MEMORANDUM. SUBJECT: Management Response to Program Performance Review Construction Management Division (Report No )

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1 PUBLIC WORKS DEPARTMENT CONSTRUCTION MANAGEMENT DIVISION 115 S. Andrews Avenue, Room A550 Fort Lauderdale, Florida FAX MEMORANDUM DATE: June 2, 2010 TO: FROM: Broward County Board of County Commissioners Bertha Henry, County Administrator SUBJECT: Management Response to Program Performance Review Construction Management Division (Report No ) County Administration has reviewed the recommendations contained in the Program Performance Review of the Construction Management Division of the Public Works Department dated April 15, The County Auditor s review period has generally covered a seven year time frame from 2003 to April CMD staff has worked closely with the Auditor s Office since June of 2009 to assist in providing detailed information for this audit. County Administration offers the following responses to each of the recommendations contained in the review. These baseline schedules and budgets serve as an extremely effective management tool to ensure there are no unnecessary or unexplained costs or schedule overruns. County Auditor Recommendations County Auditor Recommendation 1: Develop meaningful performance measures for reporting to OMB and internal use by managers. Performance measures should be clearly defined and reflective of Division goals. Reported attainment levels should be based upon complete and actual information, and demonstrate the efficiency and effectiveness of major services. Agree. Enhanced project reporting has already been implemented through the Public Works Department s quarterly Capital Projects Status Report. The Capital Projects Status Report tracks baseline project budgets and schedules and reports changes to those baselines over the duration of a project. In doing so, the evolution of a project from inception to physical reality is placed into context; giving more meaning to project costs and schedules and documenting the causes of changes, often outside of CMD s direct control, which impact the completion of the project. Broward County Board of County Commissioners Sue Gunzburger Kristin D. Jacobs Albert C. Jones Ken Keechl Ilene Lieberman Stacy Ritter John E. Rodstrom, Jr. Diana Wasserman-Rubin Lois Wexler

2 County Auditor Recommendation 2: Identify, collect and analyze pertinent unit cost data. Unit costs calculations should use full cost methodology. County Auditor Recommendation 3: Complete benchmarking activities including (1) the identification of comparable peers and valuable performance measures and (2) data gathering and analysis. Once complete, potential areas for improvements should be identified and corrective actions initiated as appropriate. County Auditor Recommendation 4: Establish and enforce productivity standards for project management activities. This may include (but is not limited to) the following activities: updating time management/task oriented studies, validating project weighting key used in analyzing project manager workloads, developing specific performance criteria for staff, and, evaluating staff performance against defined standards. County Administration Response (2, 3 and 4): Agree. CMD continues to benchmark its design/construction costs and schedules to compare them to external and internal data sources and peer groups. CMD has also renewed its efforts to find peer agencies and private sector organizations against which to benchmark its project management and administrative activities. An extensive workload analysis for CMD s project management staff has been developed and implemented for managing performance expectations. The initial version of the workload analysis is based on estimated values for specific project tasks. CMD is now positioned to collect actual performance data which allows for better direction and control of project management staff and their assigned projects. Likewise, this ongoing data collection activity forms the baseline against which CMD s performance can be compared to benchmarked peer agencies. To ensure a full total project analysis of CMD s performance, the data collection activities will be expanded in FY11 to CMD administrative and support staff. County Auditor Recommendation 5: Continue to implement initiatives to ensure that contract negotiations result in fair and reasonable pricing for County construction projects. Results of negotiation meetings should be tracked in a manner consistent with the County Auditor s memorandum dated June 21, 2004, and approved by BOCC on August 4, Agree. The Division is pleased that its efforts are recognized and will maintain appropriate reporting of its positive results. For the past year, the Division is now much more prepared and aggressive in its negotiation of contracts, change orders, amendments and work authorizations. CMD now utilizes external data to compare and establish the fairness and reasonableness of proposed consultant and contractor pricing. CMD s renewed emphasis on negotiations is saving money most notably the approximately $4 million saved in CMD s negotiation of the courthouse project s design agreement. County Auditor Recommendation 6: Strengthen supervision of construction projects to ensure cost increases are minimized whenever possible. This includes but is not limited to

