Tuesday, February 15, 2000

Stadium overruns may pass $45M


Auditor: Lax oversight, rush job part of problem

BY DAN KLEPAL
The Cincinnati Enquirer

[stadium]
'The project is in trouble,' admits county commissioner Tom Neyer.
(AP photo)
| ZOOM |
        Taxpayers will need to open their wallets a lot wider to finish paying for Paul Brown Stadium.

        The cost of building the Bengals a new home on the riverfront for what the county assumed since December 1997 would be a “guaranteed maximum price” of $287 million may go up $35 million to $45 million — or more.

        The bottom line is that even after a two-month audit — during which a New York firm performed a detailed examination of scores of contract changes — no one can say for certain what the final price tag will be.

        Also unclear is whether the stadium will be ready for the first preseason game Aug. 19.

[stadium]
        If it's not, taxpayers will take another hit in the wallet by forfeiting to the Bengals $2 million for each preseason game and $4 million for each regular season game not played there.

        “The project is in trouble, but it's absolutely recoverable,” said Hamilton County Commissioner Tom Neyer. “It's critical for the stadium to be ready by Aug. 19, so it's critical for the work to continue and the workers down there to continue getting paid.

        “We can work out the responsibility for those payments at a later time. Now is not the time to start pointing fingers.”

        County officials were told Monday that a hurried construction schedule, lax oversight and poor record-keeping contributed to the increased cost.

        However, there is no evidence of fraud or theft in the records reviewed by auditors, officials said.

        The county may be able to recover some of the money for those overruns, but only after lengthy negotiations or, possibly, lawsuits.

        For now, it appears the county will have to put up the cash so the frantic pace of work does not slow.

        Howard Green pointed plenty of fingers Monday.

        Mr. Green, a principal consultant with the accounting firm of PricewaterhouseCoopers, assigned blame for the cost overruns to nearly everyone associated with the project — NBBJ Architects, construc tion manager Turner Barton Mallow D.A.G. and stadium project manager Getz Ventures.

        He did not blame the county officials who hired him to conduct the audit.

        PricewaterhouseCoopers was hired in December to look at change orders — when specific work increases in scope and price — associated with stadium construction.

        The firm, which has a downtown office, also looked at how much more money the county would have to contribute to finish the project, and if the county's controls over change orders are sufficient to spot trouble.

        Mr. Green said the biggest chunk of overruns came as a result of the project architect seeking bids for work before final drawings were complete.

        County commissioners would then approve the bids as they came in under budget, only to have large increases in scope and cost when the plans were final.

Paperwork a mess
        Mr. Green said the subsequent change orders would work their way from desk to desk inside construction trailers without anyone determining:

        • Who was responsible for the additional work.

        • If the work was necessary.

        • How much the work would cost.

        • How the change could be tracked.

        The paperwork was in such a mess that some items couldn't be tracked, forcing auditors to interview employees to fill in the missing pieces during the review, he said.

        “It appears that no one warned the county of the consequences of going to the street with incomplete drawings,” Mr. Green said. “And the project manager was not prepared to support the review we wanted.

        “He did not know the answers to questions we were asking.”

        County officials reached the guaranteed maximum price for the stadium as a result of negotiating with the contractor after a preliminary set of design drawings were complete.

        The idea was that taxpayers would be responsible only for the $287 million guaranteed maximum price, and that the contractor would pick up any cost overruns. The actual cost of building the stadium, buying the land and paying fees is more than $400 million.

        Mr. Green said the guaranteed maximum price (GMP) appears to have been poorly developed.

        “We found that the GMP contains numerous exceptions and allowances for items that were missing from these (drawings),” the audit report says.

        In addition, the auditor says both the construction manager and the project manager were too willing to pass on cost overruns as modifications to the county's GMP.

        The report states that during an interview between Mr. Green and the project manager, more than $350,000 in modifications to the county's GMP were removed when challenged.

        The cost overruns will continue to rise, Mr. Green said.

        There are more than 300 change orders being processed and the construction manager is unable to say how much they will cost. And the architect has scores of other change orders that will soon be placed into the system.

        Also, the rush to finish the project will force the county to pay a premium in salaries for weekend and overtime labor, Mr. Green said, adding it is important for the county to get a handle on how much that will cost.

        “I am shocked, saddened and angered by this report,” Hamilton County Administrator Dave Krings said. “This is not a proud day.”

"An opportunity to reflect'
        County Auditor Dusty Rhodes has been advising the county to hire a construction auditor since the sales tax passed in 1996. Mr. Rhodes said he was promised that a stadium authority would be used to make decisions when it came to stadium construction.

        “The failure to set up a stadium authority is ground zero for all of this,” Mr. Rhodes said. “That idea went by the boards the minute the sales tax passed, and it's been sort of ad hoc by these people ever since.”

        County Commissioner Bob Bedinghaus, who championed the sales tax increase to pay for the stadiums, said the county will consider assembling a stadium authority for the Reds ballpark.

        “This is an opportunity for us to reflect on how we could have done things better,” Mr. Bedinghaus said.

        Said Mr. Rhodes: “They should have had a construction auditor on the job from day one.”

        That is likely to happen with the Reds ballpark.

        Mr. Krings said he thinks the county should either retain PricewaterhouseCoopers or hire another construction auditor to work with the architect, project manager and con struction manager on the baseball stadium.

        He also announced that Getz Ventures, which was supposed to supervise work on the Reds ballpark, will not participate in that project.

        Instead, it will focus on finishing the football stadium and the county will look for a new project manager.

        In the meantime, the architect, project manager and construction manger are expected to attend Wednesday's county commission meeting to discuss the overruns, as well as the construction schedule for Paul Brown Stadium.

        The so-called “project team” was being briefed about the audit late Monday and declined to comment through a spokeswoman, except to say: “(They) really need some time to go through the report and digest it.”

How change orders add to construction costs
Stadium milestones



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