Report 94024 Summary - March 1995
Contracting Practices Need Improvement
Results in Brief
The Division of the State Architect (DSA) within the Department of General Services is partially responsible for the design and construction of state facilities (capital outlay program). Under the capital outlay program, the DSA is responsible for designing a project, selecting architectural and engineering consultants, bidding and awarding construction contracts, supervising and inspecting construction, preparing the project budget, and managing the overall project. To carry out its responsibility, the DSA awards three types of contracts-architectural and engineering contracts, construction contracts, and contracts for retainer services.
Our review focused on whether the DSA complied with the state contracting laws and regulations in awarding its contracts. Additionally, the DSA was responsible for a major construction project that involved the seismic upgrading of the Armory and Ahmanson buildings owned by the California Museum of Science and Industry (CMSI). We reviewed whether the DSA followed the appropriate building codes and consulted with the required advisory boards before making decisions that resulted in the demolition of a major building. Specifically, we noted the following:
- The DSA awarded $1.2 million of new work by simply amending ongoing contracts rather than taking the steps necessary to award this work through a competitive process.
- The DSA did not always prepare independent estimates before it negotiated fees with its consultant contractors.
- It awarded one contract for a project manager without properly advertising for it.
- The DSA did not obtain the required approvals before some consultant contractors performed services for a contract.
- It did not always obtain approvals when it exceeded its sole source and delegated authority limits for some of its contracts.
- Even though the Legislature, in Chapter 757, Statutes of 1992, directed that both the Ahmanson and the Armory buildings be replaced, the CMSI and the DSA intended to replace the Ahmanson building and leave the Armory building. However, according to the state architect, it was appropriate to use the funds only for construction of the Ahmanson building because the CMSI was replacing the two original CMSI buildings with one that equalled the size of both.
- The state architect recommended that the CMSI employ the more restrictive Field Act codes as the design standards for the CMSI project. The CMSI agreed with the DSA's recommendation and approved the use of the more restrictive codes. However, according to an opinion of the Legislative Counsel, the building standards of the Field Act do not apply to the construction of the new museum at the CMSI and, instead, the CMSI should use building standards under the California State Building Standards Code.
- Further, even though cost estimates were based on the use of the Field Act standards, the DSA took the necessary steps to obtain a cost comparison and recommended the reconstruction of an expanded museum based on the lower of the cost estimates.
- As required, the CMSI consulted with two historical boards before submitting the budget package for the new museum to the Department of Finance.
- The DSA used the funds of the Earthquake Safety and Rehabilitation Bond Act of 1990 to pay for expenditures that, according to the state architect, were a necessary and integral part of the new museum facility.
The DSA should take full advantage of the benefits that are realized when contract work is awarded through a competitive process. Before simply adding significant new work to existing contracts, the DSA should thoroughly assess whether or not it would be more prudent to seek competitive bids or proposals first.
To ensure that it receives a fair and reasonable price, the DSA should prepare an estimate of services before negotiations and not rely on the consultant contractor's cost proposals.
To ensure that it does not limit competition in selecting its consultant contractors, the DSA should advertise all contracts in the California Contracts Register and through publications of professional societies.
To ensure that it does not expose the State to potential financial liability for work performed if the contract is not approved, the DSA should take the following steps:
- Ensure that its consultant contractors do not perform work or provide services before the DSA obtains approvals for its contracts; and
- Require its consultant contractors to submit invoices that include specific service dates.
In its response, the DGS states that it will take appropriate actions to address our recommendations. However, the DSA also responds that it disagrees with some of the conclusions of our report. For example, the DSA contends that its decisions to amend existing contracts, instead of performing a new selection process, were in the best interest of the State. In addition, the DSA disagreed that it exposed the State to potential monetary liability when its consultant contractors started work before the contract was approved.