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INTERNAL AUDIT REPORT
Operational - Capital Audit
Parking Garage Elevator Modernization Project
March 2021 – March 2024
Issue Date: May 22, 2024
Report No. 2024-06
Parking Garage Elevator Modernization Project
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TABLE OF CONTENTS
Executive Summary ................................................................................................................................................. 3
Background ............................................................................................................................................................. 4
Audit Scope and Methodology ............................................................................................................................... 5
Schedule of Observations and Recommendations ................................................................................................ 6
Appendix A: Risk Ratings ......................................................................................................................................... 7
Appendix B: Addendum 5 Removal of Car Finishes ............................................................................................... 8
Parking Garage Elevator Modernization Project
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Executive Summary
Internal Audit (IA) completed an audit of the Parking Garage Elevator Modernization Project (Project)
for the period March 2021 through March 2024. The audit was performed to provide a systematic and
independent examination of the quality of the Port's monitoring of the Project, to determine if best
practices were being followed, to verify compliance with contractual requirements, and to identify
potential risks that may affect the Project's schedule and budget.
The Port of Seattle (Port) used OAC Services, Inc. to design the elevators. The Project will replace ten
elevators serving the Parking Garage Sections B and C elevator cores and replace nine of ten motor
drives serving elevators in the Parking Garage Sections D and E elevator cores. Additionally, it will
provide new call buttons, lighting, and cab finishes in all 27 elevator cabs within the parking garage
(including those in the Parking Garage Section A). The intent of these modifications was to enhance
customer experience and maintain operational integrity of the vertical conveyance system within the
airport parking garage.
The Project is being performed through a Design-Bid-Build delivery method. The original contract
agreement between Osborne Construction Company (Osborne) and the Port was in the amount of $8.5
million. During the Project, there have been approximately $4 million in change orders and an additional
166 excusable days added to the schedule, primarily because of a Port error on the bid documents.
These errors also resulted in the project being suspended for 638 days.
The challenges encountered in this project can be attributed to several factors, including staff turnover,
errors made by the Port, and insufficient coordination among various Port departments, which led to
delays in decision making. Our audit identified an opportunity where internal controls and procedures
can be enhanced or developed. This opportunity is listed below and discussed in more detail beginning
on page six of this report.
(Medium) Removal of important material specifications during the bidding phase resulted in post award
change orders that are expected to increase the cost of the contract by $3.5 million and as a result, the
Port will incur additional soft costs of $284,856.
We would like to extend our gratitude to the Port’s Engineering Construction Management team, Central
Procurement Office, and Risk Management team for their assistance and expertise during the
engagement.
Glenn Fernandes, CPA
Director, Internal Audit
Responsible Management Team
Karen Goon, Deputy Executive Director
Sofia Mayo, Acting Director of Central Procurement Office
Janice Zahn, Director of Engineering- Construction Management
Parking Garage Elevator Modernization Project
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Background
The Airport Parking Garage elevators provide vertical circulation services for millions of airport parking
and ground transportation customers every month. Continued and reliable operations of these systems
are vitally important to the traveling public, as well as to airport operations.
The project was separated into two phases. The purpose of the first phase was to weatherize the B and
C elevator cores, remove trip hazards, and provide a uniform lobby floor finish throughout the parking
garage. Phase one’s scope of work included:
• Re-roof, patch/seal walls, add awnings, replace roof hatches, and add safety railings to the B and C
elevator cores.
• Level the floor between the B and C elevator lobbies and the surrounding 3
rd
and 4
th
floor parking
garage plaza floors.
• Resurface most elevator lobby floors to make them ADA compliant.
The second phase of the project will replace ten elevators serving the parking garage sections B and C
elevator cores and will replace nine of ten motor drives serving elevators in the parking garage sections
D and E elevator cores. Additionally, new call buttons, lighting and cab finishes will be provided in all 27
elevator cabs within the parking garage (including those in parking garage section A). These
modifications will enhance the customer experience and maintain the operational integrity of the vertical
conveyance system within the airport parking garage.
The Agreement total as of May 8, 2024 was $12.5 million, which included approximately $4 million in
executed change orders. Additionally, there were $310,728 in Open Trends
1
, which will potentially
increases the project total to $12.8 million. Although the project was currently scheduled to end on July
1, 2024, due to errors in Addendum 5, among other reasons, the Project is not anticipated to be
completed until March 31, 2026.
Schedule (Per May 8, 2024, Trend Log)
Original Contract Completion Date
1/17/2024
Approved Time Extension (Calendar Days)
166
Days Project Suspended Due to Addendum Error
638
Port Estimated Completion Date
3/31/2026
Budget (Per May 8, 2024, Trend Log)
Original Contract Sum
$8,515,805
Executed Change Orders
$3,975,042
Potential Risk (Open Trends)
$310,728
Projected Contract Amount
$12,801,575
1
Open Trend: Refers to known or potential cost/schedule risks to the project that have not yet been formally approved or
finalized by the Port.
Parking Garage Elevator Modernization Project
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Audit Scope and Methodology
We conducted the engagement in accordance with Generally Accepted Government Auditing Standards
and the International Standards for the Professional Practice of Internal Auditing. Those standards
require that we plan and conduct an engagement to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our engagement objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and conclusions based on our
engagement objectives.
