oversight

Kennedy Center: Improvements Needed to Strengthen the Management and Oversight of the Construction Process

Published by the Government Accountability Office on 2003-09-05.

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

                 United States General Accounting Office

GAO              Report to the Subcommittee on
                 Economic Development, Public
                 Buildings, and Emergency Management,
                 Committee on Transportation and
                 Infrastructure, House of Representatives
September 2003
                 KENNEDY CENTER
                 Improvements Needed
                 to Strengthen the
                 Management and
                 Oversight of the
                 Construction Process




GAO-03-823
                 a
                                                September 2003


                                                KENNEDY CENTER

                                                Improvements Needed to Strengthen the
Highlights of GAO-03-823, a report to the       Management and Oversight of the
Chairman and Ranking Minority Member,
Subcommittee on Economic Development,           Construction Process
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 will be completed in December 2003, the site improvements will
recognized a need for additional                be completed in summer 2004, and the project will include 525 parking
parking and better site access. As a            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. GAO did this study                     were preliminary in nature and were based on some unrealistic assumptions.
because of congressional concerns               They acknowledged that they should have done a better job of informing
over project delays and costs as                Congress of the preliminary nature of the estimates and the subsequent
well as challenges that the Kennedy             events in the project’s planning and bidding phases that affected the costs,
Center faces as it pursues this                 time frames, and scope. Kennedy Center officials said that they now hold
major construction effort. GAO’s                monthly meetings with Congress about the status of ongoing projects.
objectives were to (1) compare the
garage expansion and site
improvement project’s current                   The Kennedy Center faces certain challenges in managing large construction
costs, time frames, and scope with              projects. Specifically, the Kennedy Center lacks (1) adequate policies and
the estimates provided to                       procedures to guide the planning and management of the construction
congressional stakeholders in 1997              process, (2) some timely construction data on schedules and costs for
and 1998 and (2) identify what                  effectively overseeing construction projects and measuring results, and (3)
challenges the Kennedy Center                   key human capital resources and expertise that would be highly beneficial in
faces in managing large                         managing the construction process. Kennedy Center officials are now
construction projects.                          working to address these challenges. Although making improvements in
                                                these areas is no guarantee of project success, these types of improvements
                                                would strengthen the construction program and reduce risk by providing
GAO recommends that the                         greater effectiveness in managing and overseeing projects and measuring
Kennedy Center                                  results.
•    develop comprehensive                      The John F. Kennedy Center for the Performing Arts
     project management policies
     and procedures to guide the
     construction process,
•    ensure development and use of
     timely data to oversee
     construction projects, and
•    ensure that needs for human
     capital expertise are met.
In commenting on a draft of this
report, Kennedy Center officials
generally agreed with GAO’s
findings and recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-03-823.

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.
Contents



Letter                                                                                                                 1
                            Results in Brief                                                                           2
                            Background                                                                                 4
                            Garage Expansion and Site Improvement Project Estimates                                    6
                            Kennedy Center Faces Challenges in Managing Its Construction
                              Program                                                                              11
                            Conclusions                                                                            14
                            Recommendations                                                                        14
                            Kennedy Center Comments                                                                15
                            Objectives, Scope, and Methodology                                                     15


Appendixes
             Appendix I:    Kennedy Center’s Projected Revenue from Parking Spaces
                            Constructed in the Garage Expansion                                                    17
             Appendix II:   Agency Comments from the John F. Kennedy Center for the
                            Performing Arts                                                                        18


Tables                      Table 1: Summary of the Kennedy Center’s Garage Expansion and
                                     Site Improvement Project’s Estimated Cost, Scope, and
                                     Schedule                                                                          8
                            Table 2: Project Scope of the Kennedy Center Site Improvements                             9


Figure                      Figure 1: The John F. Kennedy Center for the Performing Arts’
                                      Building and Site                                                                6




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                            Page i                 GAO-03-823 Management and Oversight of the Construction Process
A
United States General Accounting Office
Washington, D.C. 20548



                                    September 5, 2003                                                                 Leter




                                    The Honorable Steven C. LaTourette
                                    Chairman
                                    The Honorable Eleanor Holmes Norton
                                    Ranking Minority Member
                                    Subcommittee on Economic Development, Public
                                     Buildings, and Emergency Management
                                    Committee on Transportation and Infrastructure
                                    House of Representatives

