Report highlights flaws in city contracting

City auditors found major flaws in how the city manages its contracts, with many of those weaknesses persisting citywide for several years, according to a special report issued this week.

Audit Manager Katie Houston told the City Council Audit and Finance Committee Wednesday that the contracting weaknesses negatively impact the city’s ability to safeguard city resources, maintain public trust and ensure delivery of services to Austinites. The audit staff looked at the results of 28 projects their office had done between Fiscal Year 2010 and FY 2018 to compile the report.

Ellen Troxclair, who chairs the committee, told the Austin Monitor that after studying the report she concluded, “There are really a lot of holes in a lot of different areas that are exposing the city to risk within our contracts or not ensuring that our city projects are being done on time and on budget.

“And considering that we have 2,700 total contracts with an authorized value of $5.5 billion, I think it’s an issue that we really need to address,” she added.

“I think there are some easy changes, like making sure that the correct legal statements are included within our contracts, and there are some more complicated things, like how do we make sure that contractors are actually delivering what they’ve agreed to in our contracts, and that the solicitation process is fair,” Troxclair concluded.

According to City Auditor Corrie Stokes, the biggest problem the city faces is how employees monitor the contracts.

Eighty-one percent of 17 contract-related audits and six investigations found issues related to monitoring. Problems included ineffectively coordinated monitoring roles and responsibilities, monitoring procedures that were not documented or implemented, and contract changes that were not documented or approved. Auditors found that on-site reviews were not always performed and that contractors were not being monitored to ensure compliance with contract terms.

A 2017 audit related to the city’s new Central Library found that management of the Public Works Department “authorized staff to overlook comments from the Quality Management Division on designs” for the library. As a result, auditors noted, “staff submitted the designs for bid and construction without subjecting them to the full quality management process. In some cases, external pressure regarding high profile or time sensitive projects resulted in modified or expedited quality reviews.”

The report noted that a number of previous audits found that city staff did not consistently review supporting documentation before approving payments to contractors. “In addition, departments did not consistently perform inspections of contractor work. As such there was no assurance that the city received the services for which it paid.” Also, in some cases, the report stated, “the city paid the contractors based on rates or transactions that conflicted with contract terms.”

Auditors also found inconsistencies in the way the city evaluated potential contractors. The key cause of such inconsistencies was inadequate oversight by departmental management, auditors said. For example, an audit of airport construction projects noted that “the department had developed a standard vendor evaluation form, but the evaluators were not required to use the evaluation forms.”

Houston told Council members auditors observed that while departments had implemented a number of recommendations over the last eight years, “there’s still a lot of work that’s needed. … The risks noted in the original audits still remain or were not fully addressed.”

Houston noted that employees will attend mandatory trainings, but training related to monitoring contractor performance has not been required. Council Member Alison Alter wanted to know how the committee could let management know that they would like to see more employees attending the contractor performance trainings.

Purchasing Officer James Scarboro said the Financial Services Department is “currently reviewing the report and considering internally if a better approach with regard to training might be an element in solving the problem. But just making folks go to training won’t necessarily cause the outcome to change.” He said they were also looking for ways to prevent problems before they happen.

Photo by John Flynn. 

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