ODOT should better scrutinize construction costs and project changes by tracking line item bids with abnormally high or low prices
Salem, OR—An audit released today by Secretary of State Dennis Richardson, finds that ODOT could potentially realize significant savings by tracking unbalanced bid items. When contractors submit abnormally high or low prices for individual line-items in construction contracts, it is called an unbalanced bid. These bids can lead to cost increases if construction projects are later changed.
“Keeping construction costs in check is critically important to efficiently manage taxpayer dollars,” said Secretary of State Dennis Richardson. “By not tracking unbalanced bids, ODOT is gambling with millions of taxpayer dollars. ODOT needs to evaluate how much these bids are actually costing the state and what steps the agency may need to take to manage them.”
Auditors reviewed data for all 413 ODOT-run construction projects completed from 2011 to 2015 and found that over 90% of these projects had at least one unbalanced bid item. Sixty-one percent (61%) had one or more unbalanced bids that were double or more than their estimated cost. ODOT considers any bid item that is at least 20% and $25,000 above or below the estimated cost to be mathematically unbalanced. The total cost for all 413 of the projects reviewed was $1.8 billion, slightly below the total estimated cost of $1.9 billion.
The audit team's analysis of the 413 ODOT construction projects found that sixty-nine percent (69%) exceeded their bid amounts. Specifically, the total cost for the 283 projects that exceeded their bid amount was $1.563 billion and the total cost over the bid amounts was $134 million. Since ODOT currently does not track its unbalanced bid items, it is unknown what portion of the overage amount was related to unbalanced bidding.
From detailed reviews of 11 construction projects, auditors found that documentation for project changes did contain the required approvals, had adequate supporting documentation, and included reasonable explanations for why the changes were needed. The agency should improve guidance to its Project Managers on how to manage project changes related to unbalanced bids.
“Unbalanced bids allow some contractors to game the system, and ODOT is not providing proper accountability,” added Secretary Richardson.
State and federal laws requiring ODOT to award contracts to the lowest bidder may encourage contractors to use unbalanced bidding. It is critical that ODOT better manage this common practice.
Read the complete Secretary of State audit, including recommendations to ODOT, here: http://sos.oregon.gov/audits/Documents/2017-02.pdf
Debra Royal, Chief of Staff, 503-507-0082, firstname.lastname@example.org