UW met its statutory requirements and has implemented three recommendations from JLARC’s 2014 sunset review

The 2010 Legislature created an alternative process that allows the University of Washington (UW) to pre-qualify contractors for certain medical facility construction projects (RCW 28B.20.744). Projects must cost $5 million or less and are limited to facilities used for critical patient care or highly specialized medical research. Projects have been located at UW Medical Center (UWMC) and Harborview Medical Center (Harborview), which UW operates under an agreement with King County.

The alternative process was intended to make the contracting process faster by using rosters of pre-qualified contractors.  The rosters eliminate the need to screen out unqualified contractors for each project and can lead to an earlier start date for construction.

UW complied with statutory requirements for administering rosters and bids

UW complied with state law that requires it to follow specific procedures for establishing rosters and soliciting project bids.  UW issued annual public solicitations for contractor qualifications, established a committee to evaluate qualifications, sent requests for bids to all roster contractors, and awarded contracts to the lowest responsible bidder.

As of January 2016, UW pre-qualified 12 contractors for its two current rosters.  Roster placement is based on relevant experience.  One roster is used for the most complex projects, such as renovating oncology suites or operating rooms, and the other is for specialized but less complex projects.

UW has implemented three recommendations from JLARC’s 2014 sunset review, which advised reauthorization

The alternative process was initially scheduled to sunset on June 30, 2015.  As required by law, JLARC staff completed a sunset review in 2014.

UW implemented the three recommendations from the sunset review:

1. It reduced the average time for contractor selection at Harborview from 31 to 16 days;
2. It reduced the average time to start construction at Harborview from 66 to 36 days; and
3. It began tracking existing information about whether prime contractors use subcontractors that are state-certified as minority or woman owned firms by the Office of Minority and Women’s Business Enterprises (OMWBE).

The Legislative Auditor also recommended reauthorizing the alternative process in 2014 because timeliness and quality had improved. In the 2015 legislative session, the Legislature extended the sunset date from June 2015 to June 2017.

Average contracting speed is faster and contractor performance ratings have improved using the alternative process

In 2010, UW stated its support for the alternative process and indicated that the process should be faster than standard public works contracting because it uses rosters of pre-qualified contractors.  The rosters eliminate the need to screen out unqualified contractors for each project, which the UW believed could lead to an earlier start date for construction.

JLARC staff analyzed 36 projects that UW bid between July 2010 and December 2015 using the alternative process.  These projects totaled an estimated $19.3 million.  Examples of recent roster projects include converting existing space into an MRI suite at UWMC and renovating a CT imaging room at Harborview (see Appendix 1 for more information about projects).

Average time to select a contractor and begin construction is faster using the alternative process

For the 36 roster projects that were bid between July 2010 and December 2015:

• The average time to select a contractor was eight days faster than for projects bid under the standard process that was used before July 2010;
• The average time to start construction, measured from the date that bids were due, was also eight days faster.

The average times are faster for both UWMC and Harborview projects.

All recent project contractors received superior or good performance ratings

The percent of contractors that received superior or good evaluations has increased under the alternative process.  UW evaluates the performance of prime contractors when they complete a project.  The 13 evaluation categories include cost controls, timeliness, and safety program management.

In April 2016, UW added two categories that will evaluate how well contractors are meeting apprenticeship requirements and engaging minority and woman owned firms as subcontractors.

Legislative Auditor Recommendation #1:

The Legislature should reauthorize UW’s alternative process for selecting medical facility construction contractors because overall timeliness and contractor performance ratings have improved.

In addition to this review, JLARC staff conducted a previous sunset review of this program in 2014. UW continues to comply with the law for administering the roster process and has implemented the Legislative Auditor’s recommendations from the 2014 sunset review. UW demonstrated improvements in average contracting speed and contractor performance during both sunset reviews.

The alternative process ends June 30, 2017, unless the Legislature reauthorizes it. The Legislature may reauthorize the alternative process without setting a new sunset date. If it wishes to set a new sunset date, it should consider allowing adequate time for the UW to implement changes and complete additional projects. Statute suggests a minimum of seven years for sunset terminations (RCW 43.131.061).

The University of Washington indicated it concurs with this recommendation.

Recent UWMC projects are slower than those started between 2010 and 2013.  Harborview projects are faster.  UW has not established timeliness goals.

Between January 2014 and December 2015, UW used the alternative process for 10 projects totaling an estimated $6.8 million.  Projects ranged in value between $121,000 to $1.9 million.

