Office of the Inspector General ^mmonwealth of Massachusetts * UMArSS AMHERST \ 312Dbb 2 7 M 20^ 4 i A Review of the Metropolitan District Commission's Swimming Pool Maintenance and Repair Contracts Wt\t (Eommottfealtlj of ^Massachusetts (§Hlce of l{\t inspector (Beneral ROBERT A. CERASOLI JOHN W MCCORMACK INSPECTOR GENERAL December 2000 STATEOFFICE BUILDING ROOM 1311 TEL: (617)727-9140 FAX (617) 723-2334 His Excellency the Governor MAILING ADDRESS STATE HOUSE STATION PO BOX 270 The Honorable President of the Senate BOSTON. MA02133 The Honorable Speaker of the House of Representatives The Honorable Chairman of the Senate Ways and Means Committee The Honorable Chairman of the Senate Post Audit and Oversight Committee The Honorable Chairman of the House Post Audit and Oversight Committee The Directors of the Legislative Post Audit and Oversight Bureaus The Secretary of Administration and Finance Members of the General Court Omnibus ad quos praesentes literae pervenerint, salutem. am today releasing a report concerning the administration of two swimming pool I maintenance and repair contracts by the Metropolitan District Commission (MDC). In MDC 1997, the conducted an internal review to identify sources of problems with the performance and oversight of these contracts. The MDC reported the results of its internal review to my Office in 1998 for further investigation. This report summarizes the findings that stemmed from my Office's investigation. I commend the MDC for its proactive stance in undertaking an internal review and in reporting issues warranting further investigation to my Office. The MDC has informed me that it has implemented changes to its contract management practices to address the problems identified by its internal review. These changes, which have not been evaluated by my Office, are described in the MDC's response to a confidential review draft appended to this report. Inspector General Digitized by the Internet Archive 2014 in https://archive.org/details/reviewofmetropolOOmass 7 Table of Contents Introduction 1 Background 3 Findings 7 Finding 1. By bidding swimming pool repair and maintenance contracts in the spring, the MDC may have discouraged competition 7 Finding 2. The MDC did not devote adequate resources to oversight of its contracts with Allied 8 Finding 3. The resident engineer failed to maintain complete and accurate contract records 8 Finding 4. The MDC issued payments to Allied despite Allied's failure to comply with contract requirements 9 Finding 5. Allied's certified payroll reports do not substantiate the MDC's payments to Allied for hourly labor 10 Finding 6. Allied failed to provide the Office of the Inspector General with payroll or other records to substantiate the MDC's payments for hourly labor 13 Finding 7. The MDC failed to control the cost of overtime work performed by Allied 14 Finding 8. The MDC's poor record-keeping practices impeded the MDC Office's review of the contracts with Allied 16 Conclusions and Recommendations 19 Appendix A: The Metropolitan District Commission's Response 21 Massachusetts Office of the Inspector General Boston, MA 02108 Phone: Intei (617)727-9140 www (617) 523-1205 (MCPPO Program) (61 (800) 322-1323 (confidential 24-hour HhHHHhIHII^HHHHHHH hotline) Publ>ilcicaattiioonn NNoo.. 1188227799--3300--77..55CC--1122//0000--IIGGOO,, aapppprroovveedd bbyy PPhhiillmmoorree Anderson III, State Purchasing Agent. Printed on recycled paper. This page intentionally left blank. Introduction The Metropolitan District Commission (MDC) is a state agency responsible for the oversight and maintenance of the Metropolitan Park System. The MDC operates and maintains 23 swimming, wading, and spray pools in 18 communities in the Greater Boston Metropolitan area. The 22 outdoor pools are open to the public from the end of the public school term in June until Labor Day. The one indoor pool operated by the MDC is a year-round facility. The MDC Commissioner initiated an internal review in 1997 to identify the source of performance problems with its contracts for swimming pool maintenance and repairs. An MDC internal report dated July 22, 1997 identified a host of concerns with these contracts, including: • cost overruns, • excessive overtime payments, • unacceptable contractor ratings for equal employment opportunity compliance, • contractor failure to submit required documentation, and • delays in opening outdoor swimming pools for the summer season. The MDC's internal report noted that nearly all of the swimming pool maintenance and repair contracts had been awarded to a single contractor - Allied Weatherproofing Company Inc. (Allied) - for a period of ten years, raising concerns about the effectiveness of the MDC's competitive bidding practices. MDC Following its internal review, the