Peña Boulevard Improvements Construction Contract

Cars driving along Peña Boulevard toward Denver International Airport.

Objective

The objective of the audit is to evaluate whether the Airport Infrastructure Management Division provided adequate oversight of phase 1 of the Peña Boulevard improvements construction contract to ensure the city received the work it paid for.

Background

The Airport Infrastructure Management Division used a “design-build” project delivery method by awarding one contract to Interstate Highway Construction Inc. for both the design and construction work related to making improvements along Peña Boulevard — the main access road to Denver International Airport.

Because of the COVID-19 pandemic, the airport reduced the original scope of phase 1. This reduced the cost from $93.4 million to $35.3 million.

Why this matters

Without strong project oversight, the airport may not ensure it receives all work in compliance with its contract, and the airport risks overpaying for construction projects and failing to meet project deadlines.

Findings

Finding 1 -  Denver International Airport Needs Better Oversight of the Peña Boulevard Improvements Construction Project to Ensure the Best Value for the City

  • The contractor, Interstate Highway Construction, did not meet its deadlines for submitting invoices and contract-change proposals.
  • Meanwhile, the airport did not meet its review deadlines and did not formalize deadlines to finalize contract changes and to review the contractor’s requests for information.
  • The airport did not correctly document and track issues regarding the contractor’s performance and it did not accurately track the project budget.
  • The airport did not provide cost estimate services, and documentation does not fully support increases in both the project schedule and cost.
  • The airport did not ensure all invoices supported the amount it paid.
  • The airport did not comply with requirements to approve subcontractors, and it did not ensure the contractor paid all of its subcontractors the correct amount they were owed.
  • The airport lacks a process to choose the best delivery method for construction projects.

Recommendations

1.1 Establish Monetary Penalties for Late Submissions – The Airport Infrastructure Management Division should establish a formal mechanism to impose monetary penalties on contractors that fail to meet required submission deadlines

Agency Response: Agree, Implementation Date – August 17, 2022 

1.2 Review Policies and Procedures – The Airport Infrastructure Management Division should formally review project management plans and other procedures during its post-project lessons learned meetings to ensure the plans include procedures that reflect actual practice.

Agency Response: Agree, Implementation Date – July 18, 2022 

1.3 Update Procedures for Project Management Review – The Airport Infrastructure Management Division should update its policies and procedures to formally establish review times and deadlines for contract changes and contractor requests for information.

Agency Response: Agree, Implementation Date – August 17, 2022 

1.4 Design Workflow to Track Noncompliant Work – The Airport Infrastructure Management Division should design and implement a workflow in Unifier dedicated to tracking and documenting all required documents to monitor the noncompliance reports it issues to contractors.

Agency Response: Agree, Implementation Date – December 14, 2022 

1.5 Design Workflow for Budget Tracking – The Airport Infrastructure Management Division should design and implement a workflow in Unifier dedicated to tracking contract-change approvals that affect a project’s contingency fund.

Agency Response: Disagree

1.6 Develop Policies and Procedures for Cost Estimate Services  The Airport Infrastructure Management Division should develop policies and procedures for providing cost estimate services in design-build contracts to ensure:

  • A contractor’s labor and equipment estimates are reasonable before the airport approves a contract change.
  • “Not-to-exceed” amounts are supported by documentation.

Agency Response: Agree, Implementation Date – August 17, 2022 

1.7. Update Policies and Procedures for Contract Changes – The Airport Infrastructure Management Division should update its policies and procedures related to reviewing and approving contract changes to ensure all changes are fully supported by documentation before the airport makes payments toward the change.

The updated procedures should, at a minimum, include steps to ensure all related information — such as email review notes or verbal discussions — are documented and included in the contract-change workflow in Unifier as well as steps to ensure all invoices are provided and reviewed before the airport makes payments toward those changes.

