Courthouse Construction
Information on Project Cost and Size Changes Would Help to Enhance Oversight Gao ID: GAO-05-673 June 30, 2005The General Services Administration (GSA) and the federal judiciary are in the midst of a multibillion-dollar courthouse construction initiative aimed at addressing the housing needs of federal district courts and related agencies. From fiscal year 1993 through fiscal year 2005, Congress appropriated approximately $4.5 billion for 78 courthouse construction projects. GAO (1) compared estimated and actual costs for recently completed courthouse projects and determined what information GSA provided to Congress on changes to proposed courthouse projects, (2) identified factors that contributed to differences between the estimated and actual costs of seven projects selected for detailed review, and (3) identified strategies that were used to help control the costs of the seven selected projects.
The actual costs of courthouse construction projects exceeded the estimated costs submitted to Congress at the design and construction phases by an average of 17 percent and 5 percent, respectively, and the reasons for the cost changes were not consistently explained. The actual costs were closer to the estimates provided at the construction phase, but the actual cost still varied widely from the estimate for some projects. Both the estimated cost and the proposed building size often changed between the two funding requests. GSA did not always indicate that changes had occurred or explain the reasons for the changes. Including this information would be consistent with leading practices in capital decision making. For the seven projects GAO reviewed in detail, most cost changes resulted from changes to the project's scope or from postponing the start of construction. For example, scope changes called for by security requirements and revisions to the U.S. Marshals Service's Design Guide increased the costs of some projects. Postponing the start of construction also increased costs because of inflation and changes in local market conditions. Factors that led to postponing construction included difficulties with site acquisition and GSA receiving funding later than anticipated. GSA used several strategies to help reduce or control costs for the seven projects, including value engineering, modified contracting methods, and involving tenant agencies. Value engineering was used during design on all projects, and in some cases, resulted in the use of less expensive materials to finish the courthouse interiors, but in other cases resulted in changes that could increase the long-term cost of operating the buildings. Some project managers used modified contracting methods to control costs by reducing the time between the design and construction phases. Project managers also used a variety of approaches for involving tenant agencies in decisions about the building design and informing them about the progress of the project.
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Report to Congressional Requesters:
June 2005:
Courthouse Construction:
Information on Project Cost and Size Changes Would Help to Enhance
Oversight:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-673]:
GAO Highlights:
Highlights of GAO-05-673, a report to congressional requesters:
Why GAO Did This Study:
The General Services Administration (GSA) and the federal judiciary are
in the midst of a multibillion-dollar courthouse construction
initiative aimed at addressing the housing needs of federal district
courts and related agencies. From fiscal year 1993 through fiscal year
2005, Congress appropriated approximately $4.5 billion for 78
courthouse construction projects.
GAO (1) compared estimated and actual costs for recently completed
courthouse projects and determined what information GSA provided to
Congress on changes to proposed courthouse projects, (2) identified
factors that contributed to differences between the estimated and
actual costs of seven projects selected for detailed review, and (3)
identified strategies that were used to help control the costs of the
seven selected projects.
What GAO Found:
The actual costs of courthouse construction projects exceeded the
estimated costs submitted to Congress at the design and construction
phases by an average of 17 percent and 5 percent, respectively, and the
reasons for the cost changes were not consistently explained. The
actual costs were closer to the estimates provided at the construction
phase, but as the figure shows, the actual cost still varied widely
from the estimate for some projects. Both the estimated cost and the
proposed building size often changed between the two funding requests.
GSA did not always indicate that changes had occurred or explain the
reasons for the changes. Including this information would be consistent
with leading practices in capital decision making.
For the seven projects GAO reviewed in detail, most cost changes
resulted from changes to the project‘s scope or from postponing the
start of construction. For example, scope changes called for by
security requirements and revisions to the U.S. Marshals Service‘s
Design Guide increased the costs of some projects. Postponing the start
of construction also increased costs because of inflation and changes
in local market conditions. Factors that led to postponing construction
included difficulties with site acquisition and GSA receiving funding
later than anticipated.
