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Audit Alleges Holes in Oregon DOT's System

Friday, March 17, 2017

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A recently released audit indicates that the Oregon Department of Transportation could be leaving itself open to artificial inflation on the part of the contractors it employs.

The audit, released by Oregon Secretary of State Dennis Richardson, leads with the assertion that “ODOT should better scrutinize construction costs and project changes by tracking line item bids with abnormally high or low prices.”

ODOT construction site
Oregon DOT, CC BY 2.0, via Flickr

A recent audit of the Oregon Department of Transportation suggests the agency could do more to prevent contractors from costing the state more money than necessary.

The issues called out by the audit center around “unbalanced bid items”—line items that a contractor bids unusually high or low on, which keeping the bid on the whole low. The Department of State argues that when a contract has unbalanced bid items and then changes are made in the project later on, it can lead to increased costs for the state.

ODOT has no mechanism for keeping an eye on unbalanced bid items in relation to project changes, the audit says, leaving the agency open to gamesmanship and even fraud by contractors. The audit notes that not all project changes are problematic or avoidable, but that they must be monitored for that potential.

How It Works

The audit cites a hypothetical example: In an overall lowest bid, a contractor could bid $50 per ton for 1,000 tons of aggregate for paving, while ODOT’s estimate for the cost of the aggregate was $25 per ton. If a change occurs in the project later on, requiring 2,000 tons of aggregate to be used, the contractor has then charged the state $100,000 for what the state had estimated would, at maximum, cost $50,000.

The audit explains that ODOT legally does not have the opportunity to reject a bid simply because a line item is “mathematically unbalanced” (i.e., notably high or low in comparison with the estimate), only when it is “materially unbalanced” (meaning there is reasonable doubt that awarding the contract to this bidder will benefit the state).

Recommendations

In order to keep an eye on mathematically unbalanced items and prevent massive overcharges like in the audit’s hypothetical example, the Department of State recommends that ODOT:

  • Track unbalanced bid items;
     
  • Include bid item numbers in contract change orders (and larger-scale changes, known as overruns and increases);
     
  • Conduct regular analyses of unbalanced items vis a vis project cost; and
     
  • Provide project managers more guidance on how to manage unbalanced items.

ODOT Response

In a response to the audit, included in its public release, ODOT Highway Administrator Paul Mather questioned the State Department’s analysis, arguing that the “data analyzed by the audit did not show that unbalanced bids have caused significant price increases.”

However, he noted, “ODOT supports the recommendations of the audit because we agree it would be useful to better understand whether unbalanced bids have impacted prices.” He said the agency was in the process of implementing new software that will help with tracking unbalanced bid items.

   

Tagged categories: Bidding; Contracts; Government; Government contracts; Infrastructure; Transportation

Comment from john lienert, (3/17/2017, 8:24 AM)

why worry about over-charging for repairs that are NEVER done in Orygun...."The pot-hole capitol of North America"


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