| yyj/" jj U.S. ENVIRONMENTAL PROTECTION AGENCY
%% ^ OFFICE OF INSPECTOR GENERAL
Close-Out of Hotline Complaint on
Unreasonable Cost Increase to the
Wastewater Treatment Facility
Improvements, Perkins, Oklahoma
Report No. 12-X-0161
December 29, 2011
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Report Contributors:
Bill Spinazzola
Michael Rickey
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail: OIG Hotline@epa.gov. write: EPA Inspector General Hotline
phone: 1-888-546-8740 1200 Pennsylvania Avenue NW
fax: 202-566-2599 Mailcode 2431T
online:
http://www.epa.gov/oiq/hotline.htm.
Washington, DC 20460
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Total estimated project costs increased significantly after the six sealed construction bids were
opened in May 2009. The lowest construction bid of $5.9 million was almost 48 percent higher
than the design engineer's estimated construction costs used in the public works authority's loan
application. The design engineer's construction estimate used in the application was prepared in
March 2008, about 14 months before the sealed construction bids were opened. The higher
construction costs increased other project costs as well. For example, costs for engineering and
construction staking were based on a percentage of the construction cost. Fees for the bond
counsel, local counsel, and financial advisor were based on a percentage of the loan amount,
which increased as a result of higher construction costs.
We were not able to determine why the contracted construction costs were so much higher than
the engineer's initial estimates used in the loan application because of a lack of comparative data.
The initial estimates and the lump sum construction bids did not include detail or common
components that could be compared. Without some data similarities between the engineer's
construction estimates and the construction bid, there is no way to compare and find variances.
Neither the contractor nor the engineer could offer an explanation for the large difference.
Although the lowest construction bid was substantially higher than the engineer's original
estimate, we found no evidence that Recovery Act requirements caused this large increase. The
Recovery Act's wage requirement had no effect because the contractor paid its construction
employees higher wages than those required. The impact of the Buy American requirement was
unknown because the contractor only requested prices for American-made goods, as required by
the Recovery Act.
Further, the Oklahoma Water Resources Board obtained information on the increase in costs for
three other projects in the state when Recovery Act requirements were added. These three
projects averaged less than a 4 percent increase in construction costs with Recovery Act
requirements. The Perkins Public Works Authority only requested bids with Recovery Act
requirements included because it knew that Recovery Act funds were available for the project.
Therefore, the bids did not have costs with and without Recovery Act requirements like some
other Oklahoma projects.
Because we did not find any indication that Recovery Act requirements increased project costs,
we have closed the complaint, and plan no further action on this matter.
Action Required
Because this report contains no recommendations, you are not required to respond to this report.
The report will be made available at http://epa.gov/oig. If you or your staff have any questions
regarding this report, please contact Melissa Heist, Assistant Inspector General for Audit, at
(202) 566-0899 or heist.melissa@epa.gov; or Robert Adachi, Product Line Director, at
(415) 947-4537 or adachi.robert@epa.gov.
12-X-0161
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Appendix A
Distribution
Regional Administrator, Region 6
Agency Follow-Up Official (the CFO)
Agency Follow-Up Coordinator
Audit Follow-Up Coordinator, Region 6
Public Affairs Officer, Region 6
Chief, State Revolving Fund and Projects Section, Water Quality Protection Division, Region 6
Chief, Financial Assistance Division, Oklahoma Water Resources Board
City Manager, Perkins, Oklahoma
12-X-0161
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