CIPP Lining Project

The Cure-In-Place-Pipe (CIPP) Lining Project (CIPP Project) was, in effect, an asset management driven project under which specific portions of the City sewer system was inspected, cleaned and repaired as necessary and to the extent necessary.

In the summer of 2006 W&W awarded a contract for “rehabilitation” of the City’s sewer involving the following scope of work:¹⁰⁰

 Sewer cleaning and video inspection;

 Internal sewer repairs;

 Flow control services;

 Full segment lining by CIPP;

 CIPP internal point repairs;

 Catchbasin lead inspections;

 Surface restoration, site clean-up and demobilization.

The initial project construction estimate was set at $976,616.80 in the five year capital budget plan. At the completion of detailed design the construction estimate was set at $976,616.80, identical to the amount set in the initial capital budget. This suggests that the designer either actually designed to a scope of work limitation imposed by the approved budget or that the estimate was capped at the plan amount of $976,161.80, producing what was essentially a

“factored estimate” wherein a specific limitation caps the data upon which the estimate is based.

Given the relatively small size of the project in question, designing to a set amount (a cost factor) is an accepted methodology; however, if the budget estimate was artificially capped without regard to the full scope of work this would represent a practice which is not generally acceptable within the industry at large.

100 Bid Opportunity No. 273-2006, Supplemental Conditions, Section D2.2, page 1

The construction tender amount was $1,368,030.30, which was $391,412.50 (40%) higher than the budget and design estimate. The difference between the estimate amount and the tendered bid was explained within the award report submitted as required through Materials Management. In effect, scope of work elements which had not been considered during the development of the original estimate had been captured by the bidding contractor, which resulted in an increase in the bid cost over the original estimate. During the project three change orders were issued by the City which expanded the scope of work and resulted in a total cost increase of $170,232.73. The total budgeted cost with change orders was $1,538,263; to-date the project reports a total cost of $1,643,295, an apparent overrun of $105,032. On the surface it appears that the budget grew from an original estimate of $976,616 to $1,643,295, a difference of $666,679. However, just less than 59% of that apparent total overrun was due to the tender price being $391,313 higher than estimated; while an additional 26% ($170,233) was due to specifically identified changes in project scope made after the project was awarded. If adjusted for those two cost issues, the total apparent overrun to date calculates to only

$105,133, which calculates to 16% of the total cost overrun to-date but only 6% of the total costs expended to-date.

While the amounts cited above are not seriously out of line with expected industry norms, Pegasus-Global notes that the single biggest increases were experienced in the bid tender amount exceeding the budget estimate and the three change orders issued after award. Both of those items are related to scope definition and as a result Pegasus-Global suggests that a

“lessons learned” exercise be conducted to ascertain if the reason for those two cost impacts be examined to determine if the scope definition was incomplete or flawed or the design estimate was flawed or based on an incomplete definition of the full project scope. (See Section 7.5 below)

Relative to schedule, the Project start date was the date of contract award (August 2006) with completion required as of June 30, 2007. The project was construction complete as of July 9, 2007, which essentially met the contractual conditions of the project. From a schedule perspective the project was executed as required.

See Table 7, CIPP Lining Project Practices, attached for a summary of Pegasus-Global findings relative to the CIPP Project.

6.2.6.1 Scope Management

As noted in Section 5.4.1 above, Pegasus-Global found no Corporate or Department Level procedure addressing planning, definition, work breakdown structure, or verification of scope which met the standards contained within the PMBOK^®. As a result Pegasus-Global had no basis of comparison against which to measure if the CIPP Project management of the project scope was consistent wit the Corporate and Department Levels.

Through its review of the project documents and the interviews conducted Pegasus-Global found that the CIPP Project had established a detailed technical scope definition for the project, with the work activities clearly identified for the contractor. The was a requirement that the contractor prepare and submit a critical path method schedule required the development of a work break down structure.

Pegasus-Global also found that the CIPP Project Practices conformed to the Corporate and Department Level Procedures relative to scope control (change control). The only PMBOK^® process standard which Pegasus-Global was unable to confirm was the verification of scope.

The Supplemental Conditions stated that:¹⁰¹

The date on which the Work has been certified by the Contract Administrator as being totally performed to the requirements of this Contract through the issue of a certificate of Total Performance is the date on which Total Performance has been achieved.

However, Pegasus-Global found no certification of “total completion” among the documents reviewed for the CIPP Project or any indication that a formal process of turnover and acceptance of the CIPP Project had been conducted.

101 Bid Opportunity No. 273-2006, Supplemental Conditions, Section D17.3, page 6

Overall Pegasus-Global found that the CIPP Project Practices relative to scope management and control met the conditions set forth in the PMBOK^® and exceeded the Procedures which exist at the Corporate and Department Levels.

