Meeting_Body
CONSTRUCTION COMMITTEE
JANUARY 15, 2025
Subject
SUBJECT: OFFICE OF THE INSPECTOR GENERAL CONSTRUCTION CHANGE ORDER SPOT CHECKS
Action
ACTION: RECEIVE AND FILE
Heading
RECOMMENDATION
Title
RECEIVE AND FILE Office of the Inspector General Construction Change Order Spot Check Report for the period September 1 to November 30, 2024.
Issue
ISSUE
On January 25, 2018, the Metro Board directed the Office of the Inspector General (“OIG”) to conduct random spot checks on change orders for the construction projects listed in the quarterly program management report to ensure that the CEO Delegation of Authority to approve Construction Change Orders Policy is performing in the manner desired by the Board of Directors.
Background
BACKGROUND
The OIG’s Construction Change Order Spot Check Program (“Spot Checks”) focuses on approved change orders and modifications that exceed $500,000. The four change orders in this report were selected from the Program Management Quarterly Major Project Status for the period of September 1, 2024 - November 30, 2024.The OIG gathers the data, reviews all the change orders over $500,000 and selects change orders from the major projects. The information for the Spot Checks was collected from the Program Management Information System (PMIS), which is the department’s database system. Also, virtual meetings and telephonic interviews were conducted with Metro Program Management, Project Control, and Procurement staff from each involved project office.
For each Spot Check, we summarized:
• Description of the change order,
• Change order detail,
• Scope of Work,
• Budget,
• Schedule (Time to execute the change order),
• Safety, and
• Recommendations (lessons learned are identified starting with this report).
Metro’s Program Control department has provided informal responses to this report before its issuance and they are asked to provide written responses to the recommendations in this OIG Spot Checks Report within 30 days after this Report is issued. Included with this report is a spreadsheet with the status of responses concerning previous OIG Spot Check Report recommendations (Attachment B).
Discussion
DISCUSSION
Spot Checks Performed in this Quarter
Spot Check #1 - Airport Metro Connector (AMC) 96th St. Transit Station Project
This OIG Spot Check report concerns the Airport Metro Connector (AMC) 96th St Transit Station Project (Contract C1197 MOD 00045), Excessive Roof Deflection.
Change Order Detail
See Attachment A Spot Check #1 table.
Summary #1
Scope of Work - This change order of $833,373 is for MOD 00045. It is related to additional work on the skylight roof at the Airport Metro Connector (AMC) 96th Street Transit Station Project. Conditions of excessive roof damage were caused by the increased load on the structural members. This resulted in the deformation of the structural elements and necessitated rework to maintain structural integrity.
Budget - This change order MOD 00045 was negotiated to $833,373. The Contractor's Proposal (CSP) was $841,430 and the Independent Cost Estimate (ICE) was $680,133. The ICE is $161,297 (19.17%) under the Contractor’s Proposal. The negotiated amount is $153,240 (22.53%) over the ICE. The staff confirmed that funds for this change order are included within the Life-of-Project budget.
Question to Airport Metro Connector Program Management
The OIG requested an explanation for the variation between the Contractor’s Proposal and ICE, and the final change order amount. Was this variation anticipated, or did additional factors arise during implementation that justified this increase?
Response from Airport Metro Connector Program Management
The variation between the Contractor’s Proposal, ICE, and final Change Amount resulted from additional Request for Information (RFI) details and evolving market and project conditions that increased costs. After negotiations, the increase was accepted by Metro. A cost-benefit analysis weighed corrections against schedule impacts, leading to the most efficient solution. Two in-person negotiation meetings ensured the Contractor's proposal was accurate and aligned with field performance.
Schedule - The CEO Delegation of Authority process was utilized for this change order. The Contractor and Metro agreed on the Scope of Work on October 1, 2024. The modification was awarded on October 23, 2024, and it took staff seventeen workdays to complete all signature approvals, assuming presentation at a January Board meeting date (no December meeting), it would have taken a total of seventy workdays to complete the transaction, under the prior Board approval method for change orders.
Safety - The Airport Metro Connector Transit Station Project has 1,290,644 Project hours through September 2024 with a Total Recordable Injury Rate (TRIR) of 1.4 (the Bureau of Labor Statistics National Average is 2.4) and a Days Away Restricted or Transferred (DART) rate of 0 (the Bureau of Labor Statistics National Average is 1.5).
