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Mayor and Members, Board of Commissioners Agenda Item 45 - May 13, 2014 – County Auditor’s Report Review of Hourly Billing Rates for Aviation Contracts

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Salary Rate Issues We reviewed salary rates for 371 of the 62 entities. We found that 12 (32%) of the 37 entities reviewed charged higher salary rates than permitted by the contracts resulting in $47,245 overbillings.

Overhead and Fringe Benefit Rate Issues We reviewed overhead and fringe benefit rates for 432 of the 62 entities. We found that 17 (40%) of the 43 entities reviewed did not comply with the overhead and fringe benefit reporting requirements resulting in unsupported overhead and fringe benefit billing rates. As a result, we were unable to determine whether the County was billed the correct overhead and fringe benefit rates. This is significant as overhead and fringe benefit rates generally comprise more than 50% of the total billing rate.

The above issues are important because they result in:

Recoveries of identified salary rate overbillings totaling $47,245.

Additional recoveries by extending our findings beyond the sampled periods to include all months in the entire contract period.

Potential future cost savings because the billing rates in these contracts will be corrected going forward.

Potential future cost avoidance across other contracts and agencies as many of the entities reviewed have similar contracts to perform work for other County agencies.

A summary of these issues by contract is presented in Appendix A of this transmittal. Specifics of these issues are explained in greater detail within the individual five reports. The desk reviews were designed to be performed early in the course of the contract in order to identify errors and issues timely and thereby provide management and the consultants with opportunities to address any issues during the contract term. Consistent with this concept, our preliminary findings and recommendations were provided to Broward County Aviation Department (BCAD) management as the reviews progressed so appropriate actions could be taken quickly. As of this date BCAD has recovered $250,917 in overbillings including $34,576 of the $47,245 specifically identified in our reviews and has revised the hourly billing rates for the remainder of the contracts. My office has initiated a second series of reviews to address fringe benefit and overhead rates that were either unsupported or waived in this review. 1 The 37 entities reviewed include five prime consultants and 32 subconsultants. The remaining 25

entities either did not bill or billed as lump sum or flat rates during our sample period. Therefore, no procedures were performed relative to the review of salary rates. 2 The 43 entities reviewed include five prime consultants and 38 subconsultants. The remaining 19

entities either requested a waiver from providing required supporting documentation or had a flat rate during our review period. Therefore, we deferred review of their overhead and fringe benefit rates.

Mayor and Members, Board of Commissioners Agenda Item 45 - May 13, 2014 – County Auditor’s Report Review of Hourly Billing Rates for Aviation Contracts

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Appendix A Summary of Issues and Overbillings

and Number of Noncompliant Entities by Contract

Findings

Overbillings and Number of Noncompliant Entities

GSP DMJM TUG Turner Atkins Total

Salary Rate Issues

Higher hourly rates billed than actually paid to the employees

$19,662

$19,662

Unallowable markup of independent contractors/contracted staff

$15,781

$3,838

$19,619

Higher fringe benefit rates billed for part-time employees than actually paid

$1,145 $2,215

$3,360

Home office rate billed for one employee who actually worked in the field office at the Airport

$1,549

$1,549

Higher multiplier increase than permitted by the contract

$3,055 $3,055

Overbillings $15,781 $3,055 $24,645 $2,215 $1,549 $47,245

Number of Noncompliant Entities

2 Subs

1 Sub

Prime & 6 Subs

Prime

1 Sub

12 Entities

Overhead and Fringe Benefit Issues

17 entities did not comply with the overhead and fringe benefit reporting requirements.

13 Subs

- 3

Subs

Prime -

17 Entities

Source: Prepared by the County Auditor’s Office

Exhibit 2 - GSP

Review of Hourly Billing Rates – Gresham, Smith and Partners Contract for Consultant Services for Terminal Modernization at the Fort Lauderdale-Hollywood International Airport

March 17, 2014 Report No. 14-03

Office of the County Auditor Evan A. Lukic, CPA

County Auditor

http://www.broward.org/Airport/FLLair/Gallery/PublishingImages/Terminal4concessiondpi600.jpg

Compliance Review

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Table of Contents

Executive Summary ........................................................................ 2

Purpose and Scope ......................................................................... 3

Methodology .................................................................................... 3

Background ..................................................................................... 3

Findings ........................................................................................... 6

Recommendations ........................................................................ 10

Appendix A .................................................................................... 11

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Executive Summary This report presents the results of our desk reviews of hourly billing rates invoiced under the contract between Broward County and Gresham, Smith and Partners (GSP) for Airport Terminals 1, 2 and 3 Modernization executed January 31, 2012. The purpose of the reviews was to determine whether hourly billing rates invoiced by GSP for their services and the services of their subconsultants complied with contract requirements. To accomplish our objective, we reviewed hourly billing rates invoiced by GSP and its 17 subconsultants for the time periods of April through July 2012 and September through October 2012. Hourly billing rates consist of actual hourly salary, overhead, and fringe benefit cost elements plus a negotiated profit. Consultants are required to certify that the cost elements billed reflect their actual costs and provide supporting documentation to enable verification and recalculation. Our reviews disclosed:

GSP invoiced the County $15,781 for unallowable markup of independent contractors’ costs charged by two subconsultants. The $15,781 represents an overbilling of 8.8% of the $178,318 in our test sample of invoices, and

13 of 17 subconsultants to GSP did not comply with the overhead and fringe benefit reporting requirements resulting in unsupported overhead and fringe benefit billing rates and in one instance of overbilling.

We found no exceptions pertaining to hourly billing rates for the services performed by GSP. We summarized noncompliance issues by GSP’s subconsultants in Appendix A on page 11. Desk reviews are intended to be performed early in the contract term in order to identify errors and compliance issues timely and provide management and the consultants with opportunities to address any issues during the contract term. Consistent with this concept, our preliminary findings and recommendations were provided to Broward County Aviation Department (BCAD) management as the reviews progressed so appropriate actions could be taken quickly. As of the date of this report BCAD has recovered approximately $34,200 in past overbillings inclusive of $11,150 identified in this review and has revised hourly billing rates over the remainder of the contract. To address the remaining issues raised in this report, we recommend the Board of County Commissioners direct the County Administrator to require GSP to remit identified overbillings, review and remit any additional overbillings from all prior and subsequent invoices, and ensure that all its subconsultants comply with all contractual requirements, and for BCAD to improve oversight of overhead and fringe benefit reporting requirements. Detailed recommendations are listed on page 10. Further, our office has initiated additional reviews to verify the

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unsupported fringe benefit and overhead rates identified in Finding 2 of this report.

Purpose and Scope The purpose of our review was to determine whether hourly billing rates invoiced by GSP for their services and the services of their subconsultants complied with contract requirements. Our review covered twelve invoices for GSP and its subconsultants for the time periods of April through July 2012 and September through October 2012.

Methodology To accomplish our objective, we:

Reviewed o The contract between GSP and Broward County dated January 31,

2012, o Selected work authorizations, o Selected invoices from GSP and its subconsultants, o Payroll registers and other supporting documentation from GSP

and its subconsultants, and o Financial Schedules or Reports1 certified by Independent Certified

Public Accountants (CPA) for GSP and its subconsultants for 2010 and 2011.

Interviewed Broward County Aviation Department (BCAD) staff, and

Consulted with the County Attorney’s Office.

Background

On January 31, 2012, the Board of County Commissioners entered into a consultant services contract with Gresham, Smith and Partners (GSP) for Terminals 1, 2 and 3 Modernization at the Fort Lauderdale-Hollywood International Airport (FLL). The contract was approved for a total maximum amount not-to-exceed $14.0 million, which included $13.1 million for labor and $900,000 for reimbursables. Under the contract, GSP provides professional architectural, engineering and construction administration services for:

Modifications and improvements to optimize the use of the existing Terminal 1, 2, and 3, and

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As required by Section 5.2.1 of the contract, total costs comprising the overhead and fringe benefit factors shall be consistent with the Federal Acquisition Regulation (FAR) Guidelines for Cost & Pricing.

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Coordination of the new configuration of Terminal 4, adjacent roadway system, and parking garages to provide a more efficient and useful service.

