New Audit Shows Major Cost Overruns In State Construction Projects

Jun 19, 2017

A new report from the state auditor’s office shows chronic cost overruns for major construction projects at the Vermont Department of Buildings and General Services.

State Auditor Doug Hoffer scrutinized 10 projects undertaken over the past five years, and found that costs came in nearly $25 million higher than the $92 million initially budgeted for the projects.

Hoffer says the 27-percent overrun, on average, is due in part to shortcomings in project management that have obscured the true cost of major infrastructure initiatives, like the Vermont Psychiatric Care Hospital in Berlin, the Public Health Lab in Colchester and the Public Safety Facility in Westminster.

“Why is that happening so frequently, so regularly?” Hoffer said in an interview Monday. “It’s got to do with how they manage these projects. They need better tools, they need a better commitment from …  top management, and they need to work more closely with the Legislature.”

Chris Cole, who was appointed commissioner of the Department of Buildings and General Services by Gov. Phil Scott in January, says there are instances in which even the best-managed projects will come in over budget.

“And we don’t necessarily have an ability to control things that we can’t see until the project begins,” Cole says.

"Their current system, their project management systems, are not sufficient to report to the general public, to their superiors and to the Legislature on [how] the projects' outcomes ... compare to the expected result." — State Auditor Doug Hoffer

Cole, however, says Hoffer’s report shines a light on areas of the department that need improvement.

“BGS does not do a particularly great job with all of its projects on scoping. It’s not universal - some projects are scoped better than others,” Cole says.

"Scoping" refers to the breadth of the design, engineering and construction activities involved in a project. And better scoping at the initial stages of a project, according to Cole, will yield more reliable cost estimates for design and construction. Cole says he’s already reorganized the department to create a “policy, planning and use” division.

“Design and construction will have a lot more information with which to design that project that could reduce some of the costs by having additional information identified in scoping,” Cole says.

Cole says Hoffer has also identified another weakness that he’s already begun to try to rectify.

“I think where the auditor’s report really does me some favors as the commissioner at BGS is to identify the lack of documentation in both our project scheduling and our project estimation,” Cole says. “We don’t utilize project scheduling software here. We really should. We don’t have project tracking, which tracks the costs of the projects and then the underlying reasons why change orders occur.”

Cole says accurate cost estimates are important.

“We have more needs than we have resources available, and so we want to make sure that our estimates are accurate so we can do as many projects as possible,” Cole says.

But he says with the 10 projects in question, the state would have incurred those higher costs no matter what phase of the project they had been discovered.

Hoffer isn’t so sure. He points to the Public Health Lab in Colchester, a project that exceeded its initial $28 million budget by $9 million.

“I think it’s fair for taxpayers to ask the question, was all of that necessary?” Hoffer says.

Hoffer says one episode from that health lab project underscores the way in which questionable planning can lead to otherwise avoidable cost overruns. The state initially planned to site the lab in facility known as Building 617, at the former IBM campus in Essex.

“For reasons that we can’t quite determine, and we asked everybody in sight, they decided at some point not to use that building,” Hoffer says. “So Building 617 was purchased, maintained, and money was spent on preparing plans, architectural and engineering plans to use it, and it was never used for those purposes. We lost $7.6 million on that.”

Hoffer says the department also lacks the record keeping needed to track overruns as they accumulate. He says “better documentation is key” to more effective oversight, both within the department and at the Vermont Legislature.

Hoffer says as of now, there’s “no simple way to track costs associated with a specific project.”

“Now I’m certain it’s not done to avoid accountability, but that is the practical outcome - no accountability,” Hoffer says.