                                    This report responds to your request that we review certain aspects of the
                                    John F. Kennedy Center for the Performing Arts’ (Kennedy Center) garage
                                    expansion and site improvement project. The Kennedy Center facility,
                                    which opened in 1971 in Washington, D.C., was established as both a
                                    national cultural arts center and a memorial to the 35th President. In 1994,
                                    responsibility for management of the Kennedy Center facility was
                                    transferred from the Department of the Interior to the Kennedy Center,
                                    which has a Board of Trustees and a management staff headed by the
                                    Kennedy Center President. In the mid-1990s, on the basis of a survey of
                                    patrons, Kennedy Center officials sought to provide additional parking and
                                    improve access to the Kennedy Center site. To address these needs, the
                                    Kennedy Center is currently constructing a garage expansion and site
                                    improvement project that will create 525 new parking spaces and, among
                                    other things, make improvements to the sidewalks, roads, and landscaping
                                    and to the marble walkways and exterior wall coverings. In addition, over
                                    the next 10 years, the Kennedy Center plans to pursue a major expansion
                                    that includes the following: an 8-acre plaza that is intended to improve
                                    pedestrian access and link the center to the surrounding area, two new
                                    buildings to house administrative offices and arts education programs,
                                    facilities for free outdoor performances, and exhibition space to educate
                                    the public about the history of performing arts in America.

                                    As agreed with your offices, our objectives were to (1) compare the garage
                                    expansion and site improvement project’s most recent costs, time frames
                                    for completion, and scope with the estimates provided to Congress in 1997
                                    and 1998 and (2) determine what challenges, if any, the Kennedy Center
                                    faces in managing large construction projects. To do this work, we
                                    analyzed project documents; examined existing policies and procedures,
                                    the organization structure, and construction data systems; and interviewed
                                    Kennedy Center and U.S. Army Corps of Engineers officials.




                                    Page 1              GAO-03-823 Management and Oversight of the Construction Process
Results in Brief   As of July 2003, Kennedy Center officials estimated that the garage
                   expansion portion of the project would cost $45 million, including revenue
                   bond issuance costs and capitalized interest payments; be completed in
                   December 2003; and include 525 parking spaces. These officials estimated
                   that the site improvement portion of the project would cost $43 million; be
                   completed in the summer of 2004; and include various improvements to the
                   sidewalks, roads, and landscaping at the Kennedy Center site. These
                   estimates vary substantially from estimates that Kennedy Center officials
                   provided to Congress in 1997 and 1998. At that time, Kennedy Center
                   officials estimated that the garage expansion would cost $25 million and
                   include between 900 and 1,000 parking spaces, and that the site
                   improvements would cost $3 million and include construction of a new
                   front-entry driveway. 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,
                   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 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.




                   Page 2              GAO-03-823 Management and Oversight of the Construction Process
The Kennedy Center faces certain challenges in managing large
construction projects. Specifically, the Kennedy Center lacks (1) adequate
policies and procedures for guiding the planning and management of the
construction process, (2) some timely construction 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. Although it was
difficult to determine the extent to which these challenges have hindered
the Kennedy Center’s efforts on the garage expansion and site
improvement project, having adequate policies and procedures, timely
data, and qualified human capital would help to strengthen the Kennedy
Center’s construction program and reduce risks. Addressing these
challenges will become increasingly important as the Kennedy Center
undertakes the larger, more costly and complex plaza and buildings
project. The critical importance of having quality guidance, data, and
human capital was highlighted by the National Research Council in a 2000
report on federal organizations, such as the Kennedy Center, that contract
out for construction management services to acquire and build facilities.1
The council found that having adequate plans, policies, and procedures;
timely and reliable data; and in-house staff with sufficient skills was
necessary for effective management and oversight of all phases of a
construction project. We are making recommendations to the Kennedy
Center President and Board of Trustees that are aimed at improving the
policies and procedures, data, and human capital efforts for the Kennedy
Center’s major construction projects.

In commenting on a draft of this report, the Kennedy Center generally
agreed with our findings and recommendations. Kennedy Center officials
stated that they found many of the recommendations helpful and that they
have initiated efforts to address them. Further, these officials provided
additional comments to clarify information regarding the project estimates,
project management data, and human capital resources, which we have
incorporated throughout the report. (See app. II for Kennedy Center
comments.)