3 monitoring initial project budgets and planning activities, and minimizing cost increases through the use of contract amendments, change orders or CPEAMs. Agree. Since April, 2010, additional cost control measures have been implemented by CMD in the following ways: Project Managers are actively tracking and reporting changes to the baseline budgets and schedules of major projects through the Public Works Department s quarterly Capital Projects Status Report in addition to the reporting provided through the Project Management Information System (PMIS) and Contracts Central. Extension of this reporting to the full portfolio of space planning and construction projects managed by CMD is being developed and implemented through the use of Facility Focus software. CMD management has increased its emphasis on maintaining and retaining project documentation of policy or business decisions, project specific circumstances and external factors that impact project cost or schedule performance. CMD is developing an RLI for cost estimating and scheduling services which will provide conceptual and detailed cost estimating support independent of design consultants and contractors for projects at all phases of development. CMD s continuing benchmarking activities and establishment of unit costs for projects will increase the Division s ability to compare and control costs in both the design and construction phases. CMD has curtailed the use of contingency funds remaining after a project s substantial completion for project enhancements. The CM@Risk process is being modified to establish firm, competitively bid costs for direct cost price elements as part of the CM@Risk Guaranteed Maximum Price (GMP). This revision, first implemented with the Board s May 25, 2010 approval of the construction contract for the Children s Reading Center and Museum, eliminates price escalation and subsequent adjustments of the estimated values on which previous GMP s were based. County Auditor Recommendation 7: Strengthen supervision and monitoring of construction schedules to minimize delays, time extensions and overruns whenever possible. This should include, but is not limited to a formalized methodology by which knowledge of project issues can be effectively escalated by project managers to management s attention. Agree. Similar to CMD s renewed emphasis on cost controls, additional schedule controls have been implemented by CMD since September, 2009 in the following ways: Project Managers are actively tracking and reporting changes to the baseline budgets and schedules of major projects through the Public Works Department s quarterly Capital Projects Status Report in addition to the reporting provided through the Project

4 Management Information System (PMIS) and Contracts Central. Extension of this reporting to the full portfolio of space planning and construction projects managed by CMD is being developed and implemented through the use of Facility Focus software. CMD management has increased its emphasis on maintaining and retaining project documentation of policy or business decisions, project specific circumstances and external factors that impact project cost or schedule performance. CMD is developing an RLI for cost estimating and scheduling services which will provide conceptual and detailed cost estimating support independent of design consultants and contractors for projects at all phases of development. CMD s continuing benchmarking activities and establishment of unit costs for projects will increase the Division s ability to prepare and manage project schedules from inception to final completion. CMD will expand its highly successful storyboarding process to incorporate both the predesign and design phases of a project in addition to the construction and postconstruction phases for which the process has already been implemented. County Auditor Recommendation 8: Ensure that compensation through liquidated damages is properly paid when projects are not completed according to contractually specified dates. Specifically, potential compensation due for the Hollywood Community Library project should be evaluated prior to release of all retainage amounts during the contract closeout process. While we agree with the recommendation, it should be noted that the closeout process for the Hollywood Community Library project was impacted by a variety of County-requested changes to the nearly completed construction. Properly negotiated change orders which provide the Contractor additional contract time for events and conditions beyond the Contractor s control supersede assessment of liquidated damages. The implementation of these changes precluded the Contractor s ability to complete the project and negated the County s ability to assess liquidated damages. While the Contract Administrator at the time of the project acted appropriately in not assessing the liquidated damages, the Project Manager did not appropriately document those circumstances or maintain records of the notifications to the Contractor as warranted and appropriate. The requirements for stringent record keeping and timely notice of key project events have been reinforced with CMD s Contract Administrator and project management staff. County Auditor Recommendation 9: Continue efforts to expedite the contract closeout process, ensuring that all activities and consultant and contractor responsibilities are concluded in reasonable time frames. Agree. The Division is pleased with the recognition of its efforts and is committed to continuing its improved performance in this regard. With its renewed focus on project closeouts, CMD has, since December 2009, reduced its time to process final payments to 8 weeks from the point of receipt of proper invoices and supporting documentation. This is in marked contrast to the

