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YELLOW SHEET Office of the State Auditor of Missouri |
September 26, 2002
Report No. 2002-96
Audit analyzes how well transportation department manages contract revisions - known as change orders - to its construction projects
Auditors found room for improvement in some processes used by the Department of Transportation to manage construction change orders.� These orders, which authorize payment for construction design, scope or quantity revisions, are very common to the construction environment.� Some orders are unavoidable, but all orders can change a project's total cost.
Auditors reviewed 100 change orders spread among 8 construction projects and issued over 18 months in 2000 and 2001.� Department officials initially expected these projects to cost $118.4 million and these 100 change orders increased costs by $12 million.� Over this same 18-month time period, the department issued 2,058 change orders totaling $45 million and spent over $1 billion on 545 construction projects.� Department officials said Missouri's 3 percent change order rate is comparable or better than neighboring states: Kansas (2-5 percent), Iowa (5.4 percent) and Illinois (4-7 percent).
Majority of change orders were necessary, but some avoidable
Auditors called 59 percent of the change order line items reviewed necessary and unforeseen before awarding the construction contract.� The 100 change orders analyzed amounted to 796 change order line items. �Auditors found the department could have avoided 330 of these change order line items, which totaled $5.8 million.� Auditors consider a change order avoidable if officials had handled the projects properly before the project was submitted for competitive bid. (See page 2)
The most common problems leading to avoidable change orders included: surveying and staking errors, quantity sheet omissions, design flaws and miscommunications.� For example, a surveying error caused the misplacement of a roadway's center line by 2 feet, which cost $108,000 to correct.� (See page 3)� Miscommunication on a St. Louis retrofitting-bridge project added $1.2 million in change orders and additional work.� (See page 6)
Some change orders wasted $1.8 million
Auditors categorized the $5.8 million in avoidable change orders into two groups.� The first group (totaling $4 million) included change orders which caused necessary additional construction. �These additions, if included in the original project contract, would have changed the total cost, either up or down.� The second group of change orders (totaling $1.8 million) caused additional construction costs, which could have been avoided with proper project management. �This second group involved change orders on two construction projects. �Miscommunication cost one project $1.2 million, while accelerating a second project cost nearly an extra $600,000.� (See page 8)
Procedural weaknesses contribute to change orders
Auditors identified five main procedural weaknesses which, if corrected, could reduce change orders including: improving district design reviews, clarifying project manager responsibilities, performing sufficient field checks, tracking causes for change orders and performing post-construction reviews. ��Department officials said they began tracking causes for change orders in April 2002 and plan to start a post-construction review process.� (See page 13)
Better oversight needed of frequently used design consultants
Department officials do not adequately oversee work of outside design consultants who design more than 50 percent of state road projects. �Oversight concerns included: not holding consultants accountable for design errors as stipulated in contracts, not tracking consultant reimbursements for design errors, and inadequate consultant evaluations. �Increasing oversight could reduce construction costs and decrease design errors. �(See page 18)