SAO AUDIT RECOMMENDATIONS AND ACTION PLAN

SAO AUDIT RECOMMENDATIONS AND ACTION PLAN

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Port of Seattle State Auditor Report Responses And Action Plan April 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 ESTIMATED STATUS/ SAO RECOMMENDATION PORT RESPONSE ACTION STEPS ACCOUNTABILITY COMPLETION REMARKS RECOMMENDATION PORT RESPONSE ACTION STEPS ESTIMATED ACCOUNTABILITY COMPLETION STATUS/ REMARKS OA1. The Port should establish a The Port agrees this Port Chief Executive Officer (CEO) directed Deputy CEO 3/15/08 The Port has senior-level Chief Procurement recommendation has merit. A Port staff to review options and best practices published the Officer (CPO) position. This official team is in place, and work is for procurement systems, and recommend Procurement CPO should report directly to the [Port] already underway to identify and organizational and process change to CEO by Recommendation organizational CEO and be responsible for evaluate procurement ...

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Port of Seattle
State Auditor Report Responses
And Action Plan
April 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    
SAO RECOMMENDATION PORT RESPONSE   RECOMMENDATION PORT RESPONSE
ACTION STEPS
 ACTION STEPS
ACCOUNTABILITY  CESOTMIMPLAETTEIDO N SRTEAMTAURSK/ S 
 ESTIMATED ACCOUNTABILITYCOMPLETISTATUS/ REMARKS The Port has published the CPO or anizational chart and implemented interim measures for the procurement of construction contracts, consultin services, and the purchase of oods and services.   Interim CPO named.  The selection rocess is underway.
OA1. The Port should establish a CEO 3/15/08 ut De CEO directed Chief Executive Officer Port this reesThe Port a senior-level Chief Procurement A Port staff to review options and best practicesrecommendation has merit. Officer (CPO) position. This official Procurement procurement systems, and recommend forteam is in place, and work is should re ort directl to the Port Recommendation e to CEO b and oralread underwa to identif rocess chan anizational and CEO and be res onsible for models inevaluate rocurement Team 15, 2008. March managing and overseeing allother organizations that engage in rocurement-related activit . Thisma or construction ro ects. With official should have authorit to hirethe hel an outside facilitator ofOA1.a Outside 11/2007 facilitator with extensive trained and independent procurementexperienced in capital projectprocurement expertise hired in officials who will be charged withdelivery, the team is reviewing andNovember 2007. reviewin and a rovin all o tionsanal zin several for rocurement-related transactions. re ersonnel, ortinmission, role, ProcurementOA1.b Internal 12/2007 Current delegations of authoritylocation, and structure of a ChiefRecommendation Team assembled in related to rocurement – contract or similarProcurement OfficeDecember 2007. Team includes awards, a roval of contract chan esfunctional unit the next overre resentatives from ma or and amendments, and related The Port’s CEOseveral weeks.procurement centers within the Port. activities involvin ex enditure ofhas asked the team to him rovide ublic funds related to constructionwith an outline of o tions and aOA1.c Procurement Recommendation Team 3/13/08 and construction management –preferred recommendation withinmeets weekly. should be rescinded and re-assigned90 days. necessary period of A to the CPO and her or his staff.im lementation lannin will follow,Im lement functional centralized rocurement6/1/08 but the CEO anticipates that theoffice. new unit or department can be o erational b June 1, 2008. The OA1.d Pre are ob descri tion, advertise, 3/15/08 workin team includes and select Chief Procurement Officer. representatives from the Port’s executive, le al, ro ect OA1.e Com lete necessar or anizational 6/1/08 mana ement, en ineerin , and lo istics. purchasing staffs.  OA2. The [Port] Commission should CommissionResolution 3181 is the structural On January 8, 2008, the Port Commission 2   
 
