Commission Meetings

INTERNAL AUDIT REPORT 
Operational Audit – Capital 
Supply Chain Disruption Management 





Issue Date: March 21, 2023 
Report No. 2023-04

               Supply Chain Disruption Management 

TABLE OF CONTENTS 

Executive Summary ...................................................................................................................................... 3 
Background .................................................................................................................................................. 4 
Audit Scope and Methodology .................................................................................................................... 5 
Appendix A: Risk Ratings .............................................................................................................................. 6 















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               Supply Chain Disruption Management 
Executive Summary 
Internal  Audit  (IA)  completed  an  audit  of  the  Port  of  Seattle's  Supply  Chain  Disruption
Management processes and internal controls. The objective of the audit was to identify how the
Port is addressing supply chain disruption management, assess the adequacy of its risk response
plan to minimize the consequences of a risk event, and how those measures align with other
agencies and the construction industry. 
The COVID-19 pandemic severely disrupted global supply chains due to government-imposed
shutdowns, demand instability, labor shortages, and bottlenecks in shipping and transportation,
affecting the construction industry's ability to access key materials and equipment. To identify
best practices for mitigating supply chain risks, IA interviewed personnel from the Port and 
benchmarked with other agencies and companies. We noted several effective processes, such
as procurement of materials in advance, in addition to industry outreach and awareness to identify
and mitigate long lead times for materials before bidding. 
Based on our work performed, we conclude that the Port has established processes through close
coordination between multiple departments including, the Central Procurement Office, the Project
Management Group, and Construction Management. These processes address key risks from
supply chain disruption. They also align with processes used by other agencies and the results of
our research within the construction industry. 
We did not identify any issues that warrant reporting. 



Glenn Fernandes, CPA 
Director, Internal Audit 


Responsible Management Team 
Loren Armstrong, Sr. Port Counsel 
Eileen Francisco, Director Aviation PMG 
Nora Huey, Director Central Procurement Office 
Stuart Mathews, Assistant Director Aviation PMG 
Janice Zahn, Chief Engineer and Director, Engineering Services 



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               Supply Chain Disruption Management 
Background 
The COVID-19 pandemic had a significant impact on the global economy, including the
construction industry. During the pandemic, one of the major challenges faced by the construction
industry has been supply chain disruption. 
The construction industry relies heavily on a global network of suppliers and manufacturers to
provide the necessary materials, equipment, and components required for construction projects.
The pandemic disrupted the supply chain in several ways: 
1.  Shutdowns  and  restrictions:  Governments  imposed  lockdowns  and  restrictions  on
businesses, including manufacturers and suppliers. These shutdowns and restrictions led
to a reduction in production capacity and delays in delivery times. 
2.  Labor shortages: The pandemic caused labor shortages in the construction industry.
Workers were unable to travel due to restrictions on movement, and some contracted
COVID-19, leading to reduced productivity and delays in construction projects. 
3.  Transportation delays: The pandemic caused significant delays in transportation, as
countries closed their borders and restricted movement. This led to delays in the delivery
of materials and equipment required for construction projects. 
4.  Price increases: The disruption in the supply chain led to price increases for certain
materials, such as lumber, due to increased demand and limited supply. 
Overall, these disruptions led to delays, increased costs, and challenges for the construction
industry. At the time of this report, these disruptions were still being experienced. 








Source: Gartner, Inc. 



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               Supply Chain Disruption Management 
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 audit included the
following procedures:
Current Supply Chain Disruption Management Processes and Internal Controls 
To evaluate the Port's current supply chain disruption management processes and internal
controls, we performed the following procedures: 
• Obtained an understanding of the Port's current supply chain disruption management
processes and related internal controls. 
• Conducted  interviews  with  personnel  from  Construction  Management,  Project
Management, and the Central Procurement Office, to assess their awareness of supply
chain disruption issues and to understand their roles in managing those risks. 
• Reviewed the processes and internal controls the Port has in place to mitigate the risk of
supply chain disruptions. 
• Performed a walkthrough of a laydown area, to confirm internal controls are properly
designed and implemented. 
Outreach and Benchmarking 
• Performed outreach with other airports and ports, government agencies, and consulting
firms, facing similar issues, to identify best practices and opportunities for improvement.
• Obtained an understanding of these external organizations’ processes and internal
controls to mitigate risks from supply chain disruptions. 
• Assessed whether there were opportunities for the Port to implement and improve their 
practices, based on best practices of other agencies.







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               Supply Chain Disruption Management 
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 
Moderate
Partial
Partial controls                        probability for
compliance with
external audit       Requires
Medium   Moderate                  Laws, Port
Not functioning                      issues and / or      attention 
Policies
effectively                               negative public
Contracts 
perception 
Low probability
Functioning as   Mostly complies                      Does not
for external audit
intended but     with Laws, Port                        require
Low      Minimal                                   issues and/or
could be        Policies,                             immediate
negative public
enhanced       Contracts                          attention 
perception 











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