INTERNAL AUDIT REPORT 


Source: Port of Seattle 
Operational Audit - Capital 
Shilshole Bay Marina Customer Facilities Project 
November 2017  December 2019 
Issue Date: December 9, 2019 
Report No. 2019-18 

INTERNAL AUDIT

Shilshole Bay Marina Customer Facilities Project 


TABLE OF CONTENTS 

Executive Summary ................................................................................................................................................ 3 
Background ............................................................................................................................................................. 4 
Audit Scope and Methodology ............................................................................................................................... 5 
Schedule of Findings and Recommendations ....................................................................................................... 6 
Appendix A: Risk Ratings ....................................................................................................................................... 7 












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Shilshole Bay Marina Customer Facilities Project 
Executive Summary 
Internal Audit (IA) completed an audit of the Shilshole Bay Customer Facilities Project (Project) for the
period November 2017 through December 2019. The audit was performed to assess the quality of the
Port's monitoring of the Project to assure it is meeting project management standards in an efficient and
effective manner. 
The engineering firm, Tetra Tech (TT) estimated the value of the project at $8.1 million in 2018. However,
the lowest bid received was approximately 25% higher than the engineer's estimate. TT, together with
Port Management, met with the lowest bidder to determine why there was a discrepancy between the
engineer's estimate and the bids. 
Internal Audit met with TT to identify factors that contributed to bids coming in higher than the original
estimate. TT indicated that they expected the Project to go out for bid in early spring when construction
bids are historically lower.  However, due to the complexity of the Project and multiple Port requested
design scope changes, the Project did not go out for bid until late the second quarter. The difference in
timing may have resulted in an increase of approximately 5%. TT also indicated that the bidders had
previous experience performing work at the Port, and their bids reflected a higher construction cost per
square foot compared to the market rates in the region that TT used in its estimate. 
TT also explained that it worked with Port Management and obtained the schedule of values from the
lowest original bidder, Western Ventures. TT utilized Western Venture's schedule of values in its 
revised estimate of $10.8 million that went out to bid in 2019. Western Ventures was ultimately
awarded the contract. 
In general, Port management's monitoring of the Project generally aligned with industry standards. 
However, our audit identified an opportunity where internal controls could be enhanced or developed. 
This opportunity is listed below and is discussed in more detail beginning on page six of this report. 
1.   (Medium) An opportunity exists to strengthen internal controls by requesting that Tetra Tech (TT)
provide individual names on invoices. This would provide the appropriate detail for the Port to assure
that individuals being billed for services performed, have the appropriate experience, fall into the
appropriate job category, and are billed at the correctly negotiated rate. 
We also noted two opportunities to improve processes, that we communicated to Port management via a
management letter. 


Glenn Fernandes, CPA 
Director, Internal Audit 

Responsible Management Team 
Stephanie Jones Stebbins, Managing Director, Maritime 
Anne Porter, Director, Maritime 
Nora Huey, Director, CPO 


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Shilshole Bay Marina Customer Facilities Project 
Background 
The Project consists of the construction of three new buildings which includes, two large, multi-use
buildings (restroom, shower and laundry) located in the south and central areas of the Marina, plus a
smaller restroom/shower only building at the north end of the Marina. As part of the project, existing
buildings M4, M5, and M6 will be demolished. In addition, a significant portion of the parking lot will be
paved. 
The South and Central buildings will be approximately 2,700 square feet each and include separate
ADA accessible men, women, and family unisex restrooms with shower facilities. Additionally, these
buildings will incorporate tenant laundry areas. The North building will be approximately 700 square feet
and include three individual all-gender restrooms and three shower facilities. Although consolidated into
fewer buildings, the new facilities will increase the number of showers over the existing configuration,
and more than double the current laundry capacity. 
The design incorporates sustainable features including, radiant heated floors, water saving fixtures,
onsite storm water management bioswales, and rooftop panel arrays which are estimated to offset 70%
of the restrooms' electrical use. Heat pumps are expected to handle over 70% of the buildings' heating
and cooling needs without requiring outside fossil fuels. 
The Project was originally scheduled to begin construction in 2018. However, the lowest bid received 
was approximately 25% higher than the engineer's estimate. To understand costs, Port staff met with 
the lowest bidder. Port management indicated that the primary difference between the estimate and bids
primarily reflected the region's current construction market that was not reflected in the estimate. Port
staff looked at alternatives that would deliver maximum customer-service improvement, but better align 
the Project scope and budget. The alternatives were also weighed against feedback from moorage and
business tenants collected during individual and public engagement meetings. 
In February 2019, Port management presented its results to the Port Commission and recommended 
an option that reduced the project scope and increased the construction authorization by $2.9 million.
This approach resulted in a total project estimate of $15.0 million which included a 15% construction
contingency and made use of the current design and permits. After the Project went out for re-bid,
Western Ventures Construction was awarded the contract in July 2019 at a total construction cost of
$10.4 million. 








