MINUTES FOR THE COMMITTEE OF THE WHOLE
OF THE CAPE CORAL CITY COUNCIL
Monday, December 1, 2008
Meeting called to order by Mayor Burch at 3:02 p.m.
present. Grill arrived at 3:15 p.m. Donnell was excused.
City Auditor Newman explained that this draft RFP is the result of the unanimous vote taken by Council at their August 4, 2008 meeting where it was determined that Council would like to have an audit of the UEP project. The motion was to go out with an RFP to hire an independent auditor to do a full forensic audit of the UEP from Southwest 1 through Southwest 4, years 2003 through 2006. Related discussion said that Council should set the parameters and the RFP should be widely advertised. In trying to develop a draft RFP for discussion purposes so that Council would have a basis to determine exactly what they want to do with this, feedback was solicited and provided between myself and individual Council members. Mayor Burch convened a group of citizens knowledgeable about construction contracts and the history of the UEP, and Council Member Deile also sent some representatives to participate in this process. She reviewed the ideas used to develop an RFP (Request for Proposals):
· Tell potential vendors what it is the City wants done,
· RFP is advertised by Procurement for an agreed upon time,
· All vendor responses will be due by a specified date and time,
· Proposals will be evaluated according to ranking criteria,
· The ranking criteria are included in the RFP,
· Shortlist the highest ranking responders,
· Invite those responders to make presentations,
· Final ranking to be determined by Council,
· Negotiate contract with the #1 ranked proposer,
· If Council is unable to reach a contract with the #1proposer, a contract is negotiated with the #2 proposer, and so on.
· The resulting contract is voted upon and approved by Council.
City Auditor Newman noted that usually the Selection Advisory Committee does the short listing and ranking; in this case we would not be using the SAC Committee unless Council desires to do so. She stated the draft RFP consists of four parts: 1) project information, 2) form of the response, 3) evaluation process, and 4) general conditions and information. She reviewed the afore-mentioned four parts of an RFP. She noted the items currently included in the RFP as a starting point are:
· Follow up on the two previous outsourced audits (Townsend on the 1999 contract and Kessler on the 2004 contract) and express opinions on open items.
· Identify legal issues in the formation and implementation of all contracts related to design management and construction services within the scope of the audit,
· Identify potential cost exceptions and non-compliance with these contracts and applicable laws,
· Evaluate the appropriateness and reasonableness of the Program Manager at Risk methodology for the City.
Council Member Bertolini referred to page 3 of the draft RFP. She stated she did not see the necessity of “A. Follow up on two previous outsourced audits and express opinions on open items”. She asked for an explanation of “B. Identify legal issues in the formation and implementation of all contracts related to design, management and construction services”. She explained why she agreed with “C. Identify potential cost exceptions and non-compliance with these contracts and applicable laws”. She also asked about “D. Evaluate the appropriateness and reasonableness of the Program Manager at Risk methodology for the City”.
Council Member Brandt noted that the request for a “forensic audit of the UEP from Southwest 1 through Southwest 4, years 2003 through 2006” would not include the Townsend audit since that audit involved the Pine Island Corridor. Therefore, “A. Follow up on two previous outsourced audits and express opinions on open items”, on page 3 of the draft RFP was not applicable. He agreed with Council Member Bertolini that “B. Identifying legal issues in the formation and implementation of all contracts related to design, management and construction services” is not a function of forensic audits. He stated “C. Identify potential cost exceptions and non-compliance with these contracts and applicable laws” is certainly something we would be interested in, and “D. Evaluate the appropriateness and reasonableness of the Program Manager at Risk methodology for the City”, is not something that a forensic auditor would have expertise in. He expressed his feeling that it would be difficult for a Council sub-committee to evaluate the proposals because of the Sunshine Laws.
Council Member Deile agreed with Council Member Brandt that the way the draft RFP was structured the Townsend audit would fall outside the parameters established. He stated he assumed that when an outside auditor comes in the first thing they would do is ask for copies of prior audits to review; he asked the City Auditor if that was true.
City Auditor Newman responded in the affirmative.
Council Member Deile stated he understood that the Kessler audit was never finished. He asked if this audit of the UEP would carry Kessler’s audit to completion.
City Auditor Newman stated the Kessler audit was presented to her as completed with a final report and a final bill for his services.
Council Member Deile asked how many responses the City received when they did the Kessler audit.
City Auditor Newman stated they did not receive many responses.
Council Member Deile explained that he would not want to be precluded from looking at someone’s response simply because they did not make the shortlist. He stated within the contract document it states that the negotiations with the #1 ranking proposer will be done by the “City”. He suggested a more granular definition of “City” when it comes to who will negotiate the contract. He referred to page 3 of the draft RFP and stated that he felt “B. Identifying legal issues in the formation and implementation of all contracts related to design, management and construction services” was outside the scope of an audit. He stated he felt the City had already done “D. Evaluate the appropriateness and reasonableness of the Program Manager at Risk methodology for the City”. He agreed with Council Member Brandt that “A. Follow up on two previous outsourced audits and express opinions on open items”, on page 3 of the draft RFP was not applicable. He noted that “C. Identify potential cost exceptions and non-compliance with these contracts and applicable laws” involved two things, 1) compliance with the contract terms and 2) with applicable laws. He suggested adding another bullet point in the scope of work that was spelled out in the Townsend contract, “investigate discrepancies as to the responses above” and “compliance with appropriate laws”.
