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HomeMy WebLinkAboutMINUTES - 08142001 - C.118 s ` ontra TO: BOARD OF SUPERVISORS FROM: JOHN SWEETEN, County Administratorn` O irk154Y. Costa _ �a y40 y � e% DATE: AUGUST 14, 2001 ------- `P County SQA COTJ SUBJECT: RESPONSE TO GRAND JURY REPORT NO. 0107 ENTITLED "DESIGN AND CONSTRUCTION OF CAPITAL FACILITIES" SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION: ADOPT report as the Board of Supervisors' response to Grand Jury Report No. 0107 entitled, "Design and 'Construction of Capital Facilities". BACKGROUND: The 2000-2001 Grand Jury filed the above-referenced report on June 7, 2001, which was reviewed by the Board of Supervisors on June 19 and subsequently referred to the County Administrator and the Capital Facilities/Debt Management Director, who jointly prepared the attached response that clearly specifies: A. Whether the finding or recommendation is accepted or will be implemented; B. If a recommendation is accepted, a statement as to who will be responsible for implementation and a definite target date; C. A delineation of the constraints if a recommendation is accepted but cannot be implemented within a six-month period; and D. The reason for not accepting or adopting a finding or recommendation. CONTINUED ON ATTACHMENT: YES SIGNATURE: �✓R OMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE PPROVE OTHER SIGNATURE(S): ACTION OF BO D N�[A^iTf�c`��9lJr[APPROVE AS RECOMMENDED�_ OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN UNANIMOUS(ABSENT ��ilYl� ) AND ENTERED ON THE MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE AYES: NOES: SHOWN. ABSENT: ABSTAIN: ATTESTED Od/ CONTACT: JULIE ENEA(925)335-1077 JOH SWEVfik CLERK OF E BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR CC: PRESIDING JUDGE OF THE SUPERIOR COURT COUNTY ADMINISTRATOR CAPITAL FACILITIES AND DEBT MANAGEMENT DIRECTOR GENERAL SERVICES DIRECTOR BYp Design and Construction of Capital Facilities August 14, 2001 County Response to Grand Jury Report No. 0107 Page 1 RESPONSE TO GRAND JURY REPORT NO. 0107 DESIGN AND CONSTRUCTION OF CAPITAL FACILITIES :.... ..... . : ....-...::.. IN IN F D GS . :.. . , ... 1. Responsibility for managing the selection, negotiation and supervision of architecture, design, construction and project management contracts is divided between the Architectural Services Division of the General Services Department and the County Administrator's Office. If a capital facility is thought to be too large for the Architectural Services Division to handle, the County Administrator assigns responsibility for the accomplishment of the architecture, design and construction to one of his immediate staff. Response: Partially disagree. Under County Ordinance, the County Administrator's Office has oversight responsibility for the planning and funding of all capital projects. As such, all capital projects require the involvement of the County Administrator's Office throughout the planning, design and construction phases. Decisions regarding facility design and scope are usually made collaboratively among the County Administrator's Office, the General Services Department, and the user agencies and departments whose projects are being planned and built, within the context of available County resources. Decisions regarding the assignment of capital projects to the General Services Department are made by the County Administrator's Office, with the input of the General Services Department. 2. For small and medium sized projects, the Architectural Services Division is responsible for designing, constructing, remodeling and managing new capital construction and alteration projects, using contract services where in-house capabilities are insufficient. Response; Agree. 3. For large projects, the County often uses contract services of Project Management firms. These firms provide a full range of services from development of facility concept, detailed engineering and architectural design, preparation of construction contract bid documents and management of construction. Response: Partially disagree. Historically, the decision to outsource project management services has been based not only on the size of project, but also its complexity and/or its urgency, and on current workload of County staff. For example, the decision to outsource project management for the new Clinical/Public Health Lab was not based on size of the project, but rather on the complexity of design, the regulatory requirements of the Office of State Health Planning and Development, and the workload of the General Services Department. The General Services Department was originally assigned the Lab project, but subsequently asked to have it outsourced because of other demands on staff time. With regard to project management services, the County has not hired project management firms to provide direct architectural design, engineering, or construction services. Rather, the role of contract project managers has been limited to coordination of these activities as the County's representative. 