hiring process for the Manager, Capital Development is nearing completion. OA2.a. On January 8, 2008, the Port Commission passed a motion establishing a subcommittee to review delegation of the Commission’s authorit throu hout the or anization. Commissioners Davis and Tarleton a reed to lead the subcommittee, and invited several members of the public with expertise in governance structures to serve as panelists assistin the subcommittee. Ph llis Cam bell, President, The Seattle Foundation, Thomas L. Purce, President, The Ever reen State Colle e, Jim Warjone, Chairman, Port Blakely Companies and current chair of the Seattle Chamber of Commerce, and Shan Mullin, Partner, Perkins Coie, acce ted the invitation and a reed to assist Commissioners Davis and Tarleton in revising Resolution 3181, the document governing delegation of Commission authority. . On May 1, 2008 the Subcommittee held its first hearing to accept public comment on ro osed chan es to the Dele ation of Authorit . On May 13, 2008 the Port opened a 30 day public comment period on the Dele ation of Authorit . On June 10, 2008 the Port extended the public comment period to June 30, 2008. Also the Subcommittee held its second hearing to accept ublic comment on ro osed chan es to the Dele ation of Authorit . At the same time the Port invited em lo ees to comment on the sub ect. On June 23, 2008 the Subcommittee held its third hearin to acce t ublic comment on the ro osed chan es to the Dele ation of Authorit . OA2.b. On May 1, 2008 the Subcommittee held its first hearing to accept ublic comment on ro osed chan es to the Dele ation of Authorit . On June 10, 2008 the Subcommittee held its second hearing to accept ublic comment on ro osed chan es to the Dele ation of Authorit . On June 23, 2008 the Subcommittee held its third hearing to accept public comment on the proposed changes to the Delegation of Authority. OA2.c. Commissioners Davis and Tarleton have spent multiple hours with Port staff discussing best practices for organizational governance.On July 1, 2008 the Subcommittee reported to the full Commission and presented a summary of recommend changes to the Delegation of
RECOMMENDATION PORT RESPONSEACTION PLANNED with rovidin s ecific recommendations for rocess improvements and enhanced checks and balances for ro ect-wide contractin authority, as well as increased public visibility and Commission artici ation for lar er construction ro ects. The CEO then will share these recommendations with the Commission.
ESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS Authorit . OA2.d. The Port Commission passed a motion on January 8, 2008 affirming its desires to review Commission Resolution 3181 to ensure that the dele ated authorit is structured in a manner that ensures maximum public trust in the Port and is in line with best practices in organizational governance. Per the motion the Commission established a subcommittee to review Resolution 3181 and to make recommendations on amendments to Resolution 3181 to the full Commission. The Subcommittee drafted revisions to the construction mana ement sections of Resolution 3181. On Ma 1, 2008 the subcommittee hosted a public meeting to receive comment and testimony on the proposed changes. The Port is now seeking public comment during a 30 day comment eriod from Ma 13, 2008 to June 11, 2008. Note: comment eriod extended to June 30, 2008 Next ste s include: • resents draft resolution to full Au ust 5, 2008 Subcommittee Commission • ust Au of 12, 2008 first readin new resolution • ust Au of 26, 2008 second readin new resolution 1.a. On Januar 24, 2008 b direction of the Chief En ineer interim actions were im lemented re uirin all chan e orders to be reviewed b Construction Managers and Contract Administrators prior to execution and that evidence of that effort to be placed in the files. On February 8, 2008 the item was discussed at the training sessions held for action item 1b. On Februar 27, 2008 the item was discussed at the trainin sessions held for action item 1b. 1.b. On Februar 8, 2008 trainin was com leted on the review rocess for all change orders. This included roles and responsibilities within the new review process and change order estimating. On February 27, 2008 training was completed on the review process for all change orders. This included roles and responsibilities within the new review rocess and chan e order estimatin . 1.c. On May 29, 2008 a standard procedure for preparing Engineer’s Estimates was established. For modifications reater than ten thousand dollars but less that fift thousand dollars a Rou h Order of Ma nitude (ROM) is required. For modifications exceeding fifty thousand dollars an Independent Estimate is required. A standard cover sheet will be used for
