Street Transportation Department Public Transit Department … · 2020. 6. 12. · Rec. 1.6: Street Transportation Department - When consultants are utilized, the Street Transportation

Project Team

Ross Tate City Auditor

Barbara Coppage Deputy City Auditor

Ryan Richelson Internal Auditor

Project Number

1200048

This report can be made available in alternate format upon request.

Street Transportation Department Public Transit Department

Capital Improvement Project – South Transit Facilities

May 20, 2020

Report Highlights Disadvantaged Business Enterprise information

Disadvantaged Business Enterprise information was not always complete or accurate. Milestone Progress Reports

Milestone Progress Reports reviewed did not contain complete and accurate information regarding the progress and problems occurring within the Project as required. Project Monitoring Controls

Monitoring controls for the Project did not ensure all budgetary and record retention requirements were met.

City Auditor Department 140 N 3rd Avenue Phoenix, AZ 85003 602-262-6641 (TTY use 7-1-1)

Mission Statement

To improve the quality

of life in Phoenix

through efficient

delivery of outstanding

public services.

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City Auditor Department

Executive Summary

Purpose The City Auditor Department contracted with REDW (Consultant), an external audit firm, to determine whether the South Transit Facility project (Project) contractor and subcontractors complied with federal and City requirements. Additionally, the Consultant assessed the City’s controls to ensure compliance.

Background The refurbishment of the South Transit Facility (Project) included interior and exterior building renovations. The Project utilized federal funds and was subject to federal requirements. The construction contractor for the Project was FCI Constructors, Inc. The life-to-date actual expenditures as of October 31, 2019, were approximately $28.1 million. The Project is now 99% complete, with some additional HVAC work remaining. The Consultant’s work was performed through interviews and document reviews. To determine compliance with applicable federal and City regulations, the Consultant selected areas for testing based on requirements within the Uniform Guidance and Federal Transit Authority (FTA) comprehensive review guide for triennial and state management reviews.

Results in Brief Disadvantaged Business Enterprise (DBE) information was not always complete or accurate.

The contracts tested by the Consultant did not always show the correct DBE goal in the City’s DBE software application. DBE information tested did not agree to the contract and change orders thereon. Information reported was not always complete or accurate. Milestone Progress Reports reviewed did not contain complete and accurate information regarding the progress and problems occurring within the Project as required.

The Consultants reviewed four required quarterly milestone progress reports (MPRs) and found that the same paragraph, containing the original scope of work for the project, was continually used for the project status. Some critical details were not reported, as required, such as an analysis of the significant project cost variance, including an analysis and explanation of cost overruns, a report of schedule changes, and an explanation of why scheduled milestones or completion dates were not met. Monitoring controls for the Project did not ensure all budgetary and record retention requirements were met.

The City signed a contract with FCI Constructors, Inc. (FCI) on March 25, 2015, for $20,510,859. In addition to the original contract, there were four amendments during

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the life of the project. The four amendments included 291 change orders, bringing the total of the contract to $23,010,859. The contract amendments were approved by City Council, and independent cost estimates were obtained for each change order as required. However, reasons for the change orders were never analyzed or presented to upper management in a budget-to-actual format, which would have allowed upper management to evaluate the entire dollar impact. Centralized records of the Project were not retained by the Street Transportation Department as required by City and federal policies and guidelines. Many documents were kept by an outside contractor. In some cases, detailed pay application information, such as labor and material breakouts and subcontractor information, had to be obtained through contractor records.

Standards This audit was conducted by REDW. REDW was contractually obligated to conduct this performance audit in accordance with generally accepted government auditing standards. Those standards require that REDW plan and perform the performance audit to obtain sufficient, appropriate evidence to provide a reasonable basis for its findings and conclusions based on its audit objectives.

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Department Responses to Recommendations

Rec. 1.1: Street Transportation Department - While this is not a required clause, the Street Transportation should add liquidated damages clauses to future project that are complex in nature or where possible environmental issues exist in its site condition to ensure damages can be recovered.

Response: Since this project, the Design and Construction Procurement Section of the City Engineer’s Office has incorporated liquidated damages clauses into the current JOC contract template. Below is the language:

Liquidated Damages

Time is of the essence for the Contractor to complete the Work. The Contractor agrees that if Substantial Completion is not attained within the Job Order Agreement Duration of Work, the City will suffer damages that are difficult to accurately estimate. The Contractor also agrees that if Final Acceptance is not obtained within (XXX) Days from the actual date when Substantial Completion of the Work has been achieved, the City will suffer damages that are difficult to accurately estimate. Each JOA will set forth the factors considered in determining the amount of liquidated damages and the actual liquidated damages that will be assessed. The following non-exclusive set of factors were considered when setting the value on this Job Order Agreement: (reason for LDs to be identified as applicable per project).

