Kennedy Center Has The Kennedy Center has completed renovations to the Opera House, Figure 4: Budgeted and Actual Costs for Selected Kennedy Center Capital Projects Renovation projects like those undertaken by the Kennedy Center are difficult to complete due to associated challenges with refurbishing as opposed to new construction. For example, according to the Kennedy 17 GAO-03-823. Center, renovation projects are susceptible to cost increases stemming from unexpected site conditions. This is consistent with our finding that a primary cause of cost growth in the projects we evaluated were contract modifications resulting from the Kennedy Center's lack of knowledge of the building's existing conditions. The Kennedy Center lacked knowledge of site conditions because (1) it does not have as-built drawings" that show how building components were originally constructed and (2) schedule and building conditions at times limited the Center's ability to conduct detailed investigations during project design stages. According to a Kennedy Center official, given the nature of construction, installed work often differs from what is indicated on the original architectural plans, sometimes in significant ways. Without accurate drawings, designers could not ascertain certain current building conditions, and inaccuracies were inadvertently built into project plans and designs. Architects and engineers additionally lacked sufficient access to the project sites during the design phase. According to Kennedy Center officials, because the Kennedy Center focused on maximizing its theaters' operating time, designers were at times limited in their ability to survey the project site and document its condition. This type of exploration often requires the removal of some portion of the existing finishes to see what is behind them. Because invasive surveys were not completed, designers did not identify utilities and structural components shielded behind walls, floors, and ceilings. In cases where the unforeseen conditions affected construction, contract modifications were needed. Kennedy Center officials said that they did not allow exploratory design work in order to preserve the building's aesthetics. Kennedy Center officials indicated that they are working to improve the design of future projects by using noninvasive exploratory methods, such as X-ray technology, to better ascertain site conditions. According to the Kennedy Center, about $1 million of the Concert Hall's contract modifications and $1.5 million of the Opera House's contract modifications were the result of actual conditions that differed from those shown on design drawings. In the Opera House renovation, the Kennedy Center attributed the following unexpected site conditions to absent asbuilt drawings and resulting in contract modifications: (1) the ceiling crawl space was not as large as the drawings indicated, (2) steel reinforcement 18 As-built or record drawings show the work as it was actually installed, which is often different from how it was designed to be installed or built. that was not shown on the drawings existed in the balconies, and (3) a large steel-reinforced concrete beam in the orchestra floor was not depicted on existing drawings. Figure 5 provides a description of the concrete beam and shows how it contributed to cost growth on the Opera House renovation project. In attempting to maintain its construction schedule while minimizing the impact on its performance schedules, the Kennedy Center incurred a considerable amount of overtime charges. As the Kennedy Center relies on proceeds from ticket sales, programs, and contributions, Center managers sought to limit the disruption to major performance venues, such as the Opera House and Concert Hall. In planning the Opera House renovation, for example, the Kennedy Center set a firm goal of completing work by December 2003 to ensure that the work would be completed in time to host the annual Kennedy Center Honors." Over $560,000 of the $4 million cost growth for the Opera House renovation resulted from overtime pay to contractors completing the renovations. The Kennedy Center also may have paid contractors more than necessary because it routinely negotiated the value of project modifications after contractors had already completed the work. For example, contractors performed about $2.2 million worth of work in the Concert Hall renovation and about $2.1 million worth of work in the Opera House rehabilitation without negotiating the value of the modifications with the Kennedy Center beforehand. Kennedy Center officials said that this was necessary to maintain tight schedules. The practice of establishing cost after work has been completed is discouraged in federal contracting regulations. Our previous work has shown that contractors have limited incentive to control costs until firm prices are negotiated for contract changes, and the government does not have an opportunity to consider more efficient construction methods or management controls if work is completed before the price is established." In an attempt to reduce risk to the Kennedy Center, it has entered into a contract for theater renovation work that shifts much of the project's risk to the contractor. Under this "construction manager at-risk" arrangement, a construction management contractor will be hired to participate in the design process and will then be responsible for hiring contractors to do the construction. The construction management contractor will be at risk from the standpoint of being responsible to the Kennedy Center for managing the construction according to the established cost, schedule, 19Begun in 1978, the Kennedy Center Honors is an annual ceremony that recognizes artists with lifetime achievement awards. The ceremony also serves as a major fundraising event. 20GAO, NASA Procurement: Challenges Remain in Implementing Improvement Reforms, GAO/NSIAD-94-179 (Washington, D.C.: Aug. 18, 1994). |