City Council Memo #1 Monday, Jan. 8, 2018 WHAT’S INSIDE:...

City Council Memo #1 Monday, Jan. 8, 2018

WHAT’S INSIDE: Page Department Updates: Dec. 11 Follow-Up Report Updates ........................................................................... 2 National Flood Insurance Program Update ............................................................... 3 Internal Audit Report – CATS Blue Line Extension ..................................................... 3 Community Meeting for Charlotte Food System Study ............................................ 4

WEEK IN REVIEW: Thursday, Jan. 11 Noon ED Committee, Room CH-14 The City Council January calendar is attached below.

January 2018 Calendar.pdf

Mayor and Council Communication 1/8/18

DEC. 11 FOLLOW-UP REPORT UPDATES Unified Development Ordinance - Schedule & Key Milestones Staff Resource: Debra Campbell, City Manager’s Office, 704-336-2671, [email protected] Council requested a timetable with dates on the Unified Development Ordinance the City Council business meeting on Dec. 11, 2017.

A timetable for the Unified Development Ordinance.

• July 2016, City Council approved a consultant and contract for the development of a zoning ordinance update and unified development ordinance.

• Action to date: identification of ordinance issues and priorities, the development of a technical outline for the Unified Development Ordinance and initial engagement with the community, an Advisory Committee, the Planning Commission and the Transportation & Planning Committee.

• Five community workshops (2016), more than 30 individual neighborhood meetings (2017), an online registration of more than 1,900 community contracts, 10 Advisory Committee meetings (2017) and updates to the Planning Commission/Planning Committee and Transportation & Planning Committee.

• Oct. 23, 2017, City Council requested a follow-up discussion with the Transportation & Planning Committee and full council to answer addition questions on scope of work, engagement process and overall schedule of milestones.

• January 2018 the city’s new planning director begins. It is anticipated the new director will review the UDO work completed to date and finalize a plan and schedule going forward.

Solid Waste Service Update Staff Resource: Victoria O. Johnson, Solid Waste Services, 704-336-3410, [email protected] At the Dec. 11 action review, Solid Waste Services provided an overview of their service portfolio that included a review of the multi-family collection service delivery approach. Over the past several months, staff has conducted an extensive procurement process for the multi-family collection portion of their service portfolio, as the current contract expires in June. In addition, some of you received an email from the incumbent service provider related to this selection process. The listing of items the incumbent mentioned, accompanied by the corresponding responses from Solid Waste Services, is attached for your reference.

mailto:[email protected]



At the Dec.11 meeting, council requested a chart showing a comparison between the two bid proposals. This chart is attached for your review. The contract for multi-family collection services is on your Jan. 8 business agenda for approval.

Republic Letter_120717.pdf

Council Comparison_Republic

DEPARTMENT UPDATES: National Flood Insurance Program Update Staff Resource: Daryl Hammock, Engineering & Property Management, 704-336-2167, [email protected] In 2017, the Federal Emergency Management System (FEMA) recognized Charlotte as a Class 4 community for implementing a comprehensive flood mitigation program that exceeds minimum federal requirements. This designation reflects flood-risk reduction efforts and creates a 30% discounted flood insurance rate for properties within the FEMA floodplain and a 10% discount elsewhere. In order to sustain the Class 4 rating, FEMA requires a strategic plan for public information. Council approved the Program for Public Information at the Aug. 22, 2016 business meeting (Item #35), which outlines activities Charlotte-Mecklenburg Storm Water Services anticipates implementing through fiscal year 2020. Attached is a plan update recently shared with the Program for Public Information Committee. The plan includes Charlotte-Mecklenburg Storm Water Services staff and the Storm Water Advisory Committee.

2017 - Charlotte Program for Public Inf

Internal Audit Report – CATS Blue Line Extension Staff Resource: Greg McDowell, City Auditor, 704-336-8085, [email protected] Attached below is a CATS Blue Line Extension audit report. The purpose of this audit was to determine whether the city has implemented appropriate controls to ensure that work associated with the BLE Civil Segment B/C contract with Lane Construction is completed within budget, in accordance with specifications and in compliance with major federal requirements. The audit also included the review of


http://charlottenc.gov/CityManager/CommunicationstoCouncil/Memo%20attachments/August%2022,%202016.pdf



payments made to Lane Construction for change orders to ensure that amounts were properly supported and documented. Conclusion: The city has implemented significant controls to ensure that the $145.7 million Civil Segment B/C contract work is completed as specified, within budget (as amended from the original $119.1 million contract award) and in compliance with federal requirements related to suspension and debarment, procurement and Davis-Bacon. The city negotiated change orders based upon independent cost estimates. While this is an acceptable approach to establish a fair and reasonable price, the city may have missed opportunities to negotiate additional cost savings.

CATS Civil Segment BC Audit Report.pdf

Community Meeting for Charlotte Food System Study Staff Resource: Tom Warshauer, Housing & Neighborhood Services, 704-336-4522, [email protected] Karen Karp and Partners (KK&P) has teamed with local sub-consultants Suede Onion, the Charlotte Mecklenburg Food Policy Council and FARMS to analyze Charlotte’s food system (farmers, markets, consumers, food access and food distribution). KK&P will present their preliminary findings and seek public input at a community meeting on Jan. 9 from 6:30 – 8:30 p.m. at Warehouse 242, located at 2307 Wilkinson Blvd. The goal of the study is to develop recommendations for a local market system that supports farmers, entrepreneurship and healthy food access while building community and place throughout Charlotte. The city began the study as a step toward eliminating food deserts caused by the lack of grocery stores, farmers markets and healthy food providers in some Charlotte neighborhoods. During this visit, the team will also complete stakeholder interviews and focus groups. A final report will be presented in the late spring to present a final report and recommendations based on their analysis and other national best practices.


Sun Mon Tue Wed Thu Fri Sat 1 2 3 4 5 6

7 8 Noon Council Agenda Briefing, 15th Floor LCR 5 p.m. Council Business Mtg., Room 267

9 10 11 Noon ED Committee CH-14

12 13

14 15

16 Noon Council Zoning Agenda Briefing, Room 886 1:30 p.m. Environment Committee Room 280 5 p.m. Zoning Mtg., Room CH-14

17 Noon HAND Committee Room 280

18 19 20

21 22 Noon Council Agenda Briefing, 15th Floor LCR 1:30 p.m. Community Safety Committee Room 280 5 p.m. Public Forum/Council Business Mtg., Room 267

23 24 25 26 27

28 29 30 31

January

2018

City Council Retreat

TBD

Martin Luther King, Jr. Day

Please see comparison chart below for staff’s evaluation of the multi‐family collection contract

proposals. This comparison was requested by City Council on December 11, 2017.

