For Immediate Release
Oct. 14, 2014
Contact: Brian Dries
Controller Butkovitz Uncovers $650,000 in Excessive Contract Costs
City Controller’s findings spur Department of Public Property to take measures that
ensure costs are reasonable & meet industry standards
Department of Public Property – Change Order & Requirements Contract Review
PHILADELPHIA – City Controller Alan Butkovitz today released a review of contract costs associated with capital projects that found almost $650,000 in overbillings due to unreasonable change orders and other questionable costs made by contractors.
From a sampling of contracts from 2010 through 2013 for the Department of Public Property (Public Property), the Controller’s auditors questioned the validity of certain change order costs, which are changes to the original contract scope or duration. These questioned change orders, which totaled $515,120, included billings for overhead and profit, labor costs and additional supervision costs that were higher than city standards.
“While unexpected conditions can arise impacting the project’s initial price tag, the amounts billed need to meet approved contract or city standards,” said Butkovitz. “When standards are not met, we reject or challenge many of these billings – and will continue to do so.
“However, Public Property needs to enforce these standards and reject invoices that do not meet city standards.”
In addition, the Controller’s auditors also determined that amounts billed for smaller projects had exceeded standard pricing resources as listed under the Blue Book rate, including trucks, equipment and fuel. These charges amounted to $134,036 of the total questioned costs.
“City requirements contracts clearly indicate that the rates charged for these items should never be higher than those listed in the Blue Book,” said Butkovitz. “The appropriate rates for equipment used on a project site must be billed accurately and only for the days the equipment was utilized.”
For one project, the Controller found a contractor was billing for a dump truck as if it was being operated for eight hours a day for four days. However, it was determined that the dump truck had operated for only 90 minutes over a four day span, resulting in the City paying 4.5 times more than should have been paid.
“For those billings that appear excessive, Public Property needs to visit and observe the work site to determine the accuracy and reasonableness of billings,” said Butkovitz.
Other recommendations provided by the Controller included:
-Require that project managers know and understand the costs associated with the revised contract requirements, prior to entering into negotiations for a change order,
-Ensure that backup is maintained for all change orders, and that the costs are clearly broken down into labor, materials, equipment and subcontractors costs, and
-Review labor rate charges to determine if they are consistent with prevailing wages.
Subsequent to the initiation of the Controller’s review and after discussing the findings with Public Property, the Commissioner has committed to establishing a working group made up of representatives of Controller’s Office as well as Public Property to improve the process and protect the resources of the city. The Commissioner also announced the department has developed or is in the process of developing various initiatives to improve their review process. They include the following:
-Forming a construction team to enhance accountability, work load distribution and training programs for contractors,
-Working with Procurement, Law and the Budget Office to establish Job Order Contracting within the public works bidding process, and
-Conducting training sessions related to these policies and procedures for all departmental personnel.