Subconsultants GSP contracted with 17 subconsultants to perform architectural, engineering and construction administration services for Terminals 1, 2 and 3 Modernization (see Table 1 on page 5 for a list of subconsultants). GSP and its subconsultants’ hourly billing rates are established in Exhibit B of the contract. Exhibit B Salary Costs Broward County compensates GSP and its subconsultants on an hourly basis at actual hourly costs plus a negotiated profit percentage. Actual hourly costs are comprised of the actual hourly salary rates paid to an employee plus an allocation of actual overhead and fringe benefit costs. Regardless of actual costs, the billable hourly rates are limited to negotiated maximums. Exhibit B “Salary Costs” of the contract provides the maximum hourly salary, overhead, fringe benefit, profit and maximum billing rates for each personnel category anticipated to be assigned to the project. Exhibit B also shows an overall multiplier, which is computed by dividing the maximum billing rate by the maximum hourly salary rate. For example, a position with a maximum hourly salary rate of $25 per hour and billed to the County at a maximum billing rate of $75 (after adding fringe benefit, overhead, and profit) equates to a 3.0 multiplier. The established multiplier is applied to the actual hourly salary rate for each of the consultant’s employees to determine the billing rate invoiced to the County. As required by the contract, services are authorized through the issuance of Work Authorizations2 (WA). The WA includes the fee proposal from GSP and its subconsultants expected to perform the services contemplated by the WA. The fee proposal establishes the maximum billing rates for the personnel categories, which may be equal to or less than the maximum allowable rates in the Exhibit B of the contract. Invoice Process GSP submits invoices to the County for hours incurred by its staff at its contract rates and reimbursable expenses. GSP’s invoices also include amounts billed to GSP by its subconsultants at the subconsultants’ contract rates and reimbursable expenses. GSP is responsible for review of invoices from its subconsultants for accuracy and completeness before including them in their invoice package to the County.

2 Section 3.9.1 of the contract states that “before any service is commenced pursuant to a Work

Authorization, Consultant shall supply the Contract Administrator (CA) with a written proposal for all charges expected to be incurred for such service, which proposal shall be reviewed by the CA.”

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After BCAD receives GSP’s invoice package, the project manager reviews the invoices following a comparison of the hourly rates billed to the contract rates and reconciliation of reimbursable amounts to the supporting documentation. The Director of Airport Capital Improvement Projects provides final approval prior to forwarding to BCAD’s Finance Division. After BCAD Finance processes the invoice, the complete invoice package is scanned by the Airport’s Document Control and sent to the County’s Accounting Division for payment. Invoice Sampling We reviewed a sample of twelve invoices for GSP and eight subconsultants totaling $178,318 for the time periods of April through July 2012 and September through October 2012. The remaining nine subconsultants did not invoice for services during our sample periods. Table 1 below shows a summary of invoices reviewed for GSP and its subconsultants.

Table 1 – Invoices Reviewed for GSP and Its Subconsultants

Consultant/Subconsultants Invoice Number

Reviewed Invoice Amounts

Reviewed

Gresham, Smith and Partners AVC46-02 & AVC46-03 $49,615

Construction Management Services 13711 & 13712 29,461

PMCM2 1-080912 & 2-081412 20,934

Reynolds, Smith and Hills, Inc. 2012493001-1 20,126

Singer Architects, Inc. 0352012001A 19,788

Lakdas/Yohalem Engineering Inc. AUG12-122502 14,424

Cage, Inc. 01 10,416

DeRose Design Consultants, Inc. 23024 10,094

Keith and Associates, Inc. 0008025 3,460

Air‐Transport IT Services, Inc. -

Argus Consulting, Inc. -

Cherokee Enterprise, Inc. -

Delta G -

Rolf, Jensen & Associates, Inc. -

ICF SH&E -

Tierra South Florida, Inc. -

TransSolutions, LLC -

S&F Engineering, Inc. -

Total Amounts Reviewed $178,318

Source: BCAD and GSP and Its Subconsultants’ Invoices

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Findings Finding #1 GSP invoiced the County $15,781 for unallowable markup of independent contractors’ costs by two of its subconsultants, representing an overbilling of 8.8% of $178,318 in sampled invoices. Independent contractors shall be billed to the County in the actual amount paid by the subconsultants without additional markup. Section 5.2.5 of the contract states that “Subconsultant Salary Costs shall be billed to County in the actual amount paid by Consultant”. In addition, Section 10.7.2 of the contract states that “Pay applications which include billing for any services performed by any subconsultants shall be passed through to County without additional charge by the Consultant.” These contract provisions apply to all of GSP’s subconsultants by virtue of the flow-down section 10.7.4 of the contract. We reviewed twelve invoices for GSP and eight subconsultants billed and paid during our review period. We compared the rates billed for each job classification to the Exhibit B and to the actual rates paid to the individuals on the payroll registers or other supporting payroll documentation. Our review disclosed that two of GSP’s subconsultants, Lakdas/Yohalem Engineering Inc. (Lakdas) and PMCM2, LLC. (PMCM2) billed their respective maximum hourly rates for work performed by independent contractors. However, Lakdas and PMCM2 should have only billed their actual costs, without additional charge, for the work performed by independent contractors. The invoices reviewed totaled $35,358 for Lakdas and PMCM2. As shown in Table 2 on the next page, the County was overbilled $15,781 during our sample period for the unallowable markup of independent contractors’ by Lakdas and PMCM2. As noted previously in the Executive Summary, the County has recovered approximately $34,200 in past overbillings inclusive of $11,150 related to PMCM2 noted in Table 2 on the next page.

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Table 2 - Computation of Overbillings by Lakdas and PMCM2 for Unallowable Markup of Independent Contractors

Subs Title Billed Rate

Allowable Rate

3 Difference

Actual Billed Hours

Overbilled Amounts

a b c = a - b d e = c * d

Lakdas Project Manager $101.15 $33.00 $68.15 52 $3,544

Technician (CADD) $66.47 $23.00 $43.47 25 $1,087

PMCM2 Senior Inspector 1&2 $86.31 $40 $46.31 161 $7,456

Senior Inspector 3 $86.31 $35 $51.31 72 $3,694

Total Overbillings $15,781

Source: Prepared by the Office of the County Auditor based on the contract, the invoices and payroll registers reviewed for Lakdas and PMCM

2.

Finding #2 13 of 17 subconsultants to GSP did not comply with overhead and fringe benefit reporting requirements, resulting in unsupported overhead and fringe benefit billing rates. Hourly labor rates billed to the County include an allocation of actual overhead and fringe benefit costs. GSP and each subconsultant were required to provide a CPA certification that overhead and fringe benefit cost factors were calculated in accordance with federal guidelines. Section 5.2.1 of the contract requires that “total costs comprising the overhead and fringe benefit factors be consistent with the Federal Acquisition Regulation (FAR) Guidelines for Cost & Pricing Data. . . The breakdown of overhead and fringe benefit factors (FAR Report) shall be certified by an independent Certified Public Accountant (CPA). However, subconsultants may be exempted from this requirement upon application to, and written approval by, the County Auditor. Said certification shall be dated within ninety (90) calendar days after Consultant's just completed fiscal year.” We reviewed and compared the overhead and fringe benefit rates listed in Exhibit B of the contract for GSP and its 17 subconsultants to the FAR reports certified by CPA. Our review found no issue with GSP’s rates, however we noted noncompliance by 13 (76%) of its subconsultants:

1. Three subconsultants’ overhead and fringe benefit rates listed in the contract are higher than their actual rates, which resulted in overstated multipliers and an overbilling of $1,979 during our sample period.

3 For an independent contractor, the allowable billing rate is the actual hourly rate paid by Lakdas

and PMCM2.

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o Tierra South Florida, Inc. (Tierra) The overhead and fringe benefit rates in Tierra’s certified FAR report were 77.98% and 47.51% of the hourly salary rate, respectively. However, the Exhibit B “Salary Cost” of the contract for Tierra shows 119% and 51.35% for overhead and fringe benefit rates, respectively. As a result, Tierra’s overall multiplier was overstated in the contract and should be reduced from 2.90 to 2.42. As described in the background, the multiplier is applied to the actual hourly salary rates for each of the consultant’s employees to determine the billing rate to the County. Although services had not yet been performed by Tierra under this contract, if the rates specified in the Exhibit had been used, the County may have been overbilled up to $36.53 per hour.

o Lakdas/Yohalem Engineering Inc. (Lakdas)

Lakdas’s Statement of Direct Labor, Fringe Benefits and General Overhead included contract services of $245,845 in their general overhead. However as confirmed by Lakdas, two independent contractors used by Lakdas on the project were invoiced to the County as direct labor. Therefore, Lakdas’s overhead rate in the contract is overstated by the contract services that were billed as direct labor. Adjusting for the overstatement decreased the overhead rate from 138% to 69%, and the resultant multiplier from 2.89 to 2.13. The invoice selected for review totaled $14,424 for Lakdas. Based on the adjusted multiplier the County was overbilled $1,979 (14%) during our sample period. This amount is in addition to the overbilling amounts related to Ladkas in Finding 1 above.

o PMCM2, LLC. (PMCM2)

The overhead and fringe benefit rates in PMCM2’s Statement of Direct Labor and Company Overhead Expenses were 104.61% and 25.80%, respectively. However, the Exhibit B “Salary Cost” of the contract for PMCM2 shows 118% and 44% for the overhead and fringe benefit rates, respectively. As a result, PMCM2’s overall multiplier was overstated and should be reduced from 2.88 to 2.53. No adjustment was necessary for the invoice selected for review because it primarily consisted of hours billed for independent contractors which were addressed in Finding 1 above.

