State hospital audit praises project’s handling

From the Salem Statesman Journal, May 29 2009

Contract management likely will ‘protect state’s investment,’ report says

A new state audit gives high marks to the Oregon State Hospital replacement team for its handling of the early stages of the $458 million project.

READ – Oregon State Hospital Replacement: Good Construction Management Practices Help Protect State Investment (PDF)

The state is moving forward with a seven-year plan to build two new psychiatric facilities to replace the obsolete and unsafe 126-year hospital in Salem.

Multilayered checks and balances are keeping project costs in line with objectives, according to the audit, released today by the Secretary of State’s Audits Division.

The audit links effective management of the project to three key factors: assembling an experienced project team; establishing clear expectations with project contractors; and managing contracts to control costs.

The project team assembled by the state Department of Human Services “has implemented good contract management practices that should help protect the state’s investment,” the report says.

Linda Hammond, state hospital replacement administrator, said she was pleased with the audit.

“I think it reflects the direction from leadership and the ability of the team that is working on this project,” she said. “This is a monumental project, and we take those responsibilities seriously, as it shows in the audit.”

Plans call for building a 620-bed facility on the existing hospital campus in central Salem, scheduled to partially open late next year and fully open in 2011, and a 360-bed hospital in Junction City, scheduled to open in 2013.

Brown said management of the initial stages of the hospital project has far exceeded prior state construction projects, including a prison-construction project that drew fire from state auditors in 1999.

“Previous audits showed real problems with how state agencies managed construction contracts,” Brown said. “This is an example of good practices that will help control the project’s costs and risks.”

The 1999 audit of prison construction turned up numerous management flaws and resulted in several recommended improvements.

A consultant on the prison project, now working on the state hospital project, used the earlier audit report to help guide construction management practices for the hospital project, according to the Secretary of State’s office.

The new audit partly links the smooth start of the hospital replacement project to the experience of the DHS team formed to work on it.

Human Services officials “recognized the project’s large size and significance, and assembled a team of department employees and consultants with a wide range of experience in construction contracting, project management, and psychiatric treatment,” the report says.

The audit also commends the agency for clearly defining each team member’s role and responsibilities.

Financial controls on the project include sharp scrutiny of contractor invoices, amendments and change orders, reports the audit.

“Specifically, we noted that project staff had reviewed contractor invoices and timesheets in detail, recalculated changes and corresponded with contractors regarding questioned costs,” it says.

Auditors spotlighted one area for change. They recommended that the hospital project team negotiate the prices for equipment rented from the general contractor in advance, as well as carefully track total rental charges to ensure prices are not exceeded.

The hospital replacement team signaled its intent to heed the recommendation, the report says.