4. The Architectural Services Division, through public advertisement, normally solicits interest in contracts for architectural and engineering design of facilities. Selection of a specific firm to execute the contract is normally then made through a review and interview process by a County committee of knowledgeable persons and a contract is then negotiated with the selected firm, normally on a firm fixed-price basis. Response: Agree. Design and Construction of Capital Facilities August 14, 2001 County Response to Grand Jury Report No. 0107 Page 2 5. The County Administrator's Office sometimes conducts a formal solicitation of interest in Project Management contracts similarly to that done for architectural contracts. Most of the times, these Project Management contracts are given to the same firm without seeking interest or competition from other qualified firms. Response: Partially disagree. The County Administrator's Office has overseen the formal solicitation of project management services for fairly large, high-visibility projects on three separate occasions over the last 15 years: the construction of the West County Detention Facility (in the late 1980s), the Contra Costa Regional Medical Facility (in 1992), and the County Administration/Summit Center building evaluation projects (in 1998). In each case, the panels that evaluated both the written and oral presentations of potential contractors was composed of a variety of County staff with expertise in facility management, building design, project planning and management, and the type of operations that would be conducted in a given facility, including staff of the General Services Department. The request for proposals (RFPs) for these projects were sent to a broad range of firms based on bidders lists maintained by the General Services Department. In certain other instances, the County Administrator's Office has recommended to the Board of Supervisors that a firm be hired to provide project management services without going through a formal solicitation process. Instances where this occurred included improvements to the County's Juvenile Hall and other juvenile justice-related facilities; the Family Law Project; improvements to the Richmond Administration Building for the District Attorney's Office; and the Clinical/Public Health Lab and the Martinez Health Center, which are both located on the grounds of the County Hospital, based upon the firm's specific knowledge and experience gained through the design and construction of the County's new hospital. 6. The processes used in the selection of a successful firm for Project Management contracts differ between the two offices responsible for the activity. The Architectural Services Division follows a process of obtaining a list of interested firms, selecting one firm by a committee of key county personnel, negotiating a contract with that firm and managing the activities and performance of that firm by qualified architects. However, the County Administrator's Office repeatedly selects the same firm, negotiates a cost-reimbursable contract with that firm and manages the firm's performance with its own staff. (Note: a cost-reimbursable contract is defined as one in which the contractor is paid for services on the basis of time spent on the project at pre-determined man-hour rates rather than a firm fixed price.) Response: Disagree. Until recently, the General Services Department did not outsource project. management services; therefore no historical comparison can be made between the selection processes. In the last year, however, the General Services Department, at the direction and with the participation of the County Administrator's Office, conducted a solicitation and competitive selection process to create a revolving or "short" list of highly qualified project/construction managers that could be assigned County projects where existing General Services Department Architectural Division staff was not available to provide the level of oversight required to move projects forward in an expeditious fashion. The selection teams included representatives of affected agencies and user departments. Project management firms were selected on the basis of their experience and background, the qualifications and experience of the individuals to be assigned to a project, the availability of these individuals to work on County projects on short notice, and their familiarity with the specific types of projects being planned. As a result of this process, seven firms were selected for the short list and were assigned new projects, including RGM Construction for the Los Medanos Health Center, Luster Construction for the replacement Animal Shelter project, 'and O'Brien Kreitzberg for the Application Permit Center. Design and Construction of Capital Facilities August 14, 2001 County Response to Grand Jury Report No. 0107 Page 3 With regard to the procurement of architectural, engineering or construction services, the selection processes utilized by the County Administrator's Office and the General Services Department are essentially the same. . 