Contracting speed slower for recent UWMC projects

Although the average contracting time for roster projects is faster than before the alternative process began in 2010, six recent UWMC projects have taken an average of 33 days to select a contractor and 57 days to start construction. These timeframes are slower than the UWMC projects analyzed in JLARC’s 2014 sunset review (Exhibit 3.1).

UW reported that it delayed the start of several UWMC projects to ensure hospital rooms were ready for construction or to coordinate budgets.  It also delayed projects in operating rooms until the hospital had fewer patients scheduled for surgery (i.e., November and December).

Contracting speed faster for recent Harborview projects

Four projects started at Harborview since January 2014 have taken an average of 16 days to select a contractor and 36 days to begin construction.  This is faster than roster projects at Harborview analyzed in JLARC’s 2014 sunset review (Exhibit 3.2).

UW attributed the improvements in contracting speed to a more proactive management approach with King County officials. UW operates Harborview under an agreement with King County.

UW has not established timeliness goals for alternative process

UW stated in 2010 legislative testimony that the main purpose of the alternative process is to speed contractor selection.  UW also chose as one of its performance measures a comparison of timeframes for beginning construction using the standard process and using the alternative process.  Timeframes are measured by the number of days between bid due date and notice to proceed date.

The average speed for both selecting a contractor and beginning construction has improved using the alternative process. However, the timeliness of the contracting process has been mixed since 2014. UW has not identified specific timeframe goals for the number of days it takes to select a contractor or begin construction. Establishing specific goals will enable UW to evaluate its performance into the future and measure interim changes in timeliness from year to year.

Legislative Auditor Recommendation #2:

UW should establish timeliness goals for selecting a contractor and beginning construction, and annually monitor its progress in meeting its goals. The UW should report this information to the Capital Projects Advisory Review Board (CPARB) by September 2017, and in its subsequent biennial reports.

UW is required to report to the Capital Projects Advisory Review Board (CPARB) every two years on its alternative process. In its recent reports, UW has included information on the timeliness of its contracting process. The Legislature created CPARB to review alternative contracting methods and recommend ways to improve their quality, efficiency, and accountability.

The University of Washington indicated it concurs with this recommendation.

No state-certified minority or woman owned firms on alternative contracting rosters, but UW taking steps to improve participation

As part of the alternative process, UW must seek proposals from certified minority or woman owned firms (RCW 28B.20.744(7)). The Washington State Office of Minority and Women’s Business Enterprises (OMWBE) certifies firms that meet certain criteria.

State-certified minority or woman owned firms are not on rosters and receive few contract dollars

UW set voluntary goals of spending 10 percent of contract dollars on state-certified minority owned firms and six percent on state-certified woman owned firms for all capital project contracts, including alternative construction contracts. However, UW has had no state-certified minority or woman owned contractors on its alternative construction rosters since the alternative process began.  UW reports that no certified contractors have applied to be on the rosters.

Since 2010, 17 roster projects have used certified firms as subcontractors.  The amount paid to these subcontractors totaled $86,600.  This is 0.4 percent of the estimated $19.3 million spent on roster projects.

UW is taking steps to improve its outreach and increase participation of certified firms

UW is using several different approaches to increase the participation of minority and woman owned firms on roster projects.

Difficult to assess barriers to participation

UW identified issues it believes pose barriers to increased participation:

• Firms certified by OMWBE are small firms. The maximum amount of annual gross receipts for businesses qualifying for state certification varies by industry, with an overall limit for all firms not to exceed $23.9 million per year.  This is considered small by the Small Business Administration standards that OMWBE follows.  UW indicates that firms with the required experience working in medical facilities tend to be large companies.
• Minority or woman owned firms may not be state-certified. UW believes that there are many minority and woman owned firms in Washington that are not state-certified.  UW has begun tracking and reporting its use of all minority and woman owned firms, not just certified firms.  It plans to utilize a Dun & Bradstreet database to determine a firm’s size, diversity status, and ownership profile.
• Specialized experience is required to perform work in medical facilities.  UW states its first priority for roster projects is patient safety. Contractors are responsible for infection control, mitigation of construction dust and noise, and proper shutdown procedures for utilities, which all impact patient safety.  To be placed on rosters, contractors must demonstrate that they have completed at least two recent projects in facilities where critical patient care or specialized medical research remained in operation during construction work.
• UW believes few certified firms meet roster qualifications. OMWBE has certified 2,123 firms statewide from all industries as of June 2016.  It is unclear how many are contractors that could meet the qualifications established for roster projects.  Additionally, a certified firm’s geographic location may not be suitable for performing work on UW facilities.

It is difficult for JLARC staff to assess the effect, if any, of these barriers on participation. Potential barriers to participation for minority and woman owned firms involve broad contracting policy issues and affect more than the 36 roster projects related to this review.

