Forensic Audit Report-WPCA Phase IV, Part B. Contract ... - Trumbull

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Forensic Consulting Services Report Town of Trumbull, Connecticut Page 41 Change Order No. 10. Combined these Change Orders reflect $275,000 or 16.4% of the total Change Order increase to the Contract. It should be noted, it is difficult to determine based on the lack of design and record information currently available for each crossing, whether or not the basis of the change orders are sound and justified, and/or whether or not the amounts ultimately agreed to by the Town are indeed a fair and reasonable representation of the work actually necessary for each crossing. As stated above, due to the limited language of the Contract Specifications and lack of Contract Drawing details, a more accurate field assessment of the work actually completed would need to be performed to render comment on the overall cost. In summary of the above the following table represents an allocation of costs based on reason and significance: Change Order Description Change Orders related to Unspecified Items of Work as indicated under Original Contract Change Orders related to “Extra Work” specifically requested by Town Change Orders specific to a separation of cost from Contract Pay Items (C.O. # 4 and C.O. # 15) Change Order Specific to Stream, River & Culvert Crossings (C.O. # 9 and # 10) Allocated Change Order Amount Percentage of Total Change Orders $758,365 45.3% $ 71,385 4.2% $570,640 34.1% $275,000 16.4 % Total Amount of Approved Change Orders $1,675,391 100% Utilization of the “Supplementary Unit Prices”, which were established for contractual convenience and contained in the original Contract 3 documents for elements of “extra work” when so duly authorized, were also allowed to be used and charged to Contract 3 under the sole discretion of lower level field representative(s) and/or the Sewer Administrator in the same undocumented, open-ended and possibly unauthorized fashion as the above change orders. This appears to be in direct violation to the provisions set forth under Section 14 of the Contract “General Conditions” where it specifically states “The contract price or time may be changed only by a change order”. Also, in some cases there appears to be some questions as to why such “Supplementary” items were charged to in comparison to others, possibly of lesser cost, that were contained and available for use under the basic contract. It is clear however that although $1,215,014 of work was charged by the contractor (as of Application for Payment No. 27, dated 11/11/2009 as seen in Exhibit F) and approved for payment by the WPCA under the “Supplementary Unit Price” items, there are no executed change orders of record that adequately quantifies the work, the specific locations of
Forensic Consulting Services Report Town of Trumbull, Connecticut Page 42 application, nor the prior approval and/or authorized expenditures of such funds by the Town’s WPCA. Similar concerns and lack of documentation are found in regards to the additional work related to the “Jog Hill Extension”, which has been reported to have added approximately $3.0 to $3.5 million of utility work to Contract 3. Although there is some documentation relating to general discussions, public hearings and an approval process performed within the Town (i.e. WPCA, Finance Committee, Town Council, etc.), there are no executed change orders or supplemental agreements to Contract 3 quantifying the amount of work added, the specific locations of application, nor any contractual adjustment (increase) to the overall contract quantities, dollar amount and/or time for completion. Again this appears to be in direct violation to the provisions set forth under Section 14 of Contract 3 “General Conditions” where it specifically states “The contract price or time may be changed only by a change order”. Based on the contractor’s “Application for Payments” it appears that once the “Extension” was apparently approved for implementation, the contractor simply extended the unit items within the original base Contract 3, as well as possibly the “Supplementary Unit Prices”, creating what is now shown to be significant overruns in quantities and costs on numerous line items. Again financially, this is viewed as an open-ended approach to the construction management of Contract 3. The addition of such work without the proper change order documentation executed between both parties of Contract 3 (the Contractor and the Town) presents significant concerns of overall accountability and oversight on the part of the Town, specifically the WPCA. The above discrepancies and lack of change order protocols may account for the variation of contract values as indicated on the Contractor’s most recent Application for Payment No. 27, dated 11/11/2009. In comparing the “Total Completed & Stored to Date” dollars ($20,680,582.06) to the “Contract Sum to Date” dollars ($17,059,650.20), the “Total Completed” exceeds the “Contract Sum” by $3,620,931.86 without any documented explanation as to why. By rights, the total “Contract Sum”, inclusive of all previously approved and executed change orders should reflect and be equal to the total expenditures approved and authorized by the Town under Contract 3. As such the “Contract Sum” serves as the “not-to-exceed” ceiling for the overall contract. Establishing and maintaining this “not-to-exceed” limit is critical to the Town as the funding entity, as well as the contractor looking to be paid, since it reflects the total amount of available funds committed and/or otherwise appropriated for the project. Failure to maintain such controls exposes the Town to over spending the budgetary constraints of the appropriation, thus creating the need to seek additional funds to meet the payment commitments of the contract. Naturally as individual change orders are processed and approved based on available funding, the “Contract Sum” is adjusted based on the net increase or decrease of the change order being processed. Unfortunately, this type of contract administration, which is accepted practices under construction and general accounting management, was not used for Contract 3.
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Forensic Audit Report-WPCA Phase IV, Part B. Contract ... - Trumbull

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