-- Thompson audit finds 63 percent of Job Order Contracts are past target date for completion --

-- 698-day delay to upgrade security cameras at one location --

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New York City Comptroller William C. Thompson, Jr. today criticized the Department of Environmental Protection (DEP) for failing to complete nearly two-thirds of job orders – including remediating environmental hazards such as lead paint and asbestos – on schedule.

“The Department of Environmental Protection’s insufficient planning and the inability to complete projects in a timely manner calls into question its administration of the job order contracting program,” Thompson said. “Most job order projects were not developed or completed on time.”

The audit – which can be viewed at www.comptroller.nyc.gov – covered Fiscal Years 2005, 2006 and 2007 (July 1, 2004 to June 30, 2007). Auditors evaluated whether DEP was properly administering job order contracts; whether the cost of work was reasonable; and whether the quality of work was satisfactory.

The Department of Environmental Protection (DEP) delivers drinking water to over nine million City and State residents, oversees more than 13,000 miles of water mains and sewers, and operates 14 water pollution control plants that can possess more than 1.3 billion gallons of wastewater a day. In addition, DEP enforces the City’s Noise, Air, and Hazardous Materials Codes.

Job Order Contracting (JOC) is a competitively bid, indefinite quantity contract under which a contractor performs work orders, as needed. JOC contracts are based on previously established unit prices for specific work items. Under JOC procedures, DEP does not have to competitively bid contracts for each small project and instead looks to the JOC contractor to perform the work. Since 2000, DEP has used JOCs, for performing maintenance, repairs, and for small or medium-sized construction projects.

JOC contracts are solicited and administered by four Department bureaus – Wastewater Treatment, Water and Sewer Operations, Water Supply, and Facilities Management and Construction. Generally, JOC contracts range from $1 million to $6 million. The term of each JOC contract is two years with a one two-year renewal option.   

Among Thompson’s findings:

• DEP does not have adequate internal controls to ensure that the JOC program is carried out in a timely manner. Auditors’ review of 83 sampled work orders revealed that 67 exceeded DEP guidelines and anticipated construction schedules. The excessive work time averaged 278 days and ranged up to 814 days. Since many JOC projects involve work at the water pollution control plants, which must comply with New York State permits that specify allowable levels of pollutants in treated wastewater, the timely completion of job order work is critical to ensure adherence to permit requirements. Moreover, the expeditious completion of JOC projects is essential so as not to jeopardize DEP’s standing with federal monitors or with State permit requirements, thereby, subjecting DEP to monetary penalties.

• Overall, 72 of 94 sampled job orders exceeded standard timeframes for determining the work necessary to complete the JOC projects. According to Wastewater guidelines, work orders should be issued within 34 days of initiating the need to do a JOC project. However, 54 of Wastewater’s 68 sampled job orders were issued from 38 days to 335 days. In 11 of the cases, work orders were not issued until more than six months after the initiation of the project. 

• Although DEP requires that job orders contain construction duration times by including anticipated construction start and end dates for all JOC projects, 50 of 79 sampled job orders exceeded their planned schedules. Specifically, construction time exceeded in 40 of 57 Wastewater job orders; 6 of 16 Water Supply job orders; and, 4 of 6 Operations job orders. In one case, Wastewater issued a job order on March 4, 2006, to upgrade a closed circuit TV system at the North River Water Pollution Control Plant. As of January 22, 2008, that construction had been delayed by 540 days. Additionally, the job order took 151 days to develop, for a total of a 698-day delay in completing the project.

• In three cases, job order work was delayed by DEP’s failure to anticipate the need to remediate environmental hazards prior to commencing job order work. For example, Wastewater issued a job order on November 11, 2006, for $570,408 to reconstruct primary sludge piping at the Wards Island Water Pollution Control Plant. As of January 23, 2008, construction had been delayed 293 days because DEP failed to remediate hazardous lead paint and asbestos before instructing the contractor to commence work. According to DEP, work was scheduled to be completed by May 30, 2008 – almost 13 months after the original completion date. Further, since temporary piping is required to keep the plant operational while sludge piping is being reconstructed, this will add an estimated $171,807 to the project.

• DEP did not assess contractors $885,500 in liquidated damages when job order work was not completed on time. Auditors found 50 cases in which construction was delayed, the majority of which projects did not include provisions to assess liquidated damages. In at least four cases, delays might be attributable to contactors, which could have warranted the imposition of liquidated damages of $623,000. Also, DEP chose not to impose liquidated damages when individual job orders contained the appropriate provisions to assess liquidated damages. In at least three of these instances, a total of $262,500 could have been assessed.

“While DEP is not obligated to assess liquidated damages, its practice of routinely relieving contractors of this obligation increases the risk that work may not be completed on time and jeopardizes its standing with the federal monitor and state permit requirement,” Thompson said.

• DEP improperly used JOC to undertake certain work. Nine of 97 sampled job orders were based entirely on tasks whose prices were not previously determined and were obtained with limited or no competition from vendors or subcontractors. Therefore, JOC was not an appropriate method for performing these tasks. Instead, DEP should have competitively procured the work in accordance with the City’s Procurement Policy Board Rules.

• Some of the costs for work items in 46 of 97 job orders were based on previously established unit prices, while other work items were not. Auditors found 72 of 124 items in 46 job orders lacked the required price quotations or justification.

• For a $129,150 job order issued on August 15, 2005, to install concrete barriers at a collection facility in Brooklyn, Wastewater deemed the cost of the entire work as non-prepriced, even though the cost should have been based on items contained in the price catalog. The contractor solicited three price quotations for the work ranging from $137,533 to $208,000. However, auditors found that the cost of work using catalog prices should have been $42,470, which is $86,680 less than the amount of the $129,150 job order.

• DEP calculates the total cost of job order work items by adjusting item unit prices with the respective contractor’s multiplier factor. However, auditors found that DEP does not ensure that stipulated multiplier factors are used and that it inaccurately adjusted unit prices in 13 of 97 sampled job orders. As a result, DEP underpaid contractors $83,813 and overpaid contractors $17,664.

Thompson made 23 recommendations, including that DEP:

• Complete job order development and issue job orders within required time frames.

• Ensure that JOC contractors complete work on schedule. In this regard, the Department should ensure that unfinished work is completed without further delay.

• Ensure that all job orders contain provisions for liquidated damages. Assess liquidated damages when contractors fail to complete work in accordance with scheduled timeframes. Determine whether liquidated damages should be assessed for the seven cases noted in this report.

• Cease its practice of using JOC for work that is not based on any established unit prices in the construction task catalogs, and calculate job order work on the basis of established unit prices in the construction task catalogs.

• Ensure that JOC contractors submit all required material samples, product data, drawings, and test reports. Implement an effective system of administration to record, collect, file and properly maintain all required documentation in Departmental files.

• Implement adequate controls to ensure that the data contained in the PROGEN database is complete, current and accurate.

In its response, DEP agreed with 21 of the 23 recommendations.

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