7. The County Administrator's Office has repeatedly hired one firm over the past 15 years for management of major projects. Contracts awarded to this firm over the last eight and one-half years total approximately $8.5 million and include consulting work on the new Martinez Health Center, the Juvenile Hall Tamalpais Addition and the New Juvenile Hall. This firm has also been selected to manage design and construction of a new Permit Center. No documentation exists explaining the reasons for this repeated selection without a competitive process. Response: Partially disagree. As stated in the County's response to Finding No. 5, the selection of the firm to provide project management services for the Martinez Health Center was a logical outgrowth of that firm's involvement in master planning activities for the new County Hospital. The firm's work on Juvenile Hall and other juvenile justice- related activities was based on its participation in master planning for juvenile facilities and its assistance in securing the federal dollars needed to enable these projects to proceed. The selection of this firm for the Application Permit Center was made as a result of the competitive short list process described in the County's response to Finding No. 6. The team that made this assignment rated the selected Firm highest for this project among the other firms on the list. 8. Documents from the Architectural Services Division describe the selection process for individual projects. Other documents show unexplained departures from the publicized process. In one instance, the initial solicitation of interest was sent to 35 firms, resulting in 14 responses. The solicitation letter indicated that a County committee would develop a short list of 6 "best qualified" firms for further evaluation and discussion. The final list contained 7 firms. Response: Agree. 9. The Architectural Services Division Selection Committee's documents for this project showed that 6 of the 14 responding firms received the highest number of votes by the committee and were listed as "best qualified." The 7th firm appearing on this "best qualified" list received only a single vote. This firm ultimately was awarded one of the contracts. Response: Partially disagree. The committee that short-listed the 14 responses was made up of three representatives of the General Services Department and one representative of the County Administrator's Office. The primary goal of the short-listing was to screen out firms that were not highly qualified to provide project management services. The selection criteria for the initial screening were enumerated in the County's response to Finding No. 6. Of the 94 firms who submitted proposals, 7 were deemed "best qualified"to advance to the interview stage of the process based on these criteria. Subsequently, selection teams composed of user departments, as well as General Services Department and County Administrator's Office staff, interviewed, assigned point scores and selected individual firms to manage specific projects. The "7"' Firm" referenced in the Grand Jury's finding received from the selection team the highest point score of the top-ranked firms for the Application Permit Center and was, accordingly, awarded the contract for that project. 10. Contracts for architectural and engineering services are negotiated, both firm fixed price and cost reimbursable. Most, if not all, Project Management contracts are cost reimbursable. It is not known how the agreed upon fixed price or the "payment limit" amount for cost reimbursable contracts were determined. Response: Partially disagree. While both architectural and project management Design and Construction of Capital Facilities August 14, 2001 County Response to Grand Jury Report No. 0107 Page 4 services are cost-reimbursable, all contracts approved by the Board of Supervisors have a fixed payment limit at the time of award based on the estimated cost of the project and the scope of services provided. As with any long-term project cost estimate, the actual project cost often differs from the original estimate due to factors including industry demand for construction materials, unforeseen delays (often caused by unusual weather), and unanticipated problems at the construction site such as abandoned power or sewer lines, discovery of asbestos, etc. When these factors affect the project plan and cost, it is usually necessary to amend the contractual agreements to reflect these changes. These amendments, along with supporting justification, are reviewed and approved by the County Administrator's Office and the Board of Supervisors. 11. In one cost reimbursable contract, the contractor provided no substantiating documentation supporting periodic contract payments. One contract payment request identified the contractor's personnel along with the number of hours worked in the intervening period and the corresponding man-hour rate for that individual. No information was provided on work performed during this intervening period nor any evaluation of actual versus scheduled progress on the project. Validity of the payment request cannot be judged from this minimal data submitted. Response: The finding does not provide sufficient information for an adequate response. County staff is expected to verify costs charged for services rendered. Such verification may include a physical review of the project, and information learned at monthly meetings and/or from periodic status reports. The Grand Jury may have mistakenly determined that invoice information it reviewed in reference to this finding represented the sole source of information supporting authorized payments for services rendered. Regrettably, without specific information supporting the finding, it is impossible for the County to verify or refute this finding. 12. County audits of the contract performance and expenditures for cost reimbursable contracts, normally a requirement on this type of contract, are not performed on projects managed by either the County Administrator's Office or the Architectural Division. Response: Disagree. County staff, both in the General Services Department and the County Administrator's Office, works closely with contract architects and project managers, attending periodic meetings with these contractors regarding project status, budget and timing issues, and other technical aspects of project development and implementation. County staff also reviews and reconciles all individual expenditures by contractors against the contract provisions. 