For Immediate Release - March 06, 2013

Audit Calls for Greater Controls on State Construction Costs

BOSTON, MA — State Auditor Suzanne Bump today announced a performance audit of the Division of Capital Asset Management and Maintenance (DCAMM), which calls for greater accountability in determining who is liable for costs that push major public construction projections over budget.

Since 2004, DCAMM, the state agency responsible for major public construction and real estate services for the Commonwealth, has been utilizing new contracting agreements known as Construction Manager at Risk (CMAR). Under CMAR agreements the state outsources management of construction earlier, during the design phase of the project’s lifespan.  This advanced arrangement allows the state and construction managers to more accurately estimate the cost of construction and set a “Guaranteed Maximum Price.”  In theory, changes in the construction plan (“change orders”) initiated by construction managers that push costs beyond the maximum price are more likely to become the responsibility of the contract manager or project designer, but the audit finds the state is footing the bill for many CMAR project overruns. 

Auditors reviewed six CMAR projects which had more than 1,000 state approved change orders, pushing budgets $19,503,472 beyond their established maximum price. Of 104 change orders tested (totaling $2,361,966), auditors found 71 percent of the changes were requested by the construction manager or designer and not the state.

The audit acknowledged DCAMM has experienced a decrease in cost growth by utilizing the CMAR method, but recommends that more can be done to leverage the agreement to decrease costs for the state.

“I applaud DCAMM for implementing new and creative strategies to lower construction costs for the Commonwealth. They appear to be bearing fruit,” said Auditor Bump. “However, in order to maximize the benefits of the CMAR method there needs to be more clarity in the contract agreements so construction managers can be made accountable to hold up their end of the bargain, and they need to ensure that all contracts are awarded based on a record of performance and qualifications.”

Other findings of the audit include:

  • DCAMM requires out-of-state contractors to be certified and in good legal standing within their respective home state, but does not adequately verify with other states if a contractor’s self-reported information is accurate.
  • DCAMM’s system for evaluating construction contractors’ performance on prior jobs is too inflexible and does not adequately reflect the unique challenges of different projects (e.g., completing the project under a certain deadline or keeping the budget low).
  • For projects over $1.5 million, DCAMM requires two independent evaluations of a contractor’s performance and the scores of each are averaged together into a final composite amount. When the two scores are widely different both evaluations are dismissed and no evaluation is maintained in state records. Such a process creates a possibility of a contractor’s past performance not being adequately represented when bidding for new state contracts.

Along with past and ongoing audits of critical state systems like MassHealth and the MBTA, today’s report represents Auditor Bump’s continuing effort to promote effective management of public resources.

Auditor Bump has called on DCAMM to more clearly define a construction manager’s responsibilities for CMAR projects, to implement an effective means of interstate communication, and to revise its performance evaluation process.

The Office of the State Auditor conducts technical and performance assessments of state government’s programs, departments, agencies, authorities, contracts, and vendors. With its reports, the OSA issues recommendations to improve accountability, efficiency, and transparency.

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Audit: Division of Capital Asset Management and Maintenance’s Planning, Design, and Construction Activities pdf format of    Division of Capital Asset Management