oversight

Kennedy Center: Improvements Needed to Strengthen the Construction Process

Published by the Government Accountability Office on 2003-09-10.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                United States General Accounting Office
                                Testimony
GAO                             Before the Chairman, Subcommittee on Economic
                                Development, Public Buildings, and Emergency
                                Management, Committee on Transportation and
                                Infrastructure, House of Representatives

For Release on Delivery
Expected at 10:00 a.m. EDT
Wednesday, September 10, 2003   KENNEDY CENTER
                                Improvements Needed to
                                Strengthen the Construction
                                Process
                                Statement of Mark L. Goldstein, Acting Director
                                Physical Infrastructure Issues




GAO-03-1141T
                                                September 10, 2003


                                                KENNEDY CENTER

                                                Improvements Needed to Strengthen the
Highlights of GAO-03-1141T, a testimony         Construction Process
before the Subcommittee on Economic
Development, Public Buildings, and
Emergency Management, Committee on
Transportation and Infrastructure, House
of Representatives




In the mid-1990s, John F. Kennedy               As of July 2003, Kennedy Center officials estimated that the garage
Center for the Performing Arts                  expansion and site improvement project would cost $88 million, the garage
(Kennedy Center) officials                      expansion would be completed in December 2003, the site improvements
recognized a need for additional                would be completed in summer 2004, and the project would include 525
parking and better site access. As a            parking spaces and various traffic flow improvements. These estimates vary
precursor to a planned project to
construct an 8-acre plaza and two
                                                substantially from estimates that Kennedy Center officials provided to
additional buildings at the site, the           congressional stakeholders in 1997 and 1998. At that time, Kennedy Center
Kennedy Center is currently in the              officials estimated that the project would cost $28 million, would be
process of constructing a garage                completed by August 2000, and would include between 900 and 1,000
expansion and site improvement                  parking spaces. According to Kennedy Center officials, the initial estimates
project.                                        were preliminary in nature and were based on some unrealistic assumptions.
                                                They acknowledged that they should have done a better job of informing
Because of congressional concerns               Congress of the preliminary nature of the estimates and the subsequent
over project delays and costs as                events in the project’s planning and bidding phases that affected the costs,
well as challenges the Kennedy                  time frames, and scope. Kennedy Center officials said they now hold
Center faces as it pursues this                 monthly meetings with Congress about the status of ongoing projects.
major construction effort, GAO
was requested to examine (1) the
garage expansion and site                       The Kennedy Center faces certain challenges in managing large construction
improvement project’s current                   projects. Specifically, the Kennedy Center lacks (1) adequate policies and
costs, time frames, and scope                   procedures to guide the planning and management of the construction
compared to estimates provided to               process, (2) some timely construction data on schedules and costs for
congressional stakeholders in 1997              effectively overseeing construction projects and measuring results, and (3)
and 1998 and (2) challenges the                 key human capital resources and expertise that would be useful in managing
Kennedy Center faces in managing                the construction process. In its September 2003 report, GAO recommended
large construction projects. GAO                that the Kennedy Center develop comprehensive project management
issued its findings in a report                 policies and procedures, ensure development and use of timely data, and
entitled Kennedy Center:                        ensure that the needs for human capital expertise are met. Kennedy Center
Improvements Needed to
Strengthen the Management and
                                                officials are now working to address these challenges.
Oversight of the Construction
Process, GAO-03-823 (Sept. 5,
2003). This testimony is based on               The John F. Kennedy Center for the Performing Arts
that report.




www.gao.gov/cgi-bin/getrpt?GAO-03-1141T.