While both companies submitted qualified and detailed proposals, the City feels Waste Pro is best suited

to meet the City’s operational and strategic goals. In service solicitations, the City is not required to

award the lowest responsive bidder. The City may pursue the “best value for money”, a consideration

which may include other factors, in addition to price. Republic Services provided over 20 years of

successful waste service, and we value their partnership.

Multi‐Family Collection Contract Proposals Comparison

Evaluation Criteria Waste Pro of North Carolina Republic Services Qualifications and Experience Necessary qualifications and

experience to perform the Services

Necessary qualifications and experience to perform the Services

Equipment Age Waste Pro’s proposal includes all new, environmentally‐friendly equipment to use for this Project. The proposed equipment (i) supports the City Council’s Environment Focus Area Plan’s objectives through the practice of environmental stewardship and protecting air quality and (ii) promotes availability of equipment for timely service. Additionally, the proposed trucks will reduce fuel consumption and noise. See Collection Equipment Comparison chart.

Republic’s proposal includes equipment produced prior to 2007 that does not meet minimum EPA emissions standards for new vehicles. See Collection Equipment Comparison chart.

Routing Waste Pro highlighted that it had conducted an extensive, physical observation of current routes, equipment utilized and personnel allocation, leading to a solution that better balances the routes and will result in fewer pieces of equipment on the road negatively impacting the environment.

Republic’s proposal did not highlight any proposed changes to current routing. The current number of dumpster collections per day are unbalanced, which can cause issues with completing routes on assigned service days.

Day # Collections

Mon 882

Tues 682

Wed 153

Thu 239

Fri 284

Financial Qualifications Financial qualifications sufficient to meet the City’s needs

Financial qualifications sufficient to meet the City’s needs

Cost Effectiveness and Value Waste Pro’s projected average annual contract cost for the three year contract term is approximately $5.8M. This includes annual unit count growth. The Waste Pro proposal averages $495K or 9% more than Republic’s proposal per year during the initial contract term. In the City’s observation of past performance of the contract, the City deemed Waste Pro’s offer of new equipment to be a vital factor to ensuring equipment availability and by extension helping to ensure on‐time performance. Additionally, the proposal of all new, environmentally‐friendly equipment supports environmental stewardship and reduces fuel consumption and noise.

Republic’s projected average annual contract cost for the three year contract term is approximately $5.3M. This includes annual unit count growth. Republic’s proposal averages $495K or 9% less than Waste Pro’s proposal per year during the initial contract term. In the City’s observation of past performance of the contract, Republic’s proposal of older equipment is a concern in ensuring equipment availability and by extension the ability to ensure on‐time performance.

MWSBE Inclusion Efforts Commitment to utilize MWSBE contractors to perform 15% of the value of the Services.

Proposal included 15% of the value of the services to be subcontracted. Recycling collection will be provided by an MWSBE contractor.

Collection Equipment Comparison

Age

Republic Diesel

Republic

SubcontractorDiesel*

Republic Total

Waste Pro Clean

Diesel**

Waste Pro

CNG

Waste Pro Total***

New 0 0 0 5 19 24

1 – 5 Years 9 0 9 0 0 0

6 ‐10 Years 8 0 8 0 0 0

11 – 15 Years

8 8 0 0 0

16+ Years 0 5 5 0 0 0

Total 25 5 30 5 19 24

*Two new trucks scheduled for 2018 and one new truck for 2019

**Equipped with the particulate system and on‐board cameras. Vehicle hydraulic lines will be armored and

utilize EnviroLogic hydraulic fluid, a non‐hazardous and biodegradable product.

***Waste Pro provided a range of total equipment and will adjust resources dedicated to the Project

after the re‐balancing of routes.

Storm Water Advisory Committee (SWAC) Program for Public Information Subcomittee Annual Meeting Minutes

Thursday, October 19, 2017 – DRAFT Hal Marshall Conference Room 407, 4th Floor

2145 Suttle Avenue, Charlotte, NC 28208 4:30 PM

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ATTENDANCE: ADVISORY COMMITTEE James “Jim” Merrifield, Chair James “Jim” Bowen, Ph.D., Vice Chair Attorney John Buric David Collins, PE Roger Diedrich Ryan Hamrick Leslie Jones, PE, BCEE Molly Murchison Rick Saltrick ATTENDANCE: CITY & COUNTY STAFF W. Dave Canaan Daryl Hammock Mark Boone, CFM Alyssa Dodd ATTENDANCE: GUESTs & VISITORs Five (5)




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ACTION: Charlotte-Mecklenburg Storm Water Services – Umbrella Team’s Program for Public Information (PPI) Annual Update/SWAC Subcommittee Report – Receive for Information Update on CRS Program for Public Information – Mark Boone, CFM and Alyssa Dodd

Dave Canaan, Division Director, County Storm Water Services, introduced Mark Boone, Information & Education Coordinator for County Storm Water Services and lead presenter for the Charlotte-Mecklenburg Storm Water Services Umbrella Team.

The Community Rating System (CRS) requirements, the PPI was first endorsed by the SWAC/PPI Committee and was submitted for adoption by the Charlotte City Council on August 22, 2016. The intent of today’s report is to seek endorsement by the SWAC prior to sending the PPI Annual Report to the City Council. Copies of today’s PowerPoint slide presentation were distributed.

SWAC Chair Jim Merrifield called to order the SWAC Subcommittee meeting at 5:25 PM to receive the Charlotte-Mecklenburg Storm Water Services Umbrella Team/PPI Committee Annual Update Report.

Present: Full Storm Water Advisory Committee; Mark Boone, CFM, representing CMSWS-County; and Alyssa Dodd representing CMSWS-City.

Umbrella Team Members Present: Sharnelle G. Currence, Deania Russo, Sassy Lojko. David Caldwell was absent.

Mark Boone introduced the Umbrella Team (Team) members and presented a PowerPoint slide presentation to outline the Umbrella Plan for Public Information that includes outreach, education and involvement strategies including but not limited to the following: goals; activities/events; media relations; and communication policies.