1
 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 3                 GAO-03-823 Management and Oversight of the Construction Process
Background   The John F. Kennedy Center for the Performing Arts, which was
             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. The Kennedy Center
             receives annual appropriations to fund operations and maintenance as well
             as construction. For example, in fiscal year 2003, Congress appropriated
             $16.2 million for the Kennedy Center’s operations and maintenance and
             $17.5 million for construction.3 The Kennedy Center 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 Act, as amended, provides that no
             changes may be made to the grounds of the Kennedy Center without the
             approval of Congress and the Secretary of the Interior. 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.4




             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.
             3
             P.L. 108-7, 117 Stat. 11, 267, 550-551 (2003).
             4
             20 U.S.C. 76i(b).




             Page 4                   GAO-03-823 Management and Oversight of the Construction Process
The garage expansion is being funded through a loan from the District of
Columbia, which issued revenue bonds to provide the related funding,5 and
the site improvements are being funded through annual appropriations. To
maintain a separation between the appropriated and nonappropriated
funds, the Kennedy Center arranged for separate construction management
and general contractors for the two parts of the project—the parking
garage expansion and the site improvements. The Kennedy Center also
maintains separate accounting for the garage expansion and the site
improvements. 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. Figure 1
shows the Kennedy Center building and adjacent area.




5
 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 the
Ambac Assurance Corporation.




Page 5                  GAO-03-823 Management and Oversight of the Construction Process
Figure 1: The John F. Kennedy Center for the Performing Arts’ Building and Site




Source: The John F. Kennedy Center for the Performing Arts (GAO added labels to identify key landmarks).


                                                                   Note: The garage expansion and site improvement project provides additional parking beneath
                                                                   terraces A, C, and D and improves the sidewalks, roads, and landscaping at the Kennedy Center site.
                                                                   Terraces A, C, and D are new structures; terrace B was part of the original structure.




Garage Expansion and                                               As of July 2003, Kennedy Center officials estimated the cost of the garage
                                                                   expansion and site improvement project at $88 million. This estimate
Site Improvement                                                   includes $43 million for the site improvements and $45 million for the
Project Estimates                                                  garage expansion, including revenue bond issuance costs and capitalized
                                                                   interest payments. The garage expansion is to include 525 new parking
                                                                   spaces. The site improvements are designed to improve vehicle and
                                                                   pedestrian access to the Kennedy Center and include repairs and changes
                                                                   to the sidewalks, roads, and landscaping surrounding the Kennedy Center
                                                                   site. Regarding the garage expansion, 104 spaces are open and operating,
                                                                   and the remainder will open in December 2003. Kennedy Center officials



                                                                   Page 6                             GAO-03-823 Management and Oversight of the Construction Process
estimated that the site improvements will be completed in the summer of
2004.

These current estimates reflect changes made after the 2001 contract
award and include such things as an approximately 1-year increase in time
frames and a $3.3 million, or 15 percent, increase in the garage expansion
costs since the time of award. These increases were primarily due to (1)
changes to the project design required by the National Capital Planning
Commission and the Commission of Fine Arts; (2) large amounts of snow
and rain during the winter and spring of 2003 that caused project delays;
and (3) unforeseen site conditions, such as deteriorated concrete and
greater-than-expected amounts of soil contamination. Kennedy Center
officials told us that the site contains petroleum and coal-tar
contamination. Although the Kennedy Center performed a soil test before
construction began, the extent of the contamination was greater than
expected. The costs associated with removing this soil contamination
account for over half of the 15 percent increase over the awarded base
contract amounts.

The July 2003 estimates of the project’s costs, time frames, and scope vary
substantially from estimates that the Kennedy Center provided to Congress
in 1997 and 1998. At that time, Kennedy Center officials estimated that the
garage expansion would cost $25 million and would include 900 to 1,000
parking spaces, and that the site improvements would cost $3 million and
include construction of a new front-entry driveway. Kennedy Center
officials estimated that the project would be completed by August 2000.
Table 1 summarizes the differences between the current and the 1997 and
1998 estimates of the project cost, scope, and schedule.




Page 7             GAO-03-823 Management and Oversight of the Construction Process
Table 1: Summary of the Kennedy Center’s Garage Expansion and Site Improvement
Project’s Estimated Cost, Scope, and Schedule

                             1997 and 1998 estimates          Current estimate
Garage
expansion
Cost                         $25 million                      $45 million
Scope                        900 to 1,000 spaces              525 spaces
Schedule                     August 2000                      December 2003
Site
improvements
Cost                         $3 million                       $43 million
Scope                        Construction of new front-       Multiple improvements to the
                             entry driveway.                  surrounding sidewalks, roadways,
                                                              and landscaping and to the marble
                                                              exterior wall coverings and
                                                              walkways.
Schedule                     August 2000                      Summer 2004
Source: The John F. Kennedy Center for the Performing Arts.


