The Audit Meeting meeting scheduled for 2023-09-07 at Pier 69

Transcript

The Audit Meeting meeting scheduled for 2023-09-07 at Pier 69

YOU
THIS IS COMMISSIONER MOHAMMED CALLING TO ORDER THE PORT OF SEATTLE'S AUDIT COMMITTEE COMMITTEE SPECIAL MEETING
TODAY IS THURSDAY, SEPTEMBER 7, 2023, AND THE TIME IS 09:10 A.M.
WE ARE MEETING TODAY AT THE PORT OF SEATTLE'S HEADQUARTERS COMMISSION CHAMBERS AND VIRTUALLY VIA THE TEAM'S PLATFORM
PRESENTED WITH ME TODAY IS COMMISSIONER SAM CHO AND PUBLIC MEMBER SARAH HOLMSTROM
TO MAKE THIS MEETING MORE ACCESSIBLE TO THE PUBLIC, THE MEETING IS BEING LIVE STREAMED AND DIGITALLY RECORDED, AND MAY BE VIEWED OR HEARD AT ANY TIME ON THE PORT'S WEBSITE
A CALL IN TELEPHONE NUMBER IS ALSO PROVIDED FOR ANYONE WHO WOULD LIKE TO LISTEN INTO THE MEETING
OUR FIRST ITEM OF BUSINESS IS APPROVAL OF OUR LAST MEETING MINUTES FROM JUNE 30, 2023
AS A REMINDER TO THE VIEWING AUDIENCE, THE PUBLIC MEMBER OF THE AUDIT COMMITTEE IS NOT A VOTING MEMBER FOR THE PURPOSES OF CASTING VOTES ON MOTIONS MADE PER THE COMMITTEE'S RULES
ARE THERE ANY CORRECTIONS TO THE MINUTES? HEARING NONE
ARE THERE ANY OBJECTIONS TO APPROVAL OF THE MINUTES AS PRESENTED? HEARING NONE
THE MINUTES ARE APPROVED
OUR NEXT ORDER OF BUSINESS IS THE OFFICE OF THE WASHINGTON STATE AUDITORS 2022 ACCOUNTABILITY AUDIT OPENING PRESENTATION MR FERNANDEZ, PLEASE INTRODUCE OUR SPEAKERS TODAY
THANKS, COMMISSIONER
TODAY WE HAVE JOE SIMMONS AND MADDIE FROST SCHAEFER FROM THE STATE AUDITOR'S OFFICE, WHO'LL BE PRESENTING THEIR OPENING PRESENTATION
JOE, THANK YOU FOR YOUR TIME TODAY TO HEAR OUR PRESENTATION REGARDING OUR UPCOMING ACCOUNTABILITY AUDIT
MY NAME IS JOE SIMMONS
I'M THE AUDIT MANAGER FOR THE STATE AUDITOR'S OFFICE HERE IN SEATTLE
I'M HERE WITH MADDIE FROST SCHAEFFER, WHO IS ASSISTANT AUDIT MANAGER AND WILL BE THE SUPERVISOR ON THE AUDIT
AND ANGELA FUNAMORI ISN'T ABLE TO BE HERE TODAY
SHE WILL AGAIN BE THE AUDIT LEAD ON THE AUDIT
AND ON THE NEXT SLIDE, JUST AN OVERVIEW OF OUR OFFICE
WE CONDUCT OVER 2400 AUDITS DURING THE PAST YEAR
THAT'S ROUGHLY 1000 ACCOUNTABILITY AUDITS, 1000 FINANCIAL STATEMENT AUDITS, AND AROUND 400 FEDERAL SINGLE AUDITS
WE REPORT TO INDEPENDENTLY ELECTED STATE AUDITOR PAT MCCARTHY AND HAVE AN OFFICE OF OVER 400 AUDITORS
AND WE HAVE ADDITIONAL AUDITS, INCLUDING PERFORMANCE AUDITS, CYBERSECURITY AUDITS THAT ARE LISTED THERE ON THAT PAGE
AND AS YOU KNOW, FOR OUR AUDIT THIS YEAR, WE'LL BE AGAIN CONDUCTING AN ACCOUNTABILITY AUDIT
AND ON THE NEXT SLIDE, IT TALKS ABOUT WHAT, IN GENERAL, ACCOUNTABILITY AUDIT COVERS
THAT WE AUDIT TO DETERMINE IF MANAGEMENT IS ADEQUATELY SAFEGUARDING PUBLIC RESOURCES THAT'S ASSETS, REVENUES, EXPENDITURES, AND PROTECTION FROM MISUSE AND MISAPPROPRIATION
AND THEN WE ALSO EVALUATE WHETHER THERE'S REASONABLE ASSURANCE THAT THERE'S PROTECTIONS AND ADHERENCE TO APPLICABLE STATE LAWS AND THE PORT'S OWN POLICIES AND PROCEDURES
AND WE USE A RISK BASED APPROACH WHERE WE DO PLANNING AT THE BEGINNING OF THE AUDIT TO EVALUATE WHICH AREAS ARE AT HIGHEST RISK FOR THE CURRENT AUDIT
WE'RE NOT YET AT THAT STAGE, WE'RE HERE TO TALK ABOUT OUR AUDIT IN GENERAL, BUT WE HAVE NOT YET STARTED THE PLANNING
ONCE WE'VE STARTED THE PLANNING STAGE, WE'LL DETERMINE THOSE AREAS AND THEN WE COMMUNICATE THOSE TO YOU ONCE THOSE ARE DETERMINED
AND ON THE NEXT SLIDE, AS YOU KNOW, OF COURSE, YOU ARE AUDITED FOR YOUR FINANCIAL STATEMENT AUDIT AND YOUR FEDERAL SINGLE AUDIT BY THE MOSS ADAMS CPA FIRM
AND AS ALWAYS, WE REVIEW THEIR WORK AND WE DO THAT EARLY IN OUR AUDIT PROCESS SO WE CAN REVIEW WHAT THEY LOOKED AT AND INCORPORATE THAT INTO OUR PLANNING FOR OUR ACCOUNTABILITY AUDIT
WE TRY TO AVOID ANY OVERLAP OF THINGS THAT THEY'VE LOOKED AT AND ALSO WE REVIEW IT TO DETERMINE THAT WE CAN RELY ON THAT WORK AND THEN WE POST THEIR REPORT ON OUR SITE ONCE WE'VE COMPLETED THAT REVIEW
AND ON THE NEXT SLIDE, WE TALK ABOUT WHAT WE DO FROM THE BEGINNING OF THE AUDIT THROUGH THE END
WE'VE ALREADY STARTED WORKING WITH THE PORT AS FAR AS WORKING OUT HOW WE CAN OBTAIN ACCESS TO DOCUMENTS AND SETTING UP SECURE WAYS TO DO THAT
WE'RE GOING TO HAVE AN INITIAL KICKOFF MEETING THIS AFTERNOON TO TALK WITH THE AUDIT LIAISON ABOUT PROCESS AND PROCEDURES FOR OBTAINING INFORMATION DURING THE AUDIT
OF COURSE, THIS ENTRANCE CONFERENCE TO TALK ABOUT OUR AUDIT
AND THEN THROUGHOUT THE AUDIT, WE HAVE WEEKLY STATUS MEETINGS WITH THE AUDIT LIAISON AND THAT ALSO INCLUDES GLENN FROM INTERNAL AUDIT
SO WE MEET REGULARLY TO KEEP THEM UPDATED ON THE PROGRESS OF AUDIT
AND IF WE DO IDENTIFY ANY ISSUES, WE DO OUR BEST TO COMMUNICATE THAT AS SOON AS THEY COME UP
SO WE DEFINITELY LOOK TO MAKE SURE THAT THERE'S NO SURPRISES AND COMMUNICATE THROUGHOUT THAT AUDIT
AND THEN AT THE END OF THE AUDIT, WE WILL PRESENT OUR RESULTS AND ON THE NEXT SLIDE THAT TALKS A LITTLE BIT ABOUT WHAT THOSE LOOK LIKE, WE WILL HAVE OUR ACCOUNTABILITY AUDIT REPORT AS ALWAYS, AND THEN THESE ARE THE LEVELS THAT WE HAVE AS FAR AS WHAT WE REPORT ON ANY KIND OF RECOMMENDATIONS
SO THE HIGHEST LEVEL IS FINDINGS AND THOSE THAT ARE MATERIAL OR SIGNIFICANT DEFICIENCIES RELATED TO INTERNAL CONTROLS OR SIGNIFICANT MATERIAL NON COMPLIANCE AND THOSE FINDINGS APPEAR IN OUR REPORT
BUT THERE'S ALSO AN OPPORTUNITY FOR THE PORT TO RESPOND TO THOSE FINDINGS
AS FAR AS WHAT ACTIONS THEY'RE TAKING
AT A LOWER LEVEL WITH MANAGEMENT LETTERS, THAT'S NOT AS SIGNIFICANT AS A FINDING, BUT STILL SOMETHING THAT WE THINK WARRANTS THE ATTENTION OF THE GOVERNING BODY
SO THAT'S IN THE FORM OF A LETTER THAT WE PROVIDE
THAT'S NOT INCLUDED IN THE REPORT, BUT IT IS REFERENCED IN THE REPORT THAT A MANAGEMENT LETTER WAS ISSUED
AND THEN OUR MOST COMMON LEVEL OF RECOMMENDATION IS EXIT ITEMS AND THOSE AREN'T REFERENCED IN THE REPORT, BUT THEY ARE RECOMMENDATIONS BASED ON THINGS WE IDENTIFY IN THE COURSE OF OUR AUDIT AND THEY'RE MORE MINOR TYPE ISSUES
BUT STILL WE REALLY HAVE APPRECIATED HOW THE PORT HAS REALLY ADDRESSED ANY EXIT RIGHT OF RECOMMENDATIONS THAT WE HAVE MADE AND DEFINITELY LOOK AT THAT AS SOMETHING THAT HOPEFULLY IS HELPFUL TO THE PORT AS FAR AS TRYING TO IDENTIFY ISSUES BEFORE THEY BECOME LARGER
AND ON THE NEXT SLIDE, GO AHEAD AND TURN IT OVER TO MADDIE
THANKS, JOE
SO ON THIS SLIDE, WE JUST HAVE A FEW GENERAL REMINDERS AS WE BEGIN OUR AUDIT
THE FIRST IS WE ARE COMMITTED TO SAFEGUARDING ANY CONFIDENTIAL OR SENSITIVE INFORMATION
IF ANY OF THE INFORMATION WE REQUEST DURING THE AUDIT IS CONFIDENTIAL OR SENSITIVE, PLEASE LET US KNOW SO WE CAN ENSURE WE'RE SAFEGUARDING IT
THROUGHOUT THE AUDIT PROCESS, WE HAVE INCLUDED THE ESTIMATED AUDIT COSTS IN THE ENTRANCE DOCUMENT, WHICH WAS SHARED WITH YOU
WE ALSO WANT YOU TO BE AWARE THAT WE HAVE AN AUDIT DISPUTE PROCESS
IF AT ANY POINT DURING THE AUDIT YOU HAVE ANY CONCERNS, WE DO HAVE AN ESTABLISHED PROCESS FOR YOU TO VOICE THOSE CONCERNS
WE ASK THAT YOU PLEASE START WITH JOE, BUT WE HAVE INCLUDED ADDITIONAL CONTACTS IN YOUR ENTRANCE AUDIT PACKET
LASTLY, WE JUST LIKE TO REMIND GOVERNMENTS THAT THERE IS A STATE LAW THAT REQUIRES YOU TO REPORT ANY KNOWN OR SUSPECTED LOSSES TO OUR OFFICE, AND YOU CAN DO THAT THROUGH OUR WEBSITE
AND ON THE NEXT SLIDE, WE HAVE SOME ADDITIONAL REMINDERS ABOUT REPORTING CYBERSECURITY ISSUES TO OUR OFFICE
YOU MAY ALSO BE REQUIRED TO REPORT CYBERSECURITY ISSUES TO THE ATTORNEY GENERAL'S OFFICE IF AN INCIDENT AFFECTS MORE THAN 500 WASHINGTON RESIDENTS
AND ONCE AGAIN, YOU MAY ALSO NEED TO REPORT ANY CYBERSECURITY ISSUES TO OUR OFFICE IF THEY INVOLVE FINANCIAL RECORDS OR FINANCIAL SYSTEMS AND ONCE AGAIN, YOU CAN DO THAT THROUGH OUR WEBSITE
AND ON THE NEXT SLIDE, A QUESTION WE OFTEN GET ASKED IS WHO EXACTLY AUDITS US? AND WE'RE PLEASED TO REPORT THAT WE ARE AUDITED EVERY THREE YEARS BY THE NATIONAL STATE AUDITORS ASSOCIATION
OUR MOST RECENT PEER REVIEW RESULTS ARE AVAILABLE ON OUR WEBSITE AT THE LINK WE HAVE PROVIDED, AND WE'RE PLEASED TO REPORT OUR LATEST RESULTS
RECEIVED A RATING OF PASS, WHICH DOESN'T SOUND VERY GREAT, BUT IT IS THE HIGHEST LEVEL OF ASSURANCE THAT YOU CAN RECEIVE, SO WE'RE VERY HAPPY WITH THAT
AND ON THE NEXT SLIDE OH, OKAY
AUDIT
SO, BEYOND OUR NORMAL AUDIT, WE DO WANT TO MAKE SURE YOU'RE AWARE OF SOME OTHER RESOURCES THAT OUR OFFICE PROVIDES
THAT INCLUDES OUR LOCAL GOVERNMENT SUPPORT TEAM, WHO PROVIDES SUPPORT THROUGH THE BARS AND ANNUAL ONLINE FILING PROCESS
THEY ALSO PERFORM ACCOUNTING AND REPORTING TRAININGS THROUGHOUT THE YEAR
SOME OF THEM ARE AVAILABLE VIRTUALLY AND RUN OUR HELP DESK THROUGH OUR CLIENT PORTAL, WHERE THEY CAN ANSWER ANY AUDITING OR ACCOUNTING QUESTIONS THROUGHOUT THE YEAR
THE NEXT IS THE CENTER FOR GOVERNMENT RESOURCES, WHICH PROVIDES FREE RESOURCES AND SERVICES TO HELP GOVERNMENTS WORK BETTER, SOLVE PROBLEMS, AND IMPROVE OPERATIONS
AND ONCE AGAIN, THESE TEAMS ARE AVAILABLE AT NO ADDITIONAL COST
ON THE NEXT SLIDE, WE TALK A LITTLE BIT MORE ABOUT THE CENTER AND SOME OF THE GREAT RESOURCES THEY'RE PROVIDING
THE FIRST IS THE NEW CYBERSECURITY CHECKUPS, WHICH ARE A FAST, FREE, AND INDEPENDENT ASSESSMENT OF A GOVERNMENT'S VULNERABILITY TO COMMON THREATS
THEY'LL ALSO PROVIDE ACTION STEPS FOR YOU AT THE END OF THE REVIEW
THEY'RE ALSO DOING A LOT WITH LEAN SERVICES AND CAN HELP GOVERNMENTS OPTIMIZE EFFICIENCY, QUALITY, AND CUSTOMER SERVICE
THEY'VE HELPED SEVERAL GOVERNMENTS WITH THINGS LIKE PERMITTING PROCESSES
THE CENTER IS ALSO PROVIDING CLIFTON STRENGTH WORKSHOPS TO HELP STRENGTHEN TEAMS AND PROMOTE EMPLOYEE SATISFACTION