To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Mark L.
Goldstein, (202) 512-2834, or
goldsteinm@gao.gov.
           Mr. Chairman, Ranking Minority Member, and Members of the
           Subcommittee:

           We welcome the opportunity to testify before you today on our work
           related to selected aspects of the Kennedy Center’s construction program.
           Specifically, my testimony will discuss the (1) differences between the
           current costs, time frames, and scope estimates of the garage expansion
           and site improvements project and the 1997 and 1998 estimates provided
           to congressional stakeholders; and (2) challenges that the Kennedy Center
           faces in managing large construction projects. As you know, on September
           5, 2003, we issued a report to you and the Ranking Minority Member on
           these issues.1 Therefore, my statement today will be short and primarily
           focus on the report’s major findings and recommendations.

           Let me begin by giving you a brief overview of the Kennedy Center’s
           construction program and the garage expansion and site improvements
           project.


           The John F. Kennedy Center for the Performing Arts, which was
Overview   established in 1964 as both a national cultural arts center and a memorial
           to the 35th President, opened in September 1971 as an independently
           administered bureau of the Smithsonian Institution. Shortly thereafter, in
           1972, the Secretary of the Interior, through the National Park Service,
           assumed responsibility for maintenance and all other services related to
           the administration of the Kennedy Center facility. In 1994, legislation was
           enacted that transferred responsibility for operations and maintenance of
           the facility to the Kennedy Center Board of Trustees.2 The 1994 legislation
           also required the Kennedy Center to develop and update annually a
           comprehensive building needs plan that details the condition of the
           Kennedy Center facility and planned renovations.




           1
            U.S. General Accounting Office, Kennedy Center: Improvements Needed to Strengthen
           Management and Oversight of the Construction Process, GAO-03-823 (Washington, D.C.:
           Sept. 5, 2003).
           2
            The Kennedy Center Board of Trustees is composed of 36 general trustees who must be
           U.S. citizens and who are appointed by the President of the United States, 13 trustees
           designated ex-officio representatives of the executive branch and other government
           branches, and 10 congressional representative trustees. Each appointed trustee serves a
           term of 6 years.



           Page 1                                                                    GAO-03-1141T
                       The Kennedy Center receives annual appropriations to fund operations
                       and maintenance as well as construction. The Kennedy Center also has
                       other sources of funds to finance capital improvements in addition to
                       annual appropriations, such as charitable donations and the ability to
                       borrow funds. The John F. Kennedy Center Parking Improvement Act of
                       1997 gave the Kennedy Center approval to design and construct the
                       parking garage expansion and site improvements project.3 The garage
                       expansion is being funded through a loan from the District of Columbia,
                       which issued revenue bonds to provide the related funding,4 and the site
                       improvements are being funded through annual appropriations. To assist
                       in the construction of the garage expansion, the Kennedy Center has hired
                       a construction management firm. For the site improvements, the Kennedy
                       Center is using construction-contracting services available to federal
                       entities through a Corps of Engineers indefinite-delivery, indefinite-
                       quantity contract. The Corps of Engineers is also providing limited
                       management assistance to the project.


                       The July 2003 estimates of the garage expansion and site improvements
Garage Expansion       project costs, time frames, and scope vary substantially from estimates
and Site               that the Kennedy Center provided to Congress in 1997 and 1998. Current
                       estimates show that the garage expansion is estimated to cost $45 million,
Improvements Project   include 525 parking spaces, and be completed in December 2003. The site
Estimates              improvements are estimated to cost $43 million; include various
                       improvements to the sidewalks, roads, and landscaping; and be completed
                       in the summer of 2004. In contrast, in 1997 and 1998, Kennedy Center
                       officials estimated that the garage expansion would cost $25 million and
                       include 900 to 1,000 parking spaces. The site improvements were
                       estimated to cost $3 million and include construction of a new front entry
                       driveway. At that time, Kennedy Center officials estimated that the garage
                       expansion and site improvements project would be completed by August
                       2000.




                       3
                       20 U.S.C. 76i(b).
                       4
                        On December 15, 1999, the District of Columbia issued $34 million in District of Columbia
                       revenue bonds and loaned the proceeds to the Kennedy Center for the purpose of
                       constructing the garage expansion. The bonds are secured by parking revenues from the
                       garage expansion. Payments of principal and interest on the bonds are insured by Ambac
                       Assurance Corporation.