Mark reported that the Umbrella Plan has three major campaigns: 1) Water Quality; 2) Volunteer Activities & Events; and Flood Safety. Mark commented that work of the Umbrella Team is guided by a lot of strategic planning, principles and policies that the Team has to follow in order to do their work. He reported that in FY16, the Team spent about $227,000 and in




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FY17, the Team has expended about $222,000, and are on par for the same budget for FY18. Mark shared some of the Umbrella Team’s accomplishments including printing 6 utility bill inserts; 30,000 postcards and brochures placed countywide for CRS credit. He continued with web accomplishments including the launch of a new website and are still working out the bugs and concerns. Mark commented about adding some historic data to the website. Mark invited the SWAC to please let the Team know if they have any issues with the website. The Umbrella Team held 51 community events & training. Some were held by the City, some were held by the County, and some events were jointly held. In the last year, about 6,300 people were reached. Mark reported that the number of volunteers is a little down from last year but the Team has plans to address that. Mark covered 106 school presentations that reached 3,016 students from kindergarten to senior high. Deania Russo, Senior Environmental Specialist and Water Quality Volunteer & Public Education Coordinator, added that some of the presentations also reached private school and home-schooled students.

Mark shared that the Umbrella Team aired 800 television and radio spots, reaching about 5.3 million people. Mark reported that the Umbrella Team discussed with the SWAC last year that the goal was not to spend more than $10 per 1,000, which is an industry goal. Mark added that the industry is changing, but the Umbrella Team is very proud that they surpassed their goal—broadcast expenditure was $9.90/1,000. He reported that on social media, the Umbrella Team had 6,000 followers on Facebook, which is a 44% increase from FY16 and the Team is averaging about 40,000 impressions per month. Mark added that during the month of September when the area had storms, people began to see Storm Water Services as an authority and a resource. He remarked that Twitter has become a famous source for local reporters. Mark reported on the earned media with 45 interviews—during FY16, the Umbrella Team had 80 storm stories aired but this year they had only 45 interviews and published stories. However, the Umbrella Team has been honored with two “Sweeps” investigative specials—three different reports approach the Team for stories for “Sweeps.” Mark explained that “Sweeps” are when television and radio stations compete with each other by going after sensational stories or the stories that will attract the most audience.

Mark presented detailed slides and reported on the Opinion Survey results captured from about 400 Charlotte City and Mecklenburg County residents—

ranging from 25 to 65+ years of age--about their opinions of our organization and our efforts. The survey questions were included Flood Safety, Water Quality, Volunteers, Stormwater Fee, Information Viewed and the Preferred View source.




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SWAC Member David Collins commented about how the 400 survey participants were found. Mark reported that the Team hired a vendor who does opinion surveys. Sharnelle G. Currence reported that the Team used a vendor to conduct the survey and the vendor actually has access to a database. The vendor asked the Umbrella Team what demographics they were looking for and the vendor utilizes the database for phone numbers, addresses, etc.

SWAC Member Collins inquired about the addresses of the survey participants and if they pay storm water fees. Mark replied that the opinion survey did not ask if they pay a storm water fee. The survey participants could live in an apartment, live where they pay storm water fees or live where they could be a fee credit recipient. Mark shared that the Umbrella Team knows that the survey participants live within Mecklenburg County—about 20% live outside of City limits and 80% live within the City limits. Mark and SWAC Member Collins shared thoughts and comments about targeting survey participants who pay a storm water fee.

SWAC Member Roger Diedrich commented that he received a call for the Opinion Survey. He shared that he completed it, giving the Team successful in efforts and other positive feedback.

Mark summarized today’s Umbrella Plan update with goals underway for FY18 as follows: update City Council; 2nd Saturday cleanups; 12-month editorial calendar; expand audience and using Telemundo for the first time; 3-year strategic planning; RFP for marking vendor 3-year contract; and the 25th Anniversary Campaign that starts in January 2018.

Alyssa Dodd, Senior Public Information Specialist, City Storm Water Services, shared that the Umbrella Team is working together to come up with a unique idea to celebrate the 25th Anniversary Campaign during the 2018 calendar year. Alyssa added that more information is to come and coordinating across the County and City to do that. She added that at the very least, they are planning to incorporate it throughout the current work where they can highlight and showcase some of our accomplishments and as well as the challenges.

SWAC Member Leslie Jones inquired whether the Umbrella Team has reached out to the “Peach Jar” related to using digital flyers on the web, where they can target CMS—which schools and which age groups. Deania Russo replied that they have not, but that the Team has been reaching out to schools doing community service hours, i.e., the IB Programs and have gotten on their calendars, and reached out to different teachers that they’ve had over the years. Deania




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continued that several are approaching the Umbrella Team from other events, i.e. Auto Bell Creek Challenge, and other teachers and teens are reaching out to the Team.

SWAC Member Jones added that it is a digital flyer system that also reaches out to every parent, and it is free. Deania remarked that she will look into the digital flyer system on the web with Peach Jar.

The SWAC members received today’s report as information. A copy of the PowerPoint slide presentation is made part of today’s meeting minutes for the record.

There being no further business, SWAC Chair Jim Merrifield thanked the Umbrella Team for today’s updates and adjourned the Umbrella PPI Team/SWAC Subcommittee meeting at 5:52 PM.

VI. Adjournment

Goals

• Educate to prevent and reduce stormwater pollution • Host and advertise volunteer activities• Communicate to protect lives and property from flood damage• Promote the agency’s image, programs, services and benefits

Broadcast

• 800 Television and Radio spots

• 5.3 Million reached

• Broadcast CPM <$9.90/1000

Print

• 6 Utility Bill Inserts

• 20,000 Project Update Post Cards Sent

• Brochures Placed Countywide for CRS

Web

• New website launched• 73,779 unique page views• Popular Pages Home (~30%) Regulations (~11%) The Big Spring Clean (~5%) Projects (~5%)

Social Media

• 6000 Followers on Facebook• 44% Increase from FY16

• Strategic Twitter Promotion• Instagram and YouTube Channels

Volunteers 3,488

• Big Spring Clean • Adopt-a-Stream • Storm Drain Marking • Creek ReLeaf• Volunteer Monitoring

Community Events

• 51 Events & Trainings

• 6,298 Reached

Presentations

• 106 school presentations 3,016 students reached (K-12)

• 14 other presentations490 reached

FY17

$167,000 Media & Creative Services$14,521 Utility Bill Messaging$16,000 Opinion Survey$10,000 Production Costs$12,000 Printing & Postage$3,000 Events$ 222,521

Flood Safety

WaterQuality

Volunteer

UBI

Production

Opinion Survey

Print &Postage

Events

Public Opinion Survey

• Goal: Evaluate effectiveness of campaigns and activities• Administered Summer-Fall 2017• 400 surveys• 26 Questions• Phone & Mail

Underway for FY18

• 25th Anniversary Campaign (starts Jan 2018)• PPI Committee Update to City Council• Second Saturday cleanups• 12-Month Editorial Calendar• Expanding our audience ( first time using Telemundo)• 3-Year Strategic Plan

MESSAGES AND OUTCOMES

CRS Topics included in PPI Priority Topics Example Messages Outcome Status FY18 1. Know your flood hazard

Your property is within the SFHA. Your property is subject to flooding. Find out about your flood hazard.