AND LASTLY, THEY ALSO HAVE THE FREE FIT TOOL, WHICH YOU CAN USE TO MANAGE AND MONITOR THE PORT'S FINANCIAL HEALTH
AND THEN ON THE NEXT SLIDE, A RESOURCE WE'RE SHARING A RESOURCE WE'RE SHARING WITH ALL GOVERNMENTS IS A GUIDE THAT WAS RECENTLY CREATED BY OUR SPECIAL INVESTIGATIONS TEAM
THIS GUIDE WAS DESIGNED SPECIFICALLY FOR ELECTED OFFICIALS TO HELP YOU KIND OF PREVENT FRAUD AND DETECT FRAUD AND KNOW HOW TO RESPOND IF YOU BECOME AWARE OF FRAUD
SO IT'S A REALLY GREAT RESOURCE THAT WE'VE RECENTLY PUT ON OUR WEBSITE
AND ON THE NEXT SLIDE, ONCE AGAIN, WE WANTED TO INCLUDE A LINK TO THAT CYBER CHECKUP RESOURCE
OUR OFFICE IS CONTINUING TO SEE MORE AND MORE GOVERNMENTS BECOME VICTIM TO CYBER FRAUD
SO WE ARE PLEASED TO OFFER THAT FREE CYBER CHECKUP, ALONG WITH SEVERAL OTHER HANDOUTS AND RESOURCES FOR GOVERNMENTS TO RESPOND TO THE CYBER RISKS WE ARE SEEING
ANOTHER RESOURCE THE CENTER HAS RECENTLY PUBLISHED IS A GUIDE TO FUEL, WHICH INCLUDES PURCHASING FUEL, PROTECTING FUEL STATIONS, AND MONITORING FUEL CONSUMPTION
AND ON THE NEXT SLIDE, WE WOULD JUST LIKE TO, AT THIS POINT, THANK YOU FOR YOUR TIME AND OPEN IT UP TO SEE IF YOU HAVE ANY QUESTIONS OR COMMENTS FOR US
THANK YOU TO THE OFFICE OF THE STATE'S AUDITOR'S OFFICE FOR THE PRESENTATION AND FOR THE WORK THAT YOU ALL DO
ARE THERE ANY QUESTIONS FROM THE COMMITTEE MEMBERS AT THIS TIME? I HAVE A QUICK QUESTION
SO JUST GOING BACK TO THE CYBER CHECKUP AND RESOURCE GUIDES THAT YOU HAVE MADE AVAILABLE, DOES THIS INFORMATION TRANSLATE WELL FOR US TO SHARE WITH ORGANIZATIONS THAT WE PARTNER WITH? WE'VE SEEN SITUATIONS WHERE SMALL GRASSROOTS ORGANIZATIONS ARE IMPACTED BY SOME SORT OF CYBER ATTACK OR SOMETHING SIMILAR, AND THEIR INFORMATION GETS COMPROMISED, WHICH ULTIMATELY IMPACTS US
AND SO HOW DOES THAT WORK WITH THIS? THAT IS A GREAT QUESTION
SO I KNOW THAT THE CYBER CHECKUPS WERE ONLY OFFERING TO GOVERNMENTS, BUT AS FAR AS THE GUIDES AND RESOURCES, THEY WERE DESIGNED WITH GOVERNMENTS IN MIND, BUT THEY ARE BASED ON INDUSTRY BEST PRACTICES
AND SO I BELIEVE THAT THERE IS INFORMATION IN THERE THAT CAN ALSO BE HELPFUL TO OTHER ORGANIZATIONS AND COMPANIES AND NONPROFITS AS WELL, FOR THEM TO KEEP IN MIND ABOUT THEIR OWN VULNERABILITIES
GREAT, THANK YOU
THAT'S HELPFUL TO KNOW THAT THAT INFORMATION IS RELEVANT
I DON'T HAVE ANY OTHER QUESTIONS
IF THERE'S NO ADDITIONAL QUESTIONS FOR THE STATE AUDITOR'S OFFICE OR MR FERNANDEZ ON THIS ITEM, WE'LL MOVE ON TO THE NEXT TOPIC
THANK YOU GUYS
AGAIN, THANK YOU FOR YOUR TIME
THANK YOU
SO I'LL MOVE US ALONG
ITEM NUMBER FOUR ON THE AGENDA IS APPROVAL OF THE 2024 PROPOSED BUDGET
GLENN PLEASE PROCEED WITH THE UPDATE
THANK YOU, COMMISSIONER
SO, NEXT SLIDE, PLEASE, MICHELLE
A LITTLE OVERVIEW OF OUR DEPARTMENT COMMISSIONERS AND MS OLMSTROM
WE PROVIDE ASSURANCE THAT THE PORT CONTROLS ARE EFFECTIVE AND EFFICIENT, THAT THEY'RE WORKING ESSENTIALLY BEFORE A FIRE STARTS
SO THINK OF IT
IF THERE'S SMOKE, WE LIKE TO COME IN AND IDENTIFY THE SMOKE AND SAY, HEY, YOUR HOUSE HAS GOT SMOKE, RATHER THAN COMING IN AFTER THE FACT AND SAY, YOUR HOUSE BURNT DOWN
SO CONTROLS PREVENT SOMETHING, YOUR HOUSE FROM BURNING DOWN, IN ESSENCE
SO THAT'S ONE OF THE KEY THINGS WE DO
WE ALSO DO A LOT OF WORK ON WE'RE DOING A LOT OF GCCM CONSTRUCTION PROJECTS
NOW, THAT'S GENERAL CONTRACTOR, CONSTRUCTION MANAGER TYPE CONSTRUCTION METHODOLOGIES
AND BECAUSE WE'RE DOING THAT, THAT SEEMS TO WORK WELL FOR THE PORT
BUT THE RCW ALSO REQUIRES INDEPENDENT AUDITS OF THOSE
SO WE FACILITATE AND PARTNER ON THOSE INDEPENDENT AUDITS
AND IT'S A LOT OF WORK
SO, YOU'LL SEE, I'LL SHOW YOU A CHART LATER OF ALL THE GCCM PROJECTS THAT THE PORT'S DOING IN THE NEXT FEW YEARS AND THE WORK THAT NEEDS TO BE DONE IN THOSE
WE ALSO USE AN OUTSIDE FIRM FOR THAT THAT WE PARTNER WITH AND WE'LL TALK ABOUT THAT, KNOW WHERE POSSIBLE
WE PROVIDE ADVISORY SERVICES TO THE PORT
WE SEE A LOT WE HAVE A LOT OF EXPERIENCE WITH OUR TEAM AND WE, YOU KNOW, THANK YOU
NO WORRIES
GLAD YOU'RE HERE
ONE OF THE THINGS WE DO IS IF THERE'S A PROCESS BROKEN OR SOMEONE NEEDS HELP WITH SOMETHING, THEY'LL COME TO US AND THEY'LL ASK US, CAN YOU HELP US WITH THIS? AND FROM TIME TO TIME, WE'LL RECOMMEND AND WE'LL HELP THEM IMPROVE THEIR PROCESS
AND THEN ONE OF THE CRITICAL THINGS TO BEING A GOOD INTERNAL AUDIT FUNCTION IS YOU DON'T REPORT INTERNALLY TO SOMEONE IN HOUSE
YOU REPORT FUNCTIONALLY TO AN AUDIT COMMITTEE
SO YOUR WORK ISN'T YOU DON'T WANT SOMEONE IN MANAGEMENT REWRITING YOUR AUDIT REPORTS AND JUST LETTING THE GOOD STUFF COME OUT TO THE PUBLIC
I MEAN, THINGS THAT ARE SCRUBBED
SO BY REPORTING TO THE AUDIT COMMITTEE FUNCTIONALLY AND ADMINISTRATIVELY TO STEVE, WE MAINTAIN OUR INDEPENDENCE AND OBJECTIVITY
NEXT SLIDE, PLEASE, MICHELLE
SO, 2024, WHAT ARE WE DOING? WHAT ARE OUR MAJOR INITIATIVES? FIRST OFF, WE WANT TO BE ABLE TO CONTINUE TO DO OUR GCCM AUDITS BECAUSE I THINK THE PORT SCALING UP FOR THIS
AND AS I THINK STEVE METRUCK, THE EXECUTIVE DIRECTOR, HAS KIND OF ANALOGIZED IT TO, WE'VE CLIMBED SMALLER MOUNTAINS, WE'RE ABOUT TO CLIMB EVEREST
SO AS WE GO TO TAKE ON ALL THESE CAPITAL PROJECTS, WE WANT TO MAKE SURE THAT FROM AN AUDIT PERSPECTIVE, WE'RE READY ALSO FOR THAT SPEND AND THAT WE CAN ADD VALUE AS WE GO
ANOTHER THING THAT WE'VE GOT AS A MAJOR ENHANCEMENT IS OUR CONCESSION AUDIT PROGRAM
SO WE HAVE MAYBE OVER 100 CONCESSIONNAIRES AT THE AIRPORT AND ON THE MARITIME SIDE, A LOT OF CONCESSIONAIRES, A LOT OF THEIR REVENUE, WHICH IS OVER $100 MILLION IS SELF REPORTED TO THE PORT
SO WE CYCLE THROUGH AND WE AUDIT THOSE
BUT WE WOULD LIKE TO ENHANCE OUR PROCESS AND INCREASE OUR SPEED AND VOLUME AND USE PERHAPS AUTOMATED TOOLS, FIGURE OUT HOW WE CAN HAVE MORE TOUCH POINTS AND AT THE SAME TIME MINIMIZE IMPACT TO THE CONCESSIONAIRES
AND IT'S A WIN WIN BECAUSE A LOT OF THESE ARE SMALLER BUSINESSES ALSO
SO WE WANT TO HELP THEM EARLY ON IN THE PROCESS AND BE AS LITTLE IMPACTFUL AS POSSIBLE, BUT YET GET GOOD COVERAGE THERE
AND WE HAVE AN OPPORTUNITY THERE
AND THEN FINALLY THERE'S THE EQUITY POLICY DIRECTIVE THAT CAME OUT THIS YEAR
AND ONE OF THE THINGS BOOKDA GHEISAR, OUR SENIOR DIRECTOR OF OEDI OFFICE OF EQUITY, DIVERSITY AND INCLUSIONS, ASKED IS A PARTNERSHIP WHERE WE CAN BUILD A TOOL TO ASSURE COMPLIANCE WITH THAT, BE IT
IF WE HAVE ANTI HUMAN TRAFFIC POLICIES, IF WE HAVE A POTENTIAL THIRD PARTY CODE OF CONDUCT, HOW DO WE GO OUT AND ENFORCE THAT? ALL OUR TOUCH POINTS ARE ACTUALLY COMPLYING WITH IT
WE JUST DON'T WANT A DOCUMENT THAT'S OUT THERE THAT NOBODY FOLLOWS
SO WE WANT TO DESIGN THAT INTO OUR WORK
SO AS WE GO OUT AND TOUCH ALL OF THESE VARIOUS ENTITIES, WE'RE ALSO EDUCATING THEM AND ASSURING COMPLIANCE IN SOME WAY
BUT THAT NEEDS TO BE DESIGNED AND BUILT
SO THAT'S A MAJOR INITIATIVE AS FAR AS GOING FORWARD NEXT YEAR
NEXT SLIDE, PLEASE, PLEASE
SO HOW DO WE DO THIS? THIS IS THE TEAM, AN INTERNAL AUDIT AT THE PORT THAT DOES ALL THAT WORK
WE'VE GOT THREE GROUPS
DAN ON THE OPERATION PERFORMANCE AUDIT SIDE AND THE CONCESSION AUDIT
YOU KNOW, ALTHOUGH WE LEVERAGE OFF OTHER RESOURCES
DAN LEADS THE PERFORMANCE AUDITS AND THE CONCESSION AUDITS
SPENCER DOES ALL THE CAPITAL WORK
SPENCER BRIGHT IN THE MIDDLE
YOU KNOW, HE'S GOT THAT LOAD WITH THE GCCM AUDITS
WE DO HAVE OUTSIDE SERVICES THAT WE USE, BUT HE'S GOT TO MANAGE THOSE AS WELL AND MAKE SURE THAT THE AUDITS ARE HAPPENING AS THE LEGISLATURE INTENDED AND KEEPS PROJECTS MOVING AND MAKE SURE THAT WE'RE GOOD STEWARDS OF TAXPAYER FUNDS
AND THEN YOU HEARD A LOT FROM THE SAO AND CYBERSECURITY
RIDICA MARWAHA, OUR IT AUDIT MANAGER, DOES AUDITS OF IT AUDITS OF CORPORATE SIDE AND THE AVIATION SIDE
WHEN YOU LOOK AT THE AIRPORT AND YOU'VE GOT ALL THOSE MOVING PARTS, YOU'VE GOT BAGGAGE SYSTEMS, RUNWAY LIGHTS THAT ARE ALL MANAGED BY COMPUTERS
AND THOSE OPERATIONS TECHNOLOGY SYSTEMS ARE AUDITED JUST AS WELL AS THE FINANCIAL SYSTEMS AND ALL THE OTHER SYSTEMS WE HAVE
SO THE THREE GROUPS THERE
NEXT SLIDE, PLEASE
MICHELLE
OUR BUDGET IS RELATIVELY STRAIGHTFORWARD
LARGEST THING IS OUR SALARIES AND WAGES, WHICH JUST GOES UP WITH INFLATION
OUR HEADCOUNT IS CONSTANT
WE ALSO INVEST IN EDUCATION BECAUSE MOST OF OUR STAFF ACTUALLY, I THINK ALL OF OUR STAFF HAVE EITHER CPA LICENSES OR SOME CONSTRUCTION CERTIFICATION OR TECHNOLOGY CERTIFICATION, LIKE A CERTIFIED INFORMATION SYSTEMS AUDITOR
AND TO MAINTAIN THOSE LICENSES AND THE TRAINING THAT'S REQUIRED TO KEEP THEM FRESH
THAT GOES INTO THE TRAVEL AND OTHER EMPLOYEE EXPENSES
THAT'S PRETTY MUCH ALL THE TRAINING
OUTSIDE SERVICES
THE BIG NUMBERS THAT YOU SEE IN THE PAST ARE FROM THE GCCM AUDITS
THEY'D COME IN AND THEN THEY'D BE CAPITALIZED, AND LINE NINE WOULD SHOW THEM BEING CAPITALIZED AND COMING OUT OF EXPENSE
NOW WE'RE CAPITALIZING THEM DIRECTLY TO THE PROJECT
AND I'LL SHOW YOU A SLIDE THAT TALKS A LITTLE BIT ABOUT THAT IN MORE DETAIL
THE $40,000 THAT YOU SEE IN THERE, WE HAVE AN INDIVIDUAL THAT'S GOING ON MATERNITY LEAVE
SHE'S ALREADY ON MATERNITY LEAVE, AND SHE'S GOING TO BE OUT FOR THE FIRST HALF OF NEXT YEAR
SO IT'S FOR SOME TEMPORARY HELP
THE OTHER THINGS ARE JUST SUNDRIES AND COMPUTER EQUIPMENT, MISCELLANEOUS ITEMS NEXT SLIDE, PLEASE, MICHELLE
SO THIS IS THE NEW BUDGET REQUEST THAT'S OUT OF THE ORDINARY
IT'S JUST FOR SOME TEMPORARY HELP TO BACKFILL STAFF THAT'S ON MATERNITY LEAVE FOR THE FIRST PART OF NEXT YEAR
AND NEXT SLIDE
SO THIS SLIDE, COMMISSIONERS, THE AUDIT COSTS HERE DO GET APPROVED BY THE FULL COMMISSION WHEN THE PROJECT IS APPROVED
SO IT'S IN THE PROJECT PRESENTATION THAT'S MADE TO YOU
