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Auditor questions millions of dollars in new Parkland hospital construction contract
[April 26, 2011]

Auditor questions millions of dollars in new Parkland hospital construction contract


Apr 25, 2011 (The Dallas Morning News - McClatchy-Tribune Information Services via COMTEX) -- An outside auditor is questioning the spending of more than $7 million in taxpayer funds to build the new Parkland Memorial hospital.

The money in question -- a small fraction of the total $688 million construction contract -- includes $3 million for unnecessary positions; $420,250 on things like barbecue lunches and gift cards to motivate workers and $111,500 in excess cellular phone contracts.



Parkland is in the process of negotiating the amounts and terms of a contract with its construction company.

Dallas County's public hospital hired Moss Adams LLP, a third-party construction auditor, to review proposed expenditures in its construction contract before the money is spent.


The goal of the outside auditor is to ensure that contractors properly spend taxpayers' money during the four years it will take to build the $1.2 billion hospital. Dallas County voters agreed in 2008 to contribute $747 million in local taxes to build the new public hospital. The remaining $500 million cost will come from private donations and the hospital's reserve funds.

The new Parkland is the largest hospital construction project under way in the nation.

"One of the basic founding principles of this Parkland replacement project is we want to be transparent," said Lou Saksen, vice president of facilities planning and development at Parkland Health and Hospital System.

BARA, the company Parkland chose for the project, is requesting a lump sum labor payment of $25.5 million. However, Moss Adams said BARA did not disclose enough information about employment levels and job functions to support $3 million of its request.

Specifically Moss Adams said BARA requested funding for too many project engineers and superintendents. The auditor questioned paying two employees $298,000 for "document control," and paying a "receptionist" $155,455 when it already has an administrative assistant on the project. Those wages would be paid over the four years it takes to build the hospital.

"Construction auditing is a special auditing," Saksen said. "Our team probably wouldn't have found some of those things." BARA is a joint venture formed specifically to land the contract to build Parkland's new hospital. The name BARA is derived from the first letter of the joint venture partners: Balfour Beatty Construction, Austin Commercial, H.J. Russell & Co. and Azteca Enterprises.

Separately, the construction partners have built some of the nation's most recognizable health institutions, like the Mayo Clinic, Cleveland Clinic and Duke University Medical Center.

"Taxpayer confidence in the BARA team to build Parkland Hospital cost-efficiently should come from our experience, capabilities and strong commitment as fellow citizens and taxpayers of Dallas County," the company said in response to questions about the audit.

But the audit shows that regardless of experience, mistakes can happen.

Not in the contract A proposal for gift cards contained a mathematical error to the tune of $234,000, according to the auditor. To help increase safety meeting attendance, two $25 gift cards were planned to be raffled weekly at the end of the meeting.

Here's the mistake, according to the auditor: BARA erroneously multiplied the $50 of weekly gift cards by 195 weeks and labeled the result 9,750 gift cards, instead of $9,750. BARA then multiplied what they thought were 9,750 gift cards by $25, for a total of $243,750.

The difference between the actual costs of the gift cards is $234,000.

BARA said its calculations were not intended to be exact, but more of an estimate of how its gift card program could work. It also said it may scale back the program if it is not effective.

"We value our workers and will provide whatever efforts are possible to return them home safely each night to their families," BARA said in a statement.

It also wants to spend $131,250 on 12 barbecue lunches over the next four years to celebrate construction safety.

Instead, Moss Adams said eight barbecue lunches for $100,000 is adequate. Their total assumes 1,000 attendees invited to two barbecues a year for four years, with an average cost of $12.50 per person.

Among the other questioned expenses, Moss Adams suggested cellular phone plans of $150 a month to be knocked down to $100 a month, a savings of $111,500 over four years.

In addition, Moss Adams requested that $90,000 in T-shirts for the purpose of team-building be stricken from the costs.

BARA also requested $37,200 in "Employee Morale" expenses. Those consist of team lunches to celebrate holidays and BARA logo clothing purchases.

"While team morale is important, these costs are specifically not reimbursable costs" under the contract, Moss Adams reported.

In response, BARA said that "these efforts will decrease turnover and increase efficiency and safety on the project, contributing both value and cost savings to Parkland." A $666,380 charge Parkland is paying Moss Adams $666,380 to provide a front-end internal review, quarterly reviews and consulting services.

"We often find noncompliant construction charges," said Curtis Matthews, a Moss Adams partner. "A very small percentage of error on a large construction project can produce substantial amounts of noncompliant charges." Without such an audit, a hospital runs the risk of reimbursing for costs not in compliance with contract terms, being overbilled for work or being billed for costs that were not incurred.

"The single largest problem I have seen was a project that was $127 million, approximately 25 percent, over budget and had poor cost records," Matthews said.

In that particular project, which Matthews declined to name, he found $5.6 million in personal home office equipment charged to the construction project. In addition, the audit found more than $16 million in labor charges that lacked support.

"This was an example of a project where the owner contacted us to perform the audit toward the end of the project," Matthews said. "Had we been involved earlier, throughout the process, many of these issues could have been avoided." To see more of The Dallas Morning News, or to subscribe to the newspaper, go to http://www.dallasnews.com. Copyright (c) 2011, The Dallas Morning News Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com.

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