Audit Report on the New York City Housing Authority’s Oversight of Contracts Involving Building Envelope Rehabilitation

The audit determined whether NYCHA effectively monitors construction contracts involving building envelope work to ensure that required work is being performed appropriately, on time and in accordance with contract terms and industry standards.

The New York City Housing Authority (NYCHA) is the largest public housing authority in North America.  NYCHA seeks to provide safe, affordable housing for low- and moderate-income New Yorkers.  More than 400,000 New Yorkers reside in NYCHA’s 328 public housing developments across the City’s five boroughs.

NYCHA’s housing stock is aging: 270 of its developments are 30 or more years old and of those, 114 are more than 50 years old.  NYCHA’s Capital Projects Division (CPD) is tasked with preserving and modernizing public housing by providing professional design and construction services.  CPD manages a diverse portfolio of construction projects that includes brick and roof upgrades, boiler replacements, as well as installation of security cameras and fire alarm systems.  CPD is staffed by approximately 380 employees who work out of a central office and at field locations throughout the five boroughs.

A major focus of CPD’s work is making buildings water-tight through rehabilitating and/or replacing building envelope components (roof, façade, windows, and foundation).  The building envelope rehabilitation work is accomplished through projects that use either traditional, standalone construction contracts or requirements contracts.  Three units in the Construction Programs section of CPD are responsible for managing envelope rehabilitation work: the Local Law 11 Unit, the Special Projects Unit, and the Construction Unit.  Data received from NYCHA shows that building envelope rehabilitation work was performed on 43 projects utilizing 51 unique contracts awarded from January, 2013 through November, 2015, our audit scope period.  The total dollar amount awarded on those contracts was approximately $1.02 billion.

NYCHA utilizes several types of software to manage its construction activities, principally Primavera, its project management system of record, Oracle Financials (Oracle), its financial system of record, and an auxiliary Microsoft Access database, known as the Mod database, which NYCHA uses to combine data from Primavera and Oracle with additional details that NYCHA states are not available from those systems.

Audit Findings and Conclusion

Our audit found that NYCHA needs to improve its monitoring of construction contracts involving building envelope rehabilitation work to ensure that all required work is being performed appropriately on time and in accordance with contract terms and industry standards.  We determined that although there appears to be adequate field staffing and inspection of construction work, and sufficient information flow from the construction sites back to the central office and upper management, NYCHA needs to improve its controls and utilize its operational resources effectively to ensure that it delivers quality improvements for its residents that will last their expected useful life.

In particular, we found:

• deficiencies in the finished work product observed at several locations during our field inspections of a sample of the projects;
• construction work was completed late at three of five sampled developments undertaken by the Special Projects unit;
• inadequate project scoping at one of three sampled developments overseen by the Construction unit led to the questionable use of a change order to procure substantial additional work to address conditions that appear to have existed at the time the original contract was let;
• recordkeeping weaknesses in Primavera, NYCHA’s construction project management software;
• unreliable data in the MOD database, NYCHA’s auxiliary management information system that integrates information from various NYCHA systems; and
• a failure to update NYCHA’s CPD procedural manual to reflect its current CM project delivery method.

Audit Recommendations

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

• Correct the identified drainage deficiency on Lafayette Gardens’ Building 5 roof.
• Ensure that full inspections are properly completed before any roofing work is accepted.
• Ensure that warranty maintenance programs for all roofs under active warranty are followed, including the examination of roofs after severe weather conditions.
• Bring any potential non-conformance to the attention of the roofing manufacturer for consideration to avoid impacting the warranty.
• Take all appropriate action to recoup the cost differential between the standard base flashing installation and the substandard provided installation for the locations identified at Pomonok Houses North.
• Investigate and determine the nature and cause of the yellow stain/growth at East 152nd Street-Courtlandt Avenue development, and properly remediate the condition.
• Require the roofing manufacturer to provide early notification when a roofing component (including, but not limited to, roof drains) will not be covered by the warranty so that NYCHA can take action to avoid exclusions and/or determine how the exclusions will impact maintenance cost and useful life of the roof.
• Conduct thorough field surveys to ensure that contract drawings accurately address existing conditions.
• Ensure all required project documentation in PCM is complete, accurate, and entered in a timely manner.
• Consider enforcing its liquidated damages provision when contracts complete late. Specifically, liquidated damages should be assessed for the three contracts we identified as being late.
• Refine the Local Law 11 contracts Master Schedule to include defined start and end dates for work at each development, as well as showing planned versus actual timelines.
• Consider identifying completion of work at each development as a contract “milestone” so liquidated damages may be assessed and enforced when appropriate.
• Ensure that complete and accurate information is entered into the Mod database in a timely manner.

Agency Response

In its response, NYCHA agreed with 9 of our 25 recommendations and disagreed with 6 of our recommendations.  NYCHA stated that the remaining 10 recommendations are not applicable “because the proposed recommendation is consistent with our current practice.”