2. Twelve subconsultants (including two subconsultants noted above)

did not provide required support for their overhead and fringe benefit rates. Twelve subconsultants did not provide a FAR Report certified by an independent CPA dated within ninety (90) calendar days after their just completed fiscal year as required by the contract (Detailed noncompliant issues are listed in Appendix A on page 11).

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As a result, we could not verify the overhead and fringe benefits factors for these subconsultants due to the lack of adequate supporting documentation. Because, overhead and fringe benefit rates generally comprise more than 50% of the total billing rate, overstatement of these rates could result in significant overbillings to the County. Therefore, we have initiated a subsequent review to further address the overhead and fringe benefit rate issues noted in the report.

As the prime consultant, GSP is solely responsible for compliance with their contract with the County. This responsibility encompasses financial accountability for invoicing of project costs including amounts billed through them by their subconsultants. To fulfill its responsibilities, GSP needs to take steps to ensure that all its subconsultants are complying with all contractual requirements.

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Recommendations

To address the issues raised in this report, we recommend the Board of County Commissioners direct the County Administrator to:

1. Require GSP to:

o Remit the overbilled amounts identified in this report to the County,

o Submit a revised Exhibit B for Tierra, Lakdas and PMCM2 reflecting

their actual overhead and fringe benefit rates identified in this report,

o Review without cost to the County all prior and subsequent invoices

from Lakdas and PMCM2, and remit any additional overpayments

identified to the County, and

o Ensure that future services performed by independent contractors are

billed on a reimbursement basis without markup.

2. Require BCAD to take all necessary steps to ensure that all future Exhibit

B rates are supported by a FAR report that was certified by a CPA and

dated within the required time period after the just completed fiscal year at

the time of negotiation, or a request for a waiver has been made to and

approved by the County Auditor.

Exhibit 2 - GSP

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Appendix A

Summary of Issues by GSP and Its Subconsultants

Consultant/ Subconsultants

Billing Reflects Actual Hourly Rates Support for Overhead & Fringe Benefit Rates

Not Billed During

Sample Period Compliant

Noncompliant (See Finding #1)

Compliant Noncompliant

(See Finding #2)

Gresham, Smith and Partners

Reynolds, Smith and Hills

Cage, Inc.

Cherokee Enterprise, Inc.

TransSolutions, LLC

Singer Architects, Inc. Outdated FAR

DeRose Design Consultants, Inc. Outdated FAR

Keith and Associates, Inc. Outdated FAR

Rolf, Jensen & Associates, Inc. Outdated FAR

Argus Consulting, Inc. Not certified by CPA

Construction Management Services No FAR or waiver request

Delta G No FAR or waiver request

S & F Engineering, Inc. No FAR or waiver request

ICF SH&E Supporting document was not prepared in accordance with FAR Guidelines

Air‐Transport IT Services, Inc. No FAR or waiver request at time of negotiations

Tierra South Florida, Inc. Contract rates exceed actual FAR rates.

Lakdas/Yohalem Engineering Inc. Overbilled $4,631 for unallowable independent

contractors markup

No FAR or waiver request and Overhead rate was overstated by contract

services.

PMCM2, LLC. Overbilled $11,150 for

unallowable independent contractors markup

No FAR or waiver request at time of negotiations and

Contract rates exceed actual FAR rates.

Total 18 Entities Reviewed 9

Not Billed 7

Compliant 2

Noncompliant 5

Compliant 13

Noncompliant


Exhibit 3 - TUG

Review of Hourly Billing Rates – The Urban Group, Inc. Consultant Services Contract for Noise Mitigation Program Assistance at the Fort Lauderdale-Hollywood International Airport



County Auditor

Compliance Review

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Office of the County Auditor

Table of Contents



Methodology .................................................................................... 3

Background ..................................................................................... 3

Findings ........................................................................................... 6

Recommendations .......................................................................... 9

Appendix A .................................................................................... 10

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Executive Summary This report presents the results of our desk reviews of hourly billing rates invoiced under the consultant services contract between Broward County and The Urban Group, Inc. (TUG) for Airport Noise Mitigation Program Assistance executed on November 27, 2006. The purpose of the reviews was to determine whether hourly billing rates invoiced by TUG for their services and the services of its subconsultants complied with contract requirements. To accomplish our objective, we reviewed hourly billing rates invoiced by TUG and its 13 subconsultants for the time periods of January through April 2012 and September through October 2012. Hourly billing rates consist of actual hourly salary, overhead, and fringe benefit cost elements plus a negotiated profit. Consultants are required to certify that the cost elements billed reflect their actual costs and provide supporting documentation to enable verification and recalculation. Our reviews disclosed that:

TUG and its six subconsultants invoiced the County at hourly rates in excess of the allowable contract rates, for fringe benefits not actually paid and for unallowable markup of independent contractors’ costs, The resultant overbillings of $24,645 represents 6% of the $419,300 in our test sample of invoices, and

Three subconsultants did not comply with the overhead and fringe benefit

reporting requirements resulting in unsupported overhead and fringe benefit

billing rates.

We summarized noncompliance issues by TUG and its subconsultants in Appendix A on page 10. Desk reviews are intended to be performed early in the contract term in order to identify errors and compliance issues timely and provide management and the consultants with opportunities to address any issues during the contract term. Consistent with this concept, our preliminary findings and recommendations were provided to Broward County Aviation Department (BCAD) management as the reviews progressed so appropriate actions could be taken quickly. As of the date of this report, the County has recovered $167,744 in past overbillings inclusive of the $19,662 (Finding #1) identified in this review and has revised hourly billing rates over the remainder of the contract. To address the remaining issues raised in this report, we recommend the Board of County Commissioners direct the County Administrator to require TUG to remit identified overbillings, review and remit any additional overbillings from all prior and subsequent invoices, and ensure that hourly rates billed comply with all contractual requirements and for BCAD to improve oversight of overhead and

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fringe benefit reporting requirements. Detailed recommendations are listed on page 9. Further, our office has initiated additional reviews to verify the unsupported fringe benefit and overhead rates identified in Finding 4 of this report.

Purpose and Scope The purpose of our review was to determine whether hourly billing rates invoiced by TUG for their services and the services of its subconsultants complied with contract requirements. Our review covered invoices (pay applications) numbered 78, 81, 82 and 92 submitted by TUG for the time periods of January through April 2012 and September through October 2012. Methodology To accomplish our objective, we:

Reviewed o The contract between TUG and Broward County dated November

27, 2006 (Including Amendments I through V), o Selected pay applications, including supporting invoices from TUG

and its subconsultants, o Payroll registers and other supporting documentation from TUG

and its subconsultants, and o Financial Schedules or Reports certified by an Independent

Certified Public Accountant (CPA) for TUG and its subconsultants.



Background

On November 27, 2006, the Board of County Commissioners entered into a consultant services contract with The Urban Group, Inc. (TUG) for Noise Mitigation Program Assistance (Program) at the Fort Lauderdale-Hollywood International Airport (FLL). The Program has three Phases. The original contract was approved for a total maximum amount not-to-exceed $280,203 for Phase I. Phases II and III were subsequently approved through contract amendments. Table 1 on the next page shows the scope of services and contract amounts for the original contract and five amendments. As of the date of our review the County had paid TUG approximately $7.7 million.

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Table 1 – Summary of TUG’s Contract and Five Amendments

Contract/ Amendments

Approved Date

Scope of Services Contract Amounts

Original Contract 11/27/2006 Phase I - Noise Mitigation Program Assistance $280,203

1st Amendment 8/5/2008

Phase II - Management and Implementation of the Voluntary Residential Sound Insulation Pilot Program

1,912,868

2nd

Amendment 11/9/2010 Phase II - Management and Implementation of the Voluntary Residential Sound Insulation Pilot Program

419,624

3rd

Amendment 7/28/2011 Revision to the reimbursable expenses Form D-1 -

4th Amendment 10/25/2011

Phase IIA - Management and Implementation of the 80 unit Voluntary Residential Sound Insulation Program

2,863,791

5th Amendment 6/26/2012

Five year extension to the existing contract Phase III – Implementation of the County-approved Noise Mitigation Program

34,088,463

Total $39,564,949

Source: TUG’s original contract and five amendments

Subconsultants TUG contracted with 13 subconsultants to perform consultant services for Noise Mitigation Program Assistance (see Table 2 on page 5 for a list of subconsultants). TUG and its subconsultants’ billing rates are established in Exhibit B of the contract. Exhibit B Salary Costs Broward County compensates TUG and its subconsultants on an hourly basis at actual hourly costs plus a negotiated profit percentage. Actual hourly costs are comprised of the actual hourly salary rates paid to an employee plus an allocation of actual overhead and fringe benefit costs. Regardless of actual costs, the billable hourly rates are limited to negotiated maximums. Exhibit B Salary Costs of the contract provides the raw hourly salary, combined overhead rate, profit and maximum rates for personnel categories anticipated to be assigned to the project. Exhibit B also shows an overall multiplier, which is computed by dividing the maximum billing rate by the maximum hourly salary rate. For example, a position with a maximum hourly salary rate of $25 per hour and billed to the County at a maximum billing rate of $75 (after adding fringe benefit, overhead, and profit) equates to a 3.0 multiplier. The established multiplier is applied to the actual hourly salary rate for each of the consultant’s employees to determine the billing rate invoiced to the County. In the 5th amendment, Exhibit B established two separate rates for home and field employees. Home employees are engaged directly in the work of the program but are not deemed located on-site at the Airport. Field employees are personnel working from a field office located at the Airport.