GSA used several strategies to help reduce or control costs for the
seven projects, including value engineering, modified contracting
methods, and involving tenant agencies. Value engineering was used
during design on all projects, and in some cases, resulted in the use
of less expensive materials to finish the courthouse interiors, but in
other cases resulted in changes that could increase the long-term cost
of operating the buildings. Some project managers used modified
contracting methods to control costs by reducing the time between the
design and construction phases. Project managers also used a variety of
approaches for involving tenant agencies in decisions about the
building design and informing them about the progress of the project.
Comparison of Actual and Estimated Courthouse Project Costs:
[See PDF for image]
[End of figure]
What GAO Recommends:
To improve the usefulness of the information on courthouse construction
projects that GSA provides to Congress, GAO recommends that GSA, when
requesting funding for those projects, identify and explain changes in
estimated costs and building size from the information provided to
Congress in prior project prospectuses or fact sheets. GSA concurred
with our recommendation.
www.gao.gov/cgi-bin/getrpt?GAO-05-673.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Mark L. Goldstein at
(202) 512-2834 or goldsteinm@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Actual Costs of Courthouse Projects Can Vary Significantly from
Estimates Provided to Congress, and Changes Are Not Consistently
Explained:
Changes in Scope and Postponement of Planned Construction Start Dates
Resulted in Cost Changes for Selected Projects:
GSA Used Several Strategies to Reduce and Control Costs of Selected
Projects:
Recent GSA Program Improvements:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: Timelines and Costs of Courthouse Projects Completed Since
1998:
Appendix III: Comments from the General Services Administration:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Changes between Estimated and Actual Costs for Seven Projects:
Table 2: Factors That Caused Scope Changes for Seven Selected Projects:
Table 3: Summary of Estimated and Actual Costs:
Figures:
Figure 1: Development and Approval Process for Funding a Typical
Courthouse:
Figure 2: Breakdown of Estimates Provided to Congress by GSA for 38
Projects:
Figure 3: Comparison of Actual and Estimated Costs:
Figure 4: Changes between Design and Construction Funding Requests:
Figure 5: Historic Preservation for the Gulfport Courthouse Project:
Figure 6: Timelines of Courthouse Construction Projects:
Abbreviations:
AOUSC: Administrative Office of the U.S. Courts:
CCP: Center for Courthouse Programs:
ESPC: Energy Savings and Performance Contracts:
GSA: General Services Administration:
OMB: Office of Management and Budget:
USMS: U.S. Marshals Service:
Letter June 30, 2005:
The Honorable James M. Inhofe:
Chairman, Committee on Environment and Public Works:
United States Senate:
The Honorable Christopher S. Bond:
Chairman, Subcommittee on Transportation and Infrastructure:
Committee on Environment and Public Works:
United States Senate:
The General Services Administration (GSA) and the federal judiciary are
in the midst of a multibillion-dollar courthouse construction program
aimed at addressing the housing needs of federal district courts and
related agencies. From fiscal year 1993 through fiscal year 2005,
Congress appropriated approximately $4.5 billion for 78 courthouse
construction projects.[Footnote 1] The judiciary's current 5-year plan
(covering fiscal years 2005 through 2009) identifies 57 new projects
that are expected to cost $3.8 billion.
In response to concerns that GSA's Inspector General and we have raised
over the years, GSA and the judiciary have taken actions to manage and
control courthouse construction costs. However, courthouse projects
continue to be costly, and increasing rents and budgetary constraints
have given the judiciary further incentive to control their costs. The
judiciary pays rent to GSA for the use of the courthouses, which GSA
owns, and the proportion of the judiciary's budget that goes to rent
has increased as the judiciary's space requirements have grown.
Additionally, in fiscal year 2004, the judiciary faced a budgetary
shortfall that required it to cut its administrative costs and reduce
staff by 6 percent. In September 2004, the judiciary announced a 2-year
moratorium on new courthouse construction projects as part of an effort
to address its increasing operating costs and budgetary constraints.
During this time, among other things, the judiciary plans to review its
space needs and standards in an effort to reduce the costs of its
space. While some of the 57 projects in the current 5-year plan and
their costs may change as a result of the moratorium, the judiciary
believes that it will continue to need additional space to accomplish
its mission.