Consequently, if the Contractor fails to attain Substantial Completion within the Job Order Agreement Term, as adjusted, the Contractor shall pay to the City <<spell out>> Dollars ($ x,xxx) - Note to CS: PM to provide direction and a calculation regarding the amount to be used as liquidated damages (not as a penalty, but damages incurred by the City for late completion) for each Day that Substantial Completion is delayed.

Consequently, if the Contractor fails to obtain Final Acceptance within XXX Days, the Contractor shall pay to the City <<spell out>> Dollars ($ x,xxx) - Note to CS: PM to provide direction and a calculation regarding the amount to be used as liquidated damages (not as a penalty, but damages incurred by the City for late completion) for each Day that Final Completion is delayed beyond the Job Order Agreement Duration of Work as adjusted.

Target Date: August 31, 2020

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Similar language is being incorporated into all other delivery method contracts.

Rec. 1.2: Streets Transportation Department - The Streets Transportation Department should require all vendors [going forward] to submit Buy America certificates with their pay applications.

Response: We propose the Buy America certificates not be included with pay applications, although contract provisions certifying that Buy America requirements be added to Progress Reports submitted with each pay application shall be required. The Buy America certificates are typically part of the submittal log information and tracked individually throughout the project by the Project Manager. As part of the pay application approval, the PM will confirm the certificates were included as part of the submittals, but would not complicate nor delay the pay application itself with their inclusion. The submittal log will be part of the permanent files saved into the city’s central record system. A Citywide standard will be issued to address this process with all City capital project managers.

Target Date: August 31, 2020

Rec. 1.3a: Street Transportation Department - Street Transportation Department or its contractors should create a process to update the Public Transit Department as DBE contractor/subcontractor changes occur in the project. This communication is key to the success of the DBE program.

Response: The Vertical Project Management (VPM) Section of the City Engineer’s Office will work with the Public Transit Department to initiate a Service Level Agreement (SLA) outlining each department’s responsibilities. Larger projects, similar to South Transit Facility refurbishment, could utilize a project-specific SLA in addition to the department-level SLA, resulting in each department’s acknowledgement of its oversight responsibilities relative to each project.

Target Date: December 31, 2020

Explanation, Target Date > 90 Days: This type of document takes time to negotiate and determine who should be responsible and how the details of the documents look.

Rec. 1.3b: Public Transit Department - Public Transit Department should implement a monitoring process to ensure vendor payments and changes to contracts are reconciled to B2GNow on a regular basis. A monthly analysis of DBE vendors not used and/or replaced, should have correspondence on file in the TrAMs system.

Response: Public Transit Department will implement a monitoring process to ensure vendor payments and changes to contracts are reconciled to B2GNow on a regular basis. A monthly analysis of

Target Date: May 20, 2020

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DBE vendors not used and/or replaced, will have correspondence on file in the B2GNow.

Rec. 1.4: Street Transportation Department - The Street Transportation Project Manager should create and submit a Milestone Progress Report that meets all the required elements for their projects. It may be necessary for the City to contact the FTA to determine how this matter can be remedied. The FTA may allow the City to report all the required elements during the closeout process.


The VPM Section has a system to track all CIP projects; this system includes schedules and milestone tracking information (PROMIS). This system also includes the Public Transit Department’s Project Manager, who is tasked with coordinating with the FTA. The VPM Section is actively tracking all CIP projects through PROMIS and provides monthly updates to all client departments.


Explanation, Target Date > 90 Days: Coordination between three parties, lack of information is our PROMIS system will take longer than 90 days.

Rec. 1.5: Street Transportation Department - The Street Transportation Department should implement a process to communicate to the user departments any anticipated changes to the projects prior to the work being done. Additionally, change orders should be presented in a budget to actual format that includes the original and revised total cost of the project. This format should also be used to inform City Council of project changes.

Response: The new Change Order form (attached) includes a signature line requiring the client department to acknowledge and approve all changes, including those which may result in a change order.

The VPM Section has an established process for changes to a project which accounts for client department involvement. Change orders and any potential changes to a project are customarily initiated during weekly construction meetings. Items are discussed as possible changes and then tracked to a decision point to either being included under the current contract as a funded allowance item or as an item that will result in a change to the contract. Items

Target Date: July 31, 2020

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requiring a change order are then developed by the contractor and independently checked by the designer/construction administrator team. All parties review the information and then a change order is then developed formally and processed through the city’s established procedures.

The VPM Section shall ensure this negotiation process and independent review is completed and documented in project files and in central records. The VPM Section will review their processes and develop an independent review process to verify the contractor’s change order requests.

Rec. 1.6: Street Transportation Department - When consultants are utilized, the Street Transportation Department should ensure that all project support and files are maintained throughout the life of the project and in accordance with the FTA regulation and the City’s Record Retention policy.


Consultants and contractors are required to use the city’s project management system (PROMIS). This system has the capacity to store all project support files including shop drawings, daily records and meeting minutes. The project is maintained in PROMIS throughout the construction of the project and then transferred into the city’s Central Records system at the close-out of the project. The Central Records system is the permanent record retention system.