In addition, at the time that the Kennedy Center officials were planning the
garage expansion and site improvement project, they were also planning to
construct a large format movie theater at an additional cost of $7 million to
$10 million. This portion of the project was later dropped due to cost
considerations. It was anticipated that repayment of the loan from the
District of Columbia would come, in part, from parking fees and movie
theater revenue. Kennedy Center officials recognize that the reduction in
planned parking spaces from approximately 1,000 to 525, as well as
elimination of the movie theater revenue, will result in a reduced amount of
revenue available for loan payments. However, they said they are confident
that given planned increases in parking prices over the next 30 years, they
will still be able to pay off the loan with revenue from the new parking
spaces. A table of the Kennedy Center’s projected parking revenue is
included in appendix I. Kennedy Center officials told us that they have
reevaluated some planned capital projects, and that making these changes
allowed them to expand the scope of the site improvements portion of the
project. These officials said that they decided to (1) eliminate two projects
involving the installation of a mezzanine in the Grand Foyer and windows
in the building facade; (2) delay the construction of a curtain wall; and (3)
construct planned repairs to elevators and an expansion of the sprinkler
and fire suppression systems in phases, rather than simultaneously.




Page 8                            GAO-03-823 Management and Oversight of the Construction Process
                                                                 Furthermore, in commenting on a draft of this report, Kennedy Center
                                                                 officials noted that the scope of the site improvements has increased
                                                                 substantially since the 1997 estimate, and that the scope now includes
                                                                 repairs and improvements to pedestrian walkways, the underground
                                                                 building service tunnel, garage exhaust systems, and the marble walkways
                                                                 and exterior wall coverings. Table 2 shows the scope of the components of
                                                                 the current site improvements. Kennedy Center officials said that they
                                                                 were initially planning on making these repairs at a later date. However, by
                                                                 including them with the site improvements, they hoped to expedite the
                                                                 work, achieve a more uniform architectural design, and reduce the number
                                                                 of contractors involved, thereby simplify scheduling and coordination
                                                                 efforts. Kennedy Center officials said these scope changes account for
                                                                 $38.6 million of the difference between the $88 million actual cost and the
                                                                 $28 million 1997 estimate.



Table 2: Project Scope of the Kennedy Center Site Improvements

Component                                                     Description
Site improvements                                             These improvements involve a reconfiguration of the access roadway to reduce
                                                              traffic congestion. The new design provides additional security, new drop-off points
                                                              in front of the main entrances, additional garage entrances and exits, and direct
                                                              access to the Potomac Expressway from the Kennedy Center site. Pedestrian
                                                              access will also be improved by replacing the steep ramp with a monumental
                                                              stairway and a fully accessible walkway. The site is being relandscaped to
                                                              accommodate these changes.
Service tunnel, service drive,                                These repairs entail adding structural reinforcement to portions of the service tunnel
and loading dock                                              roof to accommodate the new roadway above the plaza. In addition, mechanical
                                                              work is required to reroute the supply and exhaust systems that currently service
                                                              the entire building. Finally, the design includes a secured exit out of the service
                                                              tunnel, thereby making the service tunnel suitable for high-level dignitary visits.
Existing garage repairs and                                   This component includes the repair and replacement of exhaust fans and
mechanical systems                                            underground ducts and the installation of carbon monoxide monitors tied into the
                                                              existing garage exhaust system. It also includes new signage and new striping in
                                                              the existing garage.
Plaza repairs                                                 These repairs include replacing the marble around the exterior of the building with
                                                              granite pavers, plumbing repairs, and replacing all of the drains and waterproofing.
West fascia                                                   These repairs entail removing and replacing 63 marble panels, repairing the front
                                                              planter, and installing a new safety rail.
Source: The John F. Kennedy Center for the Performing Arts.




