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Audit of wastewater building raises more questions about process

Photo Credit: TRIBUNE PHOTO: JONATHAN HOUSE - The new $11.5 million office building at the Columbia Wastewater Treatment Plant was a showcase for the Bureau of Environmental Services, but its cost increases raised questions about the citys construction process.The City Council struggled Tuesday to understand how a simple construction project turned into a political nightmare.

During a morning work session, City Auditor LaVonne Griffin-Valade briefed the council on her recent audit of the new office building at the Columbia Wastewater Treatment Plant. It traced how the project ballooned from a rectangular office for Bureau of Environmental Services employees into a curved showcase for sustainable technologies along a brand new road into the North Portland facility.

Along the way, the cost tripled from the bureau’s original estimate of $3.2 million to final cost $11.5 million, including the road with a new security gate, a reception area for visitors, educational features and extensive landscaping.

“What was the cost for showcaseness?” Commissioner Steve Novick asked. Senior Management Auditor Beth Woodward, who presented most of the briefing, answered that it was not broken out as a single item, but is probably included in features aimed at helping the building achieve LEEDS Gold certification, a recognition of its environmental sensitivity.

The audit prompted Commissioner Nick Fish, who is in charge of BES, to place Dean Marriott, the bureau’s director, on paid leave. Fish has retained a local law firm to review the project, including a decision highlighted in the audit to waive a contract provision and allow the contractor to hire a BES employee to oversee the project — something the council agreed created a conflict of interest. Fish hopes the investigation will be completed by the end of the year, after which he will decided what to do with Marriott, who has civil service protection but can be fired for cause.

The cost increase became an issue during the campaign over the ballot measure to transfer control of BES and the Portland Water Bureau from the council to an independently elected district earlier this year. Fish and Mayor Charlie Hales asked Griffin-Valade to audit the project before the measure was defeated at the May primary election.

A lot of change orders

The audit released on Oct. 22 found that the building was necessary to replace temporary trailers that had begun to deteriorate. But the audit also cites several design and use decisions made by BES that increased the cost of the project. For example, the audit reported that after the council approved the project BES decided the building should be able to function as an emergency operations center, requiring an additional $500,000 in work to survive a severe earthquake. Expanding the work site also increased the cost by $1.5 million.

Many of the changes were approved by Commissioner Dan Saltzman, who was in charge of BES at the time, and the rest of the council during period reviews of the bureau’s capital construction budget. After the work session, Saltzman told the Portland Tribune that he supported the early changes to the project but stopped authorizing them at some point.

“I changed from approving the changes to not supporting them, but I can’t remember exactly when that happened,” Saltzman said.

Saltzman’s confusion is understandable. According to Woodward, the contractor requested 188 change orders on the project, most of which were approved. “Change orders are necessary in construction projects, but that’s lot,” she told the council.

According to the audit, after Saltzman stopped approving the cost increases, BES staff went behind his back to pay the building’s architect an additional $95,000, sending the funds through a project contractor.

The audit makes several recommendations for preventing such unapproved cost increases in the future. They include clarifying competing priorities, considering related needs before submitting the first budget request, better defining what the project contracts are intended to accomplish and obtaining formal council approval for significant changes and cost increases.

Small potatoes

Since the news first broke about the cost increases, Hales has required that all construction and professional services contract changes formally presented to the council if they exceed $1 million, represent a 30 percent or greater increase over the original cost, or follow two previous change orders. Fish has directed BES and the Water Bureau, which he also oversees, to place all contract requests greater than $500,000 on the regular council agenda for consideration.

Fish says he hopes the revelations will prompt the council to adopt new policies to better manage all construction project, not just those being done by BES. Such a recommendation may come to the council in November. That is when the blue ribbon commission appointed by Fish and Hales to review how the council sets water and sewer rates is scheduled to complete its work.

The commission might ask the council to appoint a standing committee to review capital construction projects and cost increases before they are approved by the council. The idea is supported by the Citizens Utility Board, a watchdog organization retained by the city to advice of BES and water bureau budget matters.

The need for such new policies may increase in the foreseeable future. The $11.5 million spent on the BES Columbia Building is small potatoes compared to some other construction projects on the horizon. They include possibly renovating the Veterans Memorial Coliseum, replacing or renovating the aging Portland Building, and a range of projects that could be funded by the news street fee the council is expected to consider in November.

Cost overruns on city projects are nothing new. Past large projects like the OHSU Aerial Tram and the Eastside Portland Streetcar extension were significantly over budget. Even the budget for renovating City Hall, where the council met Tuesday, increased from $15 million to $30 million in the late 1990s.

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