13. A performance Audit, directed by the County Administrator of the General Services Department was conducted in 1998 by a team chaired by the County Administrators Office. The Audit report, dated November 2, 1998, is critical of the performance and management of the Architectural Services Division suggesting inadequate organization, poor supervision, lack of accountability and initiative, poor coordination, and lack of training in project management skills. Recommendations included hiring a General Services Department Deputy to manage the Architectural Services Division along with several other units. The audit stated that this Deputy should possess experience in architectural design and capital project management. Response: Agree that these were audit findings. 14. County staff assigned to specific projects by the County Administrator are in career fields unrelated to architecture, engineering and construction activities, but yet are responsible for the design and construction management of major new capital facilities projects. Response: Agree. County Administrator's Office staff assigned to oversee capital facilities projects are not required to have degrees in architecture, engineering or Design and Construction of Capital Facilities August 14, 2001 County Response to Grand Jury Report No. 0107 Page 5 construction, but nevertheless have other job skills which make them well qualified to oversee the planning, design and construction processes. These skills include communication, project management, spreadsheet, budgeting, coordination and facilitation skills, which are critical when working with user departments to bring projects to fruition on time and within budget. In addition, the County has also benefited from the specific program expertise of County Administrator's Office staff in planning facilities that are conducive to effective service delivery. Moreover, given the tendency of projects to grow in scope over time ("scope creep'), County Administrator's Office staff has been responsible for enforcing stricter budget discipline on many capital projects. 15. No written County policy guidance, manuals or regulations governing the procurement of professional engineering and project management contracts exists. Response: Agree. No written County procurement policies exist specifically for professional engineering and project management contracts. NCL SI hl O C U O S 1. The process for architecture, engineering, design and construction of County capital improvements appears to be poorly managed. The Architectural Services Division, charged with the responsibility for these activities, has not been able to perform because of a lack of qualified personnel. The result has been to add specific project management responsibilities to the County Administrator's Office. This gets the job done but at uncertain costs and questions the County's reputation for equitable distribution of available project management work. Response: Disagree. County capital projects, whether overseen by the General Services Department or the County Administrator's Office, are well managed. Two of the County's largest capital projects to date, the construction of the West County Detention Center and the Contra Costa County Regional Medical Center, were completed on time and within budget. Both in the public and private sector, projects sometimes experience unexpected delays and cost overruns. For example, the Los Medanos Health Center Project exceeded estimates due to unforeseen building conditions in a property the County leased from the bankrupt hospital district. However, the County responded to these contingencies rapidly and effectively. To clarify the structure of County capital project management, General Services Department Architectural Division is responsible for project management activities only at the behest of the County Administrator, who is responsible under County Ordinance 24-4.008(8) to oversee capital projects. The County Administrator has maintained capital project management responsibilities since the creation of the office. Regarding the concern over a lack of availability of qualified General Services Department Architectural Division personnel, the County audit team that studied the General Services Department reported in its November 1998 report, under "Helpful Practices'; that the General Services Department Architectural Division maintained a "small staff of qualified individuals that serve as a core unit. Contracted services allow the unit to expand and contract as workload dictates, maximizing productivity." 