Explanation, Target Date > 90 Days: Due to the number of projects the process may take longer than 90 days.

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h C : � < = � > > = B @ @ � 5 a 4 5 < 7 5 � 4 4 5 7 A � > @ � = 9 � 7 5 D � < A 5 @ C 6 7 5 < = B ? 5 5 < = � B 7 @ : @ 7 5 : � v < = � � = a5 ` ? @ : 9 � B : < 7 = @ gµ ¾ ¿ ¸ ¹ À ¸ � c ; i < : a @ < � = 9 � B 7 = : 5 � B : D < : ; d i k i 7 = @ : 5 ? B : 7 5 @ l k = B g � i 7 = : 5 � B : 7 5 � g j B B 7 5 9 < = � : 7: ; B 7 = : 5 � B : l : ; i 7 = : 5 � B : 7 5 @ ; � > > 6 ? 5 = < @ ; � = a � = 9 � > > > � C 7 5 l 8 � : 5 < � > @ l ` ? < 4 8 = : l: 5 � = @ 4 7 5 : � : < 7 = l ? : < > < : < @ l @ 5 A < : < @ 5 ` ? < 5 9 : 7 4 5 6 7 5 8 � > > D 7 5 v 6 7 5 : ; B 7 = @ : 5 ? B : < 7 = 7 6 : ; 4 5 7 f B : g c ; B 7 = : 5 � B : D � @ @ < � = 9 7 = � � 5 B ; r s l r � y s l 6 7 5 : ; � 8 7 ? = : 7 6� r � l s y � l { s z g k = � 9 9 < : < 7 = : 7 : ; 7 5 < � < = � > B 7 = : 5 � B : l : ; 5 D 5 6 7 ? 5 � 8 = 9 8 = : @ 9 ? 5 < = � : ; > < 6 7 6 : ; 4 5 7 f B : 7 6 = 7 9 7 > > � 5 < 8 4 � B : l � = 9 : ; 5 � 9 9 < : < 7 = � > � 8 = 9 8 = : @ : 7 : � > < = � � � � � l � � � l� x � � l � � � l � = 9 � y l r � � l � � � l D ; B 7 = : 5 � B : � 8 7 ? = : : 7 � r � l � y � l { s z g c ; B 7 = : 5 � B : � 8 = 9 8 = : @ 5 B < A 9 i < : a i 7 ? = B < > � 4 4 5 7 A � > g c ; 6 7 ? 5 � 8 = 9 8 = : @ B 7 = : � < = 9 r z yB ; � = � 7 5 9 5 @ : 7 : � > < = � � r g s 8 < > > < 7 = g c ; B ; � = � 7 5 9 5 @ D 5 5 4 7 5 : 9 C a � � = = : : d > 8 < = �� = 9 < = 9 4 = 9 = : B 7 @ : @ : < 8 � : @ D 5 7 C : � < = 9 6 7 5 � B ; B ; � = � 7 5 9 5 l ; 7 D A 5 l 5 � @ 7 = @ 6 7 5: ; B ; � = � 7 5 9 5 @ D 5 = A 5 � = � > a � 9 7 5 4 5 @ = : 9 : 7 ? 4 4 5 8 � = � � 8 = : < = � C ? 9 � : : 7� B : ? � > C ? 9 � : � 5 a 6 7 5 8 � : D ; 9 � > > 7 D ? 4 4 5 8 � = � � 8 = : : 7 A � > ? � : : ; = : < 5 9 7 > > � 5< 8 4 � B : 6 5 7 8 : ; ; < � ; A 7 > ? 8 7 6 B ; � = � 7 5 9 5 @ gÁ ¹ Â ¾ Ã Ã ¹ ¿ Ä º ¸ · ¾ ¿ Ú c ; b : 5 : c 5 � = @ 4 7 5 : � : < 7 = � 4 � 5 : 8 = : @ ; 7 ? > 9 < 8 4 > 8 = : � 4 5 7 B @ @ : 7B 7 8 8 ? = > a l B ; � = � 7 5 9 5 @ @ ; 7 ? > 9 C 4 5 @ = : 9 < = � C ? 9 � : : 7 � B : ? � >6 7 5 8 � : : ; � : < = B > ? 9 @ : ; 7 5 < � < = � > � = 9 5 A < @ 9 : 7 : � > B 7 @ : 7 6 : ; 4 5 7 f B : g c ; < @ 6 7 5 8 � : @ ; 7 ? > 9� > @ 7 C ? @ 9 : 7 < = 6 7 5 8 i < : a i 7 ? = B < > 7 6 4 5 7 f B : B ; � = � @ g

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Street Transportation Department Public Transit Department … · 2020. 6. 12. · Rec. 1.6: Street Transportation Department - When consultants are utilized, the Street Transportation