BUT FOR TRANSPARENCY, SINCE WE'RE AUDITED BREAKING THIS OUT, THE ESTIMATED CONSTRUCTION COSTS ARE EARLY ESTIMATES OF JUST THE CONSTRUCTION RELATED COSTS
SO THERE'S DESIGN COSTS AND THE PORT COSTS THAT WILL INCREASE THE COST OF THESE PROJECTS
AND THESE ARE EARLY ESTIMATES
A LOT OF THESE PROJECT COSTS WILL GO UP, BUT WE BASE OUR SPEND ON THOSE AND WE ACCORDINGLY BID OUT THE AUDIT SERVICES
THEY ARE BID OUT PUBLICLY
SOME OF THEM ARE IDIQS, WHERE IT'S A PARTICULAR CONTRACT THAT COVERS TWO, THREE PROJECTS
AND THEN SOMETIMES YOU HAVE SOMETHING BIG LIKE THE SOUTH CONCOURSE, WHICH IS GOING TO BE A BILLION DOLLAR PLUS PROJECT
AND WE'LL PROBABLY HAVE TO HAVE A DEDICATED AUDITOR ON THAT WORKING WITH US CONTINUOUSLY
IT'S A TEN YEAR PROJECT
SO WHEN YOU GO ALL THE WAY INTO 2030 SOMETHING, YOU'RE GOING TO HAVE A LOT OF SPEND AND A LOT OF CHANGE THAT OCCURS OVER THAT IN THE LIFE OF THAT PROJECT
BUT FOR TRANSPARENCY, THESE ARE ESTIMATES OF WHAT THE AUDIT COSTS WILL BE
AND I JUST WANT TO IT'S REALLY THE EXPENSE BUDGET THAT GETS APPROVED HERE
THE CONSTRUCTION PUGET HERE IS, LIKE I SAID, APPROVED BY THE FULL COMMISSIONER AND SEPARATE PRESENTATION
AND THAT CONCLUDES ACTUALLY, COMMISSIONERS, MY BUDGET PRESENTATION, IT'S RELATIVELY SIMPLE, STRAIGHTFORWARD
I'LL ANSWER ANY QUESTIONS NOW
THANK YOU
MR FERNANDEZ, ARE THERE ANY QUESTIONS FROM OUR COMMITTEE MEMBERS AT THIS TIME? OKAY, IS THERE A MOTION AND A SECOND FOR APPROVAL OF THE 2024 PROPOSED BUDGET SO MOVED? SECOND
THE MOTION HAS BEEN MADE AND SECONDED
IS THERE ANY OBJECTION TO APPROVAL OF THE 2024 PROPOSED BUDGET HEARING? NONE
THE MOTION IS APPROVED
THANK YOU, COMMISSIONER
ABSOLUTELY
NEXT SLIDE, PLEASE
MICHELLE
SO, COMMISSIONERS, I HAVE A LITTLE BIT OF A GOOD NEWS STORY HERE
IF YOU LOOK AT THE BARS IN THIS FOLLOW UP CHART, YOU'LL SEE THAT THE BARS IN THE FAR RIGHT, MORE THAN TWO YEARS HAS COME DOWN SIGNIFICANTLY
1 SECOND, YOU'RE ON ITEM NUMBER FIVE
RIGHT? I'M SORRY
YEAH, I CAN INTRODUCE THE ITEM
YOU'RE GOOD
BUT YOU'RE AHEAD
THIS IS GREAT
ITEM NUMBER FIVE ON THE AGENDA IS A REVIEW OF THE OPEN ISSUES STATUS REPORT
GLENN, PLEASE PROCEED WITH THE PRESENTATION
AGAIN
APOLOGIES, COMMISSIONER
I'M JUMPING AHEAD
BUT LIKE I SAID, IT'S A GOOD NEWS STORY
AND ONE OF THE THINGS WE DID OVER THE LAST QUARTER PLUS ACTUALLY, OVER THE LAST YEAR, WE'VE BEEN WORKING DILIGENTLY WITH MANAGEMENT, ESPECIALLY ON THE INFORMATION TECHNOLOGY SIDE, TO IDENTIFY THINGS THAT ARE FIXED OR THINGS THAT ARE NOT
GOING TO BE DONE AND MITIGATED SOME OTHER WAY IF A SYSTEM IS TOTALLY GOING TO BE REPLACED BECAUSE EVERYTHING CHANGES VERY QUICKLY, IN SOME CASES JUST OTHER MITIGATION WAS PUT IN PLACE
OR HAS MANAGEMENT ACCEPTED THE RISK? THERE ARE SOME CASES WHERE WE'VE DECIDED WE'RE GOING TO DO SOMETHING ELSE, BUT POST COVID, A LOT OF WORK'S BEEN DONE AND A LOT OF ITEMS HAVE BEEN CLOSED OUT
SO WE FLUSHED THAT OUT
AND TO MS HOLMSTROM'S EARLIER REQUEST IN THE APPENDIX, WE HAVE ALL THE DETAILS ON ALL OF THESE ISSUES
SO THE ISSUE, THE STATUS, AND A LITTLE BIT MORE DETAIL ON THEM
SO YOU DO KNOW WHAT'S IN THESE BARS AND WHAT MAKES UP THE BARS
WE DO HAVE AN OPEN ISSUE IN ARCHITECTURAL AND ENGINEERING SERVICES THAT WE'LL TALK A LITTLE BIT ABOUT LATER
THERE'S A COMMENT IN THERE THAT I HAVE THAT SAYS THIS APPEARS TO BE IN THE PROCUREMENT COUNCIL AGENDA IN SEPTEMBER
THAT IS NOT ON THE AGENDA
SO THAT COMMENT NEEDS TO BE STRUCK
BUT EVERYTHING ELSE, IT'S STILL AN OPEN ISSUE
QUESTIONS ON FOLLOW UP, ARE THERE ANY QUESTIONS FROM THE COMMITTEE MEMBERS AT THIS TIME? MY MIC'S NOT ON
EVERYONE IN HERE HEARD ME
I NEVER QUESTION GOOD NEWS
THAT'S RIGHT
I MUST SAY THAT THE GRAPH HAS CHANGED SIGNIFICANTLY
I POINTED TO SARAH, YOU'VE MADE THAT POINT SEVERAL TIMES
WHY ARE THERE SO MANY OPEN ISSUES? AND SO IT'S GREAT TO SEE THIS UPDATED GRAPH
THANK YOU
OKAY, SO HEARING NO FURTHER QUESTIONS, WE CAN MOVE ON TO ITEM NUMBER SIX ON THE AGENDA, WHICH IS AN UPDATE ON THE 2023 AUDIT PLAN
GLENN, PLEASE PROCEED WITH THE PRESENTATION ON THIS ITEM
THANK YOU, COMMISSIONER
SO, A QUICK STATUS UPDATE ON OUR PLAN AND WHERE WE STAND
A LOT OF THIS IS ON TRACK
WE HAVE A FEW CHANGES
WE PUSHED THE EQUITY POLICY DIRECTIVE AUDIT THAT WAS SCHEDULED FOR THIS YEAR INTO 2024, PRIMARILY AT A REQUEST OF THE DIRECTOR OF OEDI, BECAUSE THE DIRECTIVE WAS SIGNED, INITIATED JUST IN 2024
AND SHE HASN'T HAD REALLY TIME TO SHE NEEDS A LITTLE MORE TIME BEFORE WE CAN COME BACK AND LOOK AT IT AND MAKE SURE THAT PROCESSES HAVE BEEN SET UP
SO IT MADE MORE SENSE TO MOVE THAT OUT
SO WE DID MOVE THAT OUT
WE DID PULL IN A CONTINGENCY AUDIT THAT THE AUDIT COMMITTEE HAD APPROVED EARLIER ON THE POLICE DEPARTMENT
SO WE'LL BE FOCUSING ON THE POLICE DEPARTMENT EVIDENCE ROOM, AND WE MOVED THAT UP IN LIEU OF THE EQUITY POLICY DIRECTIVE JUST FOR TRANSPARENCY
THE STATE AUDITORS AT THIS TIME ALSO DOING AN AUDIT OF THE POLICE DEPARTMENT
THEY'RE LOOKING PRIMARILY AT SEIZURES AND THEY'RE LOOKING STATEWIDE AT POLICE DEPARTMENT SEIZURES TO MAKE SURE THAT THEIR SEIZURES ARE EQUITABLE AMONGST DIFFERENT DEMOGRAPHICS
SO I WILL ASK THEM TO COME PRESENT TO THIS COMMISSION AS TO THEY'RE DOING IT STATEWIDE, SO THEY WILL PRESENT TO JLARK AS WELL, AND THEN THEY'LL PRESENT TO THIS COMMISSION WHEN THEY'RE DONE
BUT OUR WORK IS DISTINCT FROM THEIRS AND FOCUSES SPECIFICALLY ON THE EVIDENCE ROOM AND OUR CONTROLS OVER THAT
ON THE CAPITAL FRONT, THE POST, IF REALIGNMENT AT THE BOTTOM, WAS A LITTLE BEHIND SCHEDULE ON THE CONSTRUCTION SIDE
SO WE'VE MOVED OUR AUDIT ALSO, AND OUR AUDIT WORK INTO 2024
IN LIEU OF THAT, WE'VE MOVED UP CONCOURSE THE BUILDING EXPANSION FOR THE DELTA LOUNGE
SO THAT'S IN PROCESS RIGHT NOW, AND WE'LL REPORT ON THAT IN THE FOURTH QUARTER
SO THAT WAS A SWAP OUT
AND THEN ON THE INFORMATION TECHNOLOGY SIDE, THE NETWORK INFRASTRUCTURE MANAGEMENT AUDIT WILL BE MOVED TO 2024
AND WE'RE NOT PULLING ANYTHING IN FOR THAT
THAT'LL JUST BE DONE IN 2024
AND THAT'S PRIMARILY BECAUSE BRUCE CLAUSAL, WHO WAS OUR IT AUDIT MANAGER, RETIRED EARLIER THIS YEAR
AND WHILE WE'RE FILLING AYE
POSITION, WE HAVE FILLED AYE
POSITION WITH RIDICA MARWAHA, BUT WE HAVE AN OPENED AUDITOR POSITION
AND WHILE WE'RE FILLING THAT, WE'RE EXPECTING LATE SEPTEMBER TO HAVE THAT FILLED
WE JUST WON'T HAVE TIME TO GET IT DONE FOR THIS
IT IS POSTED, YES
AND I BELIEVE MID SEPTEMBER WE'RE SCHEDULED TO HAVE INTERVIEWS FOR THE POSITION CANDIDATES
SO ALL OUR OPEN POSITIONS ARE POSTED AND PEOPLE GROW, PEOPLE DEVELOP, PEOPLE RETIRE, PEOPLE MOVE ON
YOU'VE GOT A CONSTANT, CONSTANT, AND IT'S THERE WILL COME A TIME YOU CAN GROW, BUT YOU CAN'T RETIRE, MOVE ON
NEXT SLIDE, PLEASE, MICHELLE
SO THIS SHOWS IT'S A GANTT CHART THAT SHOWS YOU WHERE WE STAND WITH OUR AUDIT PLAN
THE ONES IN RED, AS I MENTIONED, ARE THE ONES THAT ARE GETTING PUSHED INTO 2024
AND UP ABOVE, WE'VE GOT A FEW MORE THAT WE'VE PULLED INTO 2023 THAT WE'LL BE DOING SO WITH THAT
COMMISSIONER, I'LL TAKE ANY QUESTIONS ON OUR AUDIT PLAN BEFORE WE JUMP INTO BUT YEAH
IS THERE ANY QUESTIONS FROM OUR COMMITTEE MEMBERS AT THIS TIME? NO QUESTIONS
I CAN MOVE US ON TO THE NEXT ITEM ON THE AGENDA
WE'RE NOW AT THE PERFORMANCE AUDIT SECTION OF THE AGENDA
ITEM NUMBER SEVEN IS A REPORT ON THE C CONCOURSE EXPANSION PROJECT
GLENN, YOU HAVE THE FLOOR
PLEASE INTRODUCE OUR SPEAKERS
THANK YOU, COMMISSIONER MOHAMED
SO I'M GOING TO ASK SPENCER BRIGHT TO COME UP TO THE PODIUM
HE'S OUR CAPITAL AUDIT MANAGER, AND I'M ALSO ON THE LINE ON TEAMS WE'VE ALSO GOT DEBBIE TOWNSEND FROM RL
TOWNSEND AND ASSOCIATES AND PATRICIA PHARRELL SHEARER FROM RL
TOWNSEND AND ASSOCIATES
NOW, RL
TOWNSEND AND ASSOCIATES IS A WMBE BUSINESS THAT ACTUALLY THEY'RE EXPERTS IN CONSTRUCTION MANAGEMENT
THEY'RE NATIONALLY KNOWN
AND ON THESE GCCM AUDITS, ON THREE OF THEM, THEY'VE WON THE CONTRACT TO DO THE INDEPENDENT AUDITS AS REQUIRED BY THE RCW
SO ALTHOUGH THEY'RE LOOKING AT SUBCONTRACTORS, THEY PARTNER WITH US ON THESE AUDITS, AND SPENCER'S GOT A LONG WORKING RELATIONSHIP WITH THEM AS WELL
SO I'M GOING TO PROVIDE A LITTLE BIT OF AN OVERVIEW, AND I'LL INTRODUCE OUR FIRST ISSUE, AND THEN WE'LL TALK THROUGH THE FIRST TWO ISSUES
AND THEN I'LL ASK MANAGEMENT TO COME UP AND SPEAK AND RESPOND AS WELL
THIS IS PRECONSTRUCTION
SO IT'S A SEA CONCOURSE EXPANSION PROJECT
AND BEFORE WE ACTUALLY START THE BUILDING OF THE FACILITIES, WE HAVE TURNER, THE WINNING BIDDER, COME IN AND DO A LITTLE BIT OF PRECONSTRUCTION WORK
SO IN THIS CASE, WE'RE EXPANDING THE SEA CONCOURSE BY ADDING MORE THAN 20,000 ALASKA LOUNGE ACCESS
WE'RE TAKING 81,000 SQUARE FOOT BUILDING AND CONVERTING IT INTO A 226,000 SQUARE FOOT FACILITY
WE'RE GROWING UPWARDS, IN ESSENCE, ALSO BECAUSE WE'RE RUNNING OUT OF SPACE AT THE AIRPORT
SO THIS IS JUST A PRELIMINARY WORK, WHICH WILL TURN INTO 100 MILLION DOLLAR PLUS PROJECT, OR QUITE A BIT OVER THAT
THIS WORK STARTED IN 2020 AND WILL RUN OUT ALL THE WAY TO THE END OF THIS YEAR
SO IT SHOULD BE DONE AT THE END OF THIS YEAR
AND THEN WE'LL GO INTO MAJOR CONSTRUCTION FROM THERE
TURNER
AS YOU SEE THERE, TURNER CONSTRUCTION COMPANY WAS SELECTED AS THE GCCM OR THE GENERAL CONSTRUCTOR CONSTRUCTION MANAGEMENT MANAGER
AND THEY'LL LIKELY BE CONTINUING ON WITH THIS PROJECT
NEXT SLIDE, PLEASE
SO, BECAUSE THIS IS PRECONSTRUCTION, YOU'RE LOOKING AT ABOUT A $4.4 MILLION PRICE TAG, WHICH YOU LOOK AT ALMOST 2 MILLION IN CHANGE ORDERS
A LARGE PART OF THIS IS CHANGE ORDERS THAT HAVE COME IN AFTER THE FACT
SO YOU'RE GOING FROM 4.4 TO ABOUT FROM TWO TO FOUR, ROUGHLY
NOW, THIS DOES FALL INTO THE RCW 39 TEN, 385 CATEGORY
THAT REQUIRES AN INDEPENDENT AUDITOR TO LOOK AT SUBCONTRACTOR COSTS, PRIMARILY