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Invoice Process TUG submits invoices to the County for hours incurred by its staff at its contract rates and reimbursable expenses. TUG’s invoices also include amounts billed to TUG by its subconsultants at the subconsultants’ contract rates and reimbursable expenses. TUG is responsible for review of invoices from its subconsultants for accuracy and completeness before including them in their invoice package to the County. After BCAD receives the invoice package, the project manager spot checks the labor rates billed against the contract rates and the reimbursable amounts against the supporting documentation. The invoices are then submitted for further processing through the Project Administrator to the Contract Administrator (CA). After the CA approves the invoice, the invoice package is sent to BCAD’s Finance Division, which processes the invoice and sends the completed package to the County’s Accounting Division for payment. Invoice Sampling Our review covered $419,300 in payments to TUG for pay applications numbered 78, 81, 82 and 92 for the time periods January through April 2012 and September through October 2012. Table 2 below shows a summary of pay applications reviewed for TUG and its subconsultants.

Table 2 Pay Applications Reviewed for TUG and Its Subconsultants

Consultant/Subconsultants

Pay Application Reviewed

Amounts Reviewed

The Urban Group, Inc. (TUG) #78 & #92 $ 87,041

The Jones Payne Group, Inc. (JPG) #78 & #92 171,262

RCT Engineering, Inc. (RCT) #78 & #92 27,533

Gartek Engineering, Inc. (Gartek) #92 47,059

AirQuest Environmental, Inc. (AirQuest) #81 18,654

Harris, Miller, Miller & Hanson, Inc.1 (HMMH) #78 16,732

Landrum and Brown #81 16,228

Keith and Associates, Inc. #82 14,735

The Sun Group, Inc. #92 8,402

Creative Edge. Inc. (Creative Edge) #92 4,942

W D Schock Company #92 3,931

Dickey Consulting Services, Inc. (Dickey) #78 2,781

AECOM2 - -

Adrian Gonzalez & Associates, PA2 - -

Total Amounts Paid $ 419,300

Source: BCAD and TUG and Its Subconsultants’ Invoices

1 During our sample period, HMMH only billed for retainage in one pay application. Therefore, no

procedures were performed relative to the review of hourly salary rates. 2 AECOM and Adrian Gonzalez & Associates, PA did not bill the County during our sample

period. Therefore, no procedures were performed relative to the review of hourly rates.

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Findings Finding 1: TUG and five of its subconsultants billed the County $19,662 at hourly rates in excess of the allowable contract rates.

As required by the contract, the hourly rates billable to the County are the actual hourly rates3 paid by TUG and its subconsultants to their employees times the multiplier established in the Exhibit B of the contract. We reviewed pay applications numbered 78, 81, 82 and 92 for the time periods January through April 20124 and September through October 2012 totaling $419,300. We compared the amounts billed for each employee to the rates shown in Exhibit B and applicable payroll registers provided by TUG and its subconsultants. Our review found that hourly rates charged by TUG and five subcontractors for certain employees were higher than the actual rates paid to the employees times the contract multiplier. Table 3 below shows the summary of $19,662 overbillings by TUG and five subcontractors during our sample period.

Table 3 - Summary of $19,662 Overbillings

Hourly Rate Billed in Excess of Allowable Hourly Rate


Pay Application

Number of Positions Overbilled

Overbilled Amounts

TUG #78 1 $879

Gartek #92 3 $8,026

JPG #78 & #92 4 $5,825

AirQuest #81 4 $3,581

RCT #92 3 $695

Dickey #78 2 $656

Total $19,662

Source: Prepared by the Office of the County Auditor based on TUG’s contract, amendments, invoices and payroll registers reviewed

As noted previously in the Executive Summary, the County has recovered approximately $167,744 in past overbillings inclusive of the $19,662 identified above and has revised hourly billing rates over the remainder of the contract.

3 Section 5.2.2 (ii) of the contract states that “the rates in Exhibit B for subconsultants are

provisional, subject to audit of actual costs.” 4 Pay application 78 covered the month of February and parts of January and March 2012. Pay

applications 81 and 82 covered April 2012.

Compliance Review

7


Finding 2: TUG’s subconsultant, Creative Edge, Inc., billed for fringe benefits which were not paid by the company.

Our review of payroll documentation for Creative Edge. Inc. (Creative Edge) disclosed that the County was billed for a part-time employee who was not paid medical, vacation or holiday benefits. Therefore, the fringe benefit rate charged to the County for this employee was overstated. However, because Creative Edge’s Exhibit B has a combined rate for both overhead and fringe benefit, we were unable to determine the amount of actual overbilling. As a result, our finding includes disallowance of $1,145 representing the combined fringe benefit and overhead payments for this employee.

Finding 3: TUG overbilled the County $3,838 for unallowable markup of non-employees.

Contracted staff and independent contractor’s salary costs shall be billed to the County in the actual amount paid by the subconsultants.5 Our review disclosed that four of TUG’s subconsultants billed the County for three contracted staff6 and one independent contractor at the maximum allowable rate under the contract. However, the actual hourly costs to the subconsultants for the contracted staff and independent contractor were much lower than the rates billed. The four subconsultants should have billed the actual costs without additional charge (markup) to the County. As shown in Table 4 below, the County was overbilled $3,838 by TUG during our sample period for the unallowable markup by its four subconsultants.

Table 4 – Summary of $3,838 Overbillings

Unallowable Markup of Contracted Staff and Independent Contractor Costs

Subconsultant Pay

Application Number of Individuals

Overbilled Overbilled Amounts

RCT #92 1 Contracted Staff $1,383

JPG #78 1 Contracted Staff $1,155

Creative Edge #92 1 Independent Contractor $1,068

AirQuest #81 1 Contracted Staff $232

Total $3,838

Source: Prepared by the Office of the County Auditor based on TUG’s contract, amendments, invoices and payroll registers reviewed

5 Section 5.2.3 of the contract states that “Subconsultant Salary Costs shall be billed to County in

the actual amount paid by Consultant” and Section 10.6.2 of the contract states that “Pay applications which include billing for any services performed by any subconsultants shall be passed through to COUNTY without additional charge by the CONSULTANT.” 6 Individuals are contracted and paid through a staffing agency.

Compliance Review

8


Finding 4: Three subconsultants did not comply with the overhead and fringe benefit reporting requirements resulting in unsupported overhead and fringe benefit billing rates.

Section 5.2.2 of the contract states that “The breakdown of overhead and fringe benefit factors shall be certified by a Certified Public Accountant (CPA). Said certification shall be dated within ninety (90) days after subconsultant’s just completed fiscal year. The subconsultant may seek assistance or a waiver of this requirement by written request to the County Auditor.” The contract also requires that the detailed breakdown of these costs shall be kept current and readily accessible to the County.

We reviewed and compared TUG and thirteen subconsultants’ overhead and fringe benefit rates as listed in Exhibit B of the original contract and amendments to their financial schedules or reports certified by a CPA. Our review found that three subconsultants had not provided required support for their overhead and fringe benefit rates (Detailed noncompliant issues are listed in Appendix A on page 10). As a result, we could not readily verify the overhead and fringe benefit factors for these subconsultants. Because overhead and fringe benefit rates generally comprise more than 50% of the total billing rate, overstatement of these rates could result in significant overbillings to the County. Therefore, we have initiated a subsequent review to further address the overhead and fringe benefit rate issues noted during the review.

As the prime consultant, TUG is solely responsible for compliance with their contract with the County. This responsibility encompasses financial accountability for invoicing of project costs including amounts billed through them by their subconsultants. To fulfill its responsibilities, TUG needs to take steps to ensure that all its subconsultants are complying with all contractual requirements.