Increase in the number of map information inquiries. Increase in number of web page hits, twitter/Facebook followers/likes. Increase in the number of people getting technical help

Ongoing

2. Insure your property for your flood hazard

You need flood insurance. Renters should buy flood insurance for their contents. Take advantage of a low-cost Preferred Risk Policy.

The total number of SFHA policies increases.

Ongoing, Measuring

3. Protect people from the hazard

Turn around, don’t drown. Increase awareness about flood safety. Decrease in street flooding rescue operations

Ongoing

4. Protect your property from the hazard

Elevate your furnace above the flood level. Keep debris and trash out of the streams and ditches. Do not dump - Drains to Creek. No Dumping: Only rain goes down the storm drain.

Drainage inspectors report fewer calls and a decrease in the amount of trash removed

Ongoing

5. Build responsibly

Get a permit before you build. Know the substantial damage rules (and the ICC benefits). You can see them at website. All projects should be at least 10 feet from the property line so you don’t alter the drainage between homes.

Fewer in permit holds. Ongoing

6. Protect natural floodplain functions

No pollutants down the storm drains; they drain to the river. Report broken silt fences: they help keep our streams clean. UBI to address 540 stream dumping regulations

Fewer flood related calls Ongoing

Additional Messages

Priority Topics Example Messages Outcome Status FY18 7. General preparedness - Campaigns

Awareness – Pay attention to flood watches and warnings. Responsibility – Don’t ever walk or drive through floodwater. Find out if your property is in a regulated floodplain. Knowledge – Know that regular insurance doesn’t cover flood damage. Know that flooding can and does happen outside of mapped floodplains.

The total number of SFHA policies increases

Ongoing, Measuring

8. Floodplain Property Retrofit Program Campaign

Get a grant to elevate your home. Call us to Apply for a grant today or at website. You are in a repetitively flooded area. You need flood insurance.

Increase in grant funding applications

Ongoing

9. Creek Signage

Adopt a Stream Increase awareness about flood safety.

Pending redesign

10. Realtor Education

Realtors should advise house hunters about flood hazard; provide REB Brochure for house hunters.

Increase distribution of REB brochure and number of trainings.

Planning

Audit Report CATS Blue Line Extension

Civil Segment B/C – Lane Construction December 20, 2017

City Auditor's Office Gregory L. McDowell, CPA, CIA

Audit Report CATS Blue Line Extension

Civil Segment B/C – Lane Construction December 20, 2017

Purpose and Scope The purpose of this audit was to determine whether the City has implemented appropriate controls to ensure that work associated with the Blue Line Extension (BLE) Civil Segment B/C contract with Lane Construction Corporation (Lane Construction) is completed within budget, in accordance with specifications and in compliance with major federal requirements. The audit also included the review of payments made to Lane Construction for change orders to ensure that amounts were properly supported and documented. 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. This report is intended for the use of the Charlotte Area Transit System (CATS) and Engineering and Property Management (E&PM) Departments, the City Manager’s Office and City Council.

Conclusion The City has implemented significant controls to ensure that the $145.7 million Civil Segment B/C contract work is completed as specified, within budget (as amended from the original $119.1 million contract award) and in compliance with federal requirements related to suspension and debarment, procurement and Davis-Bacon. The City negotiated change orders based upon independent cost estimates. While this is an acceptable approach to establish a fair and reasonable price, the City may have missed opportunities to negotiate additional cost savings.

Effective Project Management Controls Auditors noted that CATS and E&PM have established many effective controls to manage the Civil Segment B/C contract with Lane Construction. CATS has established policy and procedures manuals to guide the Blue Line Extension project, as follows: Project Management Plan – establishes the framework for managing the BLE project and

provides guidance for procurement, communications, construction management and testing.

Project Quality Plan – outlines the overall framework for implementation of Federal Transit Administration (FTA) required quality assurance and quality control activities. It covers, in detail, activities and procedures to be employed to ensure that construction

Report of Internal Audit December 20, 2017 CATS Blue Line Extension (BLE) Page 2 Review of Civil Segment B/C – Lane Construction

contracts are delivered as specified during construction. The plan provides a systematic approach to attaining the expected and acceptable level of quality.

Change Control Procedure – designed to ensure that impacts on cost, schedule, and scope are estimated and considered; elevates decision-making to the proper level of authority; and captures an audit trail, producing a complete record of the change process.

Construction Management Manual – outlines the duties and responsibilities of the construction management staff and consultants, including procedures related to contractor payments, submittals, contract changes, inspections and close-out.

Procurement Manual – establishes the policies and procedures that CATS uses to procure goods and services, as well as contract administration procedures including contract changes and payments.

Effective Compliance Controls and Results Testing of the following areas indicated compliance with federal and state requirements, in addition to CATS internal policies and procedures:

• Inspections and testing – Inspection records were maintained in accordance with NCDOT standards and the required third-party testing of materials was performed in accordance with the guidance provided in the Project Management Plan.

• Payment applications – Except as noted in some of the acceleration items in the Detailed Findings and Recommendations section of this report, auditors verified that quantities and dollar amounts reported on payment applications were supported by adequate documentation of work completed.

• Suspension and debarment – The City and contractor complied with federal requirements for suspension and debarment.

• DBE goal – Auditors confirmed that Lane Construction accurately calculated and met the DBE commitment goal at the time of contract award.

• Davis-Bacon requirements – CATS has implemented controls to ensure that contractor and subcontractor employees are paid the minimum wages outlined in Davis-Bacon requirements.

• Change orders – Independent Cost Estimates (ICE) were prepared for all change orders for new items greater than $10,000 and the proper approvals were obtained as outlined in the Change Control Procedure manual.

