SAO AUDIT RECOMMENDATIONS AND ACTION PLAN
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SAO AUDIT RECOMMENDATIONS AND ACTION PLAN

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Port of Seattle State Auditor Report Responses And Action Plan August 8, 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 RESPONSE ACTION PLANNED ESTIMATED CONTACT PERSON COMPLETION STATUS/ REMARKS OA1. The Port should The Port agrees this Port Chief Executive Officer (CEO) directed Linda Strout 6/1/08 OA1.a. In November 2007 the Port obtained the services of an outside establish a senior-level recommendation has merit. A Port staff to review options and best practices Deputy CEO facilitator with extensive procurement expertise who led a planning Chief Procurement team is in place, and work is for procurement systems, and recommend process that defined roles, responsibilities, and related position Officer (CPO) position. already underway to identify organizational and process change to CEO ...

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Port of Seattle State Auditor Report Responses And Action Plan August 8, 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.
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OA2. The [Port]Resolution 3181 is theJanuary 8, 2008, the Port Commission Commissioners On Commission should re- established a subcommittee to review thestructural framework Davis/Tarleton evaluate the current currentl dele relationshi of Commission authorit ation theunderl in Dele ation of Authorit tobetween the Port Commission described in Resolution 3181. the [Port] CEOand the CEO. Resolution encom assed in Davis and Tarleton Commissioners OA2.a It in 1994. ted3181 was ado Resolution 3181 and serve on the subcommittee. willhas remained substantiall develop and issue a newunchanged for the past 13 Delegation of Authority Subcommittee may retain outside only one of OA2.byears. However, resolution that more ex erts.the five Commissioners who clearly defines thevoted on and signed Commission’s intent with will report back to full Subcommittee OA2.cResolution 3181 remains in res ect to construction osed of CEO Commission with ro e chanoffice. A mana ement and 30, 2008. ear. amendments b Juneoccurred earlier this reporting to theGiven these circumstances, it Commission and the rovide CEO directed Port staff to review and rois a that the riate ublic concernin recommendations for chan esCommission and the CEO detailed to the construction activities. Resolutionreview the provisions of this 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
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 ESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS  As of June 3rdthe Ca ital Division was functionall Develo ment 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 recommended changes to the Delegation of
RECOMMENDATION PORT RESPONSEACTION PLANNED
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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 .  On August 5, 2008 Tom Barnard, Commission Research and Policy Analysis, presented a consolidated draft of the revised delegation of authorit to the full Commission.  OA2.d. The Port Commission passed a motion on January 8, 2008 affirmin 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 overnance. 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 chan es. The Port is now seekin ublic comment durin a 30 da comment eriod from Ma 13, 2008 to June 11, 2008. Note: comment period extended to June 30, 2008)   Next ste s include:  new resolution of 12, 2008 first readin ust Au  ust 26, 2008 second readin Au of new resolution  1.a. On Januar 24, 2008 b direction of the Chief En ineer interim actions were implemented requiring all change orders to be reviewed by Construction Managers and Contract Administrators prior to execution and that evidence of that effort to be laced in the files.  On February 8, 2008 the item was discussed at the training sessions held for action item 1b.  On February 27, 2008 the item was discussed at the training 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 rocess and chan e order estimatin .  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 fifty thousand dollars a Rough Order of Magnitude
1. We recommend that The Port will review its chan e The Port has im lemented and stren thened Ra Rawe {The Port] immediately order control procedures and fcoollnotrwosl : procedures for change orders as Chief Engineer implement and will implement changes where stren then control warranted to ensure ali nment rocedures to assure that with industr best ractices. Immediate Action: Engineers’ change order The Port has be 1. a All change orders are double checked by estimates are a and will conti naulree, atdo ymakgeu n, a Construction Manaer CM and a re ared without im rovements as art of the Contract Administrator CA before the knowledge of the 37-point action plan from the are executed by the Port. contractors proposed TwiKll iWn cpoerrfoorrmataen tchee  audit, and it  1.b  Provide trainin to ensure comliancfo amounts, and b chan e e r order estimates and cost Performance Auditor’s each Resident En ineer RE , CM and analyses are fully and iandtodi ttihoant aal crteiocno mlmane nads ations oCrAd eorn  ecsutirrmeantte rse aqnuidr edmoentms efnotr  tcrahianinnge  com letel documented. cu Where cost or rice a ro riate. The Port a rees s ecifics. analysis is used to e en evaluate change order trcheoavstit e ianwnds alopyf scisod naetrnntad c etssoetric mcohnatadenasr,y e  1A.dcd  itEiovnalaul aAtec tidoonc: umentation of analses of ro osals, the Port should require full and order sals are vital to estimates and make recommendations complete documentation transpparroepnocy and for standardization and consistency. of these reviews, accountabilit and will ensure including fully that these estimates and 1.d Establish a policy outlining when a 4   