2. Continuous use of one project management firm for large contracts, combined with the use of cost reimbursable contracts, inadequate periodic billing documentation and lack of contract audits creates the potential for irregularities in contract performance and payments. Response: Disagree. As stated in the County's response to Finding No. 5, the County has used RFPs to select firms to provide project management services on a number of its largest capital projects over the last 15 years. While one project management firm has won a number of these contracts, large projects have not been exclusively awarded to this firm. The County's obligation is to ensure that in cases where outsourcing of these services does occur, the most qualified firm and individuals available are Design and Construction of Capital Facilities August 14, 2001 County Response to Grand Jury Report No. 0107 Page 6 selected. Regarding billing, the Grand Jury did not identify any specific instance of inadequate billing documentation or contract performance problems, which makes this conclusion difficult to address. In practice, County staff reviews and approves individual expenditures by project management firms. In addition, project managers provide County staff with monthly status reports on each project to which they are assigned, including project status, budget and timing issues, and other technical aspects of project development and implementation. 3. The "payment limit' amount contained in cost reimbursable contracts is considered to be the cost controlling mechanism by itself, but it certainly does not lend to productivity or initiative. This is particularly true when the °payment limit" amount is normally the same as the firm's proposal. Response: Partially disagree. These payment limits are often established as a direct result of negotiations between the selected firm and County staff. There is nothing inherently wrong, however, with setting realistic payment limits based on a firm's experience and knowledge of what will be required to complete a project. Capital projects are inherently complicated and there are often great variances in costs based on the circumstances of each particular situation. A practice of "squeezing" firms by negotiating unrealistically low payment limits can result in problems and unnecessary delays that can be costly and jeopardize State and federal construction grant funds . 4. The recommendations of the Performance Audit of the General Services Department sought to strengthen the management and performance capability of the Architectural Services Division to enable it to do the job it is assigned. Very few of the recommendations therein relating to the Architectural Services Division appear to have been implemented. Instead, the County continues to allow responsibilities for project management to be split, resulting in the divergent and distorted processes it now experiences. Response: Partially disagree. Most of the recommendations in the 1998 audit, as well as a subsequent analysis of General Services Department Architectural Division overhead costs, have been implemented, including the addition of two senior project managers to the Architectural Division in May 1999. A new Deputy Director position was also added at this time, although this position has not yet been filled. Architectural staff positions were retitled to that of project managers and job descriptions were rewritten to reflect the heightened emphasis on project management and coordination tasks. Since the release of the 1998 audit report, several larger remodel and new construction projects have been assigned to the General Services Department, including: ➢ Tenant and Building Improvements at the Summit Centre — this project was initially outsourced when the County was considering converting the facility into the County's administrative headquarters. Once the decision was made to build a new building in downtown Martinez, the outside contract for this project was terminated and this project was assigned to the General Services Department for further planning and implementation. ➢ 4549 Delta Fair— while at first the County Administrator's Office had recommended an outside construction manager to oversee the construction phase of this 36,000 square foot office building in East County for the Employment and Human Services Department, it was persuaded by the General Services Department that the Architectural Division could handle this $9.5 million project in-house. ➢ Martinez Animal Shelter—the design phase of this project is currently outsourced. The decision as to whether to use in-house General Services Department staff for the construction phase of the project will be made later this year based on staff's workload. Design and Construction of Capital Facilities August 14, 2001 County Response to Grand Jury Report No. 0107 Page 7 It should also be clarified that the Audit Team that studied the General Services Department made no findings that the dual management of capital facilities by the County Administrator's Office and the General Services Department was inefficient or ineffective, and made no recommendations to change this management structure. 5. The current system of project management procurement for large Projects allows for selection of the firm, contract negotiations, contract performance management and authorization of payments to be performed without adequate checks and balances. Response: Disagree. Many of the County's largest building projects have involved RFPs for project management services. County employees involved in the facilities planning and development process, including staff of the General Services Department and the County Administrator's Office, as well as user departments affected by the facility project, have participated in the evaluation and selection processes. Whether the staff of the General Services Department or the County Administrator's Office supervises an outside project manager, the County Administrator's Office, the County Counsel's Office, and the Board of Supervisors or Purchasing Agent review all project management contracts before the contracts receive approval. Invoices against contracts must be itemized and are reviewed by General Services Department and/or County Administrator's Office staff, and the Auditor's Office prior to payment. 