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Audit criticizes Portland sewer building cost increases

City Auditor LaVonne Griffin-Valade is criticizing the Bureau of Environmental Services for cost increases at its new employee building at the Columbia Wastewater Treatment Plant.

The cost increased from an original estimate of $3.2 million to $11.5 million by the time the building was completed last year. The increase became an issue in the campaign on a ballot measure to transfer control of BES and the Portland Water Bureau from the City Council to an independently elected board. Mayor Charlie Hales and Commissioner Nick Fish, who is in charge of BES, asked Griffin-Valade to do an audit of the cost increases before the measure was defeated at the May primary election.

The audit released Wednesday points out that the building was necessary to replace temporary trailers that had begun to deteriorate. But the audit also cites several design and use decisions made by BES that increased the cost of the project after it had been approved by the council. For example, the audit points out that BES decided the building should be able to function as an emergency operations center after the council approved the project, requiring an additional $500,000 to be able to survive a severe earthquake. Expanding the work site also increased the cost by $1.5 million.

The audit also found that a philosophy of striving to be a model of sustainability at the city turned the project into "an educational 'showcase' of values," which resulted in a more elaborate, architecturally unique and complex project than approved by the council. And, according to the audit, weaknesses in oversight during the design stage resulted in additional costs.

And, although BES discussed the changes with the council on numerous occasions, according to the audit agency officials did not provide enough information about them for the council to understand their significance.

"Essentially, what could have been a relatively straightforward and simple building beam more complex and elaborate, as design choices and scope additions expanded the project area as well as the building's complexity. During the design process, caps in project oversight also contributed to the increase in project cost," according to the audit, "B.E.S. Columbia Building: Scope addition and ineffective design oversight led to substantially higher project costs."

The audit makes several recommendations for preventing such unapproved cost increases in the future. They include clarifying competing priorities, considering related needs before submitting the first budget request, better defining what the project contracts are intended to accomplish, and obtaining formal council approval for significant changes and cost increases.

Fish was assigned BES as the project was nearing completion. In a letter accompanying the audit, he accepts its findings and recommendations.

"This audit raises serious and troubling issues," wrote Fish, who noted that he has already directed both BES and the water bureau to place contract changes greater than $500,000 on the council's the council's regular agenda for full discussions. "Good stewardship of ratepayer dollars is critical to maintaining public confidence in our utilities."

But BES Director Dean Marriott faulted the audit for using the $3.2 million figure as the starting point. In a letter accompanying the audit, Marriott wrote that the budget was adjusted to $8.9 million to include site improvements not in the original plan by December 2010. He described them as "important improvements" that are long-lasting investments in the facility.

"Starting with this adjusted budget would provide the reader with a better comparison to the final $11.5 million cost," Marriott wrote.

The audit can be found at www.portlandonline.com/auditor/index.cfm?c=64479&a=506785.

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