Compliance Review

9


Recommendations

As mentioned in the executive summary, BCAD management has recovered the overbillings identified in this report and additional overbillings from prior and subsequent invoices. Therefore, we recommend the Board of County Commissioners direct the County Administrator to: 1. Require TUG to:

o Remit the overpayments identified in our review to the County,

o Review without cost to the County, all prior and subsequent invoices to

ensure the rates billed comply with the contract, and remit any additional

overpayments identified to the County,

o Ensure that hourly rates billable to the County are the actual hourly rates

paid by TUG and its subconsultants to their employees times the multiplier

established in the Exhibit B of the contract, and

o Ensure that future services performed by independent contractors and

contracted staff are billed on a reimbursement basis without markup.

2. Require BCAD to take all necessary steps to ensure that all future Exhibit B

rates are supported by CPA audits at the time of negotiation, or a request for

a waiver has been made to and approved by the County Auditor.

Compliance Review

10


Appendix A

Summary of Issues by TUG and Its Subconsultants


Billing Reflects Actual Hourly Rates Support for Overhead & Fringe Benefit Rates

Not Reviewed

Compliant Noncompliant

(See Finding #1) Not

Reviewed Compliant

Noncompliant (See Finding #2)

The Urban Group, Inc. Overbilled $879 for billing rates exceed actual

The Jones Payne Group, Inc.

Overbilled $6,980 for billing rates exceed actual and unallowable markup for contracted staff

No CPA report or waiver request for the original contract

RCT Engineering, Inc. Overbilled $2,078 for billing rates exceed actual and unallowable markup for contracted staff

No CPA report or waiver request for the 1

st Amendment

Gartek Engineering, Inc. Overbilled $8,026 for billing rates exceed actual

Dickey Consulting Services, Inc.

Overbilled $656 for billing rates exceed actual

AirQuest Environmental, Inc.

Overbilled $3,813 for billing rates exceed actual and unallowable markup for contracted staff

Creative Edge. Inc. Overbilled $2,213 for unallowable mark up for independent contractor and part-time employee

W D Schock Company No support for field rate in 5th

Amendment

Harris, Miller, Miller & Hanson, Inc.

Only billed retainage

AECOM Did not bill

Landrum as Brown Flat rates Flat rates

Adrian Gonzalez & Associates, PA

flat rate and did not bill

Flat rates

Keith and Associates, Inc.

The Sun Group, Inc.

Total 14 Entities Reviewed

4 N/A

3 Compliant

7

Noncompliant 2

N/A 9

Compliant 3

Noncompliant


Exhibit 4 - Turner

Review of Hourly Billing Rates – Turner Construction Company Contract to Provide Construction Management Services for Terminal 4 Expansion Construction Contracts at the Fort Lauderdale-Hollywood International Airport



County Auditor

http://www.broward.org/Airport/FLLair/Gallery/PublishingImages/T4constructionphotocolumns600.jpg

1

Table of Contents



Methodology .................................................................................... 3

Background ..................................................................................... 3

Findings ........................................................................................... 6

Recommendation ............................................................................ 7

2

Executive Summary This report presents the results of our desk reviews of hourly billing rates invoiced under the construction management services contract between Broward County and Turner Construction Company (Turner). The objective of our reviews was to determine whether hourly billing rates invoiced by Turner for their services and the services of its subconsultants complied with contract requirements. To accomplish our objective, we reviewed hourly billing rates invoiced by Turner and their six subconsultants for the time periods of May 20 through June 23, 2012 and October 21 through November 17, 2012. Hourly billing rates consist of actual hourly salary, overhead, and fringe benefit cost elements plus a negotiated profit. Consultants are required to certify that the cost elements billed reflect their actual costs and provide supporting documentation to enable verification and recalculation. Our reviews disclosed that Turner overbilled the County $2,215 for fringe benefits that exceeded Turner’s actual cost. We also noted that Turner did not comply with overhead and fringe benefit reporting requirements resulting in unsupported overhead and fringe benefit billing rates. We found no exceptions pertaining to Turner’s subconsultants. Desk reviews are intended to be performed early in the contract term in order to identify errors and compliance issues timely and provide management and the consultants with opportunities to address any issues during the contract term. Consistent with this concept, our preliminary findings and recommendations were provided to Broward County Aviation Department (BCAD) management as the reviews progressed so appropriate actions could be taken quickly. As of the date of this report BCAD has recovered $40,669 in past overbillings inclusive of the $2,215 identified in this review and has revised hourly billing rates over the remainder of the contract. To address the remaining issue raised in this report, we recommend the Board of County Commissioners direct the County Administrator to require Turner to provide support for its overhead and fringe benefit rates.

Purpose and Scope The purpose of our review was to determine whether hourly billing rates invoiced by Turner for their services and the services of its subconsultants complied with contract requirements. Our review covered pay applications numbered three and eight submitted by Turner for the time periods of May 20 through June 23, 2012 and October 21 through November 17, 2012.

3


Reviewed o The Library Agreement between Turner and Broward County

executed May 19, 2009 and amended December 6, 2011. o The Work Authorization issued by Broward County Aviation

Department (BCAD) and executed February 14, 2012, o Pay applications numbered three and eight, including supporting

invoices from Turner and its subconsultants, o Payroll registers and other supporting documentation from Turner

and its subconsultants, and o Audited Financial Schedules and Reports for Turner and its

subconsultants for 2011, and Audit Waivers for subconsultants from the County Auditor’s Office.

Interviewed BCAD staff, and


Background On May 19, 2009, the County contracted with Turner to provide construction management services for various projects at the Ft. Lauderdale-Hollywood International Airport (FLL). The contract was for three years and was extended to five years on December 6, 2011. Turner, in the role of Construction Project Manager (CPM), provides a broad range of construction management services on individual projects and oversees day to day field operations of general contractors. Turner is the management link between the project contractors and the Airport's Program Management Office (PMO).1 On February 14, 2012, Broward County Aviation Department (BCAD) issued Work Authorization No. WA001TC for Turner to provide construction management services for Terminal 4 Western-Side Expansion (WA). The Work Authorization was approved for a total payment in the amount of $25,175,738 for services to include:

Labor lump sum amount of $2,180,561, Labor maximum not-to-exceed amount of $20,625,880, and

Reimbursable maximum not-to-exceed amount of $2,369,297.

1 DMJM Aviation, Inc. is the Airport Program Management Office (PMO), which provides

management services for the New South Runway, Terminal 4 Replacement, and Enabling Projects at FLL.

4

Subconsultants Turner contracted with six subconsultants to perform work on the Terminal 4 Expansion project (see Table 1on page 6 for a list of subconsultants). Turner and its subconsultants’ billing rates are established in Exhibit L of the Work Authorization. Exhibit L Salary Costs Broward County (County) compensates Turner and its subconsultants on an hourly basis at actual hourly costs plus a negotiated profit percentage. Actual hourly costs are comprised of the actual hourly salary rates paid to an employee plus an allocation of actual overhead and fringe benefit costs. Regardless of actual costs, the billable hourly rates are limited to negotiated maximums. Exhibit L “Salary Costs” of the Work Authorization provides the maximum raw hourly salary, overhead, fringe benefit, profit and maximum total billing rates for each personnel category anticipated to be assigned to the project. Exhibit L also shows an overall multiplier, which is computed by dividing the maximum billing rate by the maximum hourly salary rate. For example, a position with a maximum hourly salary rate of $25 per hour and billed to the County at a maximum billing rate of $75 (after adding fringe benefit, overhead, and profit) equates to a 3.0 multiplier. The established multiplier is applied to the actual hourly salary rate for each of the consultant’s employees to determine the billing rate invoiced to the County. Invoice Process Turner submits invoices to the Airport Program Management Office (PMO) for hours incurred by its staff at its contract rates and reimbursable expenses. Turner’ invoices also include amounts billed to Turner by its subconsultants at the subconsultants’ contract rates and reimbursable expenses. Turner is responsible for review of invoices from its subconsultants for accuracy and completeness before including them in their invoice package to the County. After PMO receives Turner’s invoice package, PMO’s financial staff and project manager review the invoices by comparing labor rates billed to the contract rates and reconciling the reimbursable amounts to the supporting documentation. After PMO’s project manager approves the invoice, the entire package is forwarded to the BCAD staff that spot checks the invoice for accuracy and reviews the small business utilization reports for contract compliance. The invoices are then submitted to the Director of Airport Expansion Program for final approval prior to forwarding to BCAD’s Finance Division. After BCAD Finance processes the invoice, the complete invoice package is scanned by the Airport’s Document Control and then sent to the County’s Accounting Division for payment.

5

Invoice Sampling Our review covered pay applications numbered three and eight for the time periods of May 20 through June 23, 2012 and October 21 through November 17, 2012. The County paid Turner $944,148 during our sample period. Table 1 below shows a breakdown of the payments to Turner and its subconsultants for the two pay applications reviewed.