In some instances, we used judgmental sampling methods to determine the samples selected for our
testing. In those cases, the results of the work may not represent the population as a whole.
The period audited was March 2021 through March 2024 and included the following procedures:
Procurement and Bidding Process
• Obtained an understanding of the document approval process for the bid documents.
• Reached out to non-winning bidders to understand if cab finishes were included in their bids.
• Reviewed the procedure of addendum approvals and tested Addendum 5 for the required
approvals.
Insurance Test
• Obtained an understanding of what type of insurance coverage was required for this project per
the contract.
• Obtained the insurance coverage evidence.
• Compared the evidence of the existing coverage with the contractual requirement.
Pay Application Review Process
• Obtained an understanding of the inspection process of materials on site.
• Reviewed documented inspection procedures outlined by the Port and verified if the inspection
procedures aligned with industry best practices.
• Reviewed the Inspection Daily Report (IDR) folder to review if the IDRs were present and were
submitted daily.
• Randomly selected samples IDRs and verified if the reports included the details required in the
procedures.
Change Orders
• Reviewed Change Orders.
• Interviewed current and former stakeholders.
• Obtained email records from the Records Retention department to review why the cab interiors
section in Addendum 5 was crossed out.
• Compared the steps taken by Port staff, with Port policies and best practices.
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Schedule of Observations and Recommendations
Removal of important material specifications during the bidding phase resulted in post award
change orders that are expected to increase the cost of the contract by $3.5 million and as a
result, the Port will incur additional soft costs of $284,856.
During the procurement and bidding phase, the Port issued five addenda. We noted that in Addendum
5, a Port employee erroneously crossed out expected material and pattern specifications in the elevator
car finishes, without Port oversight catching the error, prior to the Addendum’s release (See Appendix
B). During construction, the contractor identified this error which resulted in five change orders that will
potentially cost the Port $3.5 million and add an additional 166 days to the project’s schedule. The Port
has estimated that its daily soft costs to oversee the Project are $1,716. This will result in an additional
$284,856 in soft costs that the Port will incur. Finally, an error in artwork (photographs) resulted in
additional glass and lighting, which led to an avoidable cost of $191,500.
CPO Procedure Section 2_Pre Award_2_5_ Advertisement Period mandates notification to the
Construction Manager (CM), Project Manager (PM), and Resident Engineer (RE) for all addenda, but
lacks a requirement for their sign-off. Moreover, although the procedure mandates a peer review before
posting, it does not specify the responsible party or their qualifications, and it does not mandate
documentation and retention of peer review evidence. Furthermore, there was a notable absence of
explicit mention of a final review, or approval step before publication. We were unable to obtain evidence
of a peer review, or final approval, of Addendum 5 because of personnel turnover and the lack of
documentation.
We also noted an additional concern during our review of change orders:
• A Port estimate was not performed for Change Order #1 which was approved on a Not-to-Exceed
(NTE) amount of $74,000. Port Standard Operating Procedures (SOPs) require an estimate for any
changes greater than $50,000.
Recommendations
1.1 Revise the CPO procedure to specify required approvers prior to issuing addenda and maintain
sufficient documentation.
1.2 Port estimates should be performed in accordance with SOPs.
Management Response
1.1 CPO agrees with the recommendation and will revise the CPO procedure to specify required
approvers prior to issuing addenda and maintain sufficient documentation.
1.2 Engineering Construction Management (CM) acknowledges the required estimate was missing from
the Not-To-Exceed Change Order (CO) 01 documentation. Per Standard Operating Procedures, CO 01
requires a reconciling change order to execute the final amount for the change. This provides an
opportunity for the project team to include an independent estimate in the reconciling change order.
Targeted training will also be done with the CM Resident Engineers and CPO Contract Administrators
on this topic during our Bi-Monthly training session.
1) Rating: Medium
DUE DATE: 07/31/2024
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Appendix A: Risk Ratings
Findings identified during the audit are assigned a risk rating, as outlined in the table below. Only one
of the criteria needs to be met for a finding to be rated High, Medium, or Low. Findings rated Low will be
evaluated and may or may not be reflected in the final report.
Rating
Operational
Internal
Controls
Compliance Public
Commission/
Management
High Significant
Missing or
partial
controls
Non-compliance
with Laws, Port
Policies,
Contracts
High probability
for external audit
issues and / or
negative public
perception
Requires
immediate
attention
Medium Moderate
Partial
controls
Not
functioning
effectively
Partial
compliance with
Laws, Port
Policies
Contracts
Moderate
probability for
external audit
issues and / or
negative public
perception
Requires
attention
Low Minimal
Functioning
as intended
but could be
enhanced
Mostly complies
with Laws, Port
Policies,
Contracts
Low probability
for external audit
issues and/or
negative public
perception
Does not
require
immediate
attention
Parking Garage Elevator Modernization Project
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Appendix B: Addendum 5 Removal of Car Finishes
The screenshot shows the erroneously crossed out expected material and pattern specifications, in the elevator
car finishes, without Port oversight catching the error prior to the Addendum’s release.
Source: Screenshot of ADDENDUM NO. 5, dated March 5, 2021