Audit Report on the Department of Parks and Recreation’s Oversight of Construction Management Consultants

EXECUTIVE SUMMARY

The New York City Department of Parks and Recreation (DPR or the Department) oversees nearly 30,000 acres of land—some 14 percent of New York City—including more than 5,000 individual parks, public spaces and recreational amenities. The Department cares for 600,000 trees along streets and parkways, and 2 million additional trees in parks throughout the five boroughs. DPR’s mission includes planning resilient and sustainable parks, public spaces, and recreational amenities, building a park system intended to serve present and future generations, and caring for parks and public spaces.

To meet its varied responsibilities, DPR plans and executes a range of capital projects, including landscaping and renovating parks and playgrounds, building recreational facilities, and constructing facilities for its own use. DPR’s Capital Projects Division (Capital Division), constructs and restores the City’s infrastructure by developing and improving parks, playgrounds, pools and recreational facilities, and its own operational facilities. At the same time, DPR’s Forestry, Horticultural and Natural Resources Division (Forestry Division or FHNR Division), focuses on improving the environment and enhancing public health by planting new trees, constructing bioswales, removing invasive plant species and planting shrubs through its Street-Tree, Green Infrastructure and Reforestation programs.

Both the Capital and Forestry Divisions contract with private construction management firms (CMs) to oversee the work of construction and landscaping contractors hired by DPR to build and execute the capital construction projects. In-house staff of the Capital and Forestry Divisions are responsible for overseeing the CMs working on projects in their respective divisions.

DPR classifies its CM-managed capital projects (whether handled by the Capital or Forestry Divisions) by their estimated costs: (1) projects estimated to cost up to and including $3 million; and (2) projects estimated to cost more than $3 million. From 2010 through 2016, DPR entered into 12 contracts totaling $96 million in contract capacity, with 8 CMs; 6 contracts for estimated project costs of $3 million or less, and 6 for estimated project costs of over $3 million. Each of these 12 DPR-CM contracts had a three-year term with an option for DPR to extend the agreements for 2 additional one-year terms.

The project-specific contracting process for CM services begins when DPR issues a Request for Proposals (RFP) for each project it intends to have supervised by an outside CM firm. The RFP describes the scope of CM services that will be needed for that project. Interested CM firms then submit proposals that describe their proposed technical approaches to the work and their total estimated construction-supervision fees for the project. DPR reviews the proposals, awards a work-specific contract to a CM firm based on “best value to the City, including relevant experience and proposed fee,” and issues a work order for the project. CMs are compensated based on an hourly rate, which includes overhead and profit. If additional time is needed to complete the project (including due to increased scope) and so additional funds beyond the amount estimated are needed, DPR authorizes payment through supplemental work orders.

Both of DPR’s divisions maintain all construction project-related information, documentation and records of associated payments to CMs in hard copy files. In addition, both divisions use a computerized construction project management system, known as “Unifier,” to track project information for monitoring, cost-control and accounting purposes.

This audit focused on 69 Capital and Forestry Division capital projects supervised by CMs during Fiscal Years 2014 and 2015. Those projects had total construction costs of $317 million (exclusive of costs for design and for special inspections) and an additional $18 million for associated project management services performed by CMs, not counting costs for DPR’s in-house oversight staff.

The objective of this audit was to determine whether DPR adequately oversees CM consultants to ensure that capital project work is performed as planned and in a timely manner.

Audit Findings and Conclusion

The audit found that DPR needs to improve its oversight of contracted CMs to ensure that their projects are completed appropriately and on time. Thirty-nine percent of DPR’s CM-managed projects open at any time during our audit scope period were not completed within scheduled timeframes. The affected projects, located throughout the five boroughs, included construction of a carousel, a bikeway, a golf course, and a pool bathhouse, as well as tree-planting projects. The delays ranged from nine days to three years and resulted in DPR’s incurring $4.9 million more in fees charged by its contracted CMs than the amounts originally budgeted—a cost overrun of 35 percent on the CM component of the projects alone.

In particular, we found that:

• The Department’s oversight of its contracted CMs was performed without formal policies and procedures in the Capital Division and without sufficient direction, consistency and clarity in its contracts with those CMs;
• Actions taken by the Department to monitor CMs were inadequate; and
• The Department failed to make optimal use of services available under CM agreements.

The weaknesses we found in DPR’s controls over its CMs and its CM-managed construction projects were evidenced by missing and incomplete construction records, flawed designs, delays in obtaining required permits, and instances in which coordination with other agencies and utilities was neglected or ineffective.

Finally, we determined that DPR lacked adequate metrics for tracking the progress of its CM-managed projects that could assist the Department to reduce delays and cost overruns. At the exit conference, DPR stated that it uses a capital dashboard based on the Unifier data to monitor the progress of individual projects and to assist it in developing strategies to address any project delays. In addition, DPR informed us that it also relies on the metrics it annually reports about its capital projects performance in the Mayor’s Management Report (MMR). However, the project tracking efforts described by DPR are unlikely to be effective because as we found in the audit, the data in the Unifier system is incomplete and inaccurate, as are the hard copy records DPR maintains. Accordingly, the Unifier data would not be sufficient to enable DPR to reliably track and assess the performance of CMs and CM-managed projects and to be alerted to contract management issues.

