August 2016
The Department of Transportation (Department) has used the design-build project delivery method (design-build method) for highway construction projects. For all highway construction projects audited1, the Department procured the design-build projects2 in accordance with most applicable statutes, rules, and other requirements. The Department also made payments to the design-build contractors and generally monitored the contracts in accordance with applicable requirements. However, the Department does not have a fully established framework to standardize its use of the design-build method.
The Department should establish a comprehensive framework of policies and procedures to form standardized, documented, and repeatable processes for the procurement3 and oversight of contracts for design-build projects to foster uniformity and potential efficiency across the Department’s districts. The lack of a fully established and documented framework for design-build projects resulted in several weaknesses and inconsistencies in the Department’s procurement and oversight of the four audited design-build projects.
The Department procured the contracts for the design-build projects audited in accordance with most applicable requirements (one of the projects audited was still in the procurement stage).
The Department lacks policies and procedures to ensure that contracts for design-build projects are procured in a consistent manner.
Auditors identified inconsistencies and weaknesses in the Department’s procurement for the four projects audited.
• The Department did not document its determination to use the design-build method for the Energy Sector Road Repair project; the IH35-E (Managed Lanes) project; the US 181 Harbor Bridge Replacement project; or the SH 99 (Grand Parkway) Segments H, I-1, and I-2 project.
• The Department did not ensure that the addenda to the requests for qualifications and requests for proposals were approved by the Department’s authorized representatives identified for each project.
• The Department did not ensure that all personnel who evaluated the qualifications statements and proposals completed an individual scoring worksheet, as required.
• The Department did not have evidence that it considered a contractor’s past performance during the evaluation process.
• The Department did not consistently retain all required contract procurement records.
The Department does not have a consistent, documented process for how to proceed if all the price proposals for a proposed project are higher than the amount that the Department estimated for the project. Specifically, the Department lacks policies and procedures for the following:
• Determining the subsequent events that should occur after management has determined that all price proposals received for a design-build project are not “financially feasible” (when the price proposals received are all higher than the Department’s cost estimate), including changing the project to lower the project’s cost.
• Evaluating and determining the point at which a design-build project must be reprocured because a request for proposals has changed significantly. Specifically, potentially significant changes to a project’s design and maintenance plan could garner additional interest from other qualified contractors that initially refrained from participating based on the project’s original design scope and the terms of the accompanying maintenance plan.
Auditors identified areas in which the Department could improve the effectiveness and efficiency of its procurement process for design-build projects. The Department should consider the following opportunities to improve the effectiveness and efficiency of its use of the design-build method.
• The Department should consider establishing an approved template that specifies the form, substance, and standard provisions for design-build contracts.
• The Department should consider documenting a policy or procedure to ensure that descriptive information related to the alternative technical concepts is redacted before the price proposals are evaluated.
• The Department should consider reviewing the membership of its evaluation committees and subcommittees to ensure adequate segregation in the membership.
• The Department should consider documenting policies and procedures to establish a process for performing a postmortem review during the close-out of a design-build project.
In general, the Department reviewed, approved, and processed payments to the design-build contractors as required.
The Department approved and executed change orders to the audited design-build projects. Specifically, all change orders tested appeared reasonable in purpose and price and did not affect the final completion date of the projects.
Auditors examined other aspects of the Department’s oversight of the construction of design-build projects, including the Department’s approval of changes to key personnel, monitoring of quality control activities, and completion and acceptance process.
Key Personnel
Auditors determined that contractors’ approved key personnel were actively involved for the three audited design-build projects with executed contracts. Additionally, appropriate Department personnel approved all the changes to contractors’ key personnel on the three design-build projects audited.18 However, the Department did not always approve changes to key personnel in a timely manner.
Monitoring of Quality Control
The Department did not consistently require the design-build contractors to document and submit quality control deliverables required by the contract provisions.
Completion and Final Acceptance
Of the four audited projects, only the Energy Sector Roadway Repair project was complete as of June 2016. Auditors examined 5 of the 30 roadway segments repaired during the Energy Sector Roadway Repair project and determined that the Department adequately monitored the processes related to substantial completion and final acceptance.