INTERNAL AUDIT REPORT 
Operational Audit- Capital 
AOA Perimeter Fence Line Standards Project 

June 2017  August 2020 
Issue Date: September 8, 2020 
Report No. 2020-11

AOA Perimeter Fence Line Standards Project 

TABLE OF CONTENTS 

Executive Summary ................................................................................................................................................ 3 
Background ............................................................................................................................................................. 4 
Audit Scope and Methodology ............................................................................................................................... 5 
Schedule of Findings and Recommendations ....................................................................................................... 7 
Appendix A: Risk Ratings ..................................................................................................................................... 10 













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AOA Perimeter Fence Line Standards Project 
Executive Summary 
Internal Audit (IA) completed an audit of the AOA Perimeter Fence Line Standards Project for the
period March 2017 through August 2020. The audit was performed to assess the quality of the Port's
monitoring of the Project to assure it was meeting project management standards in an efficient and
effective manner. 
We selected this project to audit based on the number of change orders (CO's) and the delays in
schedule completion. We selected the largest dollar value change orders, ones that changed the
scope of the project, those that approved the extension of the contract, and those that were the result
of errors and omissions. 
The project delivery method was a design-bid-build with a lump sum contract. The construction
contract total is currently $4.6 million, which includes approximately $570,000 in change orders. The
contract required that the contractor substantially complete the work no later than 225 days following
the contract execution date, which would have been October 9, 2019. To date, there has been an
additional 181 approved days that extended substantial completion to April 7, 2020. As of the
conclusion of this audit, the Contractor had not completed the Project. Port management anticipates
that the Project will not be completed until the end of September 2020. 
Through discussions with the Port's project staff, significant reasons that the Project did not meet
critical milestones included: errors in design from the Port's in-house team, and the Contractor's failure
to provide adequate resources. These design errors resulted in approximately $106,000 in avoidable
costs and an additional 56 days added to the completion of the Project. 
The Port is entitled to liquidated damages for unapproved schedule delays. As of the date of this 
report, we estimate liquidated damages are $232,000, however, the actual amount is unknown until
the Project is complete and a full reconciliation is performed. 
We identified the following opportunities where internal controls could be enhanced or developed.
These opportunities are listed below and discussed in more detail beginning on page seven of this
report. 
1.  (Medium) The Contractor's lack of experience with the Port's contract provisions and inadequate
management of the Project resulted in critical milestones not being met, negatively impacting the
completion dates. 
2.  (Medium) The Port's processes during the design phase, can be strengthened: to decrease the
potential for errors in drawings and scope changes, to avoid additional project costs, and to reduce
the need to extend a Project's completion date. 


Glenn Fernandes, CPA 
Director, Internal Audit 
Responsible Management Team 
Elizabeth Leavitt, Sr. Director Engineering, Environment and Sustainability 
Wayne Grotheer, Director, Aviation PMG 
Nora Huey, Director, Central Procurement Office 
Tina Soike, Chief Engineer and Director of Engineering Services 
Janice Zahn, Asst. Engineering Director - Construction 

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AOA Perimeter Fence Line Standards Project 
Background 
Authorization from the Port of Seattle Commission was obtained on June 13, 2017 to design, advertise
and execute a construction contract for the Airport Operations Area (AOA) perimeter fence line 
(Project). The Port construction team determined that a design-bid-build with a lump sum contract was
the most efficient method because it allowed the Port to manage the design of the Project in-house,
develop phasing that minimized operational impacts, and manage unforeseen site conditions and
risks. Massana, Inc. was selected to be the general contractor and the Port authorized Massana to
proceed with the Project on June 06, 2019 at a base construction lump sum contract cost of $4 million. 
The final construction contract total, as of the audit report date, is $4.6 million which includes 
approximately $460,000 in change orders and the potential of an additional $110,000 in COVID-19
related safety expenses. The contract required that Massana substantially complete the work no later
than 225 days following the contract execution date, which would have been October 9, 2019. There
were an additional 181 approved days that extended the substantial completion date to April 7, 2020.
As of the date of this audit report, Massana has not completed the Project. Port management
anticipates that the Project will not be Substantially Complete until the end of September 2020. 
After the event of 9/11, the Port of Seattle established a minimum fence height of twelve feet for the
AOA perimeter fence wherever permissible by the Federal Aviation Administration (FAA). Portions of
the perimeter fence have been replaced with the twelve-foot fence over time as construction projects
moved fence lines. However, areas along the fence line still exist with lower heights that needed to be
upgraded. The scope of the Project was to replace approximately 8,100 linear feet of seven-foot AOA
perimeter fence with a twelve-foot fence, plus one foot of barbed wire at the top. Approximately 6,500
linear feet out of the 8,100 linear feet of fence was replaced with a non-climbable fence. In addition,
the Project replaced AOA access gates, installed faster gate operating systems, and installed a
security camera system. 
The following table details the current schedule and budget. 
Schedule (Per August 2020 Trend Log and Pay Estimate 13) 
Approved Contractual Substantial Completion Date         04/07/20 
Forecasted Substantial Completion Date                  09/30/20 
Contractual Project Physical Completion Date              11/29/20 
Forecasted Project Physical Completion Date              01/28/21 
Budget (Per August 2020 Trend Log and Pay Estimate 13) 
Original Contract Sum                              $4,042,695 
Executed CO's and Potential Cost Risks              $572,736 
Contract Sum to Date                              $4,615,431 
Total Completed and Stored to Date                 $2,939,743 
% Complete                                         64% 



