Audit Report on the Department of Sanitation’s Oversight of Construction Management Consultants

AUDIT REPORT IN BRIEF

The Department of Sanitation (Department) collects daily over 10,500 tons of residential and institutional refuse and 1,760 tons of recyclables. To carry out this task, the Department operates 59 sanitation garages and 10 waste transfer stations within the five boroughs. At present, the Department is constructing or “closing out” six projects totaling $850 million to build three new garages and two marine transfer stations and to close and cover the Fresh Kills landfill. To carry out these improvements, the Department has contracts with five construction management consultants totaling $65 million that are responsible for managing the timely completion and close-out of the projects.

Audit Findings and Conclusion

The Department is effectively monitoring construction management consultants to ensure that work is being performed effectively and in a timely manner with the exception of the Bureau of Engineering, which is not doing so. Construction of the three projects associated with the Department’s Bureaus of Long Term Export and Waste Management Engineering were completed on time or with delays necessitated by unforeseen foundation conditions. However, the three projects associated with the Bureau of Engineering were delayed for up to six years and resulted in the payment of more than $13 million to construction management consultants. Moreover, the delay in completing one project resulted in the imposition of monetary penalties totaling more than $8 million. Furthermore, the City may be liable to pay an additional $5.9 million in penalties if another project is not completed in a timely manner, thereby yielding more than $14 million in monetary penalties.

Audit Recommendations

This report makes a total of 13 recommendations, including that the Department:

• Ensure the expeditious completion and close-out of the Garage projects mentioned in this report.
• Compile standard written procedures for overseeing projects that are managed by construction management consultants. In that regard, promulgate uniform standards for assigning in-house personnel to oversee construction management consultants.
• Devise a computerized tracking system to oversee construction progress.
• Seek recoupment for payments made to construction managers if any project and close-out delays are attributable to construction management consultants.
• Ensure that the amount of liquidated damages is sufficient to adequately protect the City’s interests in cases where delays are due to contractors.
• Ensure that all consultant and contractor performance evaluations are submitted in the City’s VENDEX system.

Department Response

The matters covered in this report were discussed with Department officials during and at the conclusion of this audit. A preliminary draft report was sent to Department officials on October 11, 2012, and discussed at an exit conference held on December 4, 2012. On December 17, 2012, we submitted a draft report to Department officials with a request for comments. We received a written response from the Department on January 7, 2013.

In their response, Department officials stated that they reviewed the draft audit “and continue to have some comments and concerns that we have mentioned several times regarding the findings and recommendations.”

Specifically, “The report goes on to further highlight the deficiencies of one Bureau, but it does not adequately recognize the other Bureaus nor the Agency for the projects audited which were successful, well administered and executed. “

“We believe the report should recognize the overall quality of work performed by the other Bureaus and supporting functions.”

Notwithstanding the Department’s complaint, the audit report prominently concluded that it was effectively monitoring construction management consultants with the exception of the Bureau of Engineering. In addition the Department agreed with 10 recommendations. We consider the Department to have disagreed with three recommendations.