Recommendations/Lessons Learned-The OIG recommends continuing to perform design constructability, quality, and safety assessments and implementing engineering controls, and monitoring systems to detect technical compliance anomalies early in the project lifecycle.
Spot Check #2 - Purple Line Extension Section 2 Transit Project
This OIG Spot Check report concerns the Purple Line Extension Section 2 (Contract C1120 MOD 00227), Unforeseen Conditions of the Private Sewer Line in the Critical Path.
Change Order Detail
See Attachment A Spot Check #2 table
Summary #2
Scope of Work- This change order of $1,670,988 is for MOD 00227. It is related to permanent improvements and unforeseen conditions of an unidentified sewer line discovered by the Contractor during the piling operations and striking the live sewer line at 2000 Ave of the Stars. The unknown sewer line was not in the as-built utility drawings, and the Los Angeles Bureau of Engineering (LABOE) was unaware of it.
Question to Purple Line Extension 2 Program Management
The OIG requested an explanation of what exploratory methods were conducted to identify and locate utilities during the design phase?
Response from Purple Line Extension 2 Program Management
Potholing was conducted for some utilities as part of the design process, but not for all utilities. The sewer line in question exceeded the effectiveness of the Ground Penetrating Radar (GPR).
The prime contractor and infrastructure designer did not account for the sewer line in their plans because it was not identified during the exploratory work of the design phase, and there was no indication of the sewer line in the as-built records provided by the Los Angeles Bureau of Engineering (LABOE). The contractor utilized typical utility location methods (i.e., potholing and GPR).
Budget - This change order MOD 00227 was negotiated to $1,670,998. The Contractor’s Proposal was $1,706,453 and the Independent Cost Estimate (ICE) was $1,628,401. The ICE is $78,052 (4.57%) under the Contractor’s Proposal. The negotiated amount is $42,597 (2.62%) over the ICE. The staff stated that funds for this change order are within the recently amended Life-of-Project budget.
Schedule - The CEO Delegation of Authority process was utilized for this change order. The Contractor and Metro agreed on the Scope of Work on October 08, 2024. The modification was awarded on October 21, 2024, and it took staff nine workdays to complete all signature approvals. Under the prior Board approval method for change orders, assuming presentation at a January 2025 Board meeting date (no December meeting), it would have taken a total of sixty workdays to complete the transaction, under the prior Board approval method for change orders.
Safety - The Purple Line Extension 2 Project has 4,757,014 Project hours through October 2024 with a Total Recordable Injury Rate of 2.35 (the Bureau of Labor Statistics National Average is 2.4) and a Days Away Restricted Transferred (DART) rate of .5 (the Bureau of Labor Statistics National Average is 1.5).
Recommendations/Lessons Learned - None
Spot Check #3 - Purple Line Extension Section 1 Transit Project
This OIG Spot Check report concerns the Purple Line Extension Section 1 (Contract C1045 MOD 00231), Wilshire/La Brea Station Plaza Standby Generator and Load Bank Procurement.
Change Order Detail
See Attachment A Spot Check #3 table.
Summary #3
Scope of Work - This change order of $2,324,954 is for MOD 00231. It is related to permanent improvements and replacement of the existing 2000 kW standby generator with a larger 2750 kW standby generator at the Wilshire/La Brea Station Plaza. The change order incorporates the Contractor’s design, procurement of equipment, and necessary construction improvements.
Budget - This change order MOD 00231 was negotiated to $2,324,954. The Contractor’s Proposal was $2,477,728 and the Independent Cost Estimate (ICE) was $1,984,603. The ICE is $493,125 (24.85%) under the Contractor’s Proposal. The negotiated amount is $340.351 (17.15%) over the ICE. The staff stated that funds for this change order are within the Life-of-Project budget.
Schedule - The CEO Delegation of Authority process was utilized for this change order. The Contractor and Metro agreed on the Scope of Work on November 07, 2024. The modification was awarded on November 18, 2024, and it took staff seven workdays to complete all signature approvals. Under the prior Board approval method for change orders, assuming presentation at a January Board meeting date (no December meeting), it would have taken a total of fifty-five workdays to complete the transaction, under the prior Board approval method for change orders.
Safety - The Purple Line Extension 1 Project has 10,456,342 Project hours through October 2024 with a Total Recordable Injury Rate of .84 (the Bureau of Labor Statistics National Average is 2.4) and a Days Away Restricted Transferred (DART) rate of .10 (the Bureau of Labor Statistics National Average is 1.5).