1. We recommend that The Port will review its chan e The Port has im lemented and stren thened Ra Rawe The Port immediatel order control rocedures and control rocedures for chan e orders as Chief Engineer implement and will implement changes where follows: strengthen control warranted to ensure alignment I diate Action: rocedures to assure that with industr best ractices. mme Engineers’ change order aTnhde wPiollr tc ohnatsi naulree,atod y mbaekgeu n, 1. a A ll Ccohnantgec toirodn erMsa anraeg dero u(CblMe )c ahnedc kae d by estimates are (a) a s ru re ared without im rovements as art of the Contract Administrator CA before the knowled e of the 37- oint action lan from the are executed b the Port. contractors’ proposed TKW ormance audi amounts, and b chane will incpoerrforate the t, and it 1.b Provide trainin to ensure comliance for order estimates and cost Performance Auditor’s each Resident En ineer RE , CM and analyses are fully and iandtodi ttihoant aal crteicoon mplmane nads ations oCrAd eorn ecsutirrmeantte rse aqnuidredmeuntms efnotr tcrahianinngge completely documented. a ro riate. The Port a rees s ecifics oc Where cost or rice . analysis is used to estimates, evaluate change order rtcheoavstit e ianwndsae lopyfe scinsod naetnrntad cstoerc ochnadnarye 1A.dcd itEiovnalaul aAtctidoonc: umentation of analses of ro osals, the Port e should re uire full and order ro osals are vital to estimates and make recommendations complete documentation transparency and for standardization and consistency. of these reviews, accountabilit and will ensure includin full that these estimates and 1.d Establish a olic outlinin when a documented supervisory reviews are well-documented change order request requires a reviews and approvals. in the files. separate estimate in lieu of a direct 4
RECOMMENDATION PORT RESPONSE
ACTION PLANNEDESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS evaluation of the existin contractor’sthis sheet will also summarize the informationall cost estimates; chan e order ro osal.contained in the estimate. 1.e Coordinate policy and procedures withOn May 30, 2008 training for change order estimating was provided to the Chief Procurement Office. ersonnel that are directl affected bca ital develo ment new the procedures. 1.f Update CM and CA manuals to reflect new rocesses and rocedures. to order estimatin was rovided chan eOn June 2, 2008 trainin for ca ital that are directl ersonnel ment develo new the b affected 1.g Provide training to CMs, CAs, Portprocedures. Construction Services PCS and Pro ect Mana ement Grou PMG on new cost1.d. On Ma 2008 a standard 29, for rocedure arin re ineer’s En estimate procedures.Estimates was established. modifications greater than ten thousand For dollars but less that fifty thousand dollars a Rough Order of Magnitude ROM is re uired. For modifications exceedin fift thousand dollars an Inde endent Estimate is re uired alon with a standard cover sheet. On Ma 30, 2008 trainin for chan e order estimatin was rovided to ca ital develo ment ersonnel that are directl affected b the new procedures. On June 2, 2008 trainin for chan e order estimatin was rovided to ca ital develo ment ersonnel that are directl affected b the new procedures. 1.e. As of June 2, 2008 the En ineerin De artment had coordinated with the Chief Procurement Office to implement revisions to the Construction Manual Standard O eratin Procedures and the Contract Manual. Trainin for affected em lo ees was also com leted. 1.f. On May 29, 2008 online CA & CM Manuals were updated with the new forms. 1.g. On May 30, 2008 training was provided to capital development ersonnel that are directl affected b the new rocedures. On June 2, 2008 training was provided to capital development personnel that are directl affected b the new rocedures. 2.a. On Februar 22, 2008 an anal sis of ro ect trend lo s detailin chan e order amounts which coincided with the contracts amount was completed. On March 3, 2008 this information was forwarded to the Internal Audit Manager. 2.b. On February 26, 2008 the Internal Audit Manager forwarded a copy of the proposed review methodology to SAO. 2.c. The report to Senior Management will happen at a later yet to be
2. We recommend that The Port has be un a review The Port will review current ro ect trend lo s, Jo ce Kiran i the Port undertake a of chan e orders and trend identif inconsistencies and note corrective Internal Audit review of all major recent logs to identify similarities actions or evaluate recommendations. Manager and ongoing projects to between Port estimated costs I diate Action: identif cases where and contractor ro osed mme 2.a Identify all cases where engineers’ engineers’ estimates and amounts. The Port will take contractors’ proposed remedial action as appropriate estimates and contractors’ proposed amounts are consistentl and also a l the rocess amounts are consistentl the same and the same and, in such improvements described determine underlying causes. 5
3.a. On Februar 27, 2008 trainin was com leted on the review and documentation process for all Change Orders as well as roles and res onsibilities within this new review rocess. 3.b. On March 12, 2008 team members were established and the team was formed. 3.c. On February 7, 2008 minimum change order documentation requirements were included in the new change order review process and checklist. These re uirements are an u date to alread existin re uirements in the Construction Manual. 3.d. As of June 2, 2008 revisions incor oratin im roved chan e order ne otiation and documentation rocedures have been made to the Construction Manual Standard Operating Procedures. 3.e. On Ma 30, 2008 re uired trainin for affected ersonnel was completed. On June 2, 2008 re uired trainin for affected ersonnel was com leted 3.f. As of June 2, 2008 the processes were coordinated and carried out by members of both the En ineerin De artment and the Central Procurement Office.
