Audit Report on Job Order Contracting by the Department of Environmental Protection

Audit Report In Brief

We performed an audit of the Department of Environmental Protection’s (Department’s) administration of job order contracts.  Job order contracting (JOC) is a procurement method for expeditiously performing maintenance, repairs, and small- or medium-sized construction projects.

Under a job order contract, four Department bureaus—Wastewater Treatment, Water and Sewer Operations, Water Supply, and Facilities Management and Construction—can direct a contractor to perform individual tasks as needed rather than awarding individual contracts for each small project.  For each individual task, the Department issues either a job order or a supplemental job order to the job order contractor.  The cost of JOC work is based on previously established unit prices for specific items (e.g., electrical, plumbing, roofing).

The Department’s use of JOC began in 2000 when it employed a consultant, The Gordian Group, to develop and implement the Department’s JOC program, create catalogs of unit prices, and provide consulting services, for which it is paid a fee on the basis of a sliding scale.

For Fiscal Years 2005 through 2007, the Department issued 1,174 job orders and supplemental job orders totaling $46.4 million.

Audit Findings and Conclusions

We found weaknesses with the Department’s administration of the job order contracting program.  Specifically, there is a lack of adequate internal controls that govern the timeliness of JOC work.  Consequently, most job order projects were not developed or completed on time, thereby reducing the JOC program’s effectiveness and resulting, in one case, in the expenditure of an additional $171,807.  Moreover, when job order work was delayed, the Department did not impose liquidated damages totaling more than $800,000.

Furthermore, we found problems with job order work whose costs were not based on pre-established prices contained in the construction task catalogs.  In some of these cases, the Department should not have used JOC to carry out the work.  In other cases, the prices lacked required supporting documentation.  We also identified one job order that was overpriced by almost $90,000 because the Department did not use the required pre-established prices.

In addition, we found inaccurate use of multiplier factors, missing contractor submittals, and problems with the PROGEN database.

Audit Recommendations

This report makes a total of 23 recommendations.  The major recommendations are that the Department should:

• Complete job order development and issue job orders within required time frames.

• Ensure that JOC contractors complete work on schedule.  In this regard, the Department should ensure that unfinished work is completed without further delay.

• Ensure that all job orders contain provisions for liquidated damages. Assess liquidated damages when contractors fail to complete work in accordance with scheduled timeframes.  Determine whether liquidated damages should be assessed for the seven cases noted in this report.

• Cease its practice of using JOC for work that is not based on any established unit prices in the construction task catalogs, and calculate job order work on the basis of established unit prices in the construction task catalogs.

• Ensure that JOC contractors submit all required material samples, product data, drawings, and test reports.  Implement an effective system of administration to record, collect, file, and properly maintain all required documentation in Departmental files.

• Implement adequate controls to ensure that the data contained in the PROGEN database is complete, current, and accurate.