Gray drafts bill to stop overruns

April 12, 1994|By James M. Coram | James M. Coram,Sun Staff Writer

The county is losing too much money on cost overruns, County Council Chairman C. Vernon Gray said yesterday, and he plans to put an end to it.

"The notion is out that in Howard County, if you low-ball your bid [on a contract for construction, supplies or services], the county will be receptive to your upping the bid" later on, Mr. Gray said.

The best way to eradicate "wasteful spending" on contract modifications, Mr. Gray believes, is to pass a law restricting such modifications -- and he has drafted a bill he believes will do just that.

The bill would limit increases to no more than 15 percent of the contract price, unless approved by a three-member committee of high-ranking county officials. The bill, which is slated for inclusion on the May agenda, would apply to any contract over $25,000.

The council chairman said he has been concerned for some time about what he considers to be a high number of expensive changes in county contracts.

"I understand that there may be unforeseen circumstances" that require changes in contracts, he said. But he wants to make sure that the circumstances leading to changes are truly "unforeseen."

Under his bill, the question of whether to approve major increases would be put to a three-member committee comprising the county auditor, the county's chief lawyer, and the county administrator or the administrator's designate. The committee would either approve the change or have the county rebid the project, Mr. Gray said.

County Executive Charles I. Ecker said he, too, is concerned about the number of changes made in contracts, but is not ready yet to endorse Mr. Gray's proposal.

Mr. Ecker said he has made changes in the way contracts are bid and carried out, and said those changes may already address some of Mr. Gray's concerns.

He said that although there was very little checking in the past about why contracts were modified, "we have changed that."

Mr. Ecker said he has not seen a draft of Mr. Gray's bill. "I don't know if it's necessary," he said.

Mr. Gray found support for his position last week in a report prepared by the accounting firm of KPMG Peat Marwick. Mr. Gray had asked the firm to conduct an administrative review of county contracts as part of its overall audit of county finances.

Peat Marwick's auditors confirmed that the county does indeed "routinely process a substantial number of contract change orders," though it did not cite any numbers in its report.

Harry H. Bain, chief of the county purchasing office, said the county spent $8.3 million on 490 contract modifications last year, but saved $4.4 million on 412 change orders in 1992.

The difference between 1992 and 1993 is that in 1993, the county worked on several major construction projects, Mr. Bain said. Changes in major projects are more costly than changes in minor ones.

Mr. Bain said there are three reasons for changing a project:

If the scope of the contract has changed since the project was bid; if enhancements are sought by the county or the bidder; or if there were omissions in the contract request to begin with.

"We're looking very, very carefully at [limiting] enhancements and are looking even harder at [limiting] scope," Mr. Bain said.

The Peat Marwick auditors suggested that the county could do a better job of making sure contracts are correct in the first place by hiring outside consultants.

"The county may not always have the technical resources to properly determine the scope of a project," the auditors said.

"If the scope is not properly determined, then significant additional costs could be incurred once the full scope of the project is realized."

Mr. Gray agrees.

"County government should be clear about what we want," he said. He plans to find out how many of last year's increases resulted from county requests and how many were due to contractor requests.

The auditors also said that awarding the contract to the lowest bidder does not always save money.

"When the selection of the lowest bidder is required, the resulting work quality may not meet county standards," the auditors stated.

Mr. Gray would get around that problem by having contractors indicate that they are qualified to do the work before bidding on a project.

"Prequalifying people would help us," Mr. Gray said, because "people wouldn't waste time putting in a bid if they couldn't otherwise carry out the project."

The auditors recommended that prequalification include factors such as the bidder's reputation, expertise, and past history with the county. Mr. Bain, the county purchasing chief, said the county now is using those criteria when awarding contracts.

"The auditors said [to] take a look at the number and type of change orders" occurring in county contracts, Mr. Bain said. "The county agreed. They stated some weaknesses that we have had in the past, and we are committed to strengthening them."

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