Table 1 Pay Applications Reviewed for Turner and Its Subconsultants

Consultant/Subconsultants Pay

Application Reviewed

Amounts Reviewed

Turner Construction Company #3 & #8 $590,496

Keith & Associates, Inc. #3 & #8 206,475

Facilities Management Solutions, LLC #3 & #8 61,826

Vertical V-Southeast, Inc. #3 & #8 43,599

Asset Builders, LLC #3 & #8 22,939

DeRose Design Consultants, Inc. #3 & #8 18,813

Shiff Construction & Development, Inc.2 -

Total Amounts Paid $944,148

Source: BCAD and Turner and Its Subconsultants’ Invoices

2 Shiff Construction & Development, Inc. did not bill the County during our sample period.

Therefore, no procedures were performed relative to the review of hourly rates.

6

Findings Finding #1: Turner overbilled the County $2,215 for fringe benefits that exceeded Turner’s actual cost. Section 6.2.1 of the WA states “The salary costs invoiced to the County shall be for the actual hourly rates paid by Turner to its employees…” We reviewed pay applications numbered three and eight for the periods of May 20 through June 23, 2012 and October 21 through November 17, 2012. We compared the amounts billed for each job classification to the rates shown in Exhibit L and applicable payroll registers provided by Turner and its subconsultants. Our review disclosed one part-time Turner employee who, as confirmed by Turner, was not paid medical, vacation or holiday benefits. Therefore, the fringe benefit rate billed to the County for this employee was overstated. As a result, the County was overbilled $2,215 in the pay applications reviewed as calculated in Table 2 below.

Table 2 Calculation of Fringe Benefit Overbilling In Pay Applications Numbered 3 and 8

Maximum Raw

Hourly Salary Overhead Fringe Profit

Maximum

Rate

Billed $130.00 $97.96 $69.76 $29.77 $327.49

Corrected $130.00 $97.96 $12.22 $24.02 $264.20

Difference $0.00 $0.00 $57.54 $5.75 $63.29

Hours Billed 35

Overbilled $2,215.15

Source: Prepared by County Auditor staff from Turner Construction’s Work Authorization, Pay Application #3 and Payroll Register

Recommendation None, subsequent to our field work BCAD recovered $40,669 in past overbillings related to this finding inclusive of the $2,215 identified above and has revised hourly billing rates over the remainder of the contract.

7

Finding #2: Turner did not comply with overhead and fringe benefit reporting requirements resulting in unsupported overhead and fringe benefit billing rates.

Section 6.2.1 of the WA states that “total costs comprising the overhead and fringe benefit factors shall be consistent with the guidelines set forth in the Agreement, and in accordance with Federal Acquisition Regulation (FAR) relating to eligible overhead costs. The breakdown of overhead and fringe benefit factors shall be provided by an independent outside Consultant. Such overhead and fringe benefit factors shall be certified by a Turner Construction Company official who certified the factors for the Defense Contractors Audit Administration (DCAA).” The Contract Administrator granted Turner permission to use audits prepared for the DCAA in lieu of a FAR report. BCAD and Turner agreed to the 2011 provisional overhead and fringe benefit factors reported by the independent Consultant at the time the contract was negotiated. We compared the overhead and fringe benefit factors contained in Exhibit L to the 2011 Provisional overhead and fringe benefit factors and found no exceptions. However, we noted the independent Consultant provided the overhead and fringe benefit factors with no data (actual report) to support the information supplied to the County. Also, Turner did not provide BCAD with the certification to DCAA for the 2011 provisional rates as required by the Work Authorization. As a result, we were unable to verify the overhead and fringe benefit rates charged by Turner due to the lack of adequate supporting documentation. Because overhead and fringe benefit rates generally comprise more than 50% of the total billing rate, overstatement of these rates could result in significant overbillings to the County. Therefore, we have initiated a subsequent review to further address the overhead and fringe benefit rate issues noted in the report.

Recommendation We recommend the Board of County Commissioners direct the County Administrator to require Turner to provide support for its overhead and fringe benefit rates.

Exhibit 5 - Atkins

Review of Hourly Billing Rates – Atkins North America, Inc. (f/k/a PBS&J) Consultant Services Contract for Expansion of Runway 9R/27L at the Fort Lauderdale-Hollywood International Airport



County Auditor

1

Table of Contents



Methodology .................................................................................... 3

Background ..................................................................................... 3

Finding ............................................................................................. 6

Recommendation ............................................................................ 7

2

Executive Summary This report presents the results of our desk reviews of hourly billing rates invoiced under the consultant services contract between Broward County and Atkins North America, Inc. (Atkins, f/k/a PBS&J) for Expansion of Runway 9R/27L. The objective of our reviews was to determine whether hourly billing rates invoiced by Atkins for their services and the services of its subconsultants complied with contract requirements. To accomplish our objective, we reviewed hourly billing rates invoiced by Atkins and their 15 subconsultants for the time periods of July 30, 2012 through September 2, 2012 and October 1, 2012 through October 28, 2012. Hourly billing rates consist of actual hourly salary, overhead, and fringe benefit cost elements plus a negotiated profit. Consultants are required to certify that the cost elements billed reflect their actual costs and provide supporting documentation to enable verification and recalculation. Our reviews disclosed Atkins invoiced the County for a subconsultant’s employee at an inappropriate rate resulting in an overbilling of $1,549 in our sample period. The subconsultant’s employee was billed at the home office hourly billing rate rather than the field office rate. We found no exceptions pertaining to hourly billing rates for the services performed by Atkins. Desk reviews are intended to be performed early in the contract term in order to identify errors and compliance issues timely and provide management and the consultants with opportunities to address any issues during the contract term. Consistent with this concept, our preliminary findings and recommendations were provided to Broward County Aviation Department (BCAD) management as the reviews progressed so appropriate actions could be taken quickly. As of the date of this report BCAD has recovered $8,304 in past overbillings inclusive of the $1,549 identified in this review and has revised hourly billing rates over the remainder of the contract.

Purpose and Scope The purpose of our review was to determine whether hourly billing rates invoiced by Atkins for their services and the services of its subconsultants complied with contract requirements. We reviewed pay applications numbered 29 and 31 submitted by Atkins for the time periods of July 30, 2012 through September 2, 2012 and October 1, 2012 through October 28, 2012.

3


Reviewed o The contract between Atkins and Broward County executed April 6,

2010 (including Amendments I, II, III and IIII), o Pay applications numbered 29 and 31, including supporting

invoices from Atkins and its subconsultants, o Selected subconsultant payment summary spreadsheets, o Payroll registers and other supporting documentation from Atkins

and its subconsultants, and o Audited Financial Schedules and Reports for Atkins and its

subconsultants for 2008 and 2009, and Audit Waiver Request for subconsultants to the County Auditor’s Office.



Background On April 6, 2010, the Board of County Commissioners entered into a consultant services contract with Atkins North America, Inc. (Atkins, f/k/a PBS&J) for Expansion of Runway 9R/27L at the Fort Lauderdale-Hollywood International Airport (FLL). The contract was approved for a total maximum amount not-to-exceed $18,378,474 for services to include:

Labor lump sum amount of $9,846,562, Labor maximum not-to-exceed amount of $6,623,906, Reimbursable maximum not-to-exceed amount of $563,006, and

Optional Services maximum not-to-exceed amount of $1,345,000. Under the contract, Atkins provides professional services for complete design, construction documents, bid and award services, and construction phase services for Expansion of Runway 9R/27L. On November 12, 2010, the Director of Purchasing approved the 1st amendment to authorize incorporation of the Federal Acquisition Regulations (FAR) audited salary rates for DeRose Design Consultants, Inc., and to replace Exhibit B Salary Costs with an updated Exhibit B. On March 8, 2011, the Board approved the 2nd amendment, which increased the total contract amount to $19,768,474 to provide funding for additional and future design work. The Director of Purchasing approved the 3rd amendment on May 18, 2011 to revise Atkins’s Exhibit B Salary Costs to include three new job titles. On December 6, 2011, the Board approved the 4th amendment to increase the total contract amount to $22,587,006.

