Thursday, May 13, 2010

Washington State Auditor to Audit Public Works Change Orders for all Public Agencies

According to the Washington State Auditor's Office, they are embarking on an initiative to audit change orders on public works projects for all public agencies in the state.  I talked with a representative of the Auditor's Office last week who confirmed this information that I had previously heard.

The Auditor's Office frequently issues audit findings charging
that agencies have executed change orders for work outside the original scope of work of the project.  

While there is no state law governing what is a permissible versus impermissible change order, the findings of the Auditor's Office often note that the agency being audited cannot guarantee that the price of the change order work is the best price because the work was not competitively bid.  In addition, out of scope change orders violate the intent of competitive bidding laws that provide an opportunity for all contractors to compete for such work.  

If you work for a public agency, here are three action steps you may want to consider:
  1. Policies and Procedures:  Does your agency have a policy and procedure in place for reviewing change orders to ensure they are within the scope of the original project and not a "cardinal" change - something that should have been separately bid?
  2. Training:  Have you considered providing training for your project management and contracting staff on change orders?  I have developed and taught a class on change orders and what constitutes appropriate versus inappropriate change orders.  If you are interested in discussing this training, please contact me.

  3. Pre-Audit:  It may be helpful to conduct a pre-audit of your change order practices in advance of an actual audit to give you time to correct any deficiencies in your practices.  You could conduct this with your own staff, or I could perform this service for you.  Please contact me if you would like to discuss having me perform a pre-audit for you, or to help you set up a pre-audit program for your agency to conduct.

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