Recommendation/Lessons Learned - None
Spot Check #4 - Airport Metro Connector (AMC) at the 96th Street Transit Station Project
This OIG Spot Check report concerns the Airport Metro Connector (AMC) 96th Street Transit Station (Contract C1197 MOD 00049), Improvements of the North-end Perimeter Site Fencing.
Change Order Detail
See Attachment A Spot Check #4 table.
Summary #4
Scope of Work - The change order of $1,134,517 is for MOD 00049 It is related to design changes of the north-end perimeter site fencing along Arbor Vitae Street at the Airport Metro Connector (AMC) 96th Street Transit Station Project. The change order amount includes costs associated with the design, procurement of materials, and construction necessitated by the increased number of bus charging stations and infrastructure improvements made by the Los Angeles Department of Water and Power (LADWP).
Budget - This change order MOD 00049 was negotiated to $1,134,517. The Contractor’s Proposal was $1,349,528 and the Independent Cost Estimate (ICE) was $1,166,373. The ICE is $183,155 (15.70%) under the Contractor’s Proposal. The negotiated amount is $31,856 (2.73%) under the ICE. The staff stated that funds for this change order are within the Life-of-Project budget.
Schedule - The CEO Delegation of Authority process was utilized for this change order. The Contractor and Metro agreed on the Scope of Work on October 30, 2024. The modification was awarded on November 18, 2024, and it took staff twelve workdays to complete all signature approvals. Under the prior Board approval method for change orders, assuming presentation at a January 2025 Board meeting date (no December meeting), it would have taken a total of fifty-one workdays to complete the transaction, under the prior Board approval method for change orders.
Safety - The Airport Metro Connector Transit Station Project has 1,290,644 Project hours through September 2024 with a Total Recordable Injury Rate (TRIR) of 1.4 (the Bureau of Labor Statistics National Average is 2.4) and a Days Away Restricted or Transferred (DART) rate of 0 (the Bureau of Labor Statistics National Average is 1.5).
Recommendations/Lessons Learned - None
FINANCIAL IMPACT
This report will have no financial impact on the Agency beyond what is described above.
Impact to Budget
For all of the construction change orders reviewed, Metro stated the funds are within the approved budget and will utilize the contingency funds to cover the cost from the Life-of-Project-budget.
• Spot Check #1) $833,373 Airport Metro Connector 96th Street Transit Station Project
• Spot Check #2) $1,670,988 Purple Line Extension Section 2 Transit Project
• Spot Check #3) $2,324,954 Purple Line Extension 1 Transit Project
• Spot Check #4) $1,134,517 Airport Metro Connector 96th Street Transit Station Project
Equity_Platform
EQUITY PLATFORM
In the opinion of the OIG, we considered whether these change orders presented any equity-related issues on their face. The OIG did not receive any data concerning community impacts. The OIG observed no obvious disparate impacts created by these change orders on small businesses or low-income persons or by the performance of the work in a manner that impacted a disadvantaged community beyond what is typical and usual when conducting any construction.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The Office of Inspector General reviews large change orders over a calendar quarter and makes recommendations as appropriate to support Metro’s Strategic Plan Goal #5: Provide responsive, accountable, and trustworthy governance within the Metro organization and CEO goals to exercise fiscal discipline to ensure financial stability. The OIG mission includes reviewing expenditures for fraud, waste, and abuse in Metro programs, operations, and resources. For each selected change order reviewed, the OIG evaluates whether there are red flags of fraud, waste, or abuse taking place. We report the details of the significant change orders and make recommendations consistent with the OIG’s Construction Best Practices report dated February 29, 2016, and supplemental report in 2023 more particularly focusing on safety, lessons learned, improving efficiencies, and prudent spending.
Next_Steps
NEXT STEPS
The OIG shall provide every quarter, an ongoing spreadsheet of recommendations to Program Control and Program Control. Program Control and Program Management agrees to respond to the recommendations of the OIG within 30 days. The OIG continues to meet periodically to discuss reports, recommendations, and the status of implementation of the recommendations with Project Management, and receive updates. The list of OIG recommendations and Metro management responses is an attachment to this OIG report (Attachment B).
Attachments
ATTACHMENTS
Attachment A - Change Order Details for Spot Checks in this report
Attachment B - OIG Recommendations and Responses Tracking Sheet
Prepared by: Stuart Bermudez, Construction Specialist Investigator, (213) 244-7324
Reviewed by: Karen Gorman, Inspector General, (213) 244-7337