AND AS I INTRODUCED, RL
TOWNSEND DID A LOT OF THE WORK, IS DOING THE WORK ON THAT
NOW, THIS PARTICULAR AUDIT THAT WE'RE TALKING ABOUT, OUR INTERNAL TEAM, SPENCER DID THE WORK ON IT AND AYE
TEAM
HOWEVER, WE'RE LEVERAGING OFF THE EXPERTISE OF R
L
TOWNSEND AND ASSOCIATES
SO OUR WORK IN THIS AUDIT ALSO FOCUSED ON THE EXPENSES THAT WE PAID TO TURNER, TO THE GCCM, AND WE WANTED TO MAKE SURE THAT THOSE EXPENSES WERE ACCURATE AND THAT THEY WERE IN COMPLIANCE WITH THE CONTRACT
AND THEN WE TOOK IT ONE STEP FURTHER AND PUT ON A PERFORMANCE AUDIT
HAT LIKE THIS IS WHERE YOU DON'T JUST LOOK AT COMPLIANCE, BUT IS WHAT YOU'RE PAYING REASONABLE? AND ARE THE MODELS THAT WE'RE USING REASONABLE? AND IT'S CALLED A PERFORMANCE AUDIT, REALLY
SO WE LOOKED
AT LABOR RATE ANALYSIS AND WE'RE GOING TO TALK ABOUT OUR FIRST ISSUE AND HOW WE BUILT THAT UP INTO THE CONTRACT
NEXT SLIDE, PLEASE, MICHELLE
SO ONE OF THE THINGS THAT HAPPENED IS IN THE CONTRACT, IN THE BACK OF THE CONTRACT WAS A TABLE
AND THE TABLE HAD ALL THE STAFF FROM TURNER WORKING ON THE PROJECT OR SCHEDULED TO WORK ON THE PROJECT AND A RATE FOR THEM
AND THAT'S THE AGREED UPON RATE PER HOUR THAT YOU'LL PAY FOR THESE INDIVIDUALS
THE DETAIL WASN'T, I GUESS, FROM WHAT I UNDERSTAND, IT SHOULDN'T HAVE BEEN IN THE CONTRACT, BUT IT WAS THERE
IT SHOWED YOU THE BUILDUP TO HOW TO GET TO THAT RATE AND IT WAS TURNER'S WORK FOR EACH OF THE INDIVIDUALS BY JOB TITLE AND BY POSITION NAME
SO WE TOOK A LOOK AT THE DETAIL IN THERE AND THEN WE ALSO GOT MORE DATA FROM TURNER
WE CLEANED UP SOME OF THE DATA AND WE DID IN ESSENCE, A COST PLUS ANALYSIS, A COST PLUS APPROACH
SO THERE'S TWO WAYS TO DO MEAN TO COME UP WITH A RATE
THERE'S A RATE TOOL THAT WE HAVE IN HOUSE, A MARKET RATE ANALYSIS WHICH USES OUR IN HOUSE BUILDUP AND SOME MODEL THAT WAS CREATED IN HOUSE AND WITH THE HELP, I BELIEVE, OF BCG, I MIGHT BE, YOU KNOW, IT'S AN IN HOUSE MODEL
SO WE HAVE THIS IN HOUSE MODEL AND THEN THERE'S ALSO A COST PLUS APPROACH AND WHAT WE USE IS A COST PLUS APPROACH WHERE YOU ADD UP ALL THE COSTS THAT MAKE UP THE RATE AND THEN YOU ADD A MARKUP ON THAT
THAT'S REASONABLE AND THAT'S PRETTY STANDARD
AND IN A LITTLE BIT I'LL LET DEBBIE AND PATRICIA TALK A LITTLE BIT ABOUT THAT AS WELL BECAUSE THEY SEE IT AND THEY'RE EXPERTS AT IT
CPO USED THEIR RATE TOOL THAT CAME UP WITH THE RATES
BUT WHEN WE RECALCULATED EACH POSITION, WE FOUND SOME THINGS AND SOME OPPORTUNITIES WHICH WE THOUGHT WERE THAT LED US TO CONCLUDE THAT MAYBE WE NEED TO TAKE A SECOND LOOK AT OUR RATE TOOL, LOOK AT THE INPUTS AND SEE IF THERE'S AN OPPORTUNITY TO FINE TUNE THAT A LITTLE BIT
AND I THINK BY DOING THAT, ESPECIALLY AS YOU SCALE UP ON THESE PROJECTS, REMEMBER, RIGHT NOW WE'RE AT LIKE 4 MILLION
THIS IS GOING TO GO TO 100 MILLION PLUS AND ALL OF THESE GCCMS ARE GOING TO BE USING A SIMILAR PROCESS
IN ADDITION, WE HAVE A LOT OF CAPITAL COMING AND A LOT OF SPEND THAT'S ON THE TABLE
SO HOW DO WE MAKE SURE OUR MODELS ARE UP TO DATE? THE FINAL RATE, LIKE I MENTIONED ON THE CONTRACT, IN COMPLIANCE WITH THE CONTRACT, WE PAID THE RATE, BUT THAT BUILD UP TO THE RATE IS WHAT WE'RE QUESTIONING AND WE'RE SAYING THERE'S AN OPPORTUNITY TO IMPROVE THE INPUTS IN THE MODEL
NEXT SLIDE, PLEASE
SO THE TOP ILLUSTRATES OUR INTERNAL RATE TOOL THAT GIVES YOU THE NEGOTIATED RATE BY POSITION AND INDIVIDUAL
AND THEN THE RIGHT YOU HAVE TURNER'S RATE BUILD UP WHICH WE ESSENTIALLY USED AND DID A COST PLUS ANALYSIS OF AND BUILT KNOW THEY BOTH COME UP TO A RATE THAT'S THEN USED IN THE CONTRACT AND THEN WE PAY THAT RATE FOR A POSITION PER HOUR THAT THEY WORK AT THE PORT
SO IF THEY WORK FOR 100 HOURS AND THEY CHARGE US $170 AN HOUR, DO THE MULTIPLICATION, THAT'S WHAT WE PAY THEM FOR
THAT IN THE BUILD UP, IF YOU DO A COST PLUS, YOU HAVE THEIR SALARIES, THEIR WAGES, EVERYTHING'S COVERED
YOU HAVE THEIR OVERHEAD, THEIR PROFIT
ALL THE KEY ELEMENTS SHOULD BE EITHER IN THE COST PLUS BUILD UP OR COVERED BY THE RATE TOOL
THERE'S NOTHING OUTSIDE THAT
SO AFTER THAT, AT THE END OF THE DAY, THOSE ELEMENTS ARE WHAT YOU'RE PAYING ON, AND THERE'S A PROCESS AND A WAY TO DO THAT
SO, LIKE, YOU KNOW, WE'VE GOT A SERIES OF ITEMS IN MY THIRD BULLET HERE THAT WE LOOKED AT THAT WOULD BE QUESTIONED IF WE USED A COST PLUS APPROACH
AND THAT'S HOW SPENCER CAME UP WITH AYE
DIFFERENCE ON POTENTIAL SAVINGS
AND AT THIS POINT, RATHER THAN GO THROUGH THE DETAIL HERE, I'M GOING TO LET THE EXPERTS TALK
SO, PATRICIA AND KNOW, IF YOU CAN UNMUTE AND WHOEVER WANTS TO TAKE THE STAGE AND TALK A LITTLE BIT ABOUT THESE, I WOULD APPRECIATE IT
AND INTRODUCE YOURSELF AS YOU COME ONLINE
GOOD MORNING
MY NAME IS PATRICIA FARRELL SHEARER, AND I'M A PROJECT EXECUTIVE WITH EARL TOWNSEND ASSOCIATES
AND DEBBIE TOWNSEND, OUR PRESIDENT, IS ALSO HERE, SO SHE MAY CHIME IN FROM TIME TO TIME
IN TERMS OF THE RATE BUILDUP, THERE WERE SOME ITEMS THAT I BELIEVE INTERNAL AUDIT IDENTIFIED AS POTENTIAL NON COMPLIANCE WITH THE AUDIT, PERHAPS NON REIMBURSABLE COSTS
AND FROM AN INDUSTRY STANDARD PERSPECTIVE, THE BENEFITS THAT WE IDENTIFY AS NON REIMBURSABLES ARE TYPICALLY WHAT IA HAD DONE AS WELL
SO, FOR INSTANCE, TUITION REIMBURSEMENT WE TYPICALLY SEE WITHIN THE INDUSTRY
KNOW THE CONTRACT REQUIRES SKILLED EMPLOYEES, AND THAT WOULD BE SOMETHING THAT WOULD BE COVERED BY THEIR GENERAL OFFICE OVERHEAD EXPENSE AND OR FEES
AND THEN BONUSES, OBVIOUSLY, ARE DISCRETIONARY
AND SO STAFF RETENTION, WE HAVE FOUND IN THE MARKETPLACE, THERE'S A LOT OF FLUCTUATION RIGHT NOW IN TERMS OF STAFF RETENTION
HOWEVER, WE WOULD LOOK AT THAT AS SOMETHING, AGAIN, THAT THE PORT MAY NOT HAVE TO PAY FOR IN THE MARKET RATE
EMPLOYEE ASSISTANT PROGRAMS, THINGS LIKE OUTSIDE EDUCATIONAL PROGRAMS, IN WHAT HAVE YOU FOR THE ASSISTANT PROGRAMS THAT THE EMPLOYEES MAY GO THROUGH
SO THE YEAR END PREMIUM PAY AGAIN, WE IDENTIFY THAT TYPICALLY AS DISCRETIONARY, AS SOMETIMES A BONUS AND OR OTHER AREAS WHERE THE YEAR END PAY IS HIGHER THAN THAT, WHICH WOULD BE THE NORMAL SALARY ABOVE AND BEYOND THE OTHER AREAS THAT INTERNAL AUDIT HAD IDENTIFIED
I THINK WHEN WE MET WITH SPENCER WAS A GENERAL LIABILITY INSURANCE RATE THAT APPEARED TO BE EXCESSIVE
AND HE SOUGHT OUR COUNSEL
AND WE HAVE A TENDENCY TO AGREE WITH AYE
IN THAT ACCORDING TO OUR DATABASES, HISTORICAL DATA THAT WE HAVE, WE TYPICALLY FIND THE INDUSTRY STANDARD TO RANGE BETWEEN 0.5 AND .75
AND SO, OF COURSE, THAT RAISES THOSE RATES THAT ARE BILLABLE FROM THE CONTRACTORS
WHAT WAS SOMEWHAT SURPRISING IN THE FINDINGS WAS THAT THE VIRTUAL DESIGN, WHICH IS A MODELING SYSTEM, IT'S A SOFTWARE PRODUCT THAT ALLOWS THE CONTRACTOR TO LOOK AT THE MECHANICAL AND THE ELECTRICAL DESIGN TO DETERMINE WHETHER THERE WILL BE CONFLICTS DURING THE CONSTRUCTION PHASE
AND SO THAT VIRTUAL DESIGN AND CONSTRUCTION SOFTWARE IS IN FACT A REIMBURSABLE
HOWEVER, IT WOULD BE SOMETHING THAT WE WOULD TYPICALLY SEE TO BE SOMEWHAT REASONABLE ONCE THEY INVEST IN THIS EQUIPMENT, INVEST IN THE SOFTWARE
WE DON'T SEE IT AS A RECURRING COST
I BELIEVE IN THIS PARTICULAR CASE, THE AVERAGE RATE SHOULD HAVE BEEN APPROXIMATELY $6.14
HOWEVER, THE AUDIT IDENTIFIED AREAS WHERE THE RATES WERE BETWEEN FIVE AND 75, WHICH WE DON'T TYPICALLY SEE WITHIN THE INDUSTRY FOR THAT PARTICULAR ROLE
AND THE BNO TAX PRETTY SIMPLE
I BELIEVE THAT THE BNO TAX FOR THE STATE OF WASHINGTON THAT WE HAVE USED FROM TIME TO TIME, OF COURSE, IS ZERO POINT 41%
AND THAT WAS ELEVATED AS WELL IN THE INTERNAL AUDITS REVIEW
DEBBIE, IF YOU HAVE SOMETHING WHEN WE LOOK AT THIS, WE WOULD RECOMMEND THIS IS AN ALTERNATIVE METHODOLOGY OF ESTABLISHING REASONABLE RATES FOR PROJECT MANAGEMENT THAT IS DOING PRECONSTRUCTION ALONG WITH DURING THE CONSTRUCTION PHASE
AND THAT WOULD BE SOMETHING THAT WE WOULD RECOMMEND TO THE PORT IN TERMS OF ESTABLISHING SOMETHING THAT YOU HAVE ACTUAL COST EVALUATIONS TO COME UP WITH SOMETHING THAT'S REASONABLE
AND DEBBIE, I'M THINKING MAYBE THROUGH THE DURATION OF THE PROJECT AS WELL, THAT MAY BE SOMETHING THAT IF THE COST, OBVIOUSLY THEY ARE GOING TO BE INCREASES AND WHAT HAVE YOU
AND SO IF, IN FACT, YOU CAN ESTABLISH A RATE THAT'S BASED ON ACTUAL COSTS OR INFORMATION THAT'S WITHIN THE INDUSTRY AND ESTABLISH THOSE RATES, THAT WOULD BE REASONABLE FOR THE DURATION OF THE PROJECT
RIGHT, I WAS GOING TO ADD TO THAT
WE'VE BEEN IN BUSINESS FOR OVER 30 YEARS, AND WE ONLY DO CONSTRUCTION AUDITING
SO WE HAVE QUITE A BIT OF HISTORY ON THIS TYPE OF AUDITING
MOST OF THE TIME, GENERALLY, OUR GO TO POSITION IS ACTUAL COST FOR LABOR
WE FIND THAT ANYTIME YOU USE A FIXED RATE, ESPECIALLY IF IT'S NOT AUDITED, YOU END UP PAYING MAYBE 15, 20% MORE THAN WHAT YOU WOULD EXPECT TO
WE BELIEVE THAT CONTRACTORS SHOULD BE PAID FAIRLY AND REASONABLY
AND I THINK YOU CAN DO THAT VIA THE AUDIT PROCESS, OR IT DOESN'T MATTER
IT DOESN'T AUDITORS HAVE TO DO IT
BUT WHOEVER REVIEWS TO MAKE SURE THAT THEY UNDERSTAND THE COMPONENTS IN THESE LABOR RATES AND PAY IN A REASONABLE AMOUNT, I THINK THAT'S REALLY THE OBJECTIVE OF WHAT I WOULD THINK THE PORT WOULD WANT TO GO TOWARDS
DEBBIE, WE ALSO USED REDUCED THE FEE FROM I BELIEVE IT WAS, WE SET IT AT FIVE TO 15% IS THAT WHAT YOU USED? FIVE TO 12%
FIVE TO 12% THAT SPENCER USED
I JUST WANT YOU TO COMMENT ON THAT AND SEE IF THAT'S REASONABLE AS WELL
RIGHT
WHEN WE REVIEWED WHAT SPENCER DID ORIGINALLY VERSUS SORT OF THE FINAL KNOW, I THINK HE HAS BEEN EXTREMELY FAIR AND CONSERVATIVE
THOSE FEE THAT GLENN JUST MENTIONED ARE REALLY ON THE VERY HIGH END OF WHAT WE TYPICALLY SEE