 
ESTIMATED STATUS/ ACCOUNTABILITY  COMPLETION REMARKS 
SAO RECOMMENDATION PORT RESPONSE ACTION STEPS   re-evaluate the current dele ation of a subcommittee to review the establishedframework underl the in authority to the [Port] CEOrelationship between the Port delegation of Commission authority currently encom assed in Resolution 3181 in Resolution 3181.Commission and the CEO. described and develo and issue a new in tedResolution 3181 was ado delegation of authority resolution that has remained1994. It Davis and TarletonOA2.a Commissioners more clearly defines thesubstantially unchanged for thewill serve on the subcommittee. Commission’s intent with res ect to one ears.ast 13 onl However, construction management and OA2.bof the five Commissioners who Subcommittee may retain outside reporting to the Commission and the experts.voted on and signed Resolution ublic concernin construction e chan A3181 remains in office. activities. Subcommittee OA2.c ear.of CEO occurred earlier this back to full ort will re Given these circumstances, it is Commission with proposed a ro riate that the Commission amendments b June 30, 2008. and the CEO review the rovisions of this bedrock document.CEO directed Port staff to review and provideGeneral Counsel Ultimatel , the Commission, in esdetailed recommendations for chan to the conversation with the CEO, will rovisionsResolution 3181 related to strike the balance between policyconstruction management and construction direction and implementation, asactivity reporting by March 15, 2008. well as other matters concernin the sco e of the CEO’s authorit . team assembled and meetinOA2.d Internal To advance that effort, the CEOto review specific provisions and has asked members of hisrocesses. executive team, led b the General Counsel, to provide him with recommendations for u datin , clarif in and stren thenin a variety of provisions in Resolution 3181 within 90 days. The CEO has directed the team to ive s ecific attention to the results of this performance audit and the 49 resultin recommendations. In articular, the team is char ed with providing specific
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    1/8/08      6/30/08    3/15/08        
    Complete.                Port staff continues work su ortin the Commission as directed b the Sub-Committee.  
SAO RECOMMENDATION PORT RESPONSE ACTION STEPS   
ACCOUNTABILITY ESTIMATED STATUS/  COMPLETIONREMARKS
recommendations for rocess improvements and enhanced checks and balances for ro ect-wide contractin authorit , as well as increased public visibility and Commission participation for larger construction ro ects. The CEO then will share these recommendations with the Commission. 1. We recommend that The Port The Port will review its chan e The Port has im lemented and stren thened Pro ect immediatel im lement and order control rocedures and will control rocedures for chan e orders as Mana ement,  strengthen control procedures to implement changes where follows: Engineering &  assure that Engineers’ change order warranted to ensure alignment with Construction estimates are a re ared without industr best ractices. The Port Immediate Action: (PMEC) knowled e of the contractors’ has alread be un, and will e chan All1. a orders are double checked b  proposed amounts, and (b) change continue, to make improvementsa Construction Manager (CM) and a order estimates and cost anal ses as art of the 37- oint action lanContract Administrator the CA before are full and com letel documented. from the TKW erformance audit, Port. theare executed b Where cost or price analysis is used and it will incorporate the to evaluate chan e order ro osals, Performance Auditor’s additional1.b Provide trainin liance for to ensure com the Port should re uire full and recommendations into that actioneach Resident En , CM and ineer RE complete documentation of these plan as appropriate. The PortCA on current requirements for change en es,order estimates and document training rseuvpieerwvsis, oinryc lruedviinegw fsu llayn dd oacpupmroevnatles.d  caogsrte easn atlhasti isn adnedpsedceonntd earsti mats ecifics.  reviews of contractor change order proposals are vital to transparency Additional Action: and accountabilit and will ensure 1.c Evaluate documentation of anal ses of  that these estimates and reviews estimates and make recommendations are well-documented in the files. for standardization and consistency.  1.d Establish a olic outlinin when a change order request requires a separate estimate in lieu of a direct evaluation of the existing contractor’s change order