To assist the committees with their oversight of the courthouse
construction program, you asked us to review courthouse construction
project costs. As a result, we (1) compared estimated and actual costs
for recently completed courthouse projects and determined what
information GSA provided to Congress on changes to the proposed
courthouse projects, (2) identified factors that contributed to
differences between the estimated and actual costs of selected
projects, and (3) identified strategies that were used to help control
the costs of the selected projects. To do this work, we reviewed
project documents submitted to Congress and obligations data from GSA's
budget office for 38 projects completed since 1998. For each project,
we compared the actual cost, including claims, with the estimated total
project cost that GSA provided to Congress, typically when it requested
funding for the project's design and construction. GSA generally
requests funding in two phases--initially for the design of the project
and then later for the project's construction--and provides Congress
with an estimate of the project's total cost with each request. We then
selected seven completed courthouses for a detailed review to identify
factors that affected costs and the strategies used to help control
them. The seven courthouses we reviewed were located in Albany,
Georgia; Cleveland, Ohio; Denver, Colorado; Erie, Pennsylvania;
Gulfport, Mississippi; Las Vegas, Nevada; and Seattle, Washington. We
selected these courthouses to include a range of cost changes, sizes,
and geographic locations. We visited the courthouses, reviewed relevant
project files, and interviewed GSA project managers and others involved
in the projects. We also discussed our work with judiciary officials,
including Administrative Office of the U.S. Courts (AOUSC) officials
and judges. We determined that the project cost data were reliable for
the purposes of our review. We conducted our work from July 2004
through April 2005 in accordance with generally accepted government
auditing standards (see app. I for more information on our scope and
methodology).
Results in Brief:
The actual costs of courthouse construction projects exceeded the
estimated costs submitted to Congress at the design and construction
phases by an average of 17 percent and 5 percent, respectively, and the
reasons for the cost changes were not consistently explained in GSA's
documents. Specifically, the actual costs for courthouse construction
projects completed since fiscal year 1998 ranged from 23 percent below
to 115 percent above the first cost estimates provided to
Congress.[Footnote 2] The actual costs were closer to the estimates
provided at the second key point, when funds were requested for
construction, than they were to the design phase estimates, but the
actual costs still ranged from 25 percent below to 52 percent above the
construction phase estimates.[Footnote 3] Both the estimated project
cost and the proposed building size, described in the prospectus or
fact sheet submitted to Congress with the request for construction
funding, often differed from the information contained in earlier
design phase documents. However, GSA did not always indicate that
changes had occurred or explain the reasons for the changes. As a
result, changes to the courthouse projects that could have increased
costs might not have been apparent to congressional decision makers.
For the seven projects we reviewed in detail, most cost changes
resulted from changes in the scope of the project or from postponing
the start of construction. We found that changes to the scope of these
projects often resulted in cost changes. For example, changes called
for by security requirements and revisions to the U.S. Marshals
Service's Design Guide increased the costs of some projects. We also
found that postponing the start of construction increased the
likelihood of cost increases due to inflation and changes in local
market conditions. Factors that led to postponing construction included
difficulties with site acquisition and GSA receiving funding later than
anticipated. We did not find that departures from the U.S. Courts
Design Guide (Design Guide), which sets standards for courthouse
construction, were a major factor in project cost increases.
For the seven projects we reviewed in detail, GSA used several
strategies to help reduce or control costs, such as value engineering
(a process to identify potential cost-saving changes), modified
contracting methods, and a variety of approaches for involving and
communicating with tenant agencies. GSA used value engineering during
the design of all seven projects to help control costs. Many of the
value engineering changes resulted in the use of less expensive
materials to finish the interior of the courthouses. Some other
changes, such as the removal of a window washing platform, could
increase the future operating costs of the buildings. Some project
managers used modified contracting methods in an effort to control
costs by reducing the time between the design and construction phases.
This strategy reduced the risk that changes in tenants' requirements
and inflation could increase costs. In keeping with capital project
leading practices, GSA project managers also used a variety of
communication tools to involve project stakeholders in decisions about
the building design and keep them informed about the progress of the
project. For example, each project manager had a full-size model of a
district courtroom built before construction began to solicit judges'
and other stakeholders' comments and input. Changes to the design and
layout of the courtrooms were made at this point, thereby helping to
control costs by minimizing changes during construction.