                       Page 2                                                                     GAO-03-1141T
                       According to Kennedy Center officials, the initial garage expansion
                       estimates were preliminary in nature and were based on some unrealistic
                       assumptions related to comparable construction projects, the failure to
                       consider the need for year-round operations, and construction market
                       conditions. In addition, Kennedy Center officials said that the final scope
                       of the site improvements portion of the project increased significantly
                       from the early estimates because they decided to accelerate the scheduling
                       of some planned repairs in hopes of expediting the work and reducing the
                       number of contractors, thus simplifying project coordination efforts.
                       These officials acknowledged that they should have done a better job of
                       informing Congress of the preliminary nature of the estimates and the
                       subsequent events in the planning and bidding phases of the project that
                       affected the costs, time frames, and scope. Kennedy Center officials said
                       they are now holding monthly meetings with congressional stakeholders
                       regarding the status of Kennedy Center projects.


                       In addition to problems associated with the planning phases of the
Kennedy Center         projects, we also noted that the Kennedy Center faces a number of
Faces Challenges in    challenges in managing large construction projects. The Kennedy Center
                       lacks (1) adequate policies and procedures to guide the planning and
Managing its           management of the construction process, (2) some timely construction
Construction Program   data on schedules and costs for effectively overseeing construction
                       projects and measuring results, and (3) key human capital resources and
                       expertise that would be highly beneficial in managing the construction
                       process. Let me elaborate on these three challenges.

                   •   Policies and procedures—Although the Kennedy Center had some limited
                       construction-related guidance, such as safety plans developed by the
                       construction management contractor, it does not have formal, written
                       project management policies and procedures to help guide and administer
                       construction projects in various areas such as project organization, quality
                       control and assurance, project execution, and day-to-day contract
                       administration. Such policies and procedures would help ensure overall
                       project oversight of all Kennedy Center construction projects, including
                       the garage expansion and site improvements project.

                   •   Timely construction data—The Kennedy Center does not always receive
                       timely construction data on schedules and costs that are necessary for
                       monitoring construction costs and measuring results, such as estimated
                       total project costs. For example, regarding the garage expansion, the
                       Kennedy Center decided to waive submission of key timely written project
                       management reports from the construction manager and rely instead on


                       Page 3                                                         GAO-03-1141T
    weekly meetings. These weekly meetings are no substitute for timely
    written reports typically used in construction project management—
    reports that would have provided additional detailed information on
    schedules and costs that could have been helpful in project oversight.

•   Human capital resources and expertise—Kennedy Center officials lack
    key human capital resources and expertise that would be highly beneficial
    in managing the construction process. For example, the Kennedy Center
    experienced significant turnover in both in-house staff and contractor
    personnel during the design stages of the garage expansion and site
    improvements project, which has contributed to reduced institutional
    knowledge of the project and has increased the time necessary to finalize
    design decisions. The President of the Kennedy Center told us he
    recognized that the Kennedy Center continues to lack adequate staff or
    expertise to manage its upcoming plaza and buildings project. However,
    Kennedy Center officials have since noted that they are in the process of
    filling key positions of director of capital projects and project manager,
    have engaged an architect and developer firm, and now feel that they do
    have sufficient staff and expertise.

    These construction management challenges are not new to the Kennedy
    Center. In September 1995, a Kennedy Center consultant reported that
    there were no clear lines of responsibility within the existing facility
    management structure, and that job descriptions were not clearly defined.5
    In addition, the consultant’s report also noted that “An organized system
    should be developed for managing information concerning the facility
    operations to be used to monitor performance against established
    standards.” Regarding human capital, we reported in 1993 that the
    Kennedy Center lacked a federal contracting officer, architects, engineers,
    or other professional occupations associated with capital projects.6 We
    concluded that the Kennedy Center did not have sufficient capability to
    effectively manage large-capital construction projects. Since 1993, the
    Kennedy Center added a contracting department with 5 full-time positions
    and an entire project management department consisting of 9
    employees—6 full-time Kennedy Center employees, including 4 project
    managers and 2 support personnel, plus 3 contract employees.