City Manager Stewart stated he agreed with Council Member Brandt’s concerns regarding A, B, and D. He reminded Council that there had been four audits done on these items: Townsend, Kessler Report, and two State Auditor General audits. He stated contradictory to the allegations made by Mr. Kessler that something illegal was going on, bid rigging, we are still in a situation where neither that complaint nor any audit has revealed any inappropriate activity on the part of anyone. He commented that while he supports the Council’s decision to do a compliance audit you need to ask yourself, “why are you doing a forensic audit when the audits that have been done before failed to reveal any illegal activity of any kind?”
Council Member Brandt referred to the two memos from Council Member Deile dated October 10th and October 27th regarding the draft audit RFP. He stated he was unable to identify where the comments on the October 27th memo had been fully implemented into the current draft RFP. He noted he would like to see Council Member Deile’s comments from both memos responded to. He expressed his feeling that a lot more work needed to be done on the RFP.
Mayor Burch asked if Council Member Deile’s comments were added into the draft RFP.
City Auditor Newman explained the difficulty she ran into when including the individual Councilmember’s comments into the draft.
Council Member Deile explained that he felt the problem they faced was trying to work
within the parameters established by the Sunshine Laws. He addressed some of the comments he made in his October 10th and 27th memos.
Mayor Burch stated it appears as if Item C. “Identify potential cost exceptions and non-compliance with these contracts and applicable laws” is the only item under Purpose that Council would like to pursue.
Council Member Deile concurred with Mayor Burch that Council would like to pursue C. He read into the record the bullet points listed in the Townsend audit under Scope of Work. He stated he would add to that list “Investigate any discrepancies to determine responsibility and compliance with appropriate laws”.
Discussion was held regarding whether or not “A. Follow up on two previous outsourced audits and express opinions on open items” should be done by the auditor.
Council Member Deile shared his thoughts that an outside auditor would as a matter of course review what had been done prior and bill the City for their review. He stated he felt it would be negligent on their part not to do so.
City Auditor Newman explained she would expect that an auditor coming in would look at all past audits, management’s response to those audits, and subsequent actions to those audits. The auditor will probably do this whether or not the City tells them to do so. It is for Council to decide how valuable that information is to them.
Council Member Bertolini stated according to Council Member Brandt the Townsend
audit would be irrelevant because of the timeline.
City Auditor Newman noted that the work documents from the Townsend audit might not be available since their retention period has expired.
Council Member Brandt asked whether or not Mr. Kessler reviewed the Townsend audit before he prepared his audit.
City Auditor Newman responded she was quite certain that Mr. Kessler looked at the Townsend audit.
City Attorney Menendez referred to some of the contracts going back to 2003 and the comment made that “part of the reason for doing this might be to be able to recover in the event that anyone did not comply based on the auditor’s findings”. She advised Council that due to the length of time there might be statues of limitation problems.
City Auditor Newman explained that when you are thinking about structuring an audit you look at the purpose of what it is you want to do and then you define the scope; objectives are within the scope or boundary defined. She noted that they structured the scope and objectives in three phases:
· Phase I – Validity of the contract
· Phase II – 2004 Contract Compliance
· Phase III – 1999 Contract Compliance
City Manager Stewart addressed the difference between a follow up on an audit and looking at an audit to see what was done. He stated Council needs to determine whether or not another audit will be done on the findings of the previous audits which have been audited by the Auditor General.
Mayor Burch commented that the follow up with Townsend would be a part of Phase II. He suggested looking at Phase I first.
Council Member Deile stated he felt under Phase I, Objective 1, “Review the procurement process for compliance with Florida State Statutes, City ordinances and best practices in achieving competitive prices” was a valid objective. He expressed his opinion that “a.” and “b.” under that objective were not necessary since they involved the propriety of the Construction Manager/Program Manager at Risk approach. He stated he felt “c” and “d” were valid. Number 2 of the Objectives could be in Phase II, “Review all agreements (contracts, letters, work authorizations, change orders, etc.) between the City and its CM/PM and all subcontractors”.
City Manager Stewart referred to the Phase I Objectives and asked where compliance with the contract comes in.
Council Member Deile noted that contract compliance was covered in Phase II.
Mayor Burch expressed his feeling that thee idea that Program Management had been discussed and investigated simply was not true.
Council Member Deile referred to Phase III, 1999 contract compliance, and stated he was not sure what the relevant statues of limitations were.
City Attorney Menendez explained it depended on the nature of the claim, however, many statutes of limitations are four years.
Brief discussion was held regarding statutes of limitations and how they may relate to the audit.
Brief discussion was held regarding the cost of the audit.