6. The reason for relieving the Architectural Services Division of the responsibility for numerous major capital improvement projects was the Division's limited capabilities. It is noted that this limited capability was replaced with staff from the County Administrator's Office. One or more qualified persons could have been added to the Architectural Services Division office instead to perform this function. Response: Disagree. Economy and efficiency, not limited capabilities, are the primary reasons for securing the services of outside project management consultants for large or complex projects. The General Services Department Architectural staff was not "relieved" of these responsibilities, it never had such responsibilities. Throughout the early and mid-1990s, the County had a limited amount of funds to spend on capital projects due to the severe recession, state budget cuts and property tax shifts. As a result, increasing in-house County Architectural staff was not warranted or financially feasible. Unlike outside project managers who work on a project by project basis, the General Services Department's Architectural staff are permanent County employees whose salary and benefits must be paid in good financial times and bad, whether there is a lot of project activity or a significant drop-off due to budget cuts and economic recessions. Given that the County's ability to finance capital projects has improved in the last few years, due both to a brief economic boom and additional funding from federal and State capital improvement programs, there has been a sharp acceleration in departmental requests for long-needed County capital facility improvement projects. To meet this growing demand, two additional senior project managers were added to the Architectural Division in 1999. Increased use of outside project/construction management over this same time period has also occurred, since it allows the County to address this "peak"in project activity in a cost-effective fashion, particularly on those types of specialty projects for which unique expertise is required, without over expanding the County's permanent workforce. County Administrator's Office staff did not replace General Services Department staff in the role of major capital improvement project oversight. The County Administrator's Office has had a role in capital project management for at least 20 years. ....... . . ... CO RE END TI N - =MM A O S _ 1. Develop standardized and uniform County regulations prescribing required Design and Construction of Capital Facilities August 14, 2001 County Response to Grand Jury Report No. 0107 Page 8 processes for procuring engineering and design services by contract, to include: a. selection of firms, type of contract to use and negotiation of contract scope and price, specifically identifying the requirements justifying repeated use of one firm. b. written documentation requirements to include explanation for any divergence from the regulation requirements. Response: Has not yet been implemented, but will be. The County Administrator will, within 90 days, develop written procedures for engaging outside professional project management, engineering and architectural services related to County capital facilities projects. 2. Develop County regulations prescribing required processes and standards for cost reimbursable contracts, to include: a. detailed project schedule of major component of work. b. amount of supporting information to be provided with periodic payment requests. C. requirements for periodic County audits. Response: Will not be implemented because it is not warranted. Detailed project schedules of major component work and the amount of supporting information required for payment are normally defined in the contract documents. Contractor charges for services rendered are reviewed on a continual basis by several individuals prior to payment. 3. Re-evaluate the November 2, 1998 Performance Audit of the General Services Department with a view toward strengthening the Architectural Services Division so it can perform the County's total design and construction management function by December 2002. Response: The recommendation will not be implemented because it is not warranted. As stated in the County's response to Conclusion No. 4, most of the recommendations of the study have been implemented, including the addition of staff and the creation of a Deputy Director position to provide oversight to the architectural, lease management, and building maintenance functions of the General Services Department. It is not feasible, nor is it necessarily desirable, to perform all design and construction management services in-house. Given the wide fluctuations in available project funding, it would be more fiscally prudent to outsource project management services to meet peak levels of project activity, particularly for unique or specialized types of projects, rather than overstaff this operation. The County Administrator's Office will, however, continue to support the General Services Department's efforts to strengthen its organizational capacity and management skills related to capital projects.