5.5% IS PROBABLY A GOING RATE RIGHT NOW, MAYBE EVEN A LITTLE ON THE HIGH SIDE
BUT I WOULD SAY, CONSIDERING THE TIMES, THAT'S PROBABLY NOT UNUSUAL, ESPECIALLY IN THE WASHINGTON AREA
BUT ANYTHING HIGHER, 15%
I HAVE NEVER SEEN ANY ON A BIG PROJECT LIKE THIS, HAVEN'T SEEN FEES THAT HIGH
SO I THINK THAT THE WORK I THOUGHT THE WORK DONE WAS LOOKED AT FAIRNESS FOR THE CONTRACTOR
AND I WILL TELL YOU, WE'VE AUDITED TURNER FOR YEARS AND HAVE A VERY GOOD UNDERSTANDING OF THEIR FINANCIAL SYSTEM, THEIR LABOR AND LABOR
YOU KNOW, I THINK WHAT SPENCER DID PRETTY MUCH FELL IN LINE WITH WHAT WE WOULD KNOW COMMENTED ON AS WELL
QUESTIONS? WELL, THANK YOU TO THE STAFF FOR THIS REPORT AND PATRICIA AND DEBBIE, THANK YOU FOR OFFERING YOUR EXPERTISE AND ALL OF THE INFORMATION THAT YOU TWO HAVE SHARED TODAY
ARE THERE ANY QUESTIONS FROM THE COMMITTEE MEMBERS AT THIS TIME? I HAVE ONE GENERAL QUESTION
I THINK ONE THING THAT STOOD OUT TO ME IN A PRESENTATION ON THE C CONCOURSE WAS THE $1.94 MILLION IN CHANGE ORDERS
AND I HAVE NO SENSE OF WHETHER OR NOT THAT'S A LOT OR A LITTLE
BUT OFTENTIMES I FEEL LIKE THERE'S ALWAYS THIS DEBATE, ESPECIALLY AROUND PROJECT MANAGEMENT, OVER HOW YOU GO ABOUT THE PROJECT, WHETHER IT'S GCCM OR DESIGN BUILD OR DESIGN BID BUILD
AND I'M CURIOUS IF WE'VE EVER LOOKED AT THE DATA AROUND HOW MUCH WE GET IN CHANGE ORDERS RELATIVE TO HOW WE'RE MANAGING THE PROJECT
AND OBVIOUSLY EVERY PROJECT IS A LITTLE DIFFERENT AND THE PROJECT COST IS DIFFERENT
BUT IT WOULD BE INTERESTING FOR ME TO SEE WE'RE SEEING A LOT MORE CHANGE ORDERS IN GCCM PROJECTS OR IN DESIGN BUILD PROJECTS, BECAUSE I THINK IT'S IMPORTANT FOR US TO UNDERSTAND AND BE ABLE TO FORECAST WHAT OUR COSTS ARE
AND IF WE CONTINUE TO GET RECURRING, IF WE SEE A PATTERN OF MORE CHANGE ORDERS IN CERTAIN TYPES OF PROJECTS THAN OTHERS, THEN MAYBE THAT'S REASON FOR US TO CONSIDER TAPERING THOSE KINDS OF PROJECTS
I ALSO HAVE A THEORY THAT CERTAIN PROJECTS ARE PROBABLY GOOD FOR DESIGN BUILD AND CERTAIN PROJECTS ARE GOOD FOR GCCM AND CERTAIN PROJECTS ARE GOOD FOR DESIGN BID BUILD
AND IT MIGHT JUST BE MY IGNORANCE ON HOW WE DECIDE WHICH ROUTE WE'D GO, BUT I WOULD IMAGINE THAT ANALYSIS ON THE CHANGE ORDERS AND WHATNOT COULD INFORM US ON THAT TOO
SO I SEE JANICE IS COMING, BECAUSE JANICE CAN ANSWER THAT
I DO KNOW JUST ONE COMMENT
I KNOW THE PORT HAD A LOT OF SUCCESS WITH GCCMS, AND ALSO IF YOU HAVE A LUMP SUM, IT'S NOT AUDITABLE
SO A LOT OF THESE THINGS THAT WE'RE TALKING ABOUT ARE JUST LUMPED TOGETHER, CHARGED TO THE PORT IN ONE, AND YOU CAN'T PICK IT APART FROM AN AUDIT PERSPECTIVE
SO THERE'S AN ADVANTAGE TO GCCMS FROM THAT PERSPECTIVE
AND I'LL LET JANICE TALK ABOUT WHETHER 1.94 IS REASONABLE AND CHANGE ORDERS
YEAH, THANK YOU VERY MUCH FOR YOUR QUESTION
I WOULD SAY THAT AS WE CONTINUE TO USE MORE GCCM, WE HAVE LEARNED A LOT IN THE LAST FOUR OR FIVE GCCM
THESE ONES YOU'RE SEEING HERE, THE NEXT ONE WITH THE MAIN TRAUMA, LOW VOLTAGE WAS AWARDED IN 2019, THIS ONE IN 2020
WHAT WE ARE LEARNING IS THE BENEFITS OF THE GCCM IN PRECONSTRUCTION
SO THESE EARLIER ONES, WE DID NOT HAVE ENOUGH MONEY IN THE PRE CONSTRUCTION FOR SOME OF THE SITE INVESTIGATION AND THE HELP THAT THEY DO WITH OUR DESIGNERS IN THIS EARLY PART OF THE DESIGN WORK
SO THAT'S WHY YOU'RE SEEING THE LARGE CHANGE ORDERS IN MAIN TERM, LOW VOLTAGE HAD AN INCREASE C CONCOURSE
AND THEN AS WE'VE MOVED ALONG IN OUR NEWER GCCM, WE'RE HAVING DISCUSSIONS TO REALLY UNDERSTAND FROM OUR LESSONS LEARNED, WHAT SHOULD WE HAVE AS A PRECONSTRUCTION CONTRACT VALUE THAT ACCOUNTS FOR THE SCOPE OF WORK THAT WE WANT DONE? BECAUSE THE REASON WE USE GCCM AND THE RCW 39 TEN IS BASED ON IS THAT EARLY INTERACTION OF THE CONTRACTOR TO HELP US VET AND REDUCE RISK AND UNDERSTAND THE SITUATION AND SITE CONDITIONS
AND I WOULD SAY THAT OVER THE FIRST COUPLE OF THEM THAT YOU ARE SEEING NOW, WE UNDERESTIMATED THE BENEFITS OF THE GCCM
AND SO THOSE INITIAL CONTRACTS, WE ISSUED CHANGE ORDERS TO INCREASE THE VALUE SO WE COULD GET MORE EFFORT OUT OF THE GCCM
AND CAN YOU REMIND ME WAS IF GCCM OR WAS THAT DESIGN BUILD? IT WAS PROGRESSIVE DESIGN BUILD
THAT'S WHAT I THOUGHT
OKAY
THANKS, SARAH
OKAY, ON THIS RECOMMENDATION, I GUESS I'M STILL TRYING TO PIECE TOGETHER SOME OF THIS
SO, LIKE THE GENERAL LIABILITY RATE AND THESE THREE ITEMS AT THE BOTTOM OF THIS PAGE, IS THAT IN OUR CPO MODEL THAT THESE ARE WRONG, OR IS THIS IN WHAT TURNER SUBMITTED THAT WAS THESE NUMBERS? NO
SO TURNER HAD SOMETHING ATTACHED ACTUALLY TO THE BACK OF THE CONTRACT
IT WAS A RATE BUILDUP TABLE
AND AN EXAMPLE IS IN THE ACTUAL AUDIT REPORT WHERE THEY LISTED OUT ALL OF THESE CHARGES AND LITERALLY THEY PUT THE RATES ON THERE AND HOW THEY CAME UP WITH THE FINAL CHARGE PER POSITION
SO THE TABLE WILL SAY, THESE ARE THE BENEFITS WE'RE CHARGING YOU
THIS IS THE VIRTUAL DESIGN COST, THIS IS OUR INSURANCE, THIS IS OUR TAX
AND IF YOU PUGET ALL OF THOSE, IT COMES UP TO A RATE, AND THAT RATE IS WHAT ENDS UP BEING CHARGED TO THE PORT
NOW, WHEN WE ASKED CPO WHY WAS THIS IN, THEY SAID THE TABLE SHOULDN'T HAVE BEEN IN THE CONTRACT
WE AGREED TO THIS RATE IN THE CONTRACT, SO WE SHOULD BE PAYING BASED ON THE RATE
AND THEY SAID OUR MODEL COMES UP WITH THE SAME RATE, SO OUR MODEL SAID THE RATE IS OKAY
AND THAT'S KIND OF WHERE WE OKAY
SO THAT'S WHY THE RECOMMENDATION IS FOCUSING ON OUR TOOL AND OUR CURRENT RATE TOOL, BECAUSE WE'RE SAYING BASED ON WHAT TURNER SUBMITTED, THESE ARE CLEARLY IS THIS DOESN'T LEAVE A LOT OF QUESTION MARK
I MEAN, LIKE, THE B O TAX RATE IS VERY CUT AND DRY
SO I GUESS I DON'T UNDERSTAND HOW I MEAN, FROM TURNER'S PERSPECTIVE, I GUESS THERE'S A PROFITABILITY ASPECT, OBVIOUSLY, BUT FROM OUR SIDE, WHY WOULD WE I CAN'T IMAGINE WE HAD THE RATE WRONG
SO DO WE HAVE SOMEWHERE ELSE IN OUR TOOL THAT IS TOO HIGH, THAT IS ACCOUNTING FOR HOW WE CAME UP WITH THE SAME RATE? LIKE, IF THE BNO TAX I CAN'T IMAGINE WE HAVE SOMETHING DIFFERENT THAN THE ZERO POINT 47 1%
CLEARLY TURNER'S DID
AND IF WE'RE SAYING OUR RATE TOOL CAME UP WITH THE SAME RATE, THEN WE'VE GOT PROBLEMS ELSEWHERE WITHIN OUR TOOL THAT WE NEED TO FIGURE OUT WHERE THEY ARE
DO WE KNOW WHERE THOSE ARE? WELL, THAT'S MY RECOMMENDATION
I HAVE SOME THEORIES, BUT I THINK YOU HAVE TO GO BACK AND LOOK AT THE TOOL
AND I THINK MY CONCERN WITH THE TOOL IS THAT WE'VE GOT THREE COMPONENTS THE MARKET RATE ANALYSIS, HISTORICAL, AND WHAT OTHER INFORMATION WE HAVE FROM THAT COMPANY
NORA IS GOING TO TALK ABOUT THIS IN A RESPONSE IF YOU'D LIKE HER TO RESPOND NOW
YES
AND YOU ALSO HAVE THE RL TOWNSEND FOLKS THAT CAN ANSWER ANY QUESTIONS FOR YOU
NORA, WOULD YOU LIKE AND KYLE, WOULD YOU LIKE TO RESPOND TO THAT? THANKS, COMMISSIONER
PUBLIC MEMBER
MY NAME IS KYLE DOBERT
I'M THE SENIOR MANAGER OF CONSTRUCTION CONTRACTING, SO I'M IN CHARGE OF THE GROUP THAT MANAGED THIS CONTRACT
JUST A COUPLE THINGS ABOUT THE RATE TOOL
SO, ONE, THE TABLE THAT TURNER PROVIDE WAS INFORMATIONAL
SO IT WASN'T IN THERE INCORRECTLY, BUT IT WAS FOR INFORMATION ONLY
WE DIDN'T USE THE RATE BUILDUP TO NEGOTIATE THE RATES, SO WE WERE LOOKING FOR A FAIR AND REASONABLE RATE BASED ON MARKET RATES
SO WE HAVE INFORMATION ABOUT WHAT A FAIR AND REASONABLE RATE FOR, LIKE, A PROJECT MANAGER ONE WAS
WE DIDN'T GO DOWN TO THE LEVEL OF BNO TAXES XYZ, SO WE KNEW THAT A PROJECT MANAGER ONE IN THIS AREA MIGHT MAKE, LET'S SAY, $100 FULLY BURDENED
TURNER SUBMITTED A RATE
WE USED THAT INFORMATION TO NEGOTIATE WHAT WE CONSIDERED IS A FAIR AND REASONABLE RATE
SO GLENN'S REFERRING TO NOW GOING BACK AND RECREATING THE RATE AS A COST PLUS FIXED FEE CONTRACT, THAT'S NOT HOW WE CAME UP WITH THE RATE
SO THAT'S WHY THERE'S MAYBE A DISCREPANCY WITH WHAT THEY'RE SAYING AND WHAT OUR TOOL MIGHT HAVE
OUR TOOL WOULDN'T USE THIS INFORMATION
SO I GUESS CAN YOU ELABORATE ON WHAT THE TOOL USES FOR THE FAIR MARKET RATE? WHAT ARE THE INPUTS FOR THAT, THEN, YEAH, FOR THE MARKET RATE, WE GET A NUMBER OF DATA POINTS FROM DIFFERENT MARKET BOOKS
I DON'T HAVE THE MANAGER HERE WHO HAS ACTUALLY CREATED THE DOES THE INPUTS AND STUFF
SO BASICALLY WE GO AND ON AN ANNUAL BASIS, THERE ARE A NUMBER OF REFERENCE GUIDES THAT WE USE THAT WE INPUT THAT INFORMATION AND THEN WE BREAK IT DOWN BY JOB CLASSIFICATION
WE DO, I THINK IT'S A ONE THROUGH TEN GRADE, SO TO SPEAK
SO IT CAN BE A PM ONE UP THROUGH A PM TEN
AND SO WE USE THE MARKET DATA TO CREATE A CALCULATION IN ORDER TO COME UP WITH WHAT THE MARKET RATE IS
I THINK IT'S IMPORTANT TO ALSO UNDERSTAND WE DON'T JUST USE ONE TOOL, WE DON'T USE ONE DATA POINT
SO WHEN WE'RE LOOKING AT THIS, WE LOOK AT THE INFORMATION THAT COMES FROM OUR DIFFERENT RATE BOOKS AND CREATE THAT CALCULATION THROUGH THE TOOL
WE ALSO LOOK AT HISTORICAL INFORMATION, AND I'M NOT NECESSARILY CERTAIN IN THIS INSTANCE, A LOT OF TIMES WE CAN LOOK AT OTHER INVOICES WHAT OTHER AGENCIES, WHAT OTHER COMPANIES PAY IN ORDER TO UNDERSTAND SORT OF WHAT ARE ALL THOSE DIFFERENT DATA POINTS
IN ORDER TO DETERMINE WHAT IS A FAIR AND REASONABLE BILLING RATE, WE SPECIFICALLY CHOSE NOT TO DO A COST REIMBURSEMENT
IT'S NOT COMMON TO DO THOSE ON GCCM TYPE CONTRACTS
OKAY, SO I GUESS MY CONCERN IS THE SPECIFIC ITEMS IDENTIFIED HERE SEEM PRETTY BLACK AND WHITE
AND WHEN WE'RE LOOKING AT COMPARING TO A FAIR MARKET RATE THAT WE ARE UPDATING ANNUALLY, IT SOUNDS LIKE WE ARE LOOKING AT THOSE EACH YEAR
OBVIOUSLY, THE ECONOMY AND DEMAND AND AVAILABILITY OF RESOURCES OF THESE TYPE OF PEOPLE IS GOING TO MAKE A BIG DIFFERENCE IN THAT