5 Division s past average time of 2-1/2 years in the years 2002 to To that end, CMD has initiated revisions to its record keeping system which will ensure appropriate documentation of project completion and assist in expediting the closeout process. County Auditor Recommendation 10: Ensure that construction project management services are provided to all customer agencies, as applicable, regardless of project size. Agree. Since 2008, CMD has been streamlining project tracking into one system (Facility Focus) for the full space planning and project portfolio has improved the monitoring of all projects regardless of project size. Likewise, all requests for projects made to CMD will be assigned a Project Manager responsible for providing the highest level of customer support and service for that assigned project. County Auditor Recommendation 11: Ensure that project monitoring documentation practices are strengthened, including requirements for project managers to review and amend/approve meeting minutes, and project site visits reports accurately and completely document field observations. Agree. CMD has been revising its filing systems and strengthening its documentation practices through additional training for its project managers, construction supervisors, and administrative support staff. Full and constant documentation of all project processes is a top priority for the Division. County Auditor Recommendation 12: Ensure completion of project punch lists is adequately monitored and that specific dates for warranties are recorded and enforced, as applicable. Agree. The Division follows a rigorous punch-list procedure to ensure that Contractors complete each detail of construction with the highest quality. CMD management and project managers are actively reviewing administrative procedures and documentation requirements for on-going and future construction projects to ensure punch-list work is properly documented in the Division s files. County Auditor Recommendation 13: Track additional costs and potential long term savings for LEED projects to determine the most beneficial and cost effective level of certification for future projects. Agree. CMD is developing its in-house expertise in LEED-certified construction. However, the statutory and policy requirements for sustainable buildings and the use of the LEED rating system are relatively new. As such performance data is only now becoming available which will allow evaluation of the cost effectiveness of sustainable building design, construction and operating activities. As such, the performance data for the County s two LEED-certified projects, the South Regional Library and the EPD Lab facility, will be the foundation for an on-going assessment of

6 the LEED programs cost effectiveness. These projects are unique in terms of their functions (a laboratory) and operation (South Regional Library is partially operated by Broward College) and may not be totally suitable for comparison to other, more conventional buildings. CMD will, however, continue to evaluate design, construction and operational data for all existing and future LEED projects to ensure the best short and long-term values for the County. County Auditor Recommendation 14: Continue to examine cost feasibility of implementing BIM technology. We agree with the audit findings that BIM technology provides a powerful tool to help increase efficiencies and its use should be expanded to more projects. CMD has implemented Building Information Modeling (BIM a system of 3-dimensional visualization of design data) on two projects: the new Broward County family/civil courthouse and the Children s Reading Center and Museum projects. These implementations have already resulted in design efficiencies and have allowed detection of design conflicts. The faster design process, better communication between designers and subcontractors, and the avoidance of in-the-field change orders during construction indicate that BIM technologies and methods will more than live up to its promise as a benefit to building owners. CMD will continue to develop these technologies and document achieved efficiencies and cost savings. BWH/th/sh/ds cc: Evan Lukic, County Auditor Jeff Newton, County Attorney Pam Madison, Interim Deputy County Administrator Pete Corwin, Assistant to the County Administrator Monica Cepero, Assistant to the County Administrator Tom Hutka, Director, Public Works Department Steve Hammond, Interim Director, Construction Management Division