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Shilshole Bay Marina Customer Facilities Project 
Audit Scope and Methodology 
We conducted the engagement in accordance with Generally Accepted Government Auditing Standards
and the International Standards for the Professional Practice of Internal Auditing. Those standards
require that we plan and conduct an engagement to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our engagement objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and conclusions based on our
engagement objectives. 
The period audited was November 2017 through December 2019 and included the following procedures: 
Invoice Review Process / Approved Consultant Personnel 
Assessed the Port project team's process was adequate to assure invoices were accurate and
properly supported. 
Selected the five largest invoices, accounting for 45 percent of total consultant costs. Performed
testing on correct amount, invoice accuracy, properly supported, and whether consultant rates 
and names agreed to the Level of Effort and Fee Schedule. 
Reviewed contract language and compared to the Consultant's proposal. 
Bid Withdraw Request 
Assessed whether the Project team's process was adequate to assure the bid withdraw request
was accurate and reasonable, and that the Team complied with the CPO Procedures Manual. 
Reviewed the letter submitted by the bidder for the bid withdrawal request and Port's acceptance
letter. 
Obtained and reviewed documentation to support the bidder's reasoning to withdraw its bid. 
Project Scope Changes and Cost Escalation 
Obtained an understanding of the history of the Project through management inquiry and the
review of documentation. 
Reviewed the timeline from Project concept, including scope changes, resulting in design and
construction cost escalations. 
Reviewed steps taken by Port management between the initial bid and re-bid, including meetings
held between the Port and construction firms to identify reasons why initial bid proposals
exceeded the engineer's estimate. 







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Shilshole Bay Marina Customer Facilities Project 
Schedule of Findings and Recommendations 
1) Rating: Medium 
An opportunity exists to strengthen internal controls by requesting that Tetra Tech (TT) provide 
individual names on invoices. This would provide the appropriate detail for the Port to assure
that individuals being billed for services performed, have the appropriate experience, fall into
the appropriate job category, and are billed at the correctly negotiated rate. 
We performed a detailed review of consultant and subconsultant invoices for the largest five monthly
pay requests with a total amount of $493,000. These pay applications equated to 45 percent of the total
amount the Port paid to TT. We noted that, in general, the Seaport Project team had a detailed review
process of invoices. For example, we saw an instance where the reviewer disallowed an invoice because
it was a duplicate from a previously submitted pay request. We also noted an instance where the
reviewer disallowed a specific purchase because it was not directly related to the Project. However, we
noted the following: 
The Level of Effort (LOE)  included personnel names for TT  and four out of the five
subconsultants,  although  all  subconsultants  had  names  on  the  negotiated  rate  sheets
maintained by CPO. TT and two of the subconsultants, who had approved personnel names on
the LOE, did not include names on their invoices. 
Invoices that did include names were not compared to the approved personnel on the LOE or
negotiated rate sheet. 
Consultant personnel were negotiated, reviewed and authorized to work on the project by the Central
Procurement Office (CPO). CPO created an Approved Personnel List through a Level of Effort document
that was included as an attachment to the Agreement. Section XIII of the Agreement states, in part,
"Consultant will ensure that individuals who are specifically identified in this Agreement shall perform
the work assigned..." Additionally, the Agreement states, "Assigned individuals shall remain assigned
until completion of services. The Consultant may request that a particular individual be replaced with a
person of like skill and experience and, if agreed by the Port." The Agreement also states that a SD
modification should occur when, "The work of the SD requires additional time, scope, and compensation;
and /or personnel are added to or deleted from the SD" (Section VI 5(D)). 
The Service Agreement (Agreement) between the Port and TT (Section VI(A) and Section III(B)) allows
for service directives to be issued on a lump sum or on a time and expense basis. Service directives for
this project were issued on a time and expense basis. Our work determined that there was an opportunity 
to strengthen existing controls. 
Recommendation: 
1.  Port management should request that TT provide individual names on invoices so that the Port can
monitor which consultants are working on the Project. Individual names can be compared to the
LOE, and if there are names that are not in line with the LOE, invoice reviewers have the ability to
work with the Rate Negotiations Team to assure the Port is billed a fair and reasonable rate. 
Management Response/Action Plan: 
Forthcoming 

DUE DATE: TBD 

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Shilshole Bay Marina Customer Facilities Project 
Appendix A: Risk Ratings 
Findings identified during the audit are assigned a risk rating, as outlined in the table below. Only one
of the criteria needs to be met for a finding to be rated High, Medium, or Low. Findings rated Low will be
evaluated and may or may not be reflected in the final report. 
Financial      Internal                                               Commission/
Rating                                   Compliance      Public 
Stewardship  Controls                                         Management 
High probability
Non-compliance
Missing or not                       for external audit   Requires
with Laws, Port
High       Significant     followed                          issues and / or     immediate
Policies, 
negative public     attention 
Contracts 
perception 
Partial              Potential for
Partial controls 
compliance with   external audit
Requires
Medium   Moderate                  Laws, Port       issues and / or
Not functioning                                          attention 
Policies             negative public
effectively 
Contracts          perception 
Functioning as
Low probability
intended but     Mostly complies                       Does not
for external audit
could be        with Laws, Port                       require
Low      Minimal                                   issues and/or
enhanced to     Policies,                            immediate
negative public
improve        Contracts                           attention 
perception 
efficiency 











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