Seeking to contain the costs of its largest infrastructure project — a new public safety building in the California Avenue business district — Palo Alto has charged its city auditor with examining every change order and invoice associated with the new structure.
And while the project still remains in an early stage, with completion scheduled for June 2023, the firm Baker Tilly is already finding errors and discrepancies, according to a recently released audit.
To date, Baker Tilly has already uncovered irregularities that had resulted in more than $7,000 in additional costs to the city. One dates back to 2017, when the city’s construction manager, Nova Partners, billed the city for an estimator at a rate of $175 per hour rather than the agreed upon amount of $160 per hour. This resulted in an overcharge totaling $6,975, according to the audit.
Public Works Assistant Director Holly Boyd said the city had included credit for that amount on the contractor’s recent invoice, resolving the issue.
In another case, the audit found the main construction company, Swinerton Builders, requesting a duplicate charge for $356.77 for equipment, money that has also since been reimbursed, according to city staff.
Given that the firm has already reviewed more than $22 million in expenditures, the issues that the audit has uncovered are relatively minor, auditors with Baker Tilly said during a Dec. 14 update on the project in front of the City Council’s Policy and Services Committee.
“They either have been corrected or are in the process of being corrected,” said Robert Zellmer, who is managing the review for Baker Tilly.
The firm plans to perform the monthly audits for the next few months, after which time it will be up to the council to decide whether to maintain the practice for the duration of the project.
“Our intent is to have a conversation about continuing with this effort over time,” said City Auditor Kyle O’Rourke, principal for public sector advocacy at Baker Tilly.
The firm’s scrutiny reflects the outsized role of the public safety building in the city’s landscape of new infrastructure. Its estimated price tag of about $118 million dwarfs those of the city’s three other recently completed infrastructure projects: the bike bridge over U.S. Highway 101 ($23.1 million), the six-level garage near California Avenue ($50.2 million) and the new Fire Station 3 near Rinconada Park ($10.1 million). The projected cost for the public safety building has more than doubled since the council adopted its infrastructure plan in 2014. The recent decline in hotel tax revenues, on which Palo Alto heavily relies for infrastructure spending, has created additional incentive for the council to ensure that the price doesn’t climb further.
At the same time, the public safety building had also been identified as the highest priority in the city’s infrastructure plan, which was adopted in 2014 and which is now nearing completion. Council members have been talking for decades about the need to replace the existing police headquarters at City Hall, which numerous reviews had deemed to be undersized and seismically unsafe.
The three-story building will house the Police Department, the emergency dispatch center, the Office of Emergency Services and the administrative offices of the Fire Department. The project also includes a public plaza on Birch Street and a meeting room.
To reduce the risk of costs increases down the road, the city’s contractors have been relying on a construction management software to look closely at coordination of different building systems, Public Works Director Brad Eggleston said at the Dec. 14 meeting. That process, he said, has led to a number of change orders in the early stages of the project.
“We’re dealing with some issues upfront early in the project that should make things go more smoothly as we get later into the project and avoid having those come up as issues while we’re actually building those parts of the project,” Eggleston said.
Boyd said the tool helps contractors identify if, for instance, the water pipe is slated to be in the same area as an electric pipe. The project team has already identified several areas where there are conflicts between different systems, she said.
“Typically, those conflicts aren’t found out you actually go to build it,” Boyd said. “We’re doing this really early with this modeling program.”