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AOA Perimeter Fence Line Standards 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 March 2017 through August 2020 and included the following procedures: 
Project Communications 
Reviewed monthly reports between Massana and the Port. 
Reviewed drawings, submittals, and requests for information (RFI). 
Reviewed RFI and submittal logs for open items affecting the project phase completion. 
Reviewed the submittal log for timeline of any delays. 
Reviewed daily construction/manpower reports. 
Assessed trends within a specific area or trade. 
Identified significant impacts to schedule or cost. 
Change Orders 
Obtained an understanding of the Port's change order review process. 
Verified approvals by required personnel (e.g. Port, Architect, etc.) 
Confirmed approved change order amounts tied to the Change Order Log. 
Reviewed for reasonableness and allowability (i.e. not base contract scope). 
Calculated proper markups (for force account CO's). 
Tested subcontractor back-up including direct costs and inclusion of accurate markups. 
Reviewed supporting documentation supporting change order/claim submission, specifically
error/omission and scope change orders. 
Verified the inclusion of reasonable unit pricing. 
Reviewed potential CO's in the trend development stage to determine if they are not within the
original scope of the project, reasonable, and allowable. 
Pay Estimate Review 
Obtained an understanding of the project management team's review and approval of pay
estimates. 
Tied out total amount paid per the pay estimates to PeopleSoft financial reports. 
Assessed the reasonableness of the overall percent complete by pay estimate. 
Verified compliance with retainage requirements. 
Bid Protest 
Obtained an understanding of the Port's adherence to the requirements of holding a bid protest
hearing. 
Verified approvals were obtained by required personnel. 
Reviewed documentation for reasonableness  and compliance with policies (bid protest,
administrative letter, administrative hearing minutes, and the Port's formal response). 
Compliance with FAA Grant requirements 
Obtained an understanding of FAA grant requirements. 
Verified compliance with material grant requirements that are susceptible to non-compliance. 

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AOA Perimeter Fence Line Standards Project 
Liquidated Damages 
Reviewed the contractual obligations for the collection of liquidated damages if the project does
not meet substantial and/or physical completion milestones. 
Calculated the potential liquidated damages that the Port may seek collection. 


















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AOA Perimeter Fence Line Standards Project 
Schedule of Findings and Recommendations 
1) Rating: Medium 
The Contractor's lack of experience with the Port's contract provisions and  inadequate
management of the Project resulted in critical milestones not being met, negatively impacting
the completion dates. 
The Project was awarded to Massana Inc. on February 26, 2019 and a Notice to Proceed was issued
on April 12, 2019. The initial duration of the contract was for 225 calendar days. The Contract's terms
required Substantial Completion by October 9, 2019. Physical Completion was to occur 120 days after
Substantial Completion. 
Events such as; Covid-19 impacts, adverse weather in December 2019 and January 2020, lack of
information in the contract documents, and Port design errors and scope changes resulted in the
Port's approval of 181 additional days through change orders. With these additional days, Substantial
Completion was extended to April 7, 2020 and Physical Completion to November 29, 2020. 
Besides the approved reasons for the extension to the completion of the Project, the Contractor's lack
of timely development of fall protection compliance documents, lack of experience with the Port's
contract provisions, failure to provide adequate resources, and inadequate managing of the Project,
resulted in the Substantial Completion milestone not being met. Additionally, there is a possibility that
the Physical Completion milestone will also be missed. 
On February 25, 2020, The Port issued a Notice of Forbearance, that the Port was willing to forbear
taking action to impose Liquidated Damages for 90 days from the date of the letter. According to the
letter, the Contractor was expected to meet certain criteria, including: completion of the project within
the 90 days, submitting information justifying the delay, and providing time for the Port to complete its
analysis of the matter. The letter stated that if the Contractor did not meet the criteria, the Port
reserved the right to assess Liquidated Damages from the original milestone date. The Contractor did
not meet the requirements of the letter. 
The Contract allows the Port to pursue liquidated damages of $1,207 per day after the Substantial
Completion date and, starting 60 days after Substantial Completion, $323 per day until Physical
Completion is met. The Port anticipates that Substantial Completion will not be achieved until the end
of September 2020. Based on a projected five-month delay, we estimate that the Port will be entitled
to pursue approximately $232,000 in liquidated damages, however, the final amount is unknown until
the Project is complete and a full reconciliation is performed. 
Recommendation: 
Upon completion of Project, Port management should calculate and pursue liquidated damages from
the Contractor. 
Management Response/Action Plan: 
The team agrees with the recommendation that Liquidated Damages should be imposed in the
amount of $1,207 per day for unexcused delays beyond the original Substantial Completion date and
$323 per day for unexcused delay beyond the Physical Completion date. The team fully intends to
pursue Liquidated Damages and that has been conveyed to the Contractor. Liquidated Damages will
be assessed once the Contractor achieves Substantial and Physical Completion when we can quantify
the actual unexcused delay. 
DUE DATE: December 31, 2020