RECOMMENDATION PORT RESPONSEACTION PLANNEDESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS cases, undertake a above in Recommendation 1. determined date. further evaluation of the Additional Action: underlying causes; 2.b Review matches identified and 2.d. Results from the internal auditor will be reviewed with Senior followed by remedial recommend remedial action. Management and remedial action will be taken by construction actions as appropriate. mana ement and contract administration ersonnel. 2.c Provide report to Senior Management. 2.d Take a ro riate remedial action as directed b Senior Mana ement. 3. We recommend that The Port has be un revisin The Port will revise its Standard O eratin Ra Rawe [the Port] revise its SOP itOs ceorantsitnru cPtiroonc eSdtuarnedsa rMda nual Pruiodceelidnuerse sf omr arnouael rt oa inndclude rsaptee cicfihca ne Chief Engineer Manual to include s ecific accu and will take the uidelines for ro er and as art of its TKW order documentation, following steps: accurate change order performance audit action plan. documentation. [The Specifically, this revision will Immediate Action: Port should rovide include more uidelines for its con 3.a Provide training on current requirements training to sultant change order negotiations and for change order documentation for CMs, staff/construction documentation. Port staff will mana ers to im rove the receive necessar trainin to REs and CAs. manner in which the support these new guidelines. Port] is documenting Additional Action: 3.b Establish team to evaluate current project change orders. ractices. 3.c Establish minimum chan e order documentation re uirements and rovide change order review checklist. 3.d Review current documentation of chan e order ne otiations and develo standard format. 3.e Provide trainin to ins ectors, REs, CMs, CAs, Program Leaders, Project Managers, PCS, Facilities & Infrastructure, internal desi ners and internal auditors on new rocedures. 3.f Coordinate rocess with new Central Procurement Office CPO , which will provide quality control, oversight and continuous improvement. 4. We recommend that As noted in the Port’s The Port will develo standard o eratin Ra Rawe the Port develo res onse to Recommendation rocedures that ali n with best industr Chief Engineer Standard Operating 3, the Port has begun practices and will take the following steps: Procedures (SOPs) that revisions to its procedures 6
4.a. As of March 25, 2008 the re uirement for a ne otiation summar was included in the change order review and checklist.
RECOMMENDATION PORT RESPONSEACTION PLANNEDESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS ali n with industr manual to better conform to Immediate Action: 27, 2008 trainin was com4.b. On Februar leted on the review and ractices. ne A 4.a best practices. industryCurrent Port be reviewed will summar otiation e for all Chandocumentation rocess Orders as well as roles and SOPs do not provide by a CM and a CA before the Portresponsibilities within this new review process. adequate information executes any change order. re ardin chan e order4.c. On March 11, 2008 a team was established to review best industr negotiations. 4.b Provide training in conjunction withpractices for change order negotiations. change order training described in 3.a. On A ril 3, 2008 team members interviewed various ublic a encies to Additional Action: racticesdetermine best industr otiations. order ne e for chan 4.c Determine best industry practice for chan e order ne otiations. are ril 3, 2008 the team develo4.d. On A read sheet to com ed a s e order ractices for chan encies best industrvarious local a 4.d Identify differences, if any, between bestnegotiations. industry practices and those applicable to Port o erations. 14, 2008 the team determined that the method currentl used b rilOn A best ractices.the Port of Seattle is consistent with industr 4.e Develop and/or revise current Port standards. e Position form for chan orders valued 29,On Ma otiation 2008 Pre-Ne at or above two hundred thousand dollars was established. 4.f Provide training to appropriate staff. 4.e. On April 14, 2008 it was determined by the team that the current “Summar of Ne otiations form is consistent with best industr ractices. The form shall contain a chronolo ical summar of the ne otiations and all pertinent information shall be attached to the form. On Ma 29, 2008 Pre-Ne otiation Position form for chan e orders valued at or above two hundred thousand dollars was established. 4.f. On Ma 30, 2008 trainin for Port of Seattle ersonnel directl affected by the new procedures for change order negotiations was conducted. On June 2, 2008 training for Port of Seattle personnel directly affected by the new procedures for change order negotiations was conducted. On June 19, 2008 trainin for Port of Seattle ersonnel directl affected by the new procedures for change order negotiations was conducted. 5.a. On Februar 27, 2008 trainin was com leted on the review rocess for all Chan e Orders as well as roles and res onsibilities within this new review process, including construction schedules. 5.b. As of Februar 26, 2008 All active ro ects were reviewed for contractual schedule compliance. Information gathered from the compliance review was utilized to develop the schedule training resentation.