                                                                 Page 9                   GAO-03-823 Management and Oversight of the Construction Process
Kennedy Center officials were unable to provide a detailed explanation of
how they arrived at the preliminary 1997 and 1998 cost and schedule
estimates because they had experienced high staff turnover since the
estimates were developed, and records were either not available or not
retained. Despite this fact, these officials said that it appeared that the
estimates were based on some unrealistic assumptions. For example, they
said the initial estimates

• were incorrectly based on construction costs of garages outside the
  District of Columbia, which was a poor comparison because they are
  less expensive to construct;

• did not adequately consider the need to keep the Kennedy Center open
  365 days per year, which had an effect on construction phasing and
  coordination issues and subsequently on the estimated costs and time
  frames; and

• did not account for the unusually expensive, busy, and competitive
  construction market conditions during this period.

Furthermore, the project was delayed for approximately 2 years as
Kennedy Center officials worked through multiple efforts to design and bid
the project and reduce project costs. For example, as part of the National
Capital Planning Commission and the Commission of Fine Arts project
review process, the Kennedy Center was required to redesign some
portions of the project to comply with their decisions regarding design
elements, finishes, landscaping, and the elimination of planned valet
parking on top of the semi-elliptical terrace.6 In addition, budget
constraints led the Kennedy Center to undertake various efforts in an
attempt to lower the project cost, such as (1) redesigning portions of the
project, (2) performing value engineering to identify and eliminate
unnecessary costs, and (3) rebidding the project after initial contractor
bids far exceeded the Kennedy Center’s expectations and it was
unsuccessful in negotiating with the lowest bidder. Kennedy Center
officials acknowledged that they should have better informed Congress of
the preliminary nature of the 1997 and 1998 estimates and the subsequent

6
 In general, the National Capital Planning Commission and the Commission of Fine Arts
review every federal development project in the National Capital Region and approve or
deny the location and design of new construction; exterior additions and renovations;
grading and landscaping; street and road extensions; and parking modifications at all federal
buildings, museums, memorials, and monuments.




Page 10                 GAO-03-823 Management and Oversight of the Construction Process
                       events in the planning and bidding phases of the project that affected the
                       project’s costs, time frames, and scope. As a result, these officials said that
                       they now have monthly meetings with congressional stakeholders to
                       discuss the status of ongoing construction projects.



Kennedy Center Faces   In addition to problems associated with the planning and bidding phases of
                       the project, we found that the Kennedy Center faces a number of
Challenges in          challenges in managing large construction projects. The Kennedy Center
Managing Its           lacks (1) adequate policies and procedures to guide the planning and
                       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. More specifically:

                       • 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. A typical project management guide
                         would include policies and procedures on the organization of the
                         project, quality control and assurance standards, project execution
                         procedures, and requirements for day-to-day administration of
                         contracts, all of which would help to ensure overall project oversight.
                         Other federal agencies that manage construction projects, such as the
                         General Services Administration, the Department of State, and the
                         Architect of the Capitol, use such guidance.

                       • Timely construction data. The Kennedy Center does not always receive
                         timely construction data on schedules and costs. These data are
                         necessary for monitoring construction costs and measuring results,
                         such as estimated total project costs. For example, the Kennedy
                         Center’s construction manager told us that he provided cash flow
                         reports only when requested, and that, at times, he provided the reports
                         at a rate of once every 3 months, instead of on a monthly basis as
                         required by the contract. In addition, the Kennedy Center decided to
                         waive the submission of key timely written project management reports
                         from the construction manager and to rely instead on weekly meetings.
                         In commenting on a draft of this report, Kennedy Center officials said
                         that they had received timely scheduling data on the garage project, on a
                         weekly and monthly basis, at various meetings. However, these



                       Page 11             GAO-03-823 Management and Oversight of the Construction Process
   meetings were no substitute for timely written reports, which are
   typically used in construction project management and would have
   provided additional detailed information on schedules and costs that
   could have been helpful in project oversight. Kennedy Center officials
   agree that they should have obtained monthly project management
   reports and are now doing so.

• 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 project, which
  has contributed to reduced institutional knowledge of the project and
  has increased the time necessary to finalize design decisions. In
  addition, two key management positions were left vacant for an
  extended period. The project executive position became vacant in
  September 2001. The person in this position is responsible for directing
  and managing all capital repair and construction projects. Kennedy
  Center officials had decided not to fill the project executive position, but
  instead to have the executive vice president assume those duties.
  However, Kennedy Center officials said that given the complexities and
  scale of the upcoming plaza and buildings project, they now plan to fill
  this position and have the person report to the executive vice president.
  Also, the contracting officer position became vacant in the summer of
  2002, and Kennedy Center officials told us that because of difficulties in
  finding a qualified candidate, they did not fill this position until March
  2003. 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, and he detailed plans
  to address these shortcomings. In commenting on a draft of this report,
  Kennedy Center officials noted that they are in the process of filling the
  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.




