Tuesday, November 18, 2008

State Auditor Cites Redmond for Change Orders

The Washington State Auditor's Office issued a finding recently that the City of Redmond did not comply with competitive bidding laws when they issued change orders to two projects that should have been competitively bid.

One project was a $1.7 million sidewalk improvement project. Redmond issued one change order for $140,000 that added two sidewalks in different locations and that were not within the original scope of the project. They issued another change order for $404,000 that also added two sidewalks not in the original scope of work.

On the second project, a $1.8 million contract for the Sammamish River Habitat Enhancement Phase 4 project, the city approved a $146,463.60 change order to landscaping and irrigation that the auditor deemed to be a separate project.

In each case, the auditor asserted that the projects should have been competitively bid as separate projects. In essence, although they didn't use the term, these changes constituted "cardinal changes" to the contract. A cardinal change is a major change in the scope of a project that deviates from the intent of the original concept and general scope of work as approved.

The auditor's criticism was that the city wasn't guaranteed that they received the lowest price on the negotiated change order work (actually an issue with all change orders), and that other contractors weren't enabled to bid on the work as a separate project.

The City of Redmond responded that they issued the change orders for convenience of using the original contractor on-site when additional funding became available.

One tool that the City of Redmond could have used would have been to bid additional segments of the sidewalk project as additive bids. They would have received competitive prices and when funding became available, they could have awarded the additive work (as long as it wouldn't have changed the order of the who the low bidder was).

For a copy of the three page audit report from the State Auditor's Office, click here.

I have prepared a training session on what are appropriate versus inappropriate change orders and issues to be aware of when issuing change orders. Please contact me if you would like to discuss having me provide the training for your agency on this subject.

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