Report of Internal Audit December 20, 2017 CATS Blue Line Extension (BLE) Page 3 Review of Civil Segment B/C – Lane Construction Summary Results While the majority of controls were functioning well and provide assurance that the contract is administered properly, auditors noted opportunities for improvement. Significant private utility delays at the beginning of the contract period resulted in a $21.7 million global settlement with the prime contractor, which included provisions for accelerating the work to keep the project on schedule. The acceleration created additional risk; i.e., the potential for excess payments and unsubstantiated claims related to payment applications and change orders. Several opportunities to increase accountability related to change orders were also noted as outlined briefly following and detailed in the Findings and Recommendations section of this report starting on page five. 1. When entering into an acceleration agreement, the City should ensure that methods exist to

segregate the costs of acceleration from costs required to complete the initial project scope, overruns and change orders.

• CATS and E&PM are satisfied that reasonable payments were negotiated and paid for

acceleration. The departments agree that additional documentation (to segregate the costs related to acceleration) should be required in the future.

2. The City could have re-negotiated two line items with significantly under-estimated

quantities. In the future, the City should require detailed cost analyses to support decisions not to re-negotiate line items with significant under-estimated quantities.

• For the BLE project, HNTB has performed monthly reviews of quantity over-runs and

prices, including discussion with the Resident Engineer; however, it did not complete written documentation of its determination. CATS and E&PM agree that additional documentation of the price analysis for all items in excess of 100% of the original bid amount would be a best practice going forward, and CATS will add this procedure to its Construction Management manual.

3. The City paid the prime contractor $12.39 per ton for concrete crushing despite subcontractor

billing at only $8.50 per ton, resulting in a $103,730 difference on a $775,600 change order.

• While performance of independent cost estimates can lead to “fair and reasonable” pricing, the example in this audit indicates that contractor proposals can be reasonable based on comparison to independent cost estimates and yet still contain proposed costs that should be questioned.

CATS and E&PM have identified some additional best practices as a result of lessons learned from the BLE, including the establishment of overhead and profit calculations for changes. In addition, Records of Negotiations are improving by including the basis of the ICE and an explanation of the price differences to the proposal.

Report of Internal Audit December 20, 2017 CATS Blue Line Extension (BLE) Page 4 Review of Civil Segment B/C – Lane Construction Background The City of Charlotte made a commitment to extend the existing LYNX Blue Line Light Rail from its current terminus in downtown Charlotte to the UNCC campus. This $1.16 billion dollar undertaking consists of 9.3 miles of track construction, 11 new train stations, four park and ride structures, and various major civil improvements such as bridges, walls and roadways. In order to complete a project of this magnitude, the city divided the project’s scope into multiple contracts. The contract for Civil – Segment B/C, was awarded to the Lane Construction Corporation in the spring of 2014. Contained within the scope of this project are the heavy civil infrastructure improvements related to the final 4.8 miles of track, the majority of which will run down the median of North Tryon Street. The contract includes grading, drainage, erosion control, bridges, arterial roadways, retaining walls, traffic control, traffic signal, water main and sanitary sewer installation and related works. Lane Construction was the lowest bidder at $119,051,742 (including contingency of $8,236,168) and was awarded the contract. Some of the major highlights of this contract include:

• Four structural steel bridges which will carry the light rail over the existing roadways at Old Concord Road, the I-85 Connector, University City Blvd and WT Harris Road.

• One pre-cast concrete girder bridge to carry the light rail over Toby Creek on the UNCC campus.

• One cast-in-place / cut & cover tunnel to carry the northbound lanes of Tryon Road over the light rail.

• 45,000 linear feet of new storm drainage • 158,00 tons of asphalt pavement • 185,000 square feet of mechanically stabilized earth (MSE) retaining walls

In March 2013, the City contracted with HNTB Corporation (HNTB) as a construction management consultant (CMC) for the BLE project. For the Civil Segment B/C construction contract, HNTB is responsible for inspection services, schedule management, change order management and pay application certification, with oversight by CATS. Several City Council actions have resulted in a total contract value of $145,751,742 as shown in the table below:

Item Date Amount PurposeInitial Contract April 14, 2014 119,051,742$ Initial awardAmendment #1 January 26, 2015 21,700,000 Delay claims and accelerationAmendment #2 January 27, 2016 - Modified ICT dates and incentivesAmendment #3 April 25, 2016 - Est. terms to allow closure of N. Tryon St.Amendment #4 March 30, 2017 5,000,000 Additional misc civil workTotal Contract Value 145,751,742$

Report of Internal Audit December 20, 2017 CATS Blue Line Extension (BLE) Page 5 Review of Civil Segment B/C – Lane Construction Through October 31, 2017, expenditures totaled $137.5 million and change orders (including delay and acceleration payments) equaled 31% of the initial base bid amount, as shown in the following table:

Audit Findings and Recommendations 1. When entering into an acceleration agreement, the City should ensure that methods exist

to segregate the costs of acceleration from costs required to complete the initial project scope, overruns and change orders.

The first amendment (dated April 6, 2015) to the Lynx Blue Line Extension (BLE) Civil-segment B/C with Lane Construction outlines the modified terms under which the City would pay the contractor up to $21,750,000 for accelerating contract work. According to the Request for Council Action (RCA), the amendment was necessary to recover a schedule that would maintain the projected opening of summer 2017 and minimize further delay and inconvenience to businesses, residents and commuters. The RCA further noted that utility relocations along North Tryon Street did not meet the estimated schedule and would be completed approximately six months later than originally scheduled, creating a delay to a large portion of the Civil B/C contract work.

The contract amendment included up to $5,500,000 for costs incurred to have subcontractors accelerate their sub-contractual work scopes as well as to take on additional work to meet the compressed contract schedule. The amendment stated “that in order for a cost to be eligible for payment pursuant to the subcontractor acceleration pay item, the following conditions must be met:

a. The costs must be for acceleration or work performed by a Subcontractor pursuant to a written and executed agreement that has been properly and promptly reviewed and approved by the City;

b. Any City request for documentation related to the Subcontractor, its financial standing related to the BLE Project, or the Work performed has been fulfilled to the reasonable satisfaction of the City;

c. The City reserves the right to request from the Subcontractor a proposal, inclusive of a detailed cost breakdown, and time impact analysis justifying the claimed monetary

Base Contract Contingency/Change

Orders Total

Intial Contract 110,815,574$ 8,236,168$ 119,051,742$ Contract Amendments 26,700,000 26,700,000 Total 110,815,574$ 34,936,168$ 145,751,742$

Expenditures Through 10/31/2017 (137,526,508)$

Remaining Balance 8,225,234$


amount for compensation, based on the compressed work schedule and accelerated work…”