AND THEN HISTORIC TRENDS, I GUESS WITHOUT TRYING TO GET TOO MUCH INTO THE DETAILS, I'M TRYING TO UNDERSTAND HOW THE TOOL SO YOU HAVE THESE RATE BOOKS THAT GIVE YOU, HEY, THIS IS A PM ONE, THIS IS THEIR RATE, WE INPUT THAT
HOW DOES HISTORIC PLAY INTO THAT AND DOES IT AVERAGE ALL THOSE? AND WHEN YOU GUYS LOOK AT IT, LIKE TURNER SAID, OKAY, THIS IS $50 AN HOUR
OUR TOOL SAYS BETWEEN 30 AND 50 IS REASONABLE
SO DO YOU GUYS JUST SAY, OKAY, WE'RE OKAY WITH 50? CAN YOU TELL ME A LITTLE BIT MORE ABOUT THAT PART TOO? THE FOLKS WHO ARE NEGOTIATING THIS LOOK AT ALL THE DIFFERENT DATA POINTS, AND IT IS ASSESSING THOSE DATA POINTS USING SORT OF THEIR UNDERSTANDING OF THE WORK
IT'S NOT JUST CPO
SO WE ALSO PULL IN JANICE'S TEAM, THE PROJECT MANAGEMENT TEAM, AND SO THE TEAM AS A WHOLE LOOKS AT ALL OF THE DIFFERENT DATA POINTS THEY ARE GIVEN
SO ON THE HISTORICAL INFORMATION, WE CAN DIG DOWN AND SEE HOW MANY TIMES IT'S BEEN USED
WE CAN LOOK AT WHAT THE AVERAGE IS
AND SO WE ARE LOOKING AT MULTIPLE LAYERS OF SORT OF THE DATA IN ORDER TO DETERMINE WHAT WE BELIEVE IS AN APPROPRIATE BILLING RATE
AND ONE FOLLOW UP, YOU HAD ASKED A GOOD QUESTION AROUND
IF OUR TOOL IS SAYING THIRTY DOLLARS TO FIFTY DOLLARS, AND IT'S $50, DO WE JUST APPROVE IT? GENERALLY? NO
WE HAVE A NEGOTIATION STRATEGY THAT SETS A REPORT TARGET, AND WE WILL PUSH TO THAT TARGET
AND GENERALLY IT'S NOT ON THE HIGH END OF WHATEVER OUR RANGE IS
FOR THIS CONTRACT, FOR EXAMPLE, WE REDUCE RATES TOTALLY DOWN 7% FROM WHAT WAS INITIALLY REQUESTED
SO, FOR EXAMPLE, IF THEY HAD REQUESTED $100 WORTH OF RATES, WE ACTUALLY NEGOTIATED IT, AND THE CONTRACT ENDED WITH $93 WORTH OF RATES ON AVERAGE
SO THERE'S SOMEONE ONLINE WHO HAS A HAND UP, MAYBE SARAH, THEY'LL BE ABLE TO ANSWER YOUR QUESTIONS
ADDITIONALLY, I DON'T SEE THE NAME OR OH, YOU DON'T KNOW WHO IT IS? YOU'RE WELCOME TO ANSWER IF YOU HAVE A COMMENT
HELLO, THIS IS MANDELA
CAN YOU GUYS HEAR? YEAH
YES
OKAY, A COUPLE COMMENTS AROUND THE SPECIFICS
I AM WORKING
MY NAME IS MANDELA THOMAS
I HELP RUN THE ANALYTICS TEAM THAT HELPS DO THESE RATES
I WORK FOR NORA
SO THE SOURCES, WHERE DOES THE MARKET DATA? I WANTED TO SPEAK TO THAT, AND THEN I CAN ALSO COMMENT ON SOME OF THE HISTORICAL QUESTIONS AROUND HOW THE HISTORICAL NUMBERS ARE USED
SO AMERICAN COUNCIL OF ENGINEERING COMPANIES, THAT'S WHERE WE GET SOME MARKET INFORMATION
WE LOOK AT THE BUREAU OF LABOR STATISTICS
WE LOOK AT THE AMERICAN SOCIETY OF CIVIL ENGINEERS AND A COUPLE OF OTHER SOURCES
SO THOSE ARE THE TYPES OF MARKET INFORMATION THAT WE COLLECT AND SYNTHESIZE
AND THEN FROM THE HISTORICAL PERSPECTIVE, WE DO LOOK AT THE AVERAGE OF WHAT WE'VE PAID HISTORICALLY OVER A PERIOD OF TIME
AND IF THAT AVERAGE, IF WE HAVE MAYBE TWO OR THREE INSTANCES OF THAT PARTICULAR RATE, THEN THAT HAS LESS OF A SIGNIFICANCE
BUT IF WE HAVE, SAY, 150 INSTANCES OF HISTORICAL DATA, THEN WE KEY IN AND PAY A LITTLE BIT MORE ATTENTION TO THAT
SO THE NICE THING ABOUT THE MARKET DATA IS IT GIVES US A LOT OF INFORMATION, BUT IT IS THE AVERAGE
SO YOU'RE GOING TO HAVE OUTLIERS THAT ARE ABOVE AND OUTLIERS THAT ARE BELOW
AND THE MARKET NUMBERS WILL FIT VERY WELL FOR A BULK OF IT, BUT THERE ARE INSTANCES WHERE IT DOESN'T FIT
AND THEN THAT'S WHY IF THE MARKET INFORMATION ISN'T MAKING SENSE, THEN WE SAY, OKAY, WELL, WHAT'S HAPPENED AT THE PORT HISTORICALLY? BECAUSE WE HAVE DIFFERENT REQUIREMENTS AT THE PORT
AND SO WE LIKE TO UNDERSTAND WHERE THAT HAS BEEN IN THE PAST, AND THAT CAN HELP US INFORM HOW WE GO
BUT WE DON'T LOOK AT SOLELY STRICTLY MARKET AND ONLY THAT WE DON'T LOOK AT SOLELY HISTORICAL, BUT THESE ARE REFERENCE POINTS TO HELP US GO INTO A NEGOTIATION INFORMED
DOES THAT ANSWER THE QUESTIONS AROUND THE HISTORICAL AND THE DIFFERENT SOURCES? YEAH, THAT'S SUPER HELPFUL
THANKS FOR GIVING SOME DETAIL
I GUESS IF I TAKE A STEP BACK HERE, WHAT I WOULD ULTIMATELY SAY IS BASED ON WHAT INTERNAL AUDIT FOUND OF SAVING APPROXIMATELY 160 TO 257,000, WHEN YOU LOOK AT FULLY BURDENED, LIKE DOING LIKE A COST PLUS METHODOLOGY
I UNDERSTAND YOU GUYS SAID THAT'S NOT TYPICALLY HOW WE DO THESE GCCMS, AND I GET THAT
BUT I THINK AT A MINIMUM, THIS BEGS THE QUESTION OF WE PROBABLY NEED TO LOOK AT THE WAY WE'RE PUTTING THIS TOGETHER BECAUSE IT SEEMS LIKE WE'RE MISSING SOMETHING
IF THE FULLY BURDENED COST IS COMING UP WITH THIS KIND OF DISPARITY BETWEEN WHAT OUR MODEL IS SPITTING OUT, IT SEEMS LIKE AT THE END OF THE DAY WE'RE MISSING SOMETHING OR WE'RE LEAVING SOMETHING ON THE TABLE THAT IS COSTING THE PORT MONEY
YEAH, THANKS FOR THAT
I'D LIKE TO JUST RESPOND QUICKLY
CERTAINLY WE THINK COST PLUS OR COST REIMBURSEMENT MODELS ARE AN OPTION FOR THE PORT
IT'S SOMETHING WE CONSIDER ON EVERY CONTRACT THAT WE DO
BUT THERE IS CERTAINLY SOME INAPPROPRIATENESS ABOUT COMPARING THIS COST REIMBURSEMENT MODEL WITH THE WAY THAT WE DID IT
ONE IS RISK MANAGEMENT
SO THE RISK PROFILES ARE CONSIDERABLY DIFFERENT BETWEEN THE TWO CONTRACT TYPES
SO A COST REIMBURSEMENT CONTRACT THROUGHOUT THE LIFE OF THE CONTRACT WILL PAY ACTUAL COSTS
YOU HAVE NO PROTECTION AGAINST INDIRECT COST RATES GOING CONSIDERABLY HIGHER AND THEY ARE ADMINISTRATIVELY CONSIDERABLY BURDENSOME
THE TIME TO VERIFY THOSE COSTS THAT THE CONTRACTOR IS SUBMITTING TAKES CONSIDERABLE TIME AND IT MAKES US SLOWER FOR PROJECT DELIVERY
SO THOSE ARE CERTAINLY QUESTIONS THAT WE CONSIDER WHEN WE PICK A CONTRACT TYPE
I ACTUALLY ALSO HAVE CONCERNS WITH THE POTENTIAL COST SAVINGS THAT WE'VE LISTED IN THIS
SO ONE GOOD EXAMPLE IS THE GENERAL LIABILITY INSURANCE COST REIMBURSEMENT MODEL
CONTRACTS PAY ACTUAL COSTS
SO WE'VE CHOSEN TO SAY INDUSTRY STANDARDS 0.5%
THEY BILLED US 1.2%, BUT WE DON'T LIKE THAT BECAUSE INDUSTRY STANDARDS 0.5, IT COULD BE 10%
IF THAT'S WHAT IT COSTS TURNER, THEN THAT'S WHAT IT COSTS US IN A COST REIMBURSEMENT MODEL
SO WE CHOSE FOR OUR ANALYSIS TO REDUCE COSTS THAT SHOULD NOT HAVE BEEN REDUCED
ANOTHER EXAMPLE OF THIS IS THE BENEFITS CHARGE WHERE WE REDUCED A LOT OF THINGS THAT WE SAID ARE SOMETIMES NOT ALLOWABLE THAT NEEDS TO BE NEGOTIATED AND FIGURED OUT
WE SHOULDN'T HAVE JUST WIPED THOSE OFF THE BOARD
AND THEN FINALLY THE FEE AT FIVE AND A HALF PERCENT THAT THEY INCLUDED, THAT IS CERTAINLY STANDARD FOR CONSTRUCTION
I AGREE WITH THAT
THIS IS NOT EXACTLY A CONSTRUCTION CONTRACT
PRECONSTRUCTION CONTRACTS ARE MORE SIMILAR TO A PROFESSIONAL SERVICES CONTRACT
THEY DON'T HAVE MATERIAL COSTS AND MARKUP ON THOSE AND THINGS THAT A CONSTRUCTION CONTRACT WILL MAKE
AND THERE ARE MANY REFERENCES THROUGH ACEC OR EVEN FEDERAL LEGISLATION LIKE 23 CFR THAT LISTS COST PLUS FEE CONTRACTS GENERALLY ARE EIGHT TO 15%
WE CHOSE TO USE 5% FOR THE PURPOSE OF SHOWING A COST SAVINGS
THAT IS PROBABLY INAPPROPRIATE, I GUESS, HEARING THAT FEEDBACK
ONE THING
I GUESS I WOULD DIRECT THIS TO GLENN AND TEAM
WHAT IS OUR PROCESS FOR LIKE WHEN THERE'S DEBATE AMONG STAFF THAT WE'RE KIND OF WORKING ON THIS AND THE PEOPLE WORKING ON THIS VERSUS WHAT WE FOUND, IT SEEMS LIKE WE'RE NOT ON THE SAME PAGE AND WE'RE BRINGING THIS FORWARD TO BE PRESENTED WITH THESE SPECIFIC NUMBERS
BUT IT SOUNDS LIKE THEY HAVE SOME PRETTY SIGNIFICANT CONCERNS OR IDEAS AROUND WHY THEY DID WHAT THEY DID
SO WHEN WE PUT THIS TOGETHER, WHERE DOES IT GO? WHAT IS THE PROCESS HERE? I GUESS I DON'T KNOW
SO I'LL PROVIDE AN OVERVIEW
WE DO HAVE A DISAGREEMENT ON IT
THAT'S CLEAR
I THINK THIS PROCESS STARTED PROBABLY ABOUT SIX MONTHS AGO, AND WE CHOSE NOT TO BRING IT TO THE LAST AUDIT COMMITTEE MEETING BECAUSE WE HADN'T IRONED OUT SOME OF THE THINGS
BUT OUR POSITION STILL IS THAT THIS TIES TO THE RATE TOOL
WE THINK THERE'S AN OPPORTUNITY THAT NEEDS TO BE ADDRESSED
I THINK WE'RE SPENDING TOO MUCH
OUR RATE TOOL NEEDS TO BE RECALIBRATED, AND THAT CAME FROM A PRIOR AUDIT WHERE WE TOOK IT APART AND WE IDENTIFIED OPPORTUNITIES FOR IMPROVEMENT
SO THE OLD AUDIT ISSUE STILL STANDS
IT HASN'T BEEN ADDRESSED
NOW, WE DISAGREE IN SOME THINGS
I THINK THAT'S WHY ON THE RATES, THERE'S STILL MONEY IN THE TABLE
BUT I BELIEVE THAT'S WHY WE HAD DEBBIE TOWNSEND AND PATRICIA SPEAK A LITTLE BIT ABOUT WHAT THEY'RE SEEING AND WHY THEY THINK RATES ARE DIFFERENT
WHEN WE TALK ABOUT GLI
YEAH, THEY MIGHT HAVE AN ACTUAL GLI OF 10%, BUT THAT'S UNREALISTIC
I MEAN, I THINK THEY KNOW WHAT TURNER'S GLI IS, AND THAT'S WHY THEY WORK WITH TURNER EVERY DAY, AND THAT'S WHY THEY BROUGHT THAT UP
RIGHT
AND WE CAN ASK THEM AS WELL
SPENCER, IS THERE ANYTHING YOU'D LIKE TO ADD TO THAT? YEAH, MAYBE
I'LL JUST EVEN AT A HIGHER LEVEL OF PROCESS THROUGHOUT THE ENGAGEMENT, AS WE'RE FORMULATING CONCLUSIONS, WHAT WE'RE SEEING AT THE TIME, WE WORK WITH THE DEPARTMENTS
IN THIS PARTICULAR CASE, OF COURSE, THERE'S A DISAGREEMENT ON THE CONCLUSIONS, BUT IN MOST CASES, THROUGHOUT THE ENGAGEMENT OF CONTINUOUS MEETINGS AND UPDATES, USUALLY THE CONCLUSIONS OF THE AUDITS ARE AGREED UPON
WOULD YOU GUYS AGREE THAT UNDER MOST CIRCUMSTANCES GLENN JUST ADDING ON TO WHAT SARAH HAS ALREADY SAID, AND YOU ASKED WONDERFUL QUESTIONS TODAY THAT WERE REALLY HELPFUL
SO I JUST WANT TO THANK YOU FOR YOUR CONTRIBUTIONS
IT'S CLEAR THERE'S A DISAGREEMENT
SO I WONDER IN THIS CASE, WHAT ARE OTHER AGENCIES DOING AROUND THE STATE, AND HOW DOES THIS COMPARE TO WHAT THOSE AGENCIES ARE DOING? WOULD WE BE ABLE TO GET SOME DATA OR SOME INFORMATION THAT PROVIDES A COMPARABLE ABSOLUTELY
GO AHEAD
YES
ESPECIALLY WHEN IT COMES TO GCCM PROJECTS THROUGHOUT ALL AGENCIES, THEY ALL HAVE TO FOLLOW THE SAME RCW
SO THERE'S A LOT OF THESE TYPE OF PROJECTS OUT THERE AMONGST AGENCIES AND EXTERNAL INDEPENDENT AUDIT, CONSTRUCTION AUDIT FIRMS THAT ARE PERFORMING VERY SIMILAR WORK