We are recommending that GSA clearly identify and explain changes in
estimated project costs and building size to improve the usefulness of
project information that GSA provides to Congress. GSA commented on a
draft of this report and concurred with our findings and
recommendation. GSA and AOUSC also provided technical clarifications,
which we have incorporated in this report as appropriate.
Background:
The judiciary and GSA are responsible for managing the multibillion-
dollar federal courthouse construction program, which is designed to
address the judiciary's long-term facility needs. AOUSC, the
judiciary's administrative agency, works with the nation's 94 judicial
districts to identify and prioritize needs for new and expanded
courthouses. Since fiscal year 1996, AOUSC has used a 5-year plan to
prioritize new courthouse construction projects, taking into account a
court's need for space, security concerns, growth in judicial
appointments, and operational inefficiencies that may exist. The Design
Guide specifies the judiciary's criteria for designing new court
facilities and sets the space and design standards for courthouse
construction. First published in 1991, the Design Guide has been
revised several times to address budgetary considerations,
technological advancements, and other issues.
GSA has been using AOUSC's 5-year plan since fiscal year 1996 to
develop requests for both new courthouses and expanded court
facilities. GSA also prepares feasibility studies to assess various
courthouse construction alternatives and serves as the central point of
contact with the judiciary and other stakeholders throughout the
construction process. For courthouses that are selected for
construction, GSA prepares detailed project descriptions called
prospectuses.[Footnote 4] The prospectus includes the justification,
location, size, and estimated cost of the new or annexed facility. GSA
typically submits two prospectuses to Congress to request authorization
and funding.[Footnote 5] The first prospectus, often called the site
and design prospectus, outlines the scope and estimated costs of the
project at the outset and typically requests authorization and funding
to purchase the site for and design of the building. The second
prospectus, often called the construction prospectus, outlines the
scope and estimated costs of the project as it enters the construction
phase and typically requests authorization and funding for
construction, as well as additional funding if needed for site and
design. At the request of Congress or when additional authority and
funding are required, GSA may also provide additional prospectuses or
fact sheets that contain the project's estimated total cost.
GSA requests funding for courthouses as part of the President's annual
budget request to Congress. Once Congress authorizes and appropriates
funds for the project, GSA refines the project budget and selects
private-sector firms for the design and construction work through a
competitive procurement process. GSA also manages the construction
contract and oversees the work of the construction contractor. If
disputes arise between GSA and the contractor that cannot be resolved,
the contractor has the option of filing a claim against the federal
government. Figure 1 illustrates the process for planning, approving,
and constructing a courthouse project.
Figure 1: Development and Approval Process for Funding a Typical
Courthouse:
[See PDF for image]
Note: This figure shows the typical process for a project procured
through the design-bid-build method.
[A] Courthouse projects are financed through the Federal Buildings Fund
(FBF), a revolving fund that is used to fund GSA real property
activities with rent from tenant agencies. The President's annual
budget request to Congress proposes spending from the FBF. GSA submits
detailed project descriptions called prospectuses to Congress as part
of its Capital Investment Program. Prospectuses request authorization
and funding for new construction and repair and alteration projects.
[End of figure]
GSA and the judiciary have implemented a number of initiatives since
fiscal year 1995 to improve the management of the courthouse
construction program. These initiatives are consistent with leading
practices that we have recognized in prior reports, including the use
of project management tools and communication with
stakeholders.[Footnote 6] To improve comprehensive planning, the
judiciary implemented an annually updated 5-year plan to prioritize its
courthouse projects and revised its Design Guide to include new
criteria intended to encourage cost consciousness.
In 1995, GSA established the Courthouse Management Group, which was
reorganized in 2003 as the Center for Courthouse Programs (CCP), to
serve as a central point of contact for the judiciary, GSA's field
offices, the Office of Management and Budget (OMB), and Congress. CCP's
responsibilities include reviewing and finalizing prospectuses before
they are submitted to OMB, developing cost benchmarks and comparing new
projects' cost estimates with these benchmarks, and determining whether
proposed courthouse designs conform to the Design Guide's standards.
GSA also established three programs--the Project Management Center of
Expertise and the Design and Construction Excellence programs--to share
project management innovations and provide opportunities for peer
review during the design and construction phases.
To provide for accountability and oversight throughout a project, GSA
uses a benchmarking system at the start of the design process to
develop the first estimate of the project