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RECOMMENDATION PORT RESPONSEACTION PLANNEDESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS documented su ervisor reviews are well-documented chan e order re uest re uires a uired. For re fift thousand modifications exceedin dollars anROM is reviews and approvals. in the files. se arate estimate in lieu of a directInde endent standard cover sheet will be used for Estimate is re uired. A evaluation of the existing contractor’sall cost estimates; this sheet will also summarize the information change order proposal.contained in the estimate.   1.e Coordinate policy and procedures withfor change order estimating was provided toOn May 30, 2008 training the Chief Procurement Office.capital development personnel that are directly affected by the new  rocedures. 1.f U date CM and CA manuals to reflect new processes and procedures.On June 2, 2008 training for change order estimating was provided to  ca ital affected b the new develo ment ersonnel that are directl 1. Provide trainin to CMs, CAs, Portrocedures. Construction Services (PCS) and Project Management Group (PMG) on new cost1.d. On May 29, 2008 a standard procedure for preparing Engineer’s estimate rocedures. reater than ten thousand For modificationsEstimates was established.   thousanddollars but less that fift h dollars a Rou nitude Order of Ma (ROM) is required. For modifications exceeding fifty thousand dollars an Inde endent Estimate is re uired alon with a standard cover sheet.  On May 30, 2008 training for change order estimating was provided to capital development personnel that are directly affected by the new rocedures.  On June 2, 2008 training for change order estimating was provided to ca ital develo ment ersonnel that are directl affected b the new rocedures.  1.e. As of June 2, 2008 the En ineerin De artment had coordinated with the Chief Procurement Office to im lement revisions to the Construction Manual Standard Operating Procedures and the Contract Manual. Training for affected employees was also completed.  1.f. On May 29, 2008 online CA & CM Manuals were updated with the new forms.  1. . On Ma 30, 2008 trainin was rovided to ca ital develo ment personnel that are directly affected by the new procedures.  On June 2, 2008 trainin was rovided to ca ital develo ment ersonnel that are directly affected by the new procedures.  2.a. On February 22, 2008 an analysis of project trend logs detailing change order amounts which coincided with the contracts amount was com leted. On March 3, 2008 this information was forwarded to the Internal Audit Manager.  2.b. On Februar 26, 2008 the Internal Audit Mana er forwarded a co of the proposed review methodology to SAO.
2. We recommend that The Port has begun a review The Port will review current project trend logs, Joyce Kirangi [the Port] undertake a of change orders and trend idetintifys  ionrc eovnasliustaeten crieecs oamndm ennotdea tcioonrrse. ctive IMntaenrangale rA udit review of all ma or recent lo s to identif similarities ac on and ongoing projects to between Port estimated costs Immediate Action identify cases where and contractor proposed : en ineers’ estimates and amounts. The Port will take 2.a Identif all cases where en ineers’ contractors’ proposed remedial action as appropriate estimates and contractors’ proposed 5   
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RECOMMENDATION PORT RESPONSEACTION PLANNEDESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS amounts are consistentl and also a l the rocess amounts are consistentl the same and the same and, in such im rovements described determine underl in causes. 2.c. The re ort to Senior Mana ement will ha en at a later et to be cases, undertake a above in Recommendation 1. determined date. further evaluation of the Additional Action: underl in 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. management and contract administration personnel. 2.c Provide re ort to Senior Mana ement.  2.d Take appropriate 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 its construction Standard Procedures manual to include s ecific Chief Engineer Manual to include specific aOsp epraartti nofg  itPsroTcKeWd ures Manual gorudideer lidnecsu fmore nptraotpioenr , aanndd  awcicllu traaktee  tchhea nge guidelines for proper and  ollowino stes: accurate chan e order erformance audit action lan. f documentation. [The Specifically, this revision will Immediate Action: Port] should provide include more guidelines for trainin to its consultant chan e order ne otiations and 3.a Provide trainin on current re uirements staff/construction documentation. Port staff will for chan e order documentation for CMs, managers to improve the receive necessary training to REs and CAs. manner in which the su idelin pport these new gu es. Additional Action: Port is documentin 3.b Establish team to evaluate current project change orders. ractices.  