City Auditor Finds City Hall's Job Order Contracting (JOC) Program -- By Dept. of Public Works to Complete Millions of Dollars of Infrastructure (Incl. Repair/Renovations of Parks, Libraries, City Bldgs) Isn't Receiving Competitively Priced Projects

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City Auditor Finds City Hall's Job Order Contracting (JOC) Program -- Used By Dept. of Public Works to Complete Millions of Dollars of Infrastructure (Incl. Repair/Renovations of Parks, Libraries, City Bldgs) -- Isn't Receiving Competitively Priced Projects

Report comes as City Hall seeks sales tax increase, contending its revenue needed to fund infrastructure

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(May 25, 2016, 12:39 p.m.) -- The Long Beach City Auditor's office has released a report stating its conclusion that the City's Job Order Contracting (JOC) program -- used by the City's Dept. of Public Works to complete millions of dollars of infrastructure (including repair/renovations of parks, libraries, and City buildings) -- "is not receiving competitively priced projects."

The City Auditor's report found "a significant systemic lack of controls over all key areas of the process, creating an environment that is highly vulnerable to fraud. Too much emphasis is placed on completing projects quickly instead of ensuring projects are properly defined and competitively priced. This results in projects not having competitive bidding and being priced higher than the City is contractually obligated to pay," the City Auditor report states in its Executive Summary.

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The City Auditor's report says it has "engaged the services of an independent firm that specializes in forensic accounting and fraud investigations, which includes the services of a construction expert, to perform further review of certain JOC projects. The results of their work will be issued in a separate report at a later date." The Auditor's report doesn't explain why these results aren't being issued now.

The Auditor's report comes as City Hall seeks (with vote by mail ballots circulating now for a June 7 election day) public approval of a measure that would increase in LB's sales tax to 10% that it contends is needed and will be spent for various infrastructure projects although none are specified in the tax and the Council could use the tax proceeds for any general fund items. The Auditor's report makes no reference to the pending ballot measure.

The Auditor's report states:

This Office spent close to a year reviewing the JOC program, which resulted in numerous serious and significant findings that are detailed in the Results section of this report. Although we did not audit every project currently active in the JOC program, our review was extensive and clearly supports the evidence of a systemic lack of controls and insufficient oversight at all levels of the program. This has resulted in the City not receiving competitively priced proposals and ultimately paying more than contractually obligated for JOC projects. We encourage the City to address the systemic issues by implementing the recommendations in this report and not focus on individual project discrepancies.
We want to thank the Department's staff for their assistance, patience and cooperation during this lengthy audit. The City has acknowledged the severity of the issues surrounding the program and have begun to take steps to implement improvements. In addition, legislation recommended by this office was adopted by the City Council on May 24, 2016 that places key controls around program processes, similar to other agencies using JOC programs.

The May 24 Council action described by the City Auditor was approved by the Council with no serious public discussion by Councilmembers or city staff. The May 24 Council action changed the previous system to make the following changes:

Ability to reject any and all bids presented and rebid if in the best interest of the City;
Cap of 10% on the amount of non-catalogue items that can be used on a project;
Prequalification of JOC contractors;
Independent review of project proposals; and
Oversight of subcontractor work.

The Auditor's report offers multiple recommendations:

Due to the extensive issues found during our audit, the number of audit recommendations is substantial. Recommendations are grouped into four categories:
Overall Program Need -- Addresses management of audit recommendations.
New Legislation -- Language to be inserted into the City’s Municipal Code to provide base controls surrounding the JOC program.
Internal Processes -- Changes recommended for JOC program processes.
Catalog Vendor -- Changes recommended for use of the vendor pre-priced catalog.

In a release on her website, Auditor Doud states: "I want to thank the Department’s staff for their assistance, patience and cooperation during this lengthy audit. I am pleased the City has acknowledged the severity of the issues surrounding the program and has taken immediate steps to address the recommendations. The JOC program has the potential to make timely and much needed capital improvements for our City."

To view the Auditor's report in full, click here. LBREPORT.com is reviewing the report. Further to follow.