Page 12             GAO-03-823 Management and Oversight of the Construction Process
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. 7
In addition, the consultant’s report also noted the following: “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.8 We
concluded that the Kennedy Center did not have sufficient capability to
effectively manage large-capital construction projects. In commenting on a
draft of this report, Kennedy Center officials told us that since 1993, they
have added a contracting department of five full-time positions and an
entire project management department consisting of nine employees—six
full-time Kennedy Center employees, including four project managers and
two support personnel, plus three contract employees. In addition, these
officials said that full job descriptions have been developed for all
positions.

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 improvement project to date, having adequate policies and procedures,
timely construction data, and additional qualified human capital—even
though the Kennedy Center has enhanced its facility management staff
since our earlier reports—would help to strengthen the 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, such as the Kennedy Center, that contract out for
construction management services to acquire and build facilities. The
council found that, among other things, these organizations should have (1)
plans, policies, and procedures to define project goals and develop


7
 Wiss, Janney, Elstner Associates, Inc., Trammell Crow Company, and Environmental
Systems Design, Inc., Facility Management Assessment, Phase I (Washington, D.C.:
September 1995).
8
 U.S. General Accounting Office, Kennedy Center: Information on the Capital
Improvement Program, GAO/GGD-93-46 (Washington, D.C.: Feb. 9, 1993).




Page 13                GAO-03-823 Management and Oversight of the Construction Process
                  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. Kennedy Center officials
                  acknowledged the importance of focusing on these areas. In commenting
                  on a draft of this report, these officials said that they have initiated efforts
                  to improve these areas of concern, including (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.



Conclusions       Changes in costs, time frames, and scope are not unusual in large
                  construction projects. However, in the case of the Kennedy Center garage
                  expansion and site improvement 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
                  construction program and reduce risk by providing greater effectiveness in
                  managing and overseeing future projects and measuring results.



Recommendations   To help improve the Kennedy Center’s ability to manage and oversee its
                  construction program, we recommend that the President of the Kennedy
                  Center, in conjunction with the Chairman of the Board of Trustees,

                  • develop comprehensive project management policies and procedures to
                    guide the planning and execution of the construction process,

                  • ensure development and use of timely data to oversee construction
                    projects and measure results, and



                  Page 14              GAO-03-823 Management and Oversight of the Construction Process
                         • ensure that the needs for human capital expertise are met.



Kennedy Center           We provided a draft copy of this report to the Chairman of the Kennedy
                         Center Board of Trustees and the President of the Kennedy Center. On June
Comments                 20, 2003, the Kennedy Center President provided us with written comments
                         on behalf of the trustees and staff (see app. II). Kennedy Center officials
                         generally agreed with our findings and recommendations. They said that
                         they found the recommendations helpful, and that they have initiated
                         efforts to address them. Further, these officials provided additional
                         comments to clarify information regarding the project estimates, project
                         management data, and human capital resources, which we have
                         incorporated throughout the report as appropriate.



Objectives, Scope, and   To meet our first objective of comparing the garage expansion and site
                         improvement project’s most recent estimates on costs, time frames for
Methodology              completion, and scope with estimates previously provided to Congress in
                         1997 and 1998, we analyzed Kennedy Center construction project
                         documents, such as contracts, estimates, and plans. To gain a better
                         understanding of the construction project, we accompanied a Kennedy
                         Center official on a tour of the construction site during which the official
                         pointed out the major components and features of the project. In addition,
                         we interviewed officials with the Kennedy Center, the construction
                         management contractor, the architectural firm involved with the project,
                         and the U.S. Army Corps of Engineers. To meet our second objective of
                         determining what challenges, if any, the Kennedy Center faces in managing
                         large construction projects, we examined the Kennedy Center construction
                         process, including existing policies and procedures, organization structure,
                         and construction data systems. For background information, we reviewed
                         applicable statutes relating to the Kennedy Center and considered previous
                         GAO work and industry construction management practices.

                         We did our work between January and July 2003 in accordance with
                         generally accepted government auditing standards.