4

Subconsultants Atkins contracted with fifteen subconsultants to perform consultant services for Expansion of Runway 9R/27L project (see Table 1 on page 5 for a list of subconsultants). Atkins and its subconsultants’ billing rates are established in Exhibit B of the contract. Exhibit B Salary Costs Broward County (County) compensates Atkins and its subconsultants on an hourly basis at actual hourly costs plus a negotiated profit percentage. Actual hourly costs are comprised of the actual hourly salary rates paid to an employee plus an allocation of actual overhead and fringe benefit costs. Regardless of actual costs, the billable hourly rates are limited to negotiated maximums. Exhibit B “Salary Costs” of the contract provides the raw hourly salary, overhead, fringe, profit and maximum total billing rates for each personnel category anticipated to be assigned to the project. Exhibit B also shows an overall multiplier, which is computed by dividing the maximum billing rate by the maximum hourly salary rate. For example, a position with a maximum hourly salary rate of $25 per hour and billed to the County at a maximum billing rate of $75 (after adding fringe benefit, overhead, and profit) equates to a 3.0 multiplier. The established multiplier is applied to the actual hourly salary rate for each of the consultant’s employees to determine the billing rate invoiced to the County. Based on the contract, BCAD supplies a field office located on Airport property for Atkins and its subconsultants. Home employees are engaged directly in the work of the program but are not deemed to be located on-site at the Airport. Field employees are personnel working from a field office located at the Airport. Exhibit B of the contract specifies that the overall multipliers for home and field employees cannot exceed 2.90 and 2.45, respectively. Invoice Process Atkins submits invoices to the Airport Program Management Office1 (PMO) for hours incurred by its staff at its contract rates and reimbursable expenses. Atkins’ invoices also include amounts billed to Atkins by its subconsultants at the subconsultants’ contract rates and reimbursable expenses. Atkins is responsible for review of invoices from its subconsultants for accuracy and completeness before including them in their invoice package to the County. After PMO receives Atkins’ invoice package, PMO’s financial staff and project manager review the invoices by comparing labor rates billed to the contract rates and reconciling the reimbursable amounts to the supporting documentation. After the PMO’s project manager approves the invoice, the entire package is forwarded to the BCAD staff that spot check the invoice for accuracy and review

1 DMJM Aviation, Inc. is the Airport Program Management Office (PMO), which provides

management services for the New South Runway, Terminal 4 Replacement, and Enabling Projects at FLL.

5

the small business utilization reports for contract compliance. The Director of Airport Expansion Program provides final approval prior to forwarding to BCAD’s Finance Division. After BCAD Finance approves the invoice, the complete invoice package is scanned by the Airport’s Document Control and then sent to the County’s Accounting Division for payment. Invoice Sampling Our review covered pay applications numbers 29 and 31. Atkins invoiced the County $1,088,722 during our sample period, in which Atkins billed for $371,239 and the remaining $717,483 was billed by ten of fifteen subconsultants. Five of fifteen subconsultants did not bill the County for services during our review period. Table 1 below shows a breakdown of amounts billed by Atkins and its subconsultants for two pay applications reviewed.

Table 1 Pay Applications Reviewed for Atkins and Its Subconsultants

Consultant/Subconsultants Pay

Application Reviewed

Amounts Reviewed

Atkins North America, Inc. (f/k/a PBS&J) #29 & #31 $ 371,239

Reynolds, Smith And Hills, Inc. #29 & #31 504,574

Keith & Associates, Inc. #29 & #31 72,627

Hillers Electrical Engineering, Inc. #29 & #31 42,375

Construction Management Services, Inc.2 #29 33,500

Tierra South Florida, Inc. #29 & #31 26,518

Advance Consulting Engineering Services, Inc. #29 & #31 13,970

Brindley Pieters & Associates, Inc.2 #31 9,807

Aylward Engineering & Surveying, Inc. 2 #31 4,959

Basulto Management Consulting2 #31 4,641

Miller Legg (ML) #29 & #31 4,512

Cartaya Associates Architects, PA -

DeRose Design Consultants, Inc. -

Heath and Lineback, Inc. -

QED Consultants, Inc -

Weidlinger Associates, Inc -

Total Amounts Paid $1,088,722

Source: BCAD and Atkins and its Subconsultants’ Invoices

2 The subconsultant billed the County a lump sum amount for the pay application reviewed and

the labor rate and employee hours were not shown separately. Therefore, no procedures were performed relative to the review of hourly rates.

6

Finding Atkins invoiced the County for a subconsultant’s employee at an inappropriate rate resulting in an overbilling of $1,549 in our sample period.

The contract provides both home and field office rates. Home office rates are generally used for employees who work on the project from the consultant’s home office. Field office rates are used for employees using an on-site (field) office. Generally field office rates are lower than home office rates. Atkins and its subconsultants are required to use the appropriate home or field rate to bill the County depending on the employee’s actual work location. We reviewed pay applications numbered 29 and 31 that covered invoice dates of July 30, 2012 through September 2, 2012 and October 1, 2012 through October 28, 2012, respectively. We compared the amounts billed for each job classification to the rates shown in Exhibit B and applicable payroll registers provided by Atkins and its subconsultants. We found no exceptions between the raw hourly rates billed and actual rates paid per the payroll register for the periods reviewed, and the salary rates invoiced were equal or less than the maximum allowable rates. However, our review disclosed one Keith & Associates, Inc. (K & A) employee, who was billed using the home office rate when the employee was actually working in the Airport field office and should have been billed at the field office rate. As a result, Atkins overbilled the County $1,549 for its subconsultant K & A. Table 2 below shows the calculation of the overbilling during our sample period.

Table 2 Computation of Overbilling Due to Inappropriate Office Rate

Pay Applications 29 and 31

Title Pay

Application Invoiced

Rate Allowable

Rate3 Difference

Actual Billed Hours

Overbilled Amount

a b c = a - b d e = c * d

Construction Manager 29 $139.15 $134.75 $4.40 200 $880

Construction Manager 31 $139.15 $134.75 $4.40 152 $669

Total Overbilling $1,549

Source: Atkins Pay Application 29 and 31 and Exhibit B of the contract

As the prime consultant, Atkins is solely responsible for compliance with their contract with the County. This responsibility encompasses financial accountability for invoicing of project costs including amounts billed through them

3 The allowable billing rate is the actual raw hourly salary paid to the employee times the field

office multiplier of 2.45 as listed in K & A’s Exhibit B.

7

by their subconsultants. To fulfill its responsibilities, Atkins needs to take steps to ensure that its subconsultants are complying with all contractual requirements.

Recommendation None, subsequent to our field work BCAD recovered $8,304 in past overbillings

inclusive of the $1,549 identified above and has revised hourly billing rates over

the remainder of the contract.

Exhibit 6 - DMJM

Review of Hourly Billing Rates – DMJM Aviation, Inc. Contract for Program Management Services for New South Runway, Terminal 4 Replacement and Enabling Projects at the Fort Lauderdale-Hollywood International Airport



County Auditor

Compliance Review

1


Table of Contents



Methodology .................................................................................... 2

Background ..................................................................................... 3

Finding ............................................................................................. 6

Recommendations .......................................................................... 7

Appendix A ...................................................................................... 8

Appendix B ...................................................................................... 9

Compliance Review

2


Executive Summary This report presents the results of our desk reviews of hourly billing rates invoiced under the program management services contract between Broward County and DMJM Aviation, Inc. (DMJM) executed January 6, 2009. The purpose of the reviews was to determine whether hourly billing rates invoiced by DMJM for their services and the services of its subconsultants were in compliance with contract requirements. To accomplish our objective, we reviewed hourly billing rates invoiced by DMJM and its six subconsultants for the time periods of August through September, 2011, October through November 2011, and August through September 2012. Hourly billing rates consist of actual hourly salary, overhead, and fringe benefit cost elements plus a negotiated profit. Consultants are required to certify that the cost elements billed reflect their actual costs and provide supporting documentation to enable verification and recalculation. Our reviews disclosed that DMJM overbilled the County $3,055 in sampled invoices for one subconsultant whose multiplier increased more than the 3% permitted by the contract. We found no exceptions pertaining to hourly billing rates for the services performed by DMJM. To address the issues raised in this report, we recommend the Board of County Commissioners direct the County Administrator to require DMJM to remit identified overbillings, review and remit any additional overbillings from all prior and subsequent invoices, and ensure that increases to the multipliers for the subconsultants do not exceed those permitted under the contract. Detailed recommendations are listed on page 7.

Purpose and Scope The purpose of the review was to determine whether hourly billing rates invoiced by DMJM for their services and the services of its subconsultants complied with contract requirements. Our review covered three pay application numbers 38, 40 and 50 for the time periods of August through September, 2011, October through November 2011, and August through September 2012.


Reviewed o The program management services contract between DMJM and

Broward County dated January 6, 2009 (including Amendments I and II),

Compliance Review

3


o Selected pay applications, including supporting invoices from DMJM and its subconsultants,

o Payroll registers and other supporting documentation from DMJM and its subconsultants, and

o Financial Schedules and Reports certified by an Independent Certified Public Accountant (CPA) for DMJM and its subconsultants for 2010 and 2011.