SO THE INFORMATION IS DEFINITELY AVAILABLE
IS IT IN ALIGNMENT WITH WHAT YOU GUYS ARE FINDING? IS OTHER AUDITORS
FINDING SIMILAR CONCERNS
WELL, SO WHEN WE LOOKED AT THE A E RATE TOOL THE FIRST TIME AND HOW WE COME UP WITH THE RATES WE FOUND, YOU KNOW, IT WAS ACTUALLY RAISED TO US FROM INSIDE CPO
SOMEBODY HAD RAISED A CONCERN TO US SAYING THE TOOL ISN'T FUNCTIONING AS INTENDED
SO WE DID OUR FIRST AUDIT
WE ALSO LOOKED AT WHAT THE STATE AUDITOR WAS DOING
THE STATE AUDITOR HAD DONE AN AUDIT, A SIMILAR TYPE OF AUDITS, AND RATES ON THE COLUMBIA CROSSING BRIDGE
SO WE USE LEVERAGE OFF THAT WE TALKED TO WSDOT AT THE TIME, AND WE STILL THINK THERE'S AN OPPORTUNITY TO IMPROVE IN HOUSE
AND THAT'S KIND OF WHY WE'VE GOT IT ON THE KNOW
THERE'S A CERTAIN POINT WHERE DO YOU LET THE AUDIT ISSUE GO AWAY OR DO YOU KIND OF KEEP IT OPEN ON THE TABLE AND SAY THERE'S AN OPPORTUNITY TO IMPROVE, BUT IF WE'RE NOT GOING TO ADDRESS ANYTHING ON IT, THEN THAT'S FINE
WE DID WANT TO BRING IT FORWARD AND NOT PART OF WHAT WE DO AS NODDERS
WE'RE NOT ALWAYS GOING TO AGREE
LIKE I SAID, NINE OUT OF TEN TIMES, WE DO AGREE, OR 99% OF THE TIME WE DO AGREE, BUT THERE ARE TIMES WHERE WE DON'T
BUT WE'LL RAISE IT
IF MANAGEMENT ACCEPTS THE RISK, WE CLOSE THE ISSUE OUT AND MOVE FORWARD
I THINK IT'S REALLY STILL VERY CONCERNING HOW ELEVATED THESE NUMBERS ARE
AND I ALSO THINK ABOUT THE HISTORICAL INFORMATION THAT WE'RE USING
AND I KNOW THAT YOU GUYS HAVE SAID YOU USE A RATE BOOK AND THERE'S A LOT OF OTHER INFORMATION THAT'S BEING CONSIDERED
BUT ULTIMATELY WHATEVER IS COMING OUT AS AVERAGE I FEEL LIKE IS ON THE HIGHER END
WE'RE KIND OF GETTING THE SHORT END OF THE STICK HERE IS HOW I FEEL
AND SO IT MAKES ME THINK THAT WHAT COULD WE BE DOING BETTER IS THAT WHEN WE'RE CONSIDERING THINGS LIKE HISTORICAL NUMBERS AND NOT FOCUSED ON JUST THE MARKET RATE IN ITSELF, I FEEL LIKE WE'RE PROVIDING A LOT OF GRACE AND NOW WE'RE TALKING ABOUT MONEY
AND ARE THOSE OTHER CONTRACTORS WILLING TO ACCOUNT FOR HISTORICAL NUMBERS? IF THOSE NUMBERS HAVE BEEN LOWER IN THE PAST, WOULD THEY HONOR SOMETHING LIKE THAT? AND I WOULD DOUBT THAT
AND SO WHAT IS THE USE OF THAT, IS WHAT I WONDER
AND IS IT ULTIMATELY, BY INCLUDING THAT IN OUR CONSIDERATION, ARE WE ENDING UP HAVING TO PAY MORE AND SHOULD THAT BE REMOVED? AND SO I DON'T THINK THE SITUATION IS LIKE, WE DISAGREE AND WE BOTH LEAVE THE TABLE SORT OF THING, BUT WE GOT TO GO BACK TO THE DRAWING BOARD AND FIGURE OUT WHERE ARE THE ROOMS TO MAKE IMPROVEMENTS AND IF OTHER AGENCIES ARE DOING THE EXACT SAME THING
I DO THINK WE SHOULD HEAR THAT BACK AS A COMMISSION TO SAY THAT, OKAY, THERE'S ALL OF THESE AGENCIES THAT ARE DOING THIS, AND IT IS BEST PRACTICE, IT'S BEEN PROVEN, AND THIS IS THE ONLY WAY THAT WE CAN MANAGE SOMETHING LIKE THIS
I DON'T THINK THAT THIS IS A DONE THING, AND I KNOW YOU WANT TO RESPOND
YEAH, PLEASE, GO AHEAD
THANK YOU
AND MAYBE MANDELA WOULD EVEN LIKE TO CHIME IN AS WELL
BUT I DO SIT ON THE PROJECT REVIEW COMMITTEE AT THE STATE
I KNOW JANICE SITS ON CPARB, WHICH IS THE PARENT COMMITTEE OF THAT THAT SEES ALTERNATIVE PUBLIC WORKS AS A DELIVERY METHOD, AND AGENCIES COME TO GET APPROVAL FOR THAT
SO I DO HAVE SOME INSIGHT INTO WHAT SOME OTHER AGENCIES ARE DOING, AT LEAST FOR GCCM
AND ACTUALLY, MOST ARE NOT EVEN THIS ROBUST, SO A LOT OF THEM DO JUST COMPETE THEM AS PART OF THE RFP PROCESS
PLEASE TELL US WHAT YOUR RATES ARE ON THE PM, AND WE'LL USE IT AS A VERY SMALL PART OF THE ANALYSIS FOR SELECTING THE WINNING CONTRACTOR
AND THEN THAT RATE, REGARDLESS IF IT'S HIGH OR NOT, GETS INCLUDED IN THE CONTRACT
SOME DO A NEGOTIATED PROCESS LIKE WE'RE DOING, BUT THEIR TOOLS ARE GENERALLY NOT AS ROBUST
IT GENERALLY DOES SCALE WITH THE SIZE OF THE AGENCY AND HOW SOPHISTICATED THEY ARE
I'M NOT AWARE OF ANY THAT DO COST REIMBURSEMENT MODELS, BUT THEY COULD BE OUT THERE
JEZ, I'M NOT SURE IF YOU HAVE ANYTHING ELSE TO ADD, AND MANDELA MIGHT LIKE TO TALK A LITTLE BIT MORE ABOUT AYE
PROCESS, SPECIFICALLY TO YOUR COMMENTS, COMMISSIONER
YEAH
THANK YOU, KYLE
I WAS ACTUALLY JUST LOOKING
WE HAVE TWELVE PUBLIC AGENCIES AROUND THE STATE THAT ARE CERTIFIED TO USE GCCM, AND CERTAINLY WE CAN DO SOME OUTREACH TO SEE WHAT THEY'RE DOING
CPARB ACTUALLY ALSO HAS A GCCM BEST PRACTICES COMMITTEE WHERE WE'RE IN THE MIDDLE OF TRYING TO FINALIZE THE BEST PRACTICES GUIDE, AND WE CAN TAKE A LOOK TO SEE IF WITHIN THE GUIDE THIS PARTICULAR ITEM HAS BEEN ADDRESSED
AND IF NOT, MAKE SURE THAT WE BRING THAT UP BECAUSE I THINK IT'S AN IMPORTANT DISCUSSION ABOUT WHAT ARE THE BEST PRACTICES AROUND THIS
AND CERTAINLY LOOKING AROUND THE STATE TO SEE WHAT OTHERS ARE DOING WOULD BE IMPORTANT
JANICE AND THE OTHER THING THAT'S REALLY HELPFUL, AND IF YOU GUYS CAN COME BACK TO US WITH THAT INFORMATION, THAT WOULD BE GREAT
THIS WHOLE MODEL
I ALSO DO WONDER, HOW DOES THIS APPLY WHEN WE'RE DEALING WITH WMBE BUSINESSES? IS THE SAME LEVEL OF SORT OF GRACE AND INFORMATION BEING ACCOUNTED FOR? YEAH, I CAN ANSWER THAT QUESTION
WE USE THE DIFFERENT DATA POINTS FOR ALL OF OUR FIRMS, AND SO THAT WAY WE ARE TRYING TO BE CONSISTENT AMONGST THEM ALL AND TAKE INTO ACCOUNT THE NUANCES OF THE DIFFERENT FIRMS SO SOMETIMES WMBE FIRMS WILL GIVE US, IN ADDITION TO OUR MODEL, IN ADDITION TO HISTORIC, IF THEY HAVE INVOICES WHERE THEY CAN SHOW THAT OTHER AGENCIES ARE PAYING
SO, SAY IF OUR MODEL IS LOWER, OUR HISTORICAL SHOWS LOWER
IF THEY CAN SHOW THAT THEY HAVE A CONSISTENT PRACTICE OF GETTING PAID AT A DIFFERENT RATE, WE WILL LOOK AT THOSE INVOICES AND TAKE THAT INTO ACCOUNT WHEN WE ARE NEGOTIATING THE BILLING RATES WITH THEM
INTERESTING
OKAY, WELL, THANK YOU GUYS FOR PRESENTING
I DON'T THINK WE HAVE THANKS
DO WE HAVE ANY ADDITIONAL INFORMATION? I WANT TO THANK THE STAFF FOR THE REPORT AND TO THE TEAMS THAT ARE MANAGING THIS
THANK YOU FOR THE INFORMATION THAT YOU'VE SHARED
SO I WILL MOVE US ALONG
COMMISSIONER, THERE'S A COUPLE MORE ISSUES IN THIS REPORT THAT WE HAVE TO MOVE THROUGH
OKAY, GREAT
AND THEN WE'LL MOVE TO THE NEXT SPENCER, MICHELLE
NEXT SLIDE, PLEASE
LET'S MOVE ONE MORE FORWARD
AND ONE MORE
OKAY, PERFECT
AND SPENCER IS GOING TO TALK ABOUT THIS ONE
THANK YOU, GLENN
COMMISSIONER
MS HOLMSTROM
THE SECOND ISSUE IS SIMILAR TO WHAT WE WERE JUST DISCUSSING ON THE PREVIOUS ONE
THIS IS RELATED TO DURING OUR TESTING, IN SOME OF THE INSTANCES WE NOTICED, THERE WAS A LACK OF DOCUMENTATION THAT SUPPORTED THE APPROVED RATES THAT HAMDI EXCEEDED THE PORT PORTS MARKET MAXIMUM
SOME OF THE REASONS PROVIDED TO US WERE THAT IN CERTAIN CASES, THIS IS A PERMISSIBLE PRACTICE, PROVIDING THAT A CONTRACTOR PROVIDES DOCUMENTATION JUSTIFYING THE REQUESTED HIGHER RATE, AND ADDITIONAL REASONS PROVIDED WHY DOCUMENTATION WAS ABSENT
WAS THE PERSON THE RATE ANALYST THAT WAS RESPONSIBLE FOR APPROVING THE RATES AT THIS TIME? THIS WAS 2020 TIME FRAME SO THAT THAT RATE ANALYST WAS NO LONGER AT THE PORT AND DOCUMENTATION COULD NOT BE FOUND
NEXT SLIDE, PLEASE
HERE'S OUR RECOMMENDATIONS, AND KYLE AND NORA CAN PROVIDE THEIR MANAGEMENT RESPONSE AND ANSWER ANY QUESTIONS
TWO MORE
IN ESSENCE, IT'S A DOCUMENTATION ISSUE
WHEN WE WENT TO LOOK FOR THE DOCUMENTATION, IT WASN'T THERE NO RESPONSE FROM US
WE APPRECIATE THE AUDIT, AND I DO THINK OVERALL CPO IS VERY FOCUSED ON PROCESS IMPROVEMENT, MAKING SURE WE HAVE THE RIGHT DOCUMENTATION, AND ALSO MAKING SURE THAT WE'RE TAKING INTO SORT OF THE REASONABLENESS OF THE DOCUMENTATION AND STUFF
AND SO AS WE PROGRESS FORWARD, WE DO WANT TO MAKE SURE WE HAVE THE RIGHT LEVEL OF DOCUMENTATION
ANYWAY, THIS IS MANDELA QUICK COMMENT TO THAT
THOSE FILES WERE ON SOMEBODY'S HARD DRIVE
THEY LEFT, AND THE FILES DISAPPEAR TODAY
WE HAVE THEM STORED ON A SHARED LOCATION, AND THAT'S BEEN IN PLACE FOR THE LAST COUPLE OF YEARS, BUT IT WAS NOT IN PLACE IN THAT 2020 TIME FRAME
I HAVE A QUICK QUESTION, GLENN
DOES THAT MEAN YOU GO BACK AND LOOK AT THOSE DOCUMENTATION? NO, WHAT MANDELA SAID IS HE DOESN'T HAVE IT ANYMORE, SO THERE'S NOTHING HE SAID THEY FIXED IT GOING FORWARD, BUT GOING BACK, I SEE THEY DON'T HAVE AN ADDRESS
JUST A QUICK QUESTION
I WANT TO MAKE SURE I UNDERSTAND THIS
SO WE DID THE RATE NEGOTIATION
THE NEGOTIATION LIKE IT WAS OVERALL 7% THAT YOU HAD MENTIONED, LESS THAN WHAT THEY HAD SUBMITTED
SO ARE WE SAYING THAT IN THIS SPECIFIC ISSUE, THAT RATE THAT WE AGREED TO, WE HAD SOME THAT CAME IN HIGHER, AND THERE WASN'T DOCUMENTATION OF THAT? IS THAT WHAT WE'RE SAYING? AS PART OF THE 7% PROCESS, WE NEGOTIATED EVERY SINGLE RATE
SOME OF THEM WE HAD A PORT TARGET THAT WE DIDN'T AYE., SOME WE EXCEEDED THE PORT TARGET AND WENT EVEN LOWER THAN THE PORT TARGET
AND THIS IS SAYING IN SOME OF THOSE INSTANCES WHEN WE WENT ABOVE THE PORT TARGET, THERE WASN'T THE LEVEL OF DOCUMENTATION THAT AUDIT PREFERRED
WE THOUGHT WHEN YOU LOOK AT THE MATERIALITY OF THE NUMBERS, MAYBE OUR DOCUMENTATION WAS OKAY, BUT THAT WE WOULD ALWAYS LOOK AND MAKE SURE THAT GOING FORWARD OUR DOCUMENTATION IS AS ROBUST AS WE SHOULD HAVE IT
OKAY, SO YOU'RE SAYING THE NEGOTIATED RATE WAS HIGHER THAN THE TARGET WE HAD, BUT WE STILL NEGOTIATED AND AGREED TO THAT RATE, BUT WE DIDN'T KEEP IT
OKAY
THAT'S WHAT I UNDERSTAND
THANKS, KYLE
THANK YOU
AND THEN THE THIRD ISSUE THAT WE IDENTIFIED, WE IDENTIFIED OPPORTUNITIES TO STRENGTHEN CONTROLS DURING THE PAY APPLICATION REVIEW PROCESS
IN SOME OF OUR REVIEW, WE NOTICED THAT INSTANCES WHERE, SAY, CONTRACTUAL REQUIREMENTS WERE NOT FOLLOWED
FOR EXAMPLE, BEGINNING ON PAY APPLICATION NUMBER TWELVE, THE PORT STOPPED REQUIRING TURNER CONSTRUCTION TO SUBMIT TIMESHEETS WITH THEIR PAY APPLICATIONS, WHICH WAS A REQUIREMENT OF THE CONTRACT
