Construction Manager/General Contractor Delivery Method Follow-up

The Department of Transportation & Infrastructure fully implemented three recommendations made in the original audit report. However, the department only partially implemented two others and it has not taken sufficient action to address the risks eight other recommendations had sought to resolve. We were unable to conduct any analysis on six of those eight because none of the department’s three active construction manager/general contractor projects had progressed far enough in the construction process to allow us to assess whether the recommendations had been implemented.

For the three recommendations the department fully implemented:

• Managers developed procedures to better ensure cost estimates for construction manager/general contractor projects are more thoroughly and collaboratively validated with the construction team.
• The department’s processes can better ensure staff enforce contract terms when approving schematics, design development documents, and construction documents as necessary.
• The department’s processes will help ensure staff better consider risks specific to the construction manager/general contractor project delivery method.

Remaining Risks

The recommendations the department did not fully implement present several lingering risks. Among them, the city continues to risk overpaying for construction projects and not spending taxpayer money efficiently because:

• Department managers and staff involved in overseeing construction contracts continue to fundamentally misunderstand the difference between a lump-sum price and a guaranteed maximum price. And since our original audit, they have increased the risk to the city by formalizing incorrect guidance that deviates from leading practices. By treating a guaranteed maximum price as a lump-sum amount owed to a contractor, the city loses out on savings when the actual cost of work is less than the agreed-upon maximum price.
• Project managers also are not verifying the actual cost of work completed on construction projects that use guaranteed-maximum-price payment terms.
• Managers continue to overlook the varying complexities of the construction manager/general contractor project delivery method by using a flat 10% threshold for price differences between the city’s independent cost estimates and a contractor’s.
• Project managers are still not actively involved in monitoring contractors’ subcontracting processes for hiring subcontractors and for work a contractor subcontracts to itself.

Auditor's Letter

January 4, 2024

In keeping with generally accepted government auditing standards and Auditor’s Office policy, as authorized by city ordinance, we have a responsibility to monitor and follow up on audit recommendations to ensure city agencies address audit findings through appropriate corrective action and to aid us in planning future audits.

In September 2021, we audited how the city uses the construction manager/general contractor project delivery method and found risks involving inadequate management of the Northfield Fire Station construction project, a fundamental misunderstanding of payment terms, and ineffective monitoring of construction costs. The Department of Transportation & Infrastructure agreed to implement all 13 of our recommendations.

We recently followed up and found Transportation & Infrastructure fully implemented only three recommendations. Eight remain not implemented, and two were partially implemented.

Although the Department of Transportation & Infrastructure has made some progress, it did not fully address all the risks associated with our original audit. Consequently, we may revisit these risk areas in future audits to ensure the city takes appropriate corrective action.

We appreciate the leaders and team members in the Department of Transportation & Infrastructure who shared their time and knowledge with us throughout the audit and the follow-up process. Please contact me at 720-913-5000 with any questions.

Denver Auditor's Office


Timothy O'Brien, CPA

AUDITOR TIMOTHY O'BRIEN, CPA
Denver Auditor

Denver Auditor's Office

201 W. Colfax Ave. #705 Denver, CO 80202
Email: auditor@denvergov.org
Call: 720-913-5000
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