Legislative Auditor Recommendation #3:

In consultation with the Office of Minority and Women's Business Enterprises (OMWBE), the University of Washington should identify the barriers it believes impede its use of certified minority and woman owned firms and suggest remedies to those barriers.  The UW should report this information to the Capital Projects Advisory Review Board (CPARB) by September 2017, and in its subsequent biennial reports.

CPARB can then determine whether or not to recommend policy changes to the Legislature.

The University of Washington and OMWBE are members of the Capital Projects Advisory Review Board (CPARB).  CPARB was created by the Legislature to develop and recommend policies to enhance the quality, efficiency, and accountability of alternative contracting methods and suggest to the Legislature changes in alternative contracting approaches.

The University of Washington and the Office of Minority and Women's Business Enterprises indicated they concur with this recommendation.

Sunset reviews answer four key questions

The 2010 legislation that created the alternative process for selecting medical facility construction contractors requires a sunset review.  The Washington Sunset Act (RCW 43.131) directs JLARC staff to answer four specific questions in a sunset review.

1.  Has use of the alternative process complied with legislative intent?

Yes.  The UW has complied with statutory requirements for administering the rosters.  Use of the alternative process has reduced the time required to select a contractor by an average of eight days and the time to begin construction by an average of eight days.

2.  Does the alternative process provide for efficient and economical public works construction, with adequate cost controls in place?

Yes.  UW has used the alternative process for construction projects under $5 million at medical facilities.  UW has complied with procedural requirements established by the Legislature and has selected the lowest responsive bidder for its projects.

3.  Have projects constructed using the alternative process achieved expected performance goals and targets?

Yes.  The average time to select a contractor and begin construction has decreased under the alternative process, although the most recent projects at UWMC have taken longer than projects analyzed in JLARC’s 2014 sunset review.

Contractor performance ratings are higher under the alternative process than the previous public works process.  All four recent contractor evaluations resulted in superior or good ratings, compared to 62 percent of evaluations under the previous process.

4.  To what extent does the alternative process duplicate the activities of another agency or the private sector?

It does not.  The alternative process engages, rather than duplicates, the services of private sector contractors.

Exhibit A: Ten Most Recent Alternative Construction Projects

Exhibit B: Previous Alternative Construction Projects

Legislative Auditor Recommendation #1:

The Legislature should continue UW’s alternative process for selecting medical facility construction contractors because overall timeliness and contractor performance ratings have improved.

JLARC staff conducted sunset reviews of this program in 2014 and 2016. UW continues to comply with the law for administering the roster process and has implemented the Legislative Auditor’s recommendations from the 2014 sunset review. UW demonstrated improvements in contracting speed and contractor performance during both sunset reviews.

The alternative process ends June 30, 2017, unless the Legislature reauthorizes it. The Legislature may continue the alternative process without setting a new sunset date. If it wishes to set a new sunset date, it should consider allowing adequate time for the UW to implement changes and complete additional projects. Statute suggests a minimum of seven years for sunset terminations (RCW 43.131.061).

Legislative Auditor Recommendation #2:

UW should establish timeliness goals for selecting a contractor and beginning construction, and annually monitor its progress in meeting its goals. The UW should report this information to the Capital Projects Advisory Review Board (CPARB) by September 2017, and in its subsequent biennial reports.

UW is required to report to the Capital Projects Advisory Review Board (CPARB) every two years on its alternative process. In its recent reports, UW has included information on the timeliness of its contracting process. The Legislature created CPARB to review alternative contracting methods and recommend ways to improve their quality, efficiency, and accountability.

Legislative Auditor Recommendation #3:

In consultation with the Office of Minority and Women's Business Enterprises (OMWBE), the University of Washington should identify the barriers it believes impede its use of certified minority and woman owned firms and suggest remedies to those barriers.  The UW should report this information to the Capital Projects Advisory Review Board (CPARB) by September 2017, and in its subsequent biennial reports.

CPARB can then determine whether or not to recommend policy changes to the Legislature.

The University of Washington and OMWBE are members of the Capital Projects Advisory Review Board (CPARB).  CPARB was created by the Legislature to develop and recommend policies to enhance the quality, efficiency, and accountability of alternative contracting methods and suggest to the Legislature changes in alternative contracting approaches.

The Office of Financial Management (OFM) was given an opportunity to comment on this report. OFM responded that it does not have any comments.

University of Washington

Office of Minority and Women's Business Enterprises (OMWBE)

Audit Authority

The Joint Legislative Audit and Review Committee (JLARC) works to make state government operations more efficient and effective. The Committee is comprised of an equal number of House members and Senators, Democrats and Republicans.