OF COURSE, THE RISK ASSOCIATED WITH NOT REQUIRING TIMESHEETS IS THAT THE CONTRACTOR COULD BILL FOR TIME NOT WORKED OR A HIGHER BILLABLE RATE THAN WHAT WAS APPROVED
WE ALSO IDENTIFIED A SMALL DOLLAR AMOUNT OF OVERBILLINGS
TURNER CONSTRUCTION DID MAKE THAT ADJUSTMENT ON ONE OF THE LATER PAY APPLICATIONS AFTER WE BROUGHT IT TO THEIR ATTENTION
ANOTHER AREA IS THE PORT ALLOWED FORECASTED PAYMENTS, WHICH WAS EVERY MONTH
TURNER WOULD SUBMIT AN AMOUNT OF ANTICIPATED WORK THAT WOULD BE PERFORMED THE FOLLOWING MONTH
THE CONTRACT ONLY ALLOWED REIMBURSEMENT OF ACTUAL COSTS
WE DID PERFORM A TEST TO RECONCILE PREPAYMENTS TO MAKE SURE THAT THEY WERE CREDITED BACK TO THE PORT
WE WERE ABLE TO DO THAT WITHOUT EXCEPTION
SO ALL THE PREP PAYMENTS WERE DECREASED THE FOLLOWING MONTH
AND THEN FOR CONTRACTOR PERSONNEL CHANGES, MANAGEMENT WAS UNABLE TO PROVIDE US WITH SUPPORT THE SUPPORTING DOCUMENTATION THAT WAS REQUIRED BY CONTRACT FOR APPROVAL OF ANY OF THOSE CHANGES
FOR MOST OF THOSE PERSONNEL, WE WERE ABLE TO OBTAIN SUPPORTING DOCUMENTATION FROM TURNER CONSTRUCTION ON APPROVED RATES
NEXT SLIDE, PLEASE
AND HERE'S OUR RECOMMENDATION
AND JANICE CAN PROVIDE THE RESPONSE OF MANAGEMENT
YEAH
SO I APPRECIATE OUR PARTNERSHIP WITH INTERNAL AUDIT
SO THIS WAS A CONTRACT FROM 2020, AND THE PIECE AROUND THE DOCUMENTATION WHEN THEY HAVE A CHANGE IN PERSONNEL HAS HAPPENED ON A COUPLE OF OUR PROJECTS
AND SO WE'VE TRAINED OUR STAFF TO MAKE SURE THEY'RE REALLY CLEAR ABOUT THE STANDARD OPERATING PROCEDURES
AND THE SAME WITH THE PAY ESTIMATES THAT ALTHOUGH THEY MIGHT HAVE THOUGHT THAT THAT WAS ACTUALLY TO THE BENEFIT OF HAVING THESE FORECASTED PAYMENTS THAT THEN ARE RECONCILED THE NEXT MONTH WITH ACTUAL, THAT IS NOT OUR STANDARD OPERATING PROCEDURE
SO WE HAVE MADE SURE THAT OUR STAFF ARE REALLY CLEAR ABOUT OUR PROCEDURES AND THAT THEY DON'T GET TO CHOOSE ON THEIR OWN WHEN THEY MIGHT WANT TO DEVIATE FROM THAT
THEY MIGHT BE WELL INTENTIONED, BUT THAT IS NOT HOW WE WANT TO CONDUCT BUSINESS
SO WE THANK THEM FOR IDENTIFYING THAT AND WE'VE RECTIFIED THE SITUATION
OKAY, NEXT SLIDE, PLEASE
MICHELLE
LAST CONSTRUCTION AUDIT THAT WE'RE GOING TO TALK ABOUT IS THE MAIN TERMINAL LOW VOLTAGE PROJECT
SO THIS ONE, AGAIN, ANOTHER GCCM WITH MORTENSEN AS THE GENERAL CONTRACTOR CONSTRUCTION MANAGER
THIS IS ABOUT, YOU KNOW, IT'S PRECONSTRUCTION AGAIN
SO IT'S ABOUT $3 MILLION IN TOTAL THAT WE'VE GOT
AND LOW VOLTAGE IS ESSENTIALLY 110, 220 VOLTS AT THE PORT
AND I BELIEVE IT'S PRETTY OLD AND NEEDS TO BE REPLACED
SO WE'RE GOING THROUGH THIS MASSIVE PROJECT TO UPGRADE THE LOW VOLTAGE AT THE PORT
WHEN ALL SAID AND DONE, THIS IS AGAIN GOING TO BE A LARGE PROJECT IN TOTAL, NOT JUST PRECONSTRUCTION, BUT IT'LL BE OVER $100 MILLION AND THERE'LL BE SOME WMBE WORK AS WELL DONE IN THIS
SO I'LL LET SPENCER TALK ABOUT THE ISSUE AND THE OPPORTUNITIES FOR IMPROVEMENT
AND AS ALWAYS, LIKE JANICE SAYS, IN KNOW, WE FIND OPPORTUNITIES AND JANICE JUMPS RIGHT ON A GOOD THAT'S A GOOD PARTNERSHIP
ONE OF THE FINDINGS HERE IS VERY SIMILAR PAY APPLICATION REVIEW PROCESS, JUST TO GIVE SOME MORE PROBABLY MORE BACKGROUND OR SOMETHING FOR THE WORK THAT WE'RE PERFORMING IS QUITE DETAILED
AND SO FOR THESE FINDINGS, AS EVEN IN THE CASE THAT I'LL BE DISCUSSING SHORTLY ON THIS, FAIRLY LOW AMOUNTS IN CONSIDERATION OF THESE ARE MILLION DOLLAR PAY APPLICATIONS EVERY MONTH
SOME CAN BE 50 PAGES LONG
SO I DON'T WANT IT TO COME ACROSS AS THERE'S NO INTERNAL CONTROLS AT ALL BECAUSE THESE ARE PRETTY MINOR IN THE GRAND SCHEME OF THINGS
JUST TO PUT THAT OUT THERE, THE RESULTS THAT WE SAW ON THIS, THERE WERE $1,200 IN UNALLOWABLE COSTS, 7400 IN OVERPAYMENTS BRINGING THIS JUST BECAUSE, ALTHOUGH SMALL AMOUNTS, IT COULD POSSIBLY PERMEATE THROUGH THE REST OF THE PROJECT IF NOT CORRECTED BEFORE OR CORRECTED AS SOON AS POSSIBLE
WE NOTICED THAT THE PORT'S APPROVAL OF KEY PERSONNEL CHANGE WAS NOT MAINTAINED
THAT'S A CONTRACT REQUIREMENT
AND THERE'S TWO BUDGETS, CONTINGENCY AND OTHER STIPULATED DIRECT COST BUDGETS
THESE WERE MUTED FOR EXPENSES RELATED TO COMPLETING PRECONSTRUCTION AREA OF WORK, INSTEAD OF EXPENSES THAT WERE ALLOWABLE AS OUTLINED IN CONTRACT
OR THERE WAS A RELATED CHANGE ORDER
TOTAL CHARGED WAS $85,000 TO BOTH BUDGETS
AND AGAIN, THAT $85,000 ISN'T QUESTIONING IT AS UNALLOWABLE PAYMENTS OR WORK THAT WAS NOT PERFORMED
IT WAS JUST CHARGED TO INCORRECT BUDGETS, WHICH COULD HAVE BEEN COVERED BY A CHANGE ORDER OR SOMETHING
NEXT SLIDE, PLEASE
HERE'S OUR RECOMMENDATIONS AND JANICE CAN PROVIDE ANY ADDITIONAL INFORMATION
YEAH, SO SIMILAR TO THE LAST ONE, WE AGREE WITH THE RECOMMENDATIONS
THIS ONE WAS ACTUALLY AWARDED 18 MONTHS BEFORE THE ONE YOU HEARD PREVIOUSLY
SO A LOT OF THESE RECOMMENDATIONS WE'VE BEEN TRAINING OUR STAFF ON ALREADY
AND THE ONLY THING I WILL ADD IS THAT WE JUST HAD OUR QUARTERLY MEETING WITH THE ASSOCIATED GENERAL CONTRACTORS
SO WE HAVE A QUARTERLY BEST PRACTICES MEETING WITH THEM, AND WE SHARED WITH THEM THESE TWO AUDITS, PLUS THE ONE THAT CAME TO YOU IN JUNE
BECAUSE A BIG PART OF WHAT WE WANT TO MAKE SURE IS THAT THE CONTRACTORS ARE SUBMITTING FACTUALLY CORRECT INFORMATION SO THAT WE ACTUALLY ARE STOPPING THE MISINFORMATION FROM THE VERY SOURCE OF THE INFORMATION THAT COMES TO US
SO, AGAIN, JUST APPRECIATE THE PARTNERSHIP AND CONTINUOUS IMPROVEMENT
THIS ONE, JUST LIKE YOU ASKED BEFORE, COMMISSIONER CHO, ABOUT THE CHANGE ORDER AMOUNT, THIS ONE ALSO WAS UNDERESTIMATED IN TERMS OF HOW MUCH WORK WE WERE GOING TO BE DOING WITH THE CONTRACTOR
REALLY TRYING TO MAP OUT SOME VERY OLD INFRASTRUCTURE RELATED TO OUR LOW VOLTAGE INFRASTRUCTURE THAT WE WERE REPLACING
THANK YOU, JANICE, AND THANKS FOR SHARING YOUR RESPONSES AND ALWAYS BEING PROACTIVE AROUND THIS
ARE THERE ANY QUESTIONS FROM THE COMMITTEE MEMBERS AT THIS TIME? AND THIS WAS ITEM EIGHT, SO IF THERE'S NO QUESTIONS OR ADDITIONAL COMMENTS, I CAN MOVE US ALONG TO ITEM NUMBER NINE
SO ITEM NUMBER 910 AND ELEVEN ON THE AGENDA ARE INFORMATION TECHNOLOGY AUDIT ITEMS THESE ITEMS ARE SECURITY SENSITIVE AND WILL BE DISCUSSED IN NON PUBLIC SESSIONS
WE HAVE ONE LIMITED CONTRACT COMPLIANCE AUDIT ON OUR AGENDA TODAY
THIS IS ITEM NUMBER TWELVE
GLENN, PLEASE PROCEED WITH THE REPORT
THANKS, COMMISSIONER
THIS IS A CLEAN AUDIT
SO IT'S JUST A LITTLE BACKGROUND ON THE GRAIN TERMINAL THAT YOU SEE AT TERMINAL 86 OUT THERE
IT'S AN OLD COMPANY, LOUIS DREYFUS AND COMPANY, THAT'S BEEN MOVING GRAIN AND AGRICULTURE SINCE 1909
SO THE VOLUME IS QUITE IMPRESSIVE
AND COTTON, SOYBEANS, WHEAT, CORN ARE MOVED
THEY CAN STORE UP TO 4 MILLION BUSHELS OR 100 METRUCK TONS, WHICH IS ENORMOUS
AND THERE'S INDEPENDENT GRAIN CERTIFICATION, QUALITY CERTIFICATION THAT GOES ON OVER THERE
NEXT SLIDE, PLEASE
JUST IN VOLUME
IF YOU LOOK AT THE VOLUME OF METRUCK TONS THAT OCCURRED THIS YEAR AND IN THE PRIOR COUPLE OF YEARS, THIS IS THE PRIMARY ITEMS THAT THEY MOVE
YELLOW CORN
NOW SOYBEANS AND GRAIN SORGHUM WAS MOVED AND ABOUT 4 MILLION METRUCK TONS
SO QUITE A BIT
NEXT SLIDE, PLEASE
AND AS YOU CAN SEE, WE GET A LOT OF MONEY FROM THEM ALSO
SO ABOUT $6 MILLION A YEAR IN REVENUES THAT COME TO THE PORT
SO FROM EVERY FIVE, SIX YEARS OR SO, WE'LL GO IN AND LOOK AT THEM AND MAKE SURE THAT THEY ARE PAYING US THE CORRECT AMOUNT
SO JUST A LITTLE OVERVIEW THERE THAT I WANT TO PROVIDE
MY NEXT SLIDE JUST SAYS THAT THEY MATERIALLY COMPLIED WITH THE LEASE AND WE HAVE NO FINDINGS
AND THAT CONCLUDES OUR AUDIT PRESENTATION FOR TODAY
SO BACK TO YOU
GREAT
WE LOVE A CLEAN AUDIT
ARE THERE ANY QUESTIONS FROM THE COMMITTEE MEMBERS AT THIS TIME? HEARING NONE
MR FERNANDEZ, DO YOU HAVE ANY CLOSING COMMENTS FOR THE COMMITTEE TODAY? NO, I DO NOT
I JUST WANTED TO SAY THANKS TO PATRICIA AND DEBBIE FOR SPEAKING TODAY
ALSO, THEIR WEALTH OF KNOWLEDGE AND ALL THOSE DISAGREEMENT
THEY HAVE CLOSER INPUT AND A RELATIONSHIP WITH TURNER SINCE THEY'VE WORKED WITH TURNER FOR YEARS
THEY KNOW GLI RATES ARE NOT 10%, THEY'RE 0.5 OR WHATEVER SHE QUOTED, AND I SEE THEM ON THE SCREEN
SO THANK YOU VERY MUCH AND THANK YOU TO THE COMMISSION FOR BEING WITH US TODAY
THANK YOU
ARE THERE ANY CLOSING COMMENTS FROM THE COMMITTEE MEMBERS AT THIS TIME? WELL, I JUST WANT TO SAY THANK YOU TO YOUR ENTIRE AUDIT TEAM AND EVERYONE WHO PRESENTED TODAY AND THANKS FOR JOINING US
PATRICIA AND DEBBIE, YOU SHARED A WEALTH OF INFORMATION AND APPRECIATED YOUR COMMENTS AS WELL
SO, HEARING NO FURTHER COMMENTS, WE ARE NOW RECESSING INTO THE NON PUBLIC PORTION OF OUR MEETING AND THE TIME IS 10:44 A.M
TO DISCUSS THE THREE AUDIT RELATED ITEMS THAT ARE SECURITY SENSITIVE INFORMATION
THE NON PUBLIC PORTION OF THE MEETING WILL LAST APPROXIMATELY 30 MINUTES AND THE MEETING WILL ADJOURN WITH NO FURTHER BUSINESS AFTER THAT TIME
PARTICIPANTS JOINING THE PUBLIC, NON PUBLIC PORTION OF THE MEETING VIA TEAM, PLEASE CLOSE OUT OF THIS MEETING LINK AND JOIN THE 11:00 A.M
TEAMS MEETING
AVIATION FOR EVERYONE JOINING IN THE PHYSICAL MEETING ROOM, PLEASE PROCEED TO THE THIRD FLOOR CONFERENCE ROOM THREE CC THREE
THE CURRENT TIME IS 10:45.

Limitations of Translatable Documents

PDF files are created with text and images are placed at an exact position on a page of a fixed size.

Web pages are fluid in nature, and the exact positioning of PDF text creates presentation problems.

PDFs that are full page graphics, or scanned pages are generally unable to be made accessible, In these cases, viewing whatever plain text could be extracted is the only alternative.