AUDIT PURPOSE

The Oregon Department of Transportation spends about $400 million a year on highway, bridge, and other construction projects. The purpose of this audit was to determine if ODOT is effectively monitoring project changes to prevent unwarranted costs. Because unbalanced bidding can lead to increased project costs, we examined the agency’s efforts to monitor project changes related to those bids.

FINDINGS IMPACT

These bids could impact ODOT project costs for state contracts. If agency leadership decides to implement enhanced tracking and scrutinize unbalanced bidding, the state could potentially realize significant savings by avoiding project cost increases. Inaction will continue the status quo of incomplete data that prevents ODOT from evaluating unbalanced bidding that can lead to project cost increases.

 

Read full report here.

KEY FINDINGS

  • ODOT has processes in place to manage changes to its construction projects, but the agency does not track which bid items are unbalanced or project changes related to unbalanced bid items.
  • State and federal laws generally require ODOT to award construction contracts to the lowest bidder, so contractors sometimes submit abnormally high or low prices on certain line items, known as “unbalanced bidding.” Contractors may bid high on line items for which they think ODOT might have underestimated the quantity, with the goal of maximizing profits while keeping the overall bid low.
  • ODOT is unable to look across all projects for patterns of unbalanced bid items related to project changes. These bid items can lead to increased costs if projects are later changed, but not all project changes are problematic or avoidable.
  • We reviewed data for all 413 ODOT-run construction projects completed from 2011 to 2015 and found that over 90% of these projects had at least one unbalanced bid item, and 61% had one or more unbalanced bids that were at least double their estimated cost.
  • Total cost for the 413 projects was $1.8 billion, slightly below the total estimated costs of $1.9 billion, but 69% of projects exceeded their bid amounts. However, total project costs contain other expenditures not included in the contractor’s original bid amount, such as performance pay factors for meeting specific quality standards.

RECOMMENDATIONS

  • ODOT should track unbalanced bid items, either within existing systems or separately
  • Include bid item numbers in project changes and track them.
  • ODOT should conduct regular analyses of project changes related to unbalanced bid items and evaluate whether unbalanced bidding is negatively affecting project costs or bid competition.
  • ODOT should provide Project Managers with more guidance on how to manage unbalanced bid items.