Given these deficiencies, DPR cannot consistently ensure that CMs are fulfilling their contractual responsibilities to properly monitor construction contractors’ activities and communicate results to DPR. Nor can the Department ensure that project management deficiencies are addressed effectively. We found that DPR needs better planning, execution and accountability to improve its oversight of its contracted CMs and the performance of CMs and construction contractors on DPR’s capital projects.

 

Audit Recommendations

This report makes a total of 25 recommendations, including that DPR should:

• Prepare written policies and procedures for DPR personnel that governs their oversight of CMs that:
  • Specify DPR staffs’ duties, responsibilities and performance standards; and
  • Establish:
    • The level of authority of the DPR oversight personnel in relation to the CMs and the projects for which they are responsible, and
    • Standards for assessing CMs’ performance and dealing with those who fail to perform adequately.
• Issue a construction supervision manual for the CMs that specifies, in writing, the duties, responsibilities, and performance standards that apply to CMs.
• Develop written standard operating procedures (SOPs) with checklists to ensure that construction management issues are timely identified and that all necessary approvals, permits, surveys, design documents, and coordination with regulatory agencies and other entities are in place prior to directing a contractor to start construction.
• Optimize its use of CMs’ services to help DPR identify and timely address key logistical, scheduling and budgeting issues.
• Effectively utilize CM contracts for pre-construction CM services in DPR’s capital projects including contract-document reviews and other tasks to anticipate, identify and address project challenges to prevent and minimize delays and cost-escalation in completing the projects.
• Require CMs to ensure that contractors complete close-outs within prescribed timeframes.
• Undertake an immediate review of all of its CM services agreements for any conflicts and inconsistencies and address any found, including but not limited to, the conflict between Part I, Article 2 and Part II, Article 3, subsection 3 described in this report.
• Develop a standard record-keeping system for its capital projects to define and ensure that essential documents are obtained, maintained, and are readily retrievable.
• Ensure that the CMs prepare, maintain and provide to DPR all project documents that their contracts require, to enable DPR to determine whether the projects’ files are complete.
• Ensure that all required performance evaluations for all CMs are conducted as required and are submitted into VENDEX (now PASSPort) as required.^[1]
• Require CMs to include a summary breakdown of total payment requests by individual project, in requests where multiple projects are covered by one work order. The breakdown should identify initial CM staffing budgets, expenditures to date, remaining CM staffing dollars and the construction completion percentage for each project.
• Ensure that each project file contains a copy of the relevant summary breakdown, for each payment request so that DPR project managers can track or monitor the costs of CM services on the projects for which they are responsible.
• Develop, implement and enforce control procedures to ensure that complete and accurate data is timely entered and that required project documents are timely uploaded into the Unifier system.
• Utilize the Unifier system to accurately assess the performance of CMs and effectively manage the CM-managed construction projects based on factors such as: whether project schedules and cost targets were met; whether the records for which the CM is responsible were timely and accurately completed and filed; and the CMs’ have met their key responsibilities; and retain the completed evaluations for each project in Unifier.
• Develop and maintain performance metrics to evaluate effectiveness of CM managed projects.
• Conduct post-completion evaluations of major projects to determine whether project objectives were met, identify problems, such as delays and cost overruns and determine their causes, and develop measures to mitigate the risks of such problems in future projects.
• Ensure that periodic inspections are conducted during the two-year guarantee period to ensure that contractors are performing routine watering and maintenance, as required by their contracts.

Agency Response

In its response, DPR states that it “disagrees with the Report’s accuracy and many of its findings and conclusions, and also believes the Report does not provide a timely, useful analysis toward the enhancement of program operations.” DPR further states that the sampled CM-managed projects accounted for only 6 percent of Capital Division’s completed projects during the audit period. In doing so, DPR ignores the fact that its $335 million in expenditures on its 69 CM‑managed capital projects constituted 40 percent of its total reported capital expenditures of $810 million during the audit scope period. DPR also states that “several of the Report’s recommendations are based on outlier projects with circumstances which are (1) not representative of the broader Capital project portfolio – but provide a narrow, specific narrative—and (2) from a time period which predates the current administration. Thus, the Report does not provide Parks with many insights and alternatives it can usefully apply as Parks has continually worked to improve its Capital project processes. In fact, 14 of the 19 Capital recommendations have been implemented since Fiscal 2014, or were already in place prior to Fiscal 2014.”

With the exception of Recommendation 21, DPR did not directly state whether it agreed or disagreed with the audit’s recommendations. However, after a careful review of its response, it appears that DPR agreed to implement 2 of the recommendations (Recommendations 15 and 21); effectively agreed in whole or in part with an additional 14 recommendations by virtue of claiming to have recently adopted them or that the recommended measures had long been the agency’s practice (Recommendations 3, 6, 7, 8, 9, 10, 12, 14, 16, 18, 19, 22, 23, and 24); disagreed with five of the recommendations (Recommendations 1, 2, 4, 5, and 20); and failed to provide any responsive information related to four recommendations (Recommendations 11, 13, 17, and 25).

We have carefully reviewed DPR’s responses and find no basis to alter any of the audit’s findings.

[1] VENDEX stands for the Vendor Information Exchange System, a database of information relating to vendors who do business with the City. It was maintained by the Mayor’s Office of Contract Services and was the primary source used by agencies in making a responsibility determination.  As of August 2017, the Procurement and Sourcing Solutions Portal (PASSPort) is the City’s new, online procurement portal, where vendors and Agencies exchange information to create and manage vendor accounts, submit disclosure information, and complete performance evaluations.