4   
      1/24/08    3/5/08      6/5/08  
Part of this work is currently ongoing under TKW Item 7. Complete.    Complete
SAO RECOMMENDATION PORT RESPONSE   
ACTION STEPS
STIM STATUS/ ACCOUNTABILITY  ECOMPLAETTEIDO N REMARKS 
ro osal.  1.e Coordinate olic and rocedures with the Chief Procurement Office.  1.f Update CM and CA manuals to reflect new rocesses and rocedures.  1.g Provide training to CMs, CAs, Port Construction Services PCS and Pro ect Mana ement Grou PMG on new cost estimate procedures.  2u.n  dWeret arkeec oa mremveienwd  tohf aat ll[ thmea Poro rrte] cent The Port has begun a review of iTdheen tiPfo ritn cwiolln rseisvtieenwc iceusr raenndt  pnrootjee ccto trrrentdi vloe gs,   chan e orders and trend lo s to ec and on oin ro ects to identif cases identif similarities between Port actions or evaluate recommendations. w e estimated costs and contractor cohnetrreactnorgsin ereors oessetdi maamteosu natns da re roosed amounts.  The Port will Immediate Action:   consistentl the same and, in such take remedial action as a ro riate2.a Identif ineers’ cases where en allConstruction cases, undertake a further evaluation and also apply the processtnopor destoermcata npss cod triaenst ena dt ehs maistentlare cons  raMegan of the underl in causes; followed b im rovements described above inamou s remedial actions as appropriate. Recommendation 1. causes. indetermine underl   Additional Action: 2.b Review matches identified and Internal Audit recommend remedial action. Manager   2.c Provide re ort to Senior Mana ement. Internal Audit  Mana er 2.d Take appropriate remedial action as Construction directed b Senior Mana ement. Manager  PMEC 3. We recommend that the Port The Port has be un revisin its The Port will revise its Standard O eratin revise its SOP Manual to include construction Standard Operating Procedures manual to include s ecific guidelines for proper and accurate change 5   
8/31/08     3/5/08      TBD   TBD  TBD     
     Com lete.       
Part of this work is currently
ESTIMATED STATUS/ ACCOUNTABILITY  COMPLETION REMARKS 
SAO RECOMMENDATION PORT RESPONSE ACTION STEPS   s ecific uidelines for ro er and Procedures Manual as art of its order documentation, and will take the accurate change order TKW performance audit action following steps: documentation. The Port should lan. S ecificall , this revision will rovide trainin to its consultant include more uidelines for chan e Immediate Action: staff/construction managers to order negotiations and3.a Provide training on current requirements improve the manner in which [the documentation. Port staff willfor change order documentation for CMs, Port is documentin ro ect chan e receive necessar trainin toREs and CAs. orders. support these new guidelines. Additional Action: 3.b Establish team to evaluate current 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 negotiations and develop standard format.  3.e Provide trainin to ins ectors, REs, CMs, CAs, Program Leaders, Project Mana ers, PCS, Facilities & Infrastructure, internal desi ners and internal auditors on new procedures.  3.f Coordinate rocess with new Central Procurement Office (CPO), which will provide quality control, oversight and continuous im rovement.  4. We recommend that the Port As noted in the Port’s res onse to The Port will develo standard o eratin PMEC develop Standard Operating Recommendation 3, the Port has procedures that align with best industry Procedures (SOPs) that align with begun revisions to its procedures practices and will take the following steps: industry practices.  manual to better conform toCurrent [Port] 6   
    3/5/08     6/5/08                 7/31/08
    
