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City of Lincoln Engineering Services Audit – March 21, 2012

The Lincoln Independent Business Association (LIBA) is pleased that the Lincoln City Council is moving forward with a performance audit of Engineering Services. It is essential that the Audit Advisory Board (“the Board”) choose to include items within the scope of the audit that would have the most impact in giving the city a correct view of how Engineering Services is performing. LIBA encourages the Board to include within the scope of the audit the following four items: 1) Engineering contract addendums 2) the qualifications-based selection process in general and as it relates to the $100,000 limit 3) duplication of work and 4) a comparison of road building costs between the public and private sectors.

 I.          Engineering Contract Addendums

 LIBA requests that the Audit Advisory Board include addendums to Engineering Services Department contracts within the scope of the audit. With respect to addendums, the audit should include how many addendums have occurred on average for Engineering Services projects in the last three years, at what point in the project they occurred and why. In addition, it would also be important to know whether standard engineering protocol was followed, and how closely it was followed, during projects that included addendums. Random selection of individual projects to cut audit costs would be acceptable.

An audit of contract addendums is important because addendums should be an exception to the rule of a set budget. If proper engineering protocol is being followed, inspections should take place at different stages of the project timeline to ensure project compliance and to prevent contract addendums and increased prices from occurring. A good place to start may be to determine the percentage cost of contract addendums compared to base contracts.

 II.         The Qualifications-Based Selection Process

LIBA encourages the Audit Advisory Board to include within the scope of the audit how Engineering Services chooses the engineering firms to work for them. In other words, what is the qualifications-based selection process Engineering Services uses and how effective is the process.

An audit of the selection process is important because we want qualified engineers performing the work. In many instances, the selection process determines the price tag for the engineering work, which affects the Engineering Services budget and, ultimately, the taxpayers of Lincoln. As part of this analysis, LIBA encourages the Board to take a closer look at whether the amount set in city code for Engineering Services to be required to bid a project out should be lowered from $100,000. The possibility of inflated prices increases without bidding competition among engineering firms with the non-bid amount set so high. Also, the $100,000 to $250,000 price only requires the city to look at three bids. In general, a $100,000 fee from an engineering firm equates to about a $1 million to $2 million construction project or 10 to 20 percent of the project.

 III.        Duplication of Work

One of the other areas to include within the scope of the audit is duplication of work. It is important to include this area for purposes of tracking cost management. One of the questions that could be asked is as follows: Are city engineers duplicating or redoing work that has already been done by the private sector?

IV.        Road Building Costs

Another area to include when comparing the private sector to the public sector within the audit is road building costs. One question that could be asked is does it cost the city more money to build a road than it does the private sector in Lincoln? More specifically, LIBA encourages a thorough examination of the roads project at 84th and Adams Streets, which was going to be built privately, as well as an examination of the project at NW 56th and Adams Streets.

V.         Conclusion

LIBA strongly encourages the Audit Advisory Board to determine whether any suggestions from Engineering Services in relation to the scope of the performance audit should be considered. The term performance audit is defined in the audit resolution as an “independent assessment” of the performance of the Engineering Services Department.

LIBA appreciates the opportunity to offer suggestions to assist the Audit Advisory Board in its determination of the scope of the audit for Engineering Services. We respectfully request that the Board include LIBA’s suggestions in the audit.