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AOA Perimeter Fence Line Standards Project 
2) Rating: Medium 
The Port's processes during the design phase, can be strengthened: to decrease the potential
for errors in drawings and scope changes, to avoid additional project costs, and to reduce the
need to extend a Project's completion date. 
The Port used its in-house design team to prepare the Project's drawings which were included in the
proposal documents. At the time of our engagement, the Port had 16 approved change orders (CO) 
and one unexecuted CO for potential COVID-19 safety costs. The following table details the types of
CO's and the amounts. 
Justification Code Summary     No. of      Amount     Approved 
CO's                    Contract
Extension 
Error/Omission Designer                 7     $150,600             56 
Error/Omission Owner                  1         6,416              0 
Tenant Requested                     3       58,280            28 
Scope Change                       4      147,440           56 
COVID-19 Safety Provisions             2      110,0001             41 
Total:        17      $472,736        181 days 
Source: SQL Server Reporting Services Production- Full Trend Log, August 3, 2020 
We selected six CO's for review, based on those we considered high risk. Examples included;
designer errors and omissions, large dollar value CO's, and CO's that were approved to extend the
contract completion date. Our review covered $384,000 and 140 days of the approved contract
extension days. 
One of the CO's that we reviewed, CO 2 was to fabricate and install a crash rated overhead beam
gate, in lieu of the proposed ground track gate shown in the contract documents. CO 2 was approved
as a not-to-exceed CO in the amount of $140,000; and $105,000 has been paid to date. The CO will
be reconciled to actual costs later. CO 2 is unique in that it's coded as a scope change, but also
includes  parts  that  could  be  coded  as  a  designer  error.  During  our  discussions  with  project
management, unique instances such as this occur periodically in projects, and it is difficult to code
them so that the justification is accurately represented. The Port's Project Management Group (PMG) 
and Engineering Services have an opportunity to consider changing how to code CO's in these unique
instances; such as by creating new justification codes, or by other means. 
Based on our review, we concluded that the CO's were for allowable purposes, properly reviewed and 
approved, and included adequate supporting documentation. Two of the CO's in our sample were
related to errors in design, and these CO's totaled $100,600 and resulted in an additional 56 days
being added to the Project. We recognize that errors and/or omissions do periodically occur during the
design process, however, these change orders may have been preventable with a stronger design
process. 
Recommendations: 
Management should strengthen its processes during the design phase to obtain assurance that
suggested designs meet safety standards and that stakeholder expectations are met. 

1 The Trend Log lists this as a potential risk but has not yet been approved. The 41-day extension has been approved as a
CO. 

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AOA Perimeter Fence Line Standards Project 
Management Response/Action Plan: 
The team agrees with the assessment that the change orders on this project stem from complex and
interrelated issues, including both scope changes and design errors. With regard to the errors and
omissions components, a few efforts are underway to improve processes such that these risks are
minimized for future work. These efforts include documenting the increased depth of understanding of
compatibility of gate controller and structural systems for future designers' use, updating of Port
Master Specifications and Standards to reflect gate system needs, and updating of typical details.
Construction Management will also consider how best to code change orders with complex and
interrelated issues. As is the policy for all projects, a Lessons Learned (LL) session will be conducted
for this project upon completion. 
In April 2020, the Aviation Division also instituted additional processes for reviewing and approving
discretionary scope changes from initial project approval through design and construction. In addition
to the existing documentation accompanying discretionary change orders during construction, any
scope changes will also require approval by the project manager, program leader and project sponsor.
For scope changes over $50,000, the change must be approved by a Project Review Board made up
of the Director of Aviation Project Management Group, the Director of Aviation Capital Programs, and
the Director of Aviation Finance and Budget. For changes over $500,000, it requires an additional
approval by the Aviation Chief Operating Officer, and for changes over $1,000,000, it requires
approval by the Managing Director of Aviation. This process will be reviewed in October 2020 to
determine whether changes are needed based on the first six months of implementation. In addition to
this new process for discretionary changes, existing processes for budget increases requiring approval
by the Aviation Investment Committee and authorization increases requiring approval by the Port
Commission remain in effect.

DUE DATE: December 31, 2020 










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AOA Perimeter Fence Line Standards 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 for
intended but     Mostly complies                       Does not
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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