6.2.6.2 Time Management

As noted in Section 5.4.2 above, Pegasus-Global found no Corporate Level Procedures addressing time management (scheduling), however at the Department Level scheduling Procedures were addressed in the Project Administration Manual.¹⁰² Pegasus-Global found that because there were no Corporate Level Procedures and because the Department Level Procedures had never been updated, that the Procedures in place did not meet the standards promulgated within the PMBOK^®.

As with the majority of Projects reviewed during this Program Management audit, Pegasus-Global found that the CIPP Project required a detailed critical path method schedule with weekly based Gantt charts. In addition, the CIPP Project management team required that 10 specific activities be included within that schedule.¹⁰³

The requirements contained in the Supplemental Conditions along with schedule documents prepared by the contractor during execution of the project led Pegasus-Global to find that the schedule Practices of the CIPP Project met the standards put forth in the PMBOK^® and exceeded the Procedures which exist at the Corporate and Department Levels. As noted earlier, project construction was essentially completed as scheduled.

6.2.6.3 Cost Management

As noted in Section 5.4.3 above, the Corporate and Department Level Procedures met the cost management standards promulgated within PMBOK^®, with the exception of estimating processes.

102 Manual of Project Administration Practice, Preliminary Edition for Trial Use and Comment, March 1992, Section 7.4, page 7.12 through 7-17

103 Bid Opportunity No. 273-2006, Supplemental Conditions, Section D13.3, page 4

A review of the project documentation by Pegasus-Global found that the cost management Practices at the CIPP Project met the Corporate and Department Procedures relative to budgeting and cost control and therefore also met the standards contained within the PMBOK^®.

However, during document review and the interviews conducted with project management staff Pegasus-Global found no mention of how the CIPP Project estimate was prepared prior to issuing a Bid Opportunity document on the project scope of work. As a result, Pegasus-Global found that the estimating Practices at the CIPP Project met the budget and control Procedures at the Corporate and Department Levels, and met those same standards identified within the PMBOK^®. Pegasus-Global did not find documentation to the effect that the CIPP Project met the estimating standards contained within the PMBOK^®. As noted in Section 6.2.6 above, there appeared to be a disconnect between the detailed design estimate and the amount tendered by the contractor which should be examined within the context of lessons learned.

6.2.6.4 Quality Management

As noted in Section 5.4.4 above, Pegasus-Global found that no Quality Management and Control Procedures were found at the Corporate and Department Levels.

The CIPP Project General and Supplemental Conditions of Contract were silent relative to Quality Assurance or Quality Control. Pegasus-Global found no documentation which indicated that the CIPP Project had developed or implemented any quality planning, quality assurance or quality control Practices for implementation during the execution of the project. Therefore, Pegasus-Global found that the CIPP Project did not meet the quality management standards set forth in the PMBOK^®.

6.2.6.5 Human Resource Management

During interviews it appeared that staffing for this capital project was made based primarily on (1) availability of staff resources at the time of project authorization by the City Council, and (2) by the size and complexity of the specific project rather than as a result of any specific staffing

plan or organizational structure set for the project. The interviews also revealed that while no mandated Procedural functions or processes (i.e. quarterly reporting for major projects) were

“abandoned” due to a lack of staff, certain management and control functions which the project management team believed should have been more closely managed and controlled than required by Corporate and Department Level Procedures (i.e. progress and schedule monitoring and reporting) were not expanded due to a lack of staff resources. In summary, the staff assignments appear to have been made in response to the need to meet the requirements of the Corporate and Department Level Procedures.

Through interviews Pegasus-Global found that CIPP Project team members were fully knowledgeable as to the responsibilities of their respective positions, with clear lines of responsibility and authority provided by the CIPP Project manager.

Pegasus-Global generally found that human resource management and control was in accord with Corporate and Department Procedures and, generally with the exception of human resource planning, within PMBOK^® standards of care.

6.2.6.6 Communications Management

As noted in Section 5.4.6 above, with the exception of “Performance Reporting”, there were formal Procedures in place which governed project communications at the Corporate and Department Levels. With the exception of “Performance Reporting” Pegasus-Global also concluded that the Procedures adopted by the Corporate and Department Levels met the standards promulgated by PMBOK^®.

The review of the CIPP Project Practices Pegasus-Global found that Corporate and Department Level Procedures had been followed as required for the CIPP Project. Relative to Performance Reporting the CIPP Project required a “regular weekly job meeting” during which the progress of the work would be reviewed.¹⁰⁴ That provision was identical to provisions issued by most of the other projects reviewed during this program audit. During review of the CIPP Project documents

104 Bid Opportunity No. 273-2006, Supplemental Conditions, Section D21.1, page 7

Pegasus-Global found examples of the minutes which were produced to record those progress meetings.

Overall Pegasus-Global found that the Practices followed by the CIPP Project met all of the PMBOK^® standards for communications management and met or exceeded the Corporate and Department Level Procedures in place.

