Executive Summary
Introduction
In response to a legislative request, the PEER Committee conducted an economy and efficiency review of the Mississippi Department of Transportation’s (MDOT’s) construction engineering and inspection (CE&I) contracts with private firms. The review was conducted in accordance with MISS. CODE ANN. Section 5-3-57 (1972).
In conducting this review, PEER sought to determine the types of engineering contracts used by MDOT and identify construction engineering and inspection contracts and associated costs. PEER sought to determine whether MDOT’s use of private CE&I firms is an economical and efficient use of department resources and whether contract engineering fees for MDOT construction contracts represent excessive shares of the total project cost. PEER also sought to determine federal and state limitations on competitive procurement of professional engineering services.
Overview
Prior to November 1995, MDOT used in-house engineering staff to perform CE&I management services for all construction projects. In Fiscal Year 1996, MDOT began contracting with private engineering firms to provide CE&I services. CE&I management of the construction process requires that the private firm perform all aspects of project engineering and inspection necessary to insure that constructed highways meet specifications and are completed in a timely fashion. MDOT awarded seven construction engineering consultant contracts totaling $18,893,354 to two private engineering firms during fiscal years 1996 through 1998. Average management fees amounted to 16.7 percent of actual construction contract costs of $113,198,543. These seven construction contracts account for eleven percent of the total $1,036,271,497 in construction contracts awarded by MDOT during these years.
Although MDOT recognized a need to begin contracting CE&I services to private firms, its efforts to achieve economy have fallen short when gauged against several benchmarks. Average MDOT CE&I costs (16.7 percent) have exceeded maximum federal reimbursement limits of 15 percent of total contract cost. MDOT private CE&I costs are high in comparison to average costs of approximately 14.1 percent experienced in other states and the average 16.7 percent cost for private firm management exceeds the cost by which MDOT could perform the CE&I function internally—i.e., about 10 percent of the construction contract cost.
External limitations placed on its ability to procure competitively professional engineering services further weaken MDOT efforts to achieve economy. Federal law prohibits and state law and regulations restrict the use of competitive bidding for such contracts, disallowing the award of contracts based on price considerations. On projects that do not involve federal funding, state law does not prohibit MDOT from using competitive bidding for engineers’ and architects’ contracts for highway construction; however, professional regulations restrict its use. Instead, MDOT is limited to using competitive negotiation, which first requires selection of firms based on qualifications, then negotiations of services provided and price. The firm selection process is weakened because the MDOT selection committee bases its decisions on inconsistently applied evaluation criteria and does not insure that firms are rated uniformly. Given these limitations and weaknesses, MDOT does not effectively conduct negotiations in the interest of achieving economy because it does not take advantage of the mechanisms available (e.g., benchmarking the proposals against an estimate of performing the CE&I service internally and seeking a competitive price by considering a firm other than the first on the list).
Recommendations
1. MDOT should evaluate the need for private CE&I services by conducting a documented analysis of costs and benefits associated with privately contracting this function. This should include an analysis of:
• all costs and benefits of performing the function internally;
• costs and benefits of performing the function using private CE&I firm, including internal costs of overseeing firm performance;
• historical and projected workload levels in comparison to in-house resources; and,
• types and levels of in-house expertise needed to perform CE&I services and projected costs of maintaining desired staffing levels.
2. MDOT should follow federal guidelines which require the development of detailed cost estimates relative to CE&I contacts which show a breakdown of specific labor requirements, work hours, and an estimate of the fees to be paid a private firm.
MDOT should develop detailed cost estimates that specify the type of staffing needed to manage effectively the project being let. These estimates should be compiled independent of proposals submitted by outside firms. Additionally, the estimate should provide the type of employees, number of hours per day, rate of pay for each employee, overtime rate, and an estimate of the time it should take to complete the project.
3. MDOT should ensure that the consultant selection committee evaluates expressions of interest consistently. Additionally, the committee should apply uniform evaluation criteria when rating proposals.
• MDOT should revise the Consultant Selection and Administration of Consultant Contracts standard operating procedures to reflect current practices and procedures.
• MDOT should develop evaluation criteria to further define the factors used by the committee when selecting qualified firms for a particular project.
• MDOT should establish procedures for checking inter-rater reliability and identifying potential areas of inconsistency among raters. By doing so, the department could improve the reliability (and therefore the fairness) of a rater’s evaluations. Inter-rater reliability policies should address the following two issues:
— training of the selection committee to acceptable performance levels; and,
— monitoring ratings to determine whether raters are consistently evaluating firms to determine whether the selection process is reliable.
4. In order to promote competition in the awarding of construction and CE&I contracts on state funded projects, the Mississippi Legislature should consider amending MISS. CODE ANN. Section 73-13-15 to remove restrictions on competitive bidding by professional engineers and architects.