Background

Program Management Service Contract DMJM Aviation, Inc. (DMJM) was selected to provide program management services for the airport development program, estimated to last 10-years. On January 6, 2009, the Board of County Commissioners (Board) approved the project management services contract with DMJM for the New South Runway and Terminal 4 Replacement and Enabling Projects, RLI No. 20080317-0-AV-01. The “Maximum Not-to-Exceed” amount was approximately $5.97 million for basic and optional services including reimbursable expenses for the period of January 7 to December 31, 2009. Over the next 3 years, the Board approved three amendments to increase the contract by $59.24 million, to a “Maximum Not-to-Exceed” amount of $65.21 million, expiring in December, 2015. The original contract and three amendments are summarized in Table 1 below:

Table 1 – Summary of DMJM’s Contract and Three Amendments

Contract/ Amendments

Approved Date

“Maximum Not to Exceed” Amount

Comment

Original Contract 1/6/2009 $5.97 million First year costs

1st Amendment 2/9/2010 $5.65 million Second year costs

2nd

Amendment 12/7/2010 $21.16 million Years three and four costs

3rd

Amendment 12/4/2012 $32.43 million Years five through seven costs

Total $65.21 Million

Source: Prepared by the Office of the County Auditor with information obtained from DMJM’s contract and amendments

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Program Manager The contract defines DMJM and its subconsultants as the Program Manager (PM) for the New South Runway, Terminal 4 Replacement, and Enabling Projects. The PM is as an extension of County staff, assisting in the coordination of planning, public outreach, budget development, design, construction, and commissioning to meet the County’s needs. Subconsultants DMJM contracted with six subconsultants to perform program management services (see Table 2 on page 5 for a list of subconsultants). DMJM and its subconsultants’ hourly billing rates are established in Exhibit I of the contract. Exhibit I Salary Costs Broward County compensates DMJM and its subconsultants on an hourly basis at actual hourly costs plus a negotiated profit percentage. Actual hourly costs are comprised of the actual hourly salary rates paid to an employee plus an allocation of actual overhead and fringe benefit costs. Regardless of actual costs, the billable hourly rates are limited to negotiated maximums. Exhibit I “Salary Costs” provides the maximum raw hourly salary, overhead, fringe benefit, profit and total hourly rates for personnel categories anticipated to be assigned to the project. Exhibit I also shows an overall multiplier, which is computed by dividing the maximum billing rate by the maximum hourly salary rate. For example, a position with a maximum hourly salary rate of $25 per hour and billed to the County at a maximum billing rate of $75 (after adding fringe benefit, overhead, and profit) equates to a 3.0 multiplier. The established multiplier is applied to the actual hourly salary rate for each of the consultant’s employees to determine the billing rate invoiced to the County. Exhibit I of the contract include both home and field rates for DMJM and its subconsultants for off-site and on-site employees assigned to the contract. On-site employees work from a field office provided by BCAD and located at the Airport, while off-site employees work directly with the program but are not located on-site at the Airport. Invoice Process DMJM submits invoices to the County for hours incurred by its staff at its contract rates and reimbursable expenses. DMJM’s invoices also include amounts billed to DMJM by its subconsultants at the subconsultants’ contract rates and reimbursable expenses. DMJM is responsible for review of invoices from its subconsultants for accuracy and completeness before including them in their invoice package to the County. After BCAD receives DMJM’s invoice package, the project administrator compares the billing rates to the contract and agrees reimbursable amounts to the supporting documentation. The invoices are further reviewed by the Contract

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Administrator / Director of Airport Expansion Program (AEP) prior to forwarding to BCAD’s Finance Division for process. After BCAD Finance processes the invoice, the complete invoice package is scanned by the Airport’s Document Control and sent to the County’s Accounting Division for payment. Invoice Sampling We reviewed three pay application numbers 38, 40 and 50 for the time periods of August through September, 2011, October through November 2011 and August through September 2012. DMJM invoiced the County approximately $1.61 million during our review periods. Table 2 below shows a summary of pay applications reviewed for DMJM and its subconsultants.

Table 2

Pay Applications Reviewed for DMJM and Its Subconsultants

Consultant/Subconsultants Pay Application

Reviewed Amounts Reviewed

DMJM Aviation, Inc. #38 & #50 $ 477,190

The Corradino Group, Inc. #38 & #50 386,810

T.Y. Lin International #38 & #50 344,472

Garth Business Solutions, Inc. #38 & #50 143,248

Sharpton, Brunson & Company, PA #38 & #50 120,665

Nova Consulting Inc. #38 & #50 93,201

U.S. Cost, Inc. 1 #40 41,478

Total Amounts Paid $1,607,064

Source: BCAD and DMJM and Its Subconsultants’ Invoices

1 DMJM’s subconsultant, U.S. Cost, Inc. did not bill the County for the two pay applications 38

and 50 initially selected. We selected additional pay application #40 and reviewed one invoice (No. 21661) for U.S. Cost, Inc. totaling $41,478 for the period of October through November 2011.

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Finding DMJM overbilled the County $3,055 for one subconsultant whose multiplier increased more than the 3% permitted by the contract. Section 6.3.4 of the original contract requires that the overhead and fringe benefit factors shall be certified by a CPA or an agency of the Federal Government.2 Section 6.3.3 of the 2nd amendment requires the Program Manager to submit an annual certified FAR audit to BCAD and allows their overhead and fringe rates to be adjusted annually based on the FAR audit, provided that the adjusted multiplier cannot exceed three percent (3%) of the baseline multiplier. The contract permits the adjusted overhead rate to be approved at the sole discretion of the Contract Administrator.3 These contract provisions apply to all of DMJM’s subconsultants by virtue of the flow-down section 9.10.4 of the contract. We reviewed and compared the overhead and fringe rates for DMJM and the six subconsultants listed in Exhibit I to their certified FAR reports for the time periods covered by our sample. We found that one subconsultant, Garth Business Solutions, Inc (Garth)’s field multiplier increased by 7.7%, from 2.59 to 2.79 during our sample period4 (see Exhibit I in Appendix A and B on pages eight and nine), which was more than the 3% increase permitted by the contract. This multiplier was applied to the subconsultants’ hourly rates invoiced to the County. As a result, the County overpaid DMJM $3,055 for Garth representing (2%) of the $143,248 reviewed. Table 3 on the next page shows the calculation of the $3,055 overpayments.

2 Section 6.3.4 of the original contract states that “the breakdown of overhead and fringe benefit

factors shall be certified by a CPA. Otherwise, if the consulting firm has been audited by an agency of the Federal Government within the previous 12 months, the overhead rate determined by this audit may be used.” 3 Section 6.3.3 of the second amendment states that “Program Manager shall submit to BCAD an

annual certified FAR audit from the segment of AECOM Technology Corporation that contains DMJM Aviation, Inc., and which FAR audit shall be acceptable, in writing, by the Defense Contract Audit Agency, for use as overhead rate, provided that the annual FAR audit submitted annually from the segment does not exceed the baseline rate of 2.26 for On-Site staff or 2.56 for Off-Site staff by 3% (0.03). The use of such adjusted overhead rate will be approved at the sole discretion of the Contract Administrator.... Program Manager shall be paid retroactively, starting May 1, 2010, pursuant to this paragraph.” 4 We reviewed a sample of two invoices for Garth totaling $143,248. The 7.7% increase of the

field multiplier pertained to one invoice for the period of August through September 2011.

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Table 3 - Computation of $3,055 Overpayments

Period Review Covered

Position

Billed Rate

Allowable Rate

5

Difference Actual Billed Hours

Overbilling

a b c = a - b d e = c * d

8/27/2011-9/30/2011

Administrative Assistant “A”

$69.97 $66.96 $3.01 183 $551

Administrative Assistant “B”

$69.75 $66.75 $3.00 192 $576

Administrative Assistant “C”

$78.51 $75.13 $3.38 192 $649

Desk Support Systems

$100.44 $96.12 $4.32 180 $778

Document Control Specialist

$61.71 $59.06 $2.65 189 $501

Total Overbillings $3,055

Source: Prepared by the Office of the County Auditor based on the contract, 2nd amendment Exhibit I, the invoice and payroll registers reviewed.

As the prime consultant, DMJM is solely responsible for compliance with their contract with the County. This responsibility encompasses financial accountability for invoicing of project costs including amounts billed through them by their subconsultants. To fulfill its responsibilities, DMJM needs to take steps to ensure that its subconsultants are complying with all contractual requirements.

Recommendations

To address the issues raised in this report, we recommend the Board of County Commissioners direct the County Administrator to:

Require DMJM to: o Remit the $3,055 in overbilled amounts identified in this report,

o Review without cost to the County the invoices from the subconsultant during

the 2nd amendment, and remit to the County any additional overpayments, and

o Ensure that increases to the multipliers of subconsultants do not exceed those permitted under the contract.

5 The allowable rate is the actual raw hourly salary rate paid to the employees multiplied by the

adjusted multiplier of 2.67.

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Appendix A

Taken from Amendment 2

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Appendix B

Mayor and Members, Board of Commissioners County Auditor’s ... · maximum hourly salary rate. For...

Documents

Transcript of Mayor and Members, Board of Commissioners County Auditor’s ... · maximum hourly salary rate. For...