on oin under TKW Item 11a.  Complete
    
SAO RECOMMENDATION PORT RESPONSE   SOPs do not rovide ade uate industry best practices. information regarding change order negotiations.
ACTION STEPS
ACCOUNTABILITY  ECSOTMIMPLAETTEIDO N RSETAMTAURSK/ S 
Immediate Action: 4.a A negotiation summary will be reviewed b a CM and a CA before the Port executes an chan e order.  4.b Provide training in conjunction with chan e order trainin described in 3.a.  Additional Action: 4.c Determine best industr ractice for chan e order ne otiations.  4.d Identif differences, if an , between best industr ractices and those a licable to Port operations.  4.e Develo and/or revise current Port standards.  4.f Provide trainin to a ro riate staff.  5. Port mana ement should take The Port will review its ractices of The Port’s res onse to chan e order PMEC  immediate steps to assure that [the contract schedule enforcement and estimates is addressed under  Port] rigorously enforces all the evaluation of time extension Recommendation 1. contractual schedule re uirements. re uests to identif where further ents can Port management will immediately ensure that Then, when requests for time improve mcif icb ea ttmeandtieo. n  Ttohe the Port enforces, consistent with best  sehxtoeunlds iobne s raore emrla deev, atlhueayt ecda. n  aTnhde  tPhoert rwailcltipcaeys  sopf eother state and ractices,  all contractual reuirements for  Port should also rovide more local a encies with res ect to re aration and submission of schedules b oversight of the Change Order scheduling and enforcement when taking the following steps: conductin is review  . prroopceerslsy  tcor eeantseudr ea nthd aut seestdi. mates are gthImmediate Action: 5.a Provide training on current contract schedule requirements for CM and CA staff.
7   
 1/24/08    3/5/08   6/5/08           6/5/08            3/15/08   
 Complete.    Complete
           Complete   
SAO RECOMMENDATION   
PORT RESPONSE
ACTION STEPS
ACCOUNTABILITY ESTIMATED STATUS/  COMPLETIONREMARKS
 5.b Review all active projects for compliance with contractual schedule re uirements.  5.c If any contracts are not in compliance with contractual schedule requirements, the Port will im lement enforcement consistent with the project specifications.  Additional Action: 5.d Review industr best mana ement practices for specifying and implementing schedule enforcement.  5.e Implement any improvements identified in item 5.d.  5.f Provide training to CM, CA, PCS and PMG on revised procedures.  6. We recommend that the Port The Port concurs that chan e The Port immediatel ceased an informal PMEC immediatel cease its informal order ne otiations should be based method of resolvin chan e order differences. method of resolving change order on all relevant factors, including Immediate Action: differences, and that [the Port] formal schedule, scope, means, ractice is6.a P rt staff was notified that this im rove its chan e order methods, ricin , and o erationalo documentation requirements to considerations. Improvements tono longer permitted. include that details of change order standard procedures that are ne otiations must be based on underwa will em hasize chan e6.b A ne otiations summar must be discussions of sco e/means and order documentation trainin , CM and a CA before a areviewed b methods/pricing differences. including a focus on the abovechange order can be executed by the factors.Port.  Additional Action: 6.c All change order negotiations will be fully documented.
8   
 4/4/08   4/4/08      6/5/08    7/31/08   8/1/08     1/24/08   1/24/08     6/5/08   
 Complete.   Complete.
    Com lete.   Com lete.    
SAO RECOMMENDATION PORT RESPONSE   
ACTION STEPS
ESTIMATED STATUS/ ACCOUNTABILITY  COMPLETION REMARKS 
 6.d Change order documentation will be im roved as outlined in Recommendations 1, 3, 4 and 5.  6.e Port management will provide interim uidance until revised rocesses and procedures are put in place.  7. We recommend that [the Port] The Port will undertake additional Using a statistical sampling methodology, Internal Audit undertake a review of the chan e review of chan e orders usin Internal Audit will review Port construction Mana er orders ne otiated and a roved rocedures consistent with contracts and determine whether the Port has under all contracts to determine if accepted auditing standards to paid for other incorrect mark-ups. In addition there were other incorrect mark-ups determine whether other incorrect to the statistical sample mentioned above, on change orders. mark-ups on change orders exist. Ianterronaalc hA tuod itt ewstil lo tuhseer  ac roinstkr-abcatss ethd aat umdiit ht be   vulnerable to payment of incorrect mark-ups.   Immediate Action: 7.a Obtain State Auditor’s Office (SAO) confirmation of the sam lin and risk- based audit methodolo that will be used.   7.b Review those contracts identified b the sampling and risk-based audit methodology.   Additional Action CM and 7.c Determine if further review is necessary, CA based on outcome of the immediate action.  7.d Implement cost recovery where appropriate.
9   
     6/5/08 8/31/08               TBD
          Complete.              Corrective action was
SAO RECOMMENDATION PORT RESPONSE   
ACTION STEPS
 
ESTIMATED ACCOUNTABILITY  COMPLETION SRTEAMTAURSK/ S 
8. We recommend that [the Port] The Port will review its Information & Communications Technology PCS General im rove mana ement information mana ement information s stems ICT will work with PCS to investi ate o tions Mana er, s stems to rovide more accurate to ensure that information available for rovidin additional visibilit and more ICT Senior arnod eucpt -aton-dd actoen itrnafocrt mexatioenn drietugraerding to project managers is accurate arcocuercat tae nadn cd ounptr-taoc-t deaxte einnfdoitrumraetsi.o  nT rheeg aProdritn g Manager, Business  s. and u -to-date, and will make Services The Port should develo a better im rovements as necessar . The will assi n a business anal st to develo emxepaennsd iftourr tersa cakgianign satc itnuitaila lp rojteicmt ates Port will conduct a systematic bsyusstienems cs arpeaqbuiilriteiemse, netvs,a launataley ozep ticounrrs eannt d     es review of the small works program to prevent unforeseen cost overruns. to im rove timel trackin of actual re are cost estimates for small works s stem ro ect costs on contracts. There im rovements. will be an emphasis on providing Immedi te ActioStarted safe uards to reclude work a n: authorizations from exceedin the 10/07 order contracts, PCS does not en o8.a On contract amount.authorize work that would increase the amount s ent to above 90% of the contract value.   Additional Action: 8.b Continuall evaluate o tions to limit 3/31/08 contract spending beyond that 90% threshold. Options might include further reducin the maximum contract value and/or limitin cumulative value of all work authorizations.   8.c Provide trainin for staff on revised 3/31/08 procedures for tracking small works expenditures against budgets.   
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taken b CM and CA with the recover of $8,895.54 as of 8/30/07.  Part of this work is currentl ongoing under TKW Item 1a, 1b & 10a.      Com lete.      Com lete.       Complete.