    5
     Wiss, Janney, Elstner Associates, Inc., Trammell Crow Company, and Environmental
    Systems Design, Inc., Facility Management Assessment, Phase I (Washington, D.C.:
    September 1995).
    6
     U.S. General Accounting Office, Kennedy Center: Information on the Capital
    Improvement Program, GAO/GGD-93-46 (Washington, D.C.: Feb. 9, 1993).


    Page 4                                                                  GAO-03-1141T
Although it is difficult to determine the extent to which these challenges
have hindered the Kennedy Center’s efforts on the garage expansion and
site improvements project to date, having adequate policies and
procedures, timely construction data, and qualified human capital would
help to strengthen the overall construction program and reduce risk.
Addressing these challenges will become increasingly important as the
Kennedy Center undertakes the larger, more costly, and more complex
plaza and buildings project. The critical importance of having quality
guidance, data, and human capital was highlighted by the National
Research Council’s 2000 report on federal organizations that contract out
for construction management services to acquire and build facilities, such
as the Kennedy Center.7 The council found that, among other things, these
organizations should have (1) plans, policies, and procedures to define
project goals and develop strategies and methods for achieving those
goals; (2) detailed data to monitor progress and assess risks; and (3) in-
house staff with sufficient management, financial, and technical skills
necessary for effective oversight of all phases of the project. Effective
policies and procedures would provide a road map for project managers
on how best to estimate project costs, administer the contract, and define
the roles and responsibilities of project staff. Timely data would allow
project managers to effectively oversee project status and measure results
to gauge effectiveness. Qualified human capital and expertise would
improve efforts to control project costs, time frames, and scope.

We recognize that changes in costs, time frames, and scope are not
unusual in construction projects. However, in the case of the Kennedy
Center garage expansion and site improvements project, early estimates
proved to be especially problematic and were based on unrealistic
assumptions. Furthermore, if the Kennedy Center continues to operate
without adequate construction polices and procedures, timely schedule
and cost data, and qualified human capital, the success of its future plaza
and buildings project will be at risk. Although making improvements in
these areas is no guarantee of project success, such improvements would
strengthen the overall construction program and reduce risk by providing
greater effectiveness in managing and overseeing future projects and
measuring results.



7
 National Research Council, Outsourcing Management Functions for the Acquisition of
Federal Facilities (Washington, D.C.: National Academy Press, 2000). The council is the
working arm of the National Academy of Sciences and the National Academy of
Engineering, and it carries out studies to advise the federal government.



Page 5                                                                    GAO-03-1141T
                       Given this, we recommended in our September 2003 report that the
                       Kennedy Center

                   •   develop comprehensive project management policies and procedures to
                       guide the construction process;

                   •   ensure development and utilization of timely data to oversee construction
                       projects;

                   •   ensure that needs for human capital expertise are met.

                       Kennedy Center officials agreed with our findings and recommendations
                       and acknowledged the importance of focusing on these areas. The officials
                       said that they have initiated efforts to improve the overall construction
                       program by (1) contacting the Federal Facilities Council for assistance
                       with updating and improving construction management policies and
                       procedures; (2) requesting monthly written project management reports;
                       and (3) hiring additional in-house and contractor staff to assist in the
                       upcoming plaza and buildings project.

                       Mr. Chairman, this concludes my prepared statement. I would be happy to
                       respond to any questions you or the other members of the subcommittee
                       may have at this time.


                       For future contacts regarding this testimony, please contact Mark L.
Contact and            Goldstein at (202) 512-2834. Individuals making key contributions to this
Acknowledgements       testimony included Terrell Dorn, Casey Brown, and David C. Merrill.




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                       Page 6                                                        GAO-03-1141T
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