5. Port mana ement The Port will review its The Port’s res onse to chan e order Ra Rawe should take immediate ractices of contract schedule estimates is addressed under Chief Engineer steps to assure that [the enforcement and the Recommendation 1. Port] rigorously enforces evaluation of time extension all contractual schedule re uests to identif where Port mana ement will immediatel ensure re uirem can be that the Port enforces, consistent with best whqeenetss. Then, fmuratdhee.r iTmhper oPvoertm weinllt spay practices, all contractual requirements for extenn srieoqnus artes fmora tdiem, e secific attention to the rearation and submission of schedules b they can and should be practices of other state and taking the following steps: 7
RECOMMENDATION PORT RESPONSEACTION PLANNEDESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS ro erl evaluated. The local a encies with res ect to5.c. As of Februar 26, 2008 a com liance of surve ro all active ects Port should also rovide schedulin and enforcement Immediate Action: was A list of items rewas erformed. or res onse uirin attention more oversight of the when conducting this review. 5.a Provide training on current contractidentified. Change Order process to schedule requirements for CM and CA ensure that estimates are staff. 4, 2008 construction mana ers and residentFrom Februar 26 to A ril properly created and Thisengineers met to discuss the necessary action steps. was done to used. 5.b Review all active projects for complianceschedule requirements for each contract inachieve compliance in with contractual schedule re uirements.com liance. 5.c If any contracts are not in complianceOn April 4, 2008 all ongoing non-compliant contracts were reviewed and with contractual schedule re uirements, issued notification letters to the Contractors that were ineersresident en the Port will im lement enforcement licable a re the Contractors submit uested liance. Whereout of com consistent with the project specifications.required documentation to bring contracts into compliance. Additional Action:5.d. On A ril 4, 2008 a team was established to benchmark other 5.d Review industr best mana ement ractices enciesovernment a to relatin olicies and schedule and practices for specifying andschedule compliance. im lementin schedule enforcement. 5.e. Review of other a encies ractices is com lete and com arisons 5.e Implement any improvements identified will be made and implemented prior to Julyanalyzed. Recommendations in item 5.d.31, 2008. 5.f Provide trainin to CM, CA, PCS and with the revised schedule5.f. On Ma 29, 2008 trainin associated PMG on revised procedures.enforcement procedures and processes was conducted by Engineering and Procurement Office Staff. On June 2, 2008 training associated with the revised schedule enforcement rocedures and rocesses was conducted b En ineerin and Procurement Office Staff. On June 19, 2008 training associated with the revised schedule enforcement rocedures and rocesses was conducted b En ineerin and Procurement Office Staff. 6.a. On Januar 24, 2008 an email was issued to all Construction Managers and staff with a directive to stop any informal resolution of change orders and actions. On Februar 8, 2008 this item was discussed, alon with re uired documentation, at the training sessions held in conjunction with action item 1b. On February 27, 2008 this item was discussed, along with required documentation, at the training sessions held in conjunction with action item 1b. 6.b. On January 24, 2008 an email was issued to all Construction Mana ers and staff that all chan e order ne otiations and actions shall be reviewed by the Construction Manager and Contract Administrator prior to
6. We recommend that The Port concurs that chan e The Port immediatel ceased an informal Ra Rawe ne method of resolving change order Chief Engineer [ctehae sPe oitrts] iinmfomremdaila tmeleyt hod obradseerd ong oatlil arteiloenvsa snth foaucltdo brse, differences. of resolvin chan e order includin formal schedule, differences, and that the sco e, means, methods, Immediate Action: Port] improve its change pricing, and operational 6.a Port staff was notified that this practice is order documentation considerations. Im rovements no lon er ermitted. re uirements to include to standard rocedures that that details of change are underway will emphasize 6.b A negotiations summary must be order negotiations must change order documentation reviewed by a CM and a CA before a be based on discussions trainin , includin a focus on chan e order can be executed b the of scope/means and the above factors. Port. methods/pricing differences. Additional Action: 6.c All change order negotiations will be fully 8