6.2.6.7 Risk Management

As noted in Section 5.4.7 above, Pegasus-Global found no Procedures at the Corporate or Department Level which addressed requirements for a risk management program for capital projects.

Pegasus-Global found no mention of risk management during its review of the CIPP Project documents; however, during an interview with W&W personnel it was stated that the Department had an Asset Condition Assessment Group with a Risk Team which determined whether or not the condition of an asset such as a sewer line, warranted refurbishment. While Pegasus-Global believes that the risk management task described by W&W during the interviews is a valuable and necessary asset management function, what Pegasus-Global was looking to find was a risk management program in place which identified the risk elements inherent in the CIPP Project, then qualified, quantified and prepared responsive avoidance and mitigation actions addressing those risk elements.

Pegasus-Global found no indication that such a risk management Practice was in place for the CIPP Project and so determined that CIPP Project Practices did not meet the risk management standards contained within the PMBOK^®.

6.2.6.8 Procurement Management

As noted in Section 5.4.8 above, Pegasus-Global found that the Corporate and Department Level Procedures addressed all of the PMBOK^® procurement management functions and met the standards set for those functions.

During its review of the CIPP Project Pegasus-Global found that project management team had aligned its procurement management Practices to match the Procedures set at the Corporate and Department Levels. As a result Pegasus-Global found that the CIPP Project met the standards for procurement management contained within the PMBOK^®.

However, as discussed relative to the street renewal projects executed by Public Works, the repetitive nature of the CIPP projects may benefit from examination and adoption of more innovative project delivery methodologies which enable it to take advantage of efficiencies which are not available under a traditional DBB project delivery methodology. At a minimum W&W may want to examine the potential benefits from the following:

 Short From Bidding and Contracting

 Project bundling

 Multi-year awards

 Etc.

Again Pegasus-Global recommends that the Manager of Capital Projects work with W&W to ascertain which innovative project delivery methodologies would enable the Department to take full advantage of any gains in competitiveness and/or efficiency can best serve the needs of the CIPP projects.

6.2.6.9 Integration Management

As noted in Section 5.4.9 above, of the seven functions identified as comprising project integration management within the PMBOK^®, Pegasus-Global found that there were no Corporate and Department Level Procedures addressing four of those processes:

 Project Charter (Scope definition, goals and objectives)

 Project Management Plan (Delivery methodology strategy and execution processes and systems)

 Management Execution (Implementation of Project Management Plan)

 Monitor/Control Work (Project control system implementation and management actions/responses)

The remaining three processes (Preliminary Scope, Change Control and Close Project) were all addressed within the Corporate and Department Level Procedures.

Pegasus-Global’s review of project documents and the interviews conducted relative to the CIPP Project found that the Practices followed during the execution of the project addressed all but one of the seven PMBOK^® integration processes – development and use of a project Management Plan. Pegasus-Global found no formal, integrated or consolidated project management plan which addressed the other six processes identified within this management function. However, Pegasus-Global did find that each of the other six management process elements was addressed separately in various documents prepared during the planning and execution of the Project.

Overall Pegasus-Global found that the Practices followed on the CIPP Project met all but one of the standards set within the PMBOK^® for integration management and met, or exceeded the Corporate and Department Level Procedures in place. At the CIPP Project Level Pegasus-Global found no formal, integrated project plan in place which met the standards promulgated in the PMBOK^®.

6.2.6.10 Summary of Findings – CIPP Project

Pegasus-Global found that the CIPP Project Practices conformed to the Corporate and Department Procedures in place. As with the majority of projects examined during this program audit, the CIPP Project Practices actually exceeded the Corporate and Department Procedures, addressing some of the PMBOK^® functions and processes which had not been addressed at the Corporate or Department Levels.

The review of the documents and the discussions during the interview process conducted by Pegasus-Global also raised the following issues:

(1) W&W has a proportionally higher number of “major projects” than either PP&D or Public Works. This is primarily due to the fact that W&W facilities are process projects rather than structure or road projects.

(2) W&W has an in-house design capability which enables the Department to develop early preliminary design and scope definitions, which aids in planning and estimating projects at an earlier stage than other Departments dependent upon funds authorized by the City Council. To this end W&W could prepare iterative designs and sequentially more accurate cost estimates over time.

(3) Although the size of certain of the projects executed by W&W might benefit from a project delivery methodology other than DBB with a Contract Administrator, W&W has not actively pursued the use of those alternatives, choosing instead to conform to the City’s traditional DBB methodology. As noted earlier, Pegasus-Global believes that the CIPP project management efficiency for both the City and the contractor could be improved by adopting alternative or even innovative project delivery methodologies (i.e.

short form contracting, project bundling, etc.) intended to reduce the management and administrative burden on both the City and the contractor.