                         As agreed with your offices, unless you publicly announce its contents
                         earlier, we plan no further distribution of this report until 30 days after its
                         issue date. At that time, we will send copies of this report to the
                         appropriate congressional committees, the Chairman of the Kennedy



                         Page 15              GAO-03-823 Management and Oversight of the Construction Process
Center Board of Trustees, and the President of the Kennedy Center. We will
make copies available to others on request. In addition, this report will be
available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions, please contact me on (202) 512-2834
or at goldsteinm@gao.gov. Major contributors to this report were Casey L.
Brown, Terrell Dorn, and Thomas G. Keightley.




Mark L. Goldstein
Acting Director, Physical Infrastructure Issues




Page 16             GAO-03-823 Management and Oversight of the Construction Process
Appendix I

Kennedy Center’s Projected Revenue from                                                                                                                          Appendx
                                                                                                                                                                       ies




Parking Spaces Constructed in the Garage
Expansion                                                                                                                                                         Append
                                                                                                                                                                       x
                                                                                                                                                                       Ii




                                                                                                                            Debt service
Fiscal                         Parking rate                 Number of     Projected                     Annual            (principal plus
year                             per space             parking spaces capacity factor                  revenue                  interest)       Excess (deficit)
2004                                        $15                   525                 0.8           $2,299,500                $3,830,124            ($1,530,624)
2005                                          15                  525                 1.1            3,161,813                  2,345,932                815,881
2006                                          16                  525                 1.1            3,372,600                  2,347,134              1,025,466
2007                                          16                  525                 1.1            3,372,600                    810,765              2,561,835
2008                                          17                  525                 1.1            3,583,388                  2,327,825              1,255,563
2009                                          17                  525                 1.1            3,583,388                  3,906,706              (323,319)
2010                                          18                  525                 1.1            3,794,175                  2,353,108              1,441,067
2011                                          18                  525                 1.1            3,794,175                  2,354,248              1,439,927
2012                                          19                  525                 1.1            4,004,963                    706,533              3,298,430
2013                                          19                  525                 1.1            4,004,963                  2,333,685              1,671,278
2014                                          20                  525                 1.3            4,982,250                  2,333,633              2,648,617
2015                                          20                  525                 1.3            4,982,250                  4,060,521                921,729
2016                                          21                  525                 1.3            5,231,363                  2,362,280              2,869,083
2017                                          22                  525                 1.3            5,480,475                  2,367,424              3,113,051
2018                                          22                  525                 1.3            5,480,475                    539,607              4,940,868
2019                                          23                  525                 1.3            5,729,588                  2,335,932              3,393,656
2020                                          24                  525                 1.3            5,978,700                  2,332,691              3,646,009
2021                                          24                  525                 1.3            5,978,700                  4,275,310              1,703,390
2022                                          25                  525                 1.3            6,227,813                  2,376,286              3,851,527
2023                                          26                  525                 1.3            6,476,925                  2,379,500              4,097,425
2024                                          27                  525                 1.3            6,726,038                    311,664              6,414,374
2025                                          28                  525                 1.3            6,975,150                  2,337,920              4,637,230
2026                                          29                  525                 1.3            7,224,263                  4,513,050              2,711,213
2027                                          30                  525                 1.3            7,473,375                  2,395,916              5,077,459
2028                                          30                  525                 1.3            7,473,375                  2,394,620              5,078,755
2029                                          31                  525                 1.3            7,722,488                     58,953              7,663,535
2030                                          32                  525                 1.3            7,971,600                  2,343,953              5,627,647
Total                                                                                            $143,086,388                $63,035,320            $80,051,068
Source: The John F. Kennedy Center for the Performing Arts.

                                                              Note: The information in this appendix was provided by the John F. Kennedy Center for the Performing
                                                              Arts and does not contain any GAO analysis.




                                                              Page 17                   GAO-03-823 Management and Oversight of the Construction Process
Appendix II

Agency Comments from the John F. Kennedy
Center for the Performing Arts                                                        Appendx
                                                                                            Ii




              Page 18   GAO-03-823 Management and Oversight of the Construction Process
Appendix II
Agency Comments from the John F. Kennedy
Center for the Performing Arts




Page 19               GAO-03-823 Management and Oversight of the Construction Process
           Appendix II
           Agency Comments from the John F. Kennedy
           Center for the Performing Arts




(543062)   Page 20               GAO-03-823 Management and Oversight of the Construction Process
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