reported possible contractor payment irregularities to the Office of the Inspector General for further investigation. The Office reviewed records obtained from the MDC and from Allied, conducted interviews of MDC engineers and managers, and took a sworn deposition from Allied's President and owner. This report summarizes the results of the Office's review. also outlines It findings relating to the MDC's contract administration practices prior to 1999 that 1 rendered the swimming pool maintenance and repair contracts vulnerable to fraud, waste, and abuse. In its response to a review draft of this report, the MDC Commissioner reported that the MDC has modified its swimming pool contract management practices to address the concerns identified in its internal review. The actions undertaken by the MDC to address these contract management issues are described in the MDC Commissioner's letter to the Office, appended to this report. 2 Background The MDC's 1995-1997 and the 1997-1999 Swimming Pools Maintenance and Repair Contracts with Allied MDC The Office reviewed records relating to two contracts awarded by the to Allied for maintenance and repairs to swimming pools and service buildings. The earlier of the two contracts, P95-1790-MIA, extended from April 1995 until April 1997 and contained a maximum price of $679,625. The final cost of the contract was $821,701. The subsequent contract, P97-1887-MIA, covered the two-year period from April 1997 to April 1999 and included a maximum price of $949,384. The final cost of the contract was $852,780. These two-year contracts will hereafter be referred to as the 1995-1997 contract and the 1997-1999 contract. The work performed under both the 1995-1997 contract and the 1997-1999 contract consisted of repairs and improvements to service buildings, filtration, sterilization and piping systems, scheduled and emergency repairs to swimming pools, and tasks required to winterize the pools and to prepare them for the seasonal opening. Both contracts called for Allied to be compensated for a major portion of the work performed on a cost reimbursement basis. Each contract contained an hourly rate for technical labor and another hourly rate for non-technical labor. These hourly rates, along with Allied's actual costs for parts and materials, were used to determine Allied's compensation for much of the repair and maintenance work performed.1 This method of compensation placed a burden on the MDC to verify the actual number of hours of labor performed by Allied personnel and Allied's actual costs for parts and materials. Both contracts required Allied to submit specific documents to the MDC as a condition of receiving payment for technical and non-technical labor. Allied was required to submit daily work logs to the MDC each week describing the work performed by the contractor's work force, including the location, type of work, hours of labor, and 1 Compensation for certain specified items, such as excavation work and installation of new concrete walks and walls, was based on unit rate prices specified in the contract. 3 materials used. The contracts specified that Allied was not entitled to payment for work that was not documented in the daily work logs. The MDC's Written Contract Administration and Payment Procedures MDC In 1990 the issued to its employees a manual entitled "Standard Operating Procedures for Field Construction Projects" establishing uniform procedures for administering contracts and processing contractor payments. These written procedures should have been followed by MDC personnel responsible for administering the 1995- 1997 and the 1997-1999 swimming pool repair and maintenance contracts.2 The MDC's operating procedures manual sets out separate contract administration duties for three designated positions: resident engineer, construction inspector, and project engineer. The segregation of duties called for in the MDC manual reduces the potential for error and employee misconduct in contract oversight and payment processing. According to the MDC's operating procedures manual, the individual designated as the resident engineer is responsible for overall contract management and for maintaining specified records. The resident engineer's responsibilities include: • maintaining a project diary to provide a daily record of significant events and to track the contractor's progress, • maintaining a log of contractor submittals, • preparing weekly reports of contractor activities, • preparing monthly pay estimates, and • submitting pay estimates and invoices to the project engineer for review, signature, and processing. 2 The MDC has told this Office in December 1999, that it was preparing revised contract administration procedures. As of this date the procedures have not been implemented. 4