An Audit Report on Routine Maintenance Contracts at the Department of Transportation
April 2006
Report Number 06-034
Overall Conclusion
Routine Maintenance Contracts
The Department of Transportation (Department) has adequate contract management processes and controls over routine maintenance contracts. It needs to improve and strengthen its processes in the areas of contract planning, price establishment, and monitoring. Specifically, auditors identified the following issues:
- Two of the Department's district offices that auditors visited (in Fort Worth and Houston) do not comply with Department policy regarding planning practices for contracted routine maintenance. These two district offices did not prepare an annual maintenance plan as required by the Department's contract planning guidelines.
- The district offices' estimates for the costs of services are not accurate, and competition among bidders should be increased. Collectively, only 35 percent of three district offices' contract award amounts for fiscal years 2001 through 2005 were within 10 percent of the engineers' estimates. During this period, the three district offices auditors visited entered into 1,014 contracts, of which 97 (10 percent) had one bidder and 251 (25 percent) had two bidders. Overall, approximately 34 percent of those three district offices' contracts for this period were one- and two-bid contract awards. Statewide, the Department's district offices, on average, awarded 31 percent of contracts after receiving one or two bids.
- The three district offices auditors visited did not have support to show that the required tests, material approvals, and inspections had been performed for the contracted projects. In 22 of 30 contracts tested, at least one of the inspection-related elements for which auditors tested could not be supported. The total award amount of these 22 contracts was $8.9 million. In addition, change orders should be more closely reviewed for pricing justification, and projects should be closed out, or administratively completed, in a timely manner.
- The three district offices auditors visited are fully complying with the Department's procurement requirements for selecting qualified bidders and objectively awarding contracts.
- The three district offices auditors visited are ensuring that contract provisions hold contractors accountable for producing desired results.
Total Maintenance Contracts
The Department also establishes and enters into total maintenance contracts, which are a subset of routine maintenance contracts. Auditors reviewed 8 total maintenance contracts awarded for more than $91 million and identified the following:
- On two total maintenance contracts, the Department did not monitor or comply with the claims and collection processes involving more than $5 million in claims filed by the contractor. The claims were related to third-party damages to state property.
- The Department has clarified certain provisions in its latest total maintenance contracts, but more clarification is needed in assigning responsibility for collecting on third-party damage claims.
- The Department is fully complying with its procurement requirements in selecting qualified bidders and objectively awarding total maintenance contracts.
The Department is still learning through evaluation and assessment how to improve the results of total maintenance contracts.
Additionally, the Department is not reporting routine maintenance contract information according to the Legislative Budget Board's (LBB) instructions. The Department reports cumulative contractor payments as of the reporting date, rather than total contract awards and amendments as the LBB instructs state agencies to report. The result is that contract amounts are under-reported. The total amount obligated by the Department is not accurately reported.
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