Agency Response: Disagree

1.8 Update Policies and Procedures for Invoice Review  – The Airport Infrastructure Management Division should update its policies and procedures for lump-sum invoices to ensure they are complete and accurate before the airport approves them. At a minimum, the policies and procedures should include:

  • Steps to ensure issues with the percentage of work completed are fully resolved and documented.
  • A checklist to ensure all required documents are included such as all backup support for bond payments and project schedules.
  • Steps to ensure all checks performed by staff on the percentage of work completed are formalized in the procedures.
  • Steps to ensure the progress payment totals on the schedule of values match both the information recorded in Unifier and the information included on a contractor’s invoice and certification of payment.
  • Steps to ensure compliance with the city’s policy for general contract conditions to receive an updated schedule of values prior to each invoice submission.

Agency Response: Agree, Implementation Date – December 14, 2022 

1.9 Develop Process to Monitor Subcontractor Selection – The Airport Infrastructure Management Division should develop and implement a process to ensure compliance on Design-Build contracts with the following requirements in the city’s policy for general contract conditions:

  • Documentation of written acceptance for all subcontractors used on the project.
  • Documentation from contractor certifying subcontractor qualifications.

Agency Response: Agree, Implementation Date – August 17, 2022 

1.10 Develop Procedures for Subcontractor Payments – The Airport Infrastructure Management Division should develop and implement procedures to ensure subcontractors’ payment information is recorded in the contractor’s payment applications at the time of each invoice period. These procedures should also include steps to coordinate with the Division of Small Business Opportunity at the beginning of the project to ensure all information required to track compliance with city rules for subcontractor payments will be included on each payment application.

Agency Response: Agree, Implementation Date – August 17, 2022 

1.11 Conduct Trainings – The Airport Infrastructure Management Division should develop and conduct training with project management staff on the applicable subcontractor payment requirements prior to the start of each project to ensure the contractor follows subcontractor payment requirements.

Agency Response: Agree, Implementation Date – August 17, 2022 

1.12 Evaluate Need for Waivers – The Airport Infrastructure Management Division should work with the City Attorney’s Office airport legal services section to evaluate and document whether partial liens should be required, and if the costs outweigh the benefits, the airport should waive this specific requirement for its projects.

Agency Response: Agree, Implementation Date – August 17, 2022 

1.13 Develop and Implement a Delivery Method Selection Process – The Airport Infrastructure Management Division should develop and implement policies and procedures that document the decision-making process for selecting a project’s delivery method in alignment with leading practices, such as the Colorado Department of Transportation’s Design-Build manual.

Agency Response: Agree, Implementation Date – December 14, 2022 

Auditor's Letter

May 19, 2022

The objective of our audit of the Peña Boulevard improvements construction contract at Denver International Airport was to determine whether the airport’s oversight of phase 1 ensured the city received the work it paid for. I am pleased to present the results of this audit.

The audit found the Airport Infrastructure Management Division needs better oversight of its contract changes, invoice approvals, and subcontractor management for the Peña Boulevard improvements project to ensure compliance with applicable city and contract requirements.

By implementing recommendations for stronger construction project oversight, documented policies and procedures, and optimal use of its project management system, Denver International Airport’s Infrastructure Management Division will be better equipped to ensure it receives the work it pays for and at the best possible value. These recommendations will also ensure the city can accurately track payments to subcontractors.

This performance audit is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, “General Powers and Duties of Auditor.” We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

We extend our appreciation to the personnel in Denver International Airport’s Infrastructure Management Division who assisted and cooperated with us during the audit. For any questions, please feel free to contact me at 720-913-5000.

Denver Auditor,

Auditor's Signature
Timothy O'Brien, CPA

 

Follow-up report

A follow-up report is forthcoming. 


Timothy O'Brien Official Headshot

AUDITOR TIMOTHY O'BRIEN, CPA
Denver Auditor


Denver Auditor´s Office

201 W. Colfax Ave. #705 Denver, CO 80202
Emailauditor@denvergov.org
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