Park City School District audit finds improper contract
December 20, 2017
The Park City School District entered into a contract that was not in compliance with state codes and district policy, according to a state audit.
The Office of the State Auditor recently performed an audit of the district's contract with a general contractor, and the findings were listed in a special project report released earlier this month.
According to the audit, the district awarded a contract to a Construction Manager/General Contractor (CM/GC) that did not follow standard procurement processes when advertising and selecting a bid for a LED lighting upgrade project for facilities in the district. The contract was awarded to Hughes General Contractors, Inc. from North Salt Lake in 2013.
John Dougall, state auditor, said that the contract was improper and that there was not adequate oversight of the contrator from the district.
"The CM/GC went down with lack of supervision and engaged in certain practices that we thought violated procurement code," he said.
One of the key concerns, Dougall said, was that the district's contract with the general contractor was a cost-plus-percentage of cost arrangement, meaning the district would pay for all costs, plus a construction manager's fee of 10 percent of all costs. That payment model is not allowed by statute for public-works contracts.
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"Then (a contractor) can have an incentive to place higher costs on the government that are improper," he said.
The reason that the policies are in place is to "ensure that the taxpayers get the best value for work being done on their behalf," he said.
Todd Hauber, business administrator for the district, said that the mistakes made were due to lack of knowledge from the district staff about procurement codes, which change regularly. Moving forward, the district staff will go through trainings about procurement code so that they are aware what actions of general contractors are appropriate and which are not.
What originally called attention to the audit was that Hughes General Contractors did not award the sub-contract to the lowest bidder when selecting bids for the LED lighting replacement project in the schools, Dougall said. One of the sub-contract bidders noticed that the lowest capable bidder was not awarded the contract and they informed the Office of the State Auditor.
By making the district aware of policies for the general contractor it hires, Hauber hopes that similar mistakes will not happen again.
Since the contract with Hughes General Contractors is set to end at the end of the calendar year, Hauber said that the district will not be taking remedial actions against the contractor because it would not be cost-effective.
"At two weeks out, it doesn't make a whole lot of sense to pull up the roots," he said.
A letter to the Office of the State Auditor written by the president of the Park City Board of Education, Andrew Caplan, states that the Board was in agreement with all other recommendations released in the audit. No punitive actions were suggested for the district or the contractor.
As the district prepares to put out a request for proposal (RFP) to decide if it wants to find a new contractor or choose a different business model to do contract work in the future, Hauber said that the audit came at the perfect time.
"This audit helped inform what we need to have in the RFP, to make sure that we know what we need to be doing as a district and what the CM/GC needs to be doing as they do work for us," he said.