Public Building Commission Construction Change Orders Audit Follow-Up Inquiry

The City of Chicago Office of Inspector General (OIG) has completed a follow-up to its June 2018 audit of the Public Building Commission of Chicago’s (PBC or the “Commission”) change order review and approval process. Based on the Commission’s responses, OIG concludes that PBC has substantially implemented corrective actions related to the first audit finding and partially implemented corrective actions related to the second audit finding.

The purpose of the 2018 audit was to determine if PBC could provide reasonable assurance to its clients that change orders were justified and reasonably priced. Our audit found that while PBC designed a robust change order process, ineffective implementation of the process permitted errors and inconsistencies in the recording of information and recovery of damages. Because PBC allowed contractors to submit inconsistent information and did not hold architects accountable for errors, the agency could not demonstrate to its clients that it was effectively safeguarding public dollars.

Based on the results of the audit, OIG recommended that PBC improve its change order review and approval process by requiring contractors to submit cost proposals on a standardized digital form, and by implementing an electronic document control system for change order reviews and approvals. In addition, OIG recommended that PBC revise, and then consistently implement, its Errors and Omissions damage recovery policy, to ensure that damage calculations are reviewed and decision rationales are recorded.

In its response to the audit, PBC stated it had already begun to utilize a standardized electronic cost proposal form that facilitates accurate calculations and requires contractors to itemize labor and management costs. The response also described other corrective actions the Commission would take.

In August 2019, OIG inquired about corrective actions taken by PBC. Based on PBC’s follow-up response, OIG concludes that PBC substantially implemented corrective actions related to the first finding and partially implemented corrective actions related to the second finding. Specifically, PBC has created standardized forms, conducted trainings, and implemented procedures to ensure that all costs in change orders are accurately identified and appropriately marked up for Overhead and Profit (OH & P). While the Commission also committed to adopting an electronic change order tracking system and making comprehensive revisions to the Errors and Omissions (E & O) Manual, neither task has been fully implemented yet. Once fully implemented, OIG believes the corrective actions reported by PBC may reasonably be expected to resolve the core findings noted in the audit (i.e., the inability to assure the justification of cost increases or the pursuit of all appropriate recoverable damages).