JLARC's non-partisan staff auditors, under the direction of the Legislative Auditor, conduct performance audits, program evaluations, sunset reviews, and other analyses assigned by the Legislature and the Committee.

The statutory authority for JLARC, established in Chapter 44.28 RCW, requires the Legislative Auditor to ensure that JLARC studies are conducted in accordance with Generally Accepted Government Auditing Standards, as applicable to the scope of the audit. This study was conducted in accordance with those applicable standards. Those standards require auditors to plan and perform audits to obtain sufficient, appropriate evidence to provide a reasonable basis for findings and conclusions based on the audit objectives. The evidence obtained for this JLARC report provides a reasonable basis for the enclosed findings and conclusions, and any exceptions to the application of audit standards have been explicitly disclosed in the body of this report.

Committee Action to Distribute Report

On January 4, 2017 this report was approved for distribution by the Joint Legislative Audit and Review Committee.

Action to distribute this report does not imply the Committee agrees or disagrees with Legislative Auditor recommendations.

Scope & Objectives

Why a JLARC Sunset Review of UW’s Alternative Process for Medical Facility Construction?

The University of Washington (UW) is authorized to use an alternative process for awarding contracts to construct, remodel, or improve facilities used for critical patient care or highly specialized medical research. This process can be used for projects estimated to cost $5 million or less.

Unlike the standard contracting process which allows any contractor to bid on construction projects, the alternative process allows the UW to limit solicitations to a roster of pre-qualified contractors with demonstrated experience working in these specialized environments.

JLARC staff completed a previous Sunset Review in 2014. In that review the Legislative Auditor recommended the Legislature extend the contracting authority, and issued recommendations to the UW intended to improve the timeliness of projects and the tracking of women and minority-owned subcontractors.

Following the JLARC report, the Legislature extended the sunset date. The University’s authority to use this process now “sunsets” in June 2017 unless the Legislature reauthorizes the program. As directed in the Sunset Act (Chapter 43.131. RCW), in the year prior to the sunset date, JLARC staff review the extent to which the program has complied with legislative intent and met its performance targets.

Sunset Reviews

Statute specifies the types of questions to address in a sunset review. For this review, questions addressed will include:

1. To what extent has the UW’s use of the alternative process complied with legislative intent?
2. To what extent does the alternative process provide for efficient and economical public works construction, with adequate cost controls in place?
3. To what extent have projects constructed using the alternative process achieved expected performance goals and targets, including the use of women and minority owned contractors?
4. To what extent does the alternative process duplicate the activities of another agency or the private sector?

In addition to the sunset questions, the sunset review will also analyze the extent the University has implemented the recommendations of JLARC’s 2014 sunset review:

1. The UW should identify opportunities to reduce the time to select contractors for Harborview projects;
2. The UW should track use of women-and minority-owned subcontractors on projects using the alternative process to determine whether it is meeting its internal goal; and
3. The UW should review the other contracting steps that follow contractor selection to identify opportunities to reduce the time to begin constructing Harborview projects.

As directed by the Sunset Act, the review will include a recommendation of whether to terminate, modify, or continue without modification the UW’s alternative process for awarding contracts.

Timeframe for the Study

Staff will present the preliminary report in September 2016 and a proposed final report in December 2016.

Study methodology

The methodology JLARC staff use when conducting analyses is tailored to the scope of each study, but generally includes the following:

• Interviews with stakeholders, agency representatives, and other relevant organizations or individuals.
• Site visits to entities that are under review.
• Document reviews, including applicable laws and regulations, agency policies and procedures pertaining to study objectives, and published reports, audits or studies on relevant topics.
• Data analysis, which may include data collected by agencies and/or data compiled by JLARC staff. Data collection sometimes involves surveys or focus groups.
• Consultation with experts when warranted. JLARC staff consult with technical experts when necessary to plan our work, to obtain specialized analysis from experts in the field, and to verify results.

The methods used in this study were conducted in accordance with Generally Accepted Government Auditing Standards.

More details about specific methods related to individual study objectives are described in the body of the report under the report details tab or in technical appendices.

Contact

Authors of this Study

Stephanie Hoffman, Research Analyst, 360-786-5297

Steven Meyeroff, Research Analyst

John Woolley, Audit Coordinator

Keenan Konopaski, Legislative Auditor

Joint Legislative Audit and Review Committee

Eastside Plaza Building #4, 2nd Floor

1300 Quince Street SE

PO Box 40910

Olympia, WA 98504-0910

Phone: 360-786-5171

FAX: 360-786-5180

Email: JLARC@leg.wa.gov

JLARC Members on Publication Date