3.c Establish minimum change order documentation requirements and provide chan e order review checklist.  3.d Review current documentation of change order ne otiations and develo standard format.  3.e Provide training to inspectors, REs, CMs, CAs, Pro ram Leaders, Pro ect Mana ers, PCS, Facilities & Infrastructure, internal designers and internal auditors on new rocedures.  3.f Coordinate process with new Central Procurement Office (CPO), which will rovide ualit control, oversi ht and continuous improvement.  4. We recommend that As noted in the Port’s The Port will develop standard operating Ray Rawe [the Port] develop response to Recommendation procedures that align with best industry Chief Engineer 6   
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3.a. On Februar 27, 2008 trainin was com leted on the review and documentation rocess for all Chan e Orders as well as roles and responsibilities within this new review process.  3.b. On March 12, 2008 team members were established and the team was formed.  3.c. On Februar 7, 2008 minimum chan e order documentation re uirements were included in the new chan e order review rocess and checklist. These requirements are an update to already existing re uirements in the Construction Manual.  3.d. As of June 2, 2008 revisions incorporating improved change order ne otiation and documentation rocedures have been made to the Construction Manual Standard O eratin Procedures.  3.e. On May 30, 2008 required training for affected personnel was com leted.  On June 2, 2008 required training for affected personnel was completed  3.f. As of June 2, 2008 the rocesses were coordinated and carried out b members of both the Engineering Department and the Central Procurement Office.    
 4.a. As of March 25, 2008 the requirement for a negotiation summary was
RECOMMENDATION PORT RESPONSEACTION PLANNEDESTIMATED CONTACT PERSONCOMPLETIOSTATUS/ REMARKS Standard O eratin 3, the Port has be un ractices and will take the followin ste s:included in the chan e order review and checklist. Procedures SOPs that revisions to its rocedures align with industry manual to better conform to Immediate Action:4.b. On February 27, 2008 training was completed on the review and practices. Current [Port] industry best practices. 4.a A negotiation summary will be revieweddocumentation process for all Change Orders as well as roles and SOPs do not rovide b a CM and a CA before the Portres onsibilities within this new review rocess. adequate information executes any change order. regarding change order4.c. On March 11, 2008 a team was established to review best industry negotiations. 4.b Provide trainin in con unction withractices for chan order ne e otiations. chan e order trainin described in 3.a.  2008 team members interviewed various public agencies toOn April 3, Additional Action: otiations. order ne e for chan racticesdetermine best industr 4.c Determine best industr ractice for change order negotiations.4.d. On April 3, 2008 the team developed a spread sheet to compare  various local agencies best industry practices for change order 4.d Identif differences, if an , between bestne otiations. industr ractices and those a licable to Port operations.On April 14, 2008 the team determined that the method currently used by   best ractices.the Port of Seattle is consistent with industr 4.e Develo and/or revise current Port standards.On May 29, 2008 Pre-Negotiation Position form for change orders valued  two hundred thousand dollars was established.at or above 4.f Provide trainin to a ro riate staff.  4.e. On A 14, 2008 it was determined b ril the team that the current “Summary of Negotiations” form is consistent with best industry practices. The form shall contain a chronolo ical summar of the ne otiations and all ertinent 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 May 30, 2008 training for Port of Seattle personnel directly affected b the new rocedures for chan e order ne otiations was conducted.  On June 2, 2008 trainin for Port of Seattle ersonnel directl affected b the new rocedures for chan e order ne otiations was conducted.  On June 19, 2008 trainin for Port of Seattle ersonnel directl affected b the new rocedures for chan e order ne otiations was conducted.   5.a. On February 27, 2008 training was completed on the review process for all Change Orders as well as roles and responsibilities within this new review rocess, includin construction schedules.  5.b. As of February 26, 2008 All active projects were reviewed for contractual schedule com liance. Information athered from the compliance review was utilized to develop the schedule training
5. [Port] management The Port will review its The Port’s response to change order Ray Rawe should take immediate ctic Chief Engineer stes to assure that the pernaforceesm eonf tc aonntdr tahcte  schedule eRseticmoamtemse insd aatdidorne 1s.s ed under forces aPllo rct]o rnitgraorctouuasll ys cehnedule reevqaluueasttiso nt oo ifd teimntief ye xwtheenrseio n Port management will immediately ensure re uirements. The that the Port enforces, consistent with best when requests for tin,me fmuratdhee.r   iTmher oPvoertm ewinllt sp caay n be practices,  all contractual requirements for 7   
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