The amendment provided the contractor an incentive to not utilize the entire cap amount of $5,500,000 by allowing the contractor to bill the City for 50% of the amount remaining upon satisfactory completion of the contract work as outlined in the agreement as revised critical Intermediate Contract Times (ICT). (However, the entire cap was used and there remained no shared savings for the contractor and City.) Through April 2016, Lane Construction identified $3.7 million in subcontractor acceleration payments. These payments were based on acceleration agreements that were reviewed and approved by the City prior to the work being done. City attorneys and project managers reviewed and approved the subcontract and subcontract acceleration agreements (detailed below) but the City did not request detailed cost breakdowns or time impact analyses from any of the subcontractors (as allowed, but not required). Most of the acceleration agreements were lump sum amendments to the original subcontracts and many withheld final payment to the subcontractor based on satisfactory completion of the ICT dates. Accountability and internal control would be enhanced if the subcontractors were required to submit detailed cost breakdowns justifying the acceleration costs. This would also allow the City to subsequently review acceleration payments for contract compliance and reasonableness.

Subcontractor SpentContract in eBuilder? Work Performed

Tricor 359,285.80$ 4/23/2015 MSE WallsLane Asphalt 500,000.00$ 5/1/2015 Asphalt pavingBBH 1,580,000.00$ 5/27/2015 ElectricalPW&SC 75,000.00$ 6/2/2015 Curbs, wheelchair rampsSmith Rowe 320,000.00$ 6/11/2015 Soil nail wallHiatt & Mason 50,000.00$ 8/3/2015 Reinforcing steelConcrete Specialty Contractors 227,358.26$ 9/25/2015 Sub-ballast curbDakota 300,000.00$ 6/4/2015 Under-drain and sub-drainPW&SC (New Scope-Ballast Curb) 99,408.18$ 6/10/2016 Ballast CurbSouthern Concrete 10,000.00$ 9/25/2015 Sub-ballast curbTrucking Acceleration 1,783,947.76$ No TruckingTricor Acceleration #2 195,000.00$ 3/30/2016 MSE WallsTotal 5,500,000.00$

Subcontract Acceleration Agreements


No separate acceleration agreements were made with the initial three subcontracted trucking companies, but Lane did contract with two additional trucking companies. At the end of the acceleration period, Lane requested the remaining $5.5 million CAP on subcontractor acceleration by submitting the following schedule:

Because the trucking costs caused the contractor to reach the subcontractor acceleration cap of $5,500,000, the contractor was only paid for $1,783,948 of the $2,051,560 shown in the schedule above.

City project management staff assert that the work was completed according to the

accelerated schedule; therefore, the contractor met the requirement for payment in full. That is, staff considered all costs as accelerated costs, regardless of whether a portion of the work was already required under the original contract. However, costs due to acceleration should have been segregated from costs included in the original scope of the contract.

In trying to verify the validity of the claimed trucking costs, auditors noted the following:

a. The schedule above assumes that the Executed Contract Amount of $2.2 million was sufficient to perform the required amount of trucking required by the original scope of work.

b. Lane included trucking acceleration expenses of $818,857 in its $30.8 million settlement

proposal. Although a separate negotiated amount was not determined for trucking expenses, the $30.8 million was negotiated down to $21.7 million. CATS approved and paid the claimed $1,783,948 in trucking acceleration costs (versus the originally requested $818,857) without requesting any additional information, because the $5.5 million acceleration cap had not been reached.

SubcontractorExecuted Contract

Amount Actual to Date All Points Trucking 142,900.00$ 1,870,321.91$ Blue Max Trucking Inc. 319,967.01 Daugherty Trucking 1,055,000.00 804,801.51 Paul M. Bost Trucking 157,123.81 Yenrof Trucking 1,024,000.00 929,764.16 Total 2,221,900.00$ 4,081,978.40$

Actual to Date 4,081,978.40$ Executed Contract Amount 2,221,900.00 Actual Less Executed Contract Amount 1,860,078.40$ Remaining to Complete (Projected) 191,481.66 Total Sub Acceleration Amount 2,051,560.06$


c. An undetermined amount of additional trucking expense is related to line item overruns. For example, line item 4 (unclassified excavation) was originally estimated at 45,600 cubic yards but ultimately the City paid $30.51 per CY for 123,380 cubic yards. Hourly hauling is a component of the total cost of unclassified excavation. However, the cost of hauling was not separately disclosed by the prime contractor in the initial bid – making it impossible to determine the dollar value of additional trucking related to overruns.

By not being able to segregate costs to perform the original scope of work from the costs to perform work resulting from acceleration, the City is not able to validate the amount of trucking costs incurred due to the accelerated schedule. Recommendation 1.A.: When entering future acceleration agreements, the City should ensure that methods exist to segregate the costs of acceleration from costs required to complete the initial project scope, overruns and change orders. Recommendation 1.B.: To reduce opportunities for contractor fraud and collusion, the City should require supporting documentation for subcontractor acceleration agreements, including detailed cost breakdown schedules and time impact analyses. Response: CATS and E&PM are satisfied that reasonable payments were negotiated and paid for completion of trucking on an accelerated basis. The departments agree that additional documentation (to segregate the costs related to acceleration) should be required in the future. Audit Conclusion #1: Despite CATS’ and E&PM’s satisfaction, the City did not require or obtain sufficient documentation to determine whether the payments were reasonable. When the City adopts change order policies recommended in the February 2016 Construction Change Orders internal audit report, the City will be able to more effectively negotiate changes.

2. The City could have re-negotiated two line items with significantly under-estimated quantities. In the future, the City should require detailed cost analyses to support decisions not to re-negotiate line items with significant under-estimated quantities. During the course of any contract, it is possible that various quantities of material identified in the bid document may require amendment. As a result, contracts generally include provisions for pricing such changes. The NCDOT Standard Specifications allow for increases or reductions in the contract unit price when an overrun or underrun in a major contract item by more than 15% or an overrun in a minor contract item by more than 100% of original bid quantities occurs. Per the NCDOT Standard Specifications, major items are listed in the project special provisions. For the BLE Civil Segment B&C contract with Lane Construction, the project


special provisions did not outline any major contract items. Therefore, all 634 line items were considered “minor,” in accordance with current City practice. For the Civil B&C contract, two line items (Item #4 Unclassified Excavation and Item #78 Asphalt Plant Mix, Pavement Repair) reached quantity usage in excess of 100% over the bid quantity (171% and 112%, respectively), and exceeded the price per unit per the engineer’s estimate and the other bidders by a significant amount. For Item #4, the original bid price of $30.51 per CY was 308% of the engineer’s estimate of $9.92 per CY. The original bid price for Item #78 ($191.09) was 147% of the engineer’s estimate ($129.56). The potential existed that the winning bidder would benefit greatly from increased quantities of these items through change orders and overruns. Subsequently, change orders and overruns for these items exceeded 100% of the original bid quantity, as shown in the table below. Through pay application #25, the following chart identifies the difference in original bid and actual quantities and extended cost for the two line items:

The chart above indicates that if the engineer’s estimated unit price had been used, the City would have paid approximately $2.9 million less, about 2% of the total construction contract budget. At the time of bid review, CATS and E&PM personnel did not believe any specific action was warranted. Therefore, the low bid was accepted as written. CATS did not anticipate significant over-run quantities for these line items and made no specific provisions to limit exposure to significant variances. CATS and E&PM staff noted that they cannot negotiate specific lines items and that the only action they could have taken was to reject all bids. For the Unclassified Excavation line item noted above, it was determined by the construction management consultant Resident Engineer that it was in the best interest of the City not to renegotiate the line item unit prices. In making that determination for the unclassified excavation line item, the Resident Engineer cited increased hauling costs resulting from an accelerated work schedule (see Finding 1). Auditors noted that the Resident Engineer did not produce a detailed estimate (identifying the separate components of labor, equipment, materials, overhead) of the current costs to perform unclassified excavation.

DescriptionOriginal Bid Qty

Qty Through Pay App

#25

Total Paid Through Pay App

#25

Total At Engineer's

Estimated Unit Price Difference

Unclassified Excavation 45,600 123,380 3,764,311.90$ 1,223,925.73$ 2,540,386.17$ Asphalt Plant Mix, Pavement Repair 2,690 5,716 1,092,218.85$ 740,529.98$ 351,688.87$

4,856,530.75$ 1,964,455.71$ 2,892,075.04$


In addition to the two line items noted above, there were other line items for which overruns exceeded 100% of the original estimated quantity. The top ten line items with the largest increases in quantity had an original contract value of $2.4 million, with the paid amounts shown below. For these 10 items, the difference in the total paid and the original contract value exceeded $5 million, as shown below.

Auditors were not provided documentation related to these line items indicating that analysis was performed to determine whether unit prices should be renegotiated. However, it was noted that the CMC has been tracking over-runs in a spreadsheet and that prices generally increase over time. It could be expected that changes in quantities could have a positive or negative impact on the calculation of unit prices. Some governmental entities place limitations on the changes or overruns allowed to impact specific line items. The bid price can be limited to the quantity established in the schedule of items, while overruns are set at the market price existing when different quantities are approved. Recommendation: In the future, CATS should require the Construction Management Consultant (HNTB in this case) to prepare and document a detailed current cost estimate for line items that exceed the NCDOT re-negotiation thresholds. Response: For the BLE project, HNTB has performed monthly reviews of quantity over-runs and prices, including discussion with the Resident Engineer; however, it did not complete written documentation of its determination. CATS and E&PM agree that additional documentation of the price analysis for all items in excess of 100% of the original bid amount would be a best practice going forward, and CATS will add this procedure to its Construction Management manual. The evaluation will not only look at those items with higher costs at time of bid but those with lower costs to determine whether or not it is in the best interest of the City to try and negotiate items in excess of 100%.

Line Item #

Item DescriptionQty Paid to Date (Including CO's)

Current Amount Paid

Dollar Amount over Original

Contract 4 UNCLASSIFIED EXCAVATION 123,380 $ 3,764,311.90 $ 2,373,055.90

78 ASPHALT PLANT MIX, PAVEMENT REPAIR 5,772 1,102,954.28 588,922.18 136 PORTABLE CONCRETE BARRIER 24,669 629,054.40 535,596.90 134 TEMPORARY CRASH CUSHION 71 432,889.13 402,403.98 191 FLOWABLE FILL 1,451 391,161.73 278,510.73 73 ASPHALT CONCRETE INTERMEDIATE COURSE, TYPE I19.0B 5,507 366,802.62 241,176.16 329 FITTINGS FOR NONMETALLIC CONDUITS AND TUBING 12,930 212,569.20 164,893.20 395 ELECTRICAL DUCTBANK, 6-2" CONDUIT, CONC. ENCASED 3,499 193,432.07 142,454.69

9 GEOTEXTILE FOR SOIL STABILIZATION 82,905 150,886.70 142,432.80 605 THERMAL IMAGE PROCESSOR 55 191,483.05 135,778.89

TOTAL 7,435,545.08$ 5,005,225.43$


Audit Conclusion #2: CATS used HNTB to establish a reasonable level of control over quantities and prices. However, an opportunity was missed to further contain costs. CATS’ rationale regarding not wanting to reopen negotiations is flawed. Items that were underbid are not eligible for renegotiation until or unless quantities for any specific line item double.

3. The City paid the prime contractor $12.39 per ton for concrete crushing despite subcontractor billing at only $8.50 per ton, resulting in a $103,730 difference on a $775,600 change order. The FTA Circular 4220 defines the recipient’s responsibility to perform cost analysis:

“The recipient must obtain a cost analysis when a price analysis will not provide sufficient information to determine the reasonableness of the contract cost. The recipient must obtain a cost analysis when the offeror submits elements (that is, labor hours, overhead, materials, and so forth) of the estimated cost, (such as professional consulting and A&E contracts, and so forth). The recipient is also expected to obtain a cost analysis when price competition is inadequate, when only a sole source is available, even if the procurement is a contract modification, or in the event of a change order.”