City Auditor Newman asked if Council chooses not to do Phase I (Validity of the Contract), do they see anything in there that they would like to keep in? The objectives were to review the Procurement process so Council needs to decide whether or not they are interested in that piece, and then all of the agreements between MWH and the City.
Council Member Deile stated he felt the words “all work” for the scope was beyond what he anticipated; in the interest of cost it should be pared down. There are two major items involved in what MWH does for the City, UEP and FEB. In addition, there is other work done by MWH that has nothing to do with utilities, i.e., the lock at Ceitus. He recommended that the scope be limited to the UEP for now, and Council could see where that takes them.
Mayor Burch clarified that the intent was to look at all the work done by MWH under the UEP contract to see if it was acceptable under the terms of the contract.
Council Member Deile agreed with Mayor Burch as long as it involved the UEP contract only.
Council Member Bertolini stated they were looking to see if there was full compliance with the UEP contract.
City Auditor Newman noted it appeared that there was some interest in the procurement process for the creation of the engineering and design work and the sub-contractor pre-qualification project advertisement and bid award within the UEP contract as opposed to within all activities by MWH. She asked if Council wanted to include the Phase 1 Objective, “Review all the agreements”.
Council Member Deile stated that was where he was headed.
City Auditor Newman stated she would be happy to provide the draft RFP in mark-up condition so that Council could see what was changed or added. She addressed the Phase II scope: “The scope of the audit will encompass program management, design, and construction for all work done under the 2004 “Master Contract” as well as any additional work done for the City during this time period by MWH or Kellogg Brown & Root, Inc. (KBR). She asked if Council wanted that changed to just focus on the 2004 and the UEP.
Council Member Bertolini agreed and suggested eliminating the words “as well as any additional work done for the City during this time period”.
City Auditor Newman reviewed the Phase II Objectives. She asked if Council wanted to remove the words “follow up” from the first objective since that terminology would tell an auditor to audit this again and see where we are now on these issues.
Council Member Deile suggested striking the words “follow up”.
City Auditor Newman continued by addressing the additional Phase II Objectives:
· 2) Identify discrepancies and reasonableness in contract billing and fulfillment as it relates to: a. direct labor, both rates and hours, b. labor burden, c. direct purchase orders, e. overhead, f. staffing levels, g. verification of unit costs paid, and h. reconciliation of quantities paid to as-builts. She noted this objective means the City is expecting an opinion back from the auditor.
· 3) In the event any overcharges and/or incorrect payments are discovered, assist the City in recovery by legal action.
· 4) Review, analyze and reconcile various reports, work authorizations, and invoices and discern the reason(s) for different and overlapping reporting periods. She noted this objective asks for a “reconciliation of reports, work authorizations, and invoices”.
· 5) Determine if the correct revenue sources have been applied to invoices and if costs are being allocated appropriately across projects, including PM fees. She stated this basically asks “did you charge anything to an assessment area that was not an assessment cost?”
· 6) Analyze use of the PM contingency to determine: a. where and how it has been spent, b. what project(s) it was charged to, c. if it was affected by any change orders.
· 7) Determine whether City staff has performed due diligence in administering the contract.”
· 8) Determine the appropriateness and applicability of the work authorizations under the Master Contract. She stated this asks if the umbrella of the Master Contract cover what is in the work authorizations.
· 9) Form an opinion on the appropriateness and cost impact of the Program Manager at Risk methodology used by the City. Provide an analysis of the various methodologies the City could use for the remainder of the construction projects and recommend the best fit. She stated she understood Council to say that they did not need an auditor to tell them this.
Council Member Deile referred to page 4, number 3 under Phase II Objectives, “In the event any overcharges and/or incorrect payments are discovered, assist the City in recovery by legal action” He explained why he felt that went beyond the scope of an audit and expressed his concerns regarding the costs. He addressed number 9, noting that he felt there was no need to get an opinion on the appropriateness of the cost impact of the Program Manager at Risk methodology. He stated he felt asking the auditor to provide methodologies and recommendations on ways to go forward with the best fit for the remainder of the construction projects went beyond the scope of what an auditor would normally do.
Mayor Burch concurred with Council Member Deile’s comments.
Council Member Brandt addressed modifying number 3), noting that if any overcharges and/or incorrect payments were discovered they would want the documentation showing what happened. If Council chooses to go forward with legal action they would do that under a separate contract. He stated his notes suggest modifying number 3 and deleting numbers 1 and 9 of Phase II.
City Auditor Newman suggested that Council stop here, and she would make the revisions suggested so far.
City Manager Stewart stated he did not see anything in the draft RFP outlining the qualifications needed by an auditor.
City Auditor Newman referred to page 8, “Include a list of certifications held by each individual”. She noted that the qualifications are to be determined by Council.
Mayor Burch stated he felt they would want a certified audit firm.
Council Member Deile explained normally you submit a list of the team that is going to be working on the project and it will give their education, background, and experience. He noted that page 10 of the draft RFP, paragraph B, speaks to the issues raised by the City Manager regarding qualifications.
There being no further business, the meeting was adjourned at 4:16 p.m.
Bonnie J. Potter, MMC