Auditors reviewed all change orders greater than $50,000 and examined the results of change order negotiations. Based on the record of negotiations (RON), the majority of the change requests were approved for change orders because the City found the contractor’s proposal to be fair and reasonable, as it was less than an independent cost estimate. According to CATS, an ICE “based on appropriately calibrated and validated parametric models or cost estimating relationships” is included in the definition of cost analysis. While the City’s policies and procedures were followed, the City had an opportunity to reduce costs further because the contractor provided details regarding its existing subcontract for concrete crushing at $8.50 per ton. However, the City allowed the contractor to charge $12.39 per ton. Change order #85 was necessary because unforeseen concrete pavement was encountered within the track bed excavation limits under the existing travel lanes of North Tryon Street. The total negotiated price for the change order was $775,600, which equaled Lane Construction’s proposed cost. The final negotiated unit price was $19.39 for 40,000 square yards of concrete to be removed and crushed onsite. The ICE projected a cost of $20.58 per square yard. The contractor’s proposal included the following elements:


Subcontractor crushing cost was estimated at $12.39 per ton. The documentation found in eBuilder to support the $12.39 per ton subcontract cost did not indicate which subcontractor would be performing the work. Auditors noted that the prime contractor had contracted with a concrete removal company to crush concrete at a price of $8.50 per ton. Allowing prime contractors to estimate subcontract costs without obtaining such estimate from an actual prospective subcontractor creates the risk that a prime contractor may intentionally overstate subcontract costs recognizing the possibility of achieving additional profit. To combat this risk, best practices from the Construction Audit and Cost Control Institute (CAACCI) suggest that owners require contractors and subcontractors to agree to submit accurate cost and pricing data to support contract price adjustments and that owners reserve the right to examine the records of the contractor. In the change order noted in the audit, this approach would have identified that the contractor submitted pricing data indicating concrete crushing costs at $12.39 per ton, when the subcontractor was actually paid only $8.50 per ton. Therefore, although CATS believes they reached the goal of “fair and reasonable” contract pricing, the contractor obtained significant profit for each ton of concrete crushed, after negotiating with the City using an inaccurate cost estimate. Measurement

The ICE indicates that the concrete to be removed was approximately 10,560 linear feet by 40 feet wide (46,933 SY) with an average depth of 9 inches. This would equate to 11,733 CY, which converts to approximately 23,466 tons of concrete to be crushed. The contractor’s proposal was based on 40,000 SY at an average depth of 12 inches = 13,333 CY and 26,666 tons of concrete to be crushed. The total estimated cost for the change order was expressed in a unit cost per SY, so the extra depth used in the contractor’s calculation results in a higher per unit cost. The extra depth (or total depth) would not be measured and therefore the actual depth could impact the contractor’s profitability as actual crushing costs (measured by tons) could be substantially less (or more) than estimated while square yardage

AmountLabor 54,143.69$ Equipment 51,838.08$ Subcontractor Cost

Crushing 330,391.74$ Breaking 30,000.00$ Mobilization 4,050.00$

Total Subcontractor Cost 364,441.74$ Trucking 204,000.00$ Subtotal 674,423.51$ OH/Profit 15% 101,163.53$ Grand Total 775,587.04$

Number of Units, Square Yards 40,000

Unit Cost, per Square Yard 19.39$

Contractor ProposalUnforeseen Concrete Removal


(basis for payment) remains the same. The Record of Negotiation did not address this apparent discrepancy in the amount of work to be completed. Initially, inspectors noted the thickness of the concrete in their daily inspection reports, but auditors noted that subsequent reports only noted the total square yards. Without the thickness measurement, auditors were not able to determine the reasonableness of the estimated tonnage of concrete crushed. Auditors noted, however, that there were daily inspection entries where the concrete thickness was noted as 8 inches (lower than the ICE of 9 inches and the contractor proposal of 12 inches). The actual tonnage of concrete crushed as a result of the unforeseen concrete change order was not separately quantified by the City, its representatives or by the prime contractor. Subcontractor Payment

On December 7, 2015, comments were made in eBuilder by an HNTB staff member requesting additional clarification on the proposed $12.39 per ton crushing costs when original proposals noted a cost of $8.50 per ton. The HNTB staff member indicated that the extra work may need to be done as a force account. The HNTB Resident Engineer noted that the work had been done in good faith and needed to be paid. On December 11, 2015, HNTB returned the estimate to the general contractor for documentation of actual crushing costs or support for the proposed per ton cost. Although an additional document and cost breakdown was submitted by Lane Construction on February 2, 2016, Lane did not address the crushing cost question or explain the rationale for charging the City more than the subcontractor cost. The Record of Negotiation did not specifically address the reasonableness of the $12.39 per ton cost for crushing. Auditors reviewed the contract between Lane Construction and the crushing contractor and noted that the contract called for a unit price of $8.50 per ton. Auditors also requested and received invoices submitted to Lane Construction and noted that the subcontractor was paid $8.50 per ton for crushing concrete. Auditors did not review any documentation indicating that the actual cost incurred by the subcontractor exceeded $8.50 per ton. (Note: the contractor did not separately account for the actual number of tons crushed due to the change order.) The contractor’s proposal was overstated by $103,730, based on the difference between the proposed ($12.39 per ton) and actual ($8.50 per ton) crushing costs. Change request proposal amounts are negotiated and accepted as fair and reasonable, eliminating the need for the contractor and the City to document and review actual costs, as in a force account situation. The City has placed a priority on completing projects on time and on budget. As such, it is easier to provide both the City and the contractor with flexibility when handling changes to the original scope of work. This allows the work to continue with minimal delay, but creates the risk that contractors can overstate costs.


Recommendation: The City should establish requirements for the review and documentation of contractor’s proposals for change orders to include:

• A requirement that all subcontractor proposals be itemized by detailed cost elements and identify the subcontractor that will be performing the work. Alternately (if the prime is unwilling to supply the subcontractor information), a best practice noted above would require the contractor to submit accurate pricing (similar to the Federal “Truth in Negotiations” clause).

• Comparison of contractors’ proposals to independent cost estimates, with Record of Negotiations detailing significant differences, regardless of the bottom line total.

• Explanations for discrepancies identified in the measurement of work to be completed, especially those that could impact unit prices.

Response: The City, as a recipient of Federal Transit Administration (FTA) funds, is meeting the requirements of FTA Circular 4220 and the Federal Acquisition Regulation (FAR) for its FTA funded projects. In compliance with the FAR, the goal of contract pricing is “fair and reasonable” pricing. FAR Subpart 15.4 Contract Pricing is the primary source document. CATS and E&PM have identified some additional best practices as a result of lessons learned from the BLE, including the establishment of overhead and profit calculations for changes. In addition, Records of Negotiations are improving by including the basis of the ICE and an explanation of the price differences to the proposal. Audit Conclusion #3: CATS and E&PM noted that they have identified some additional best practices, and they believe the current process in place is in compliance with FTA and FAR requirements. While the performance of independent cost estimates is an integral function of reaching “fair and reasonable” pricing, the example provided in this audit indicates that contractor proposals can be reasonable based on comparison to independent cost estimates and yet still contain proposed costs that should be questioned.

City Council Memo #1 Monday, Jan. 8, 2018 WHAT’S INSIDE:...

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Transcript of City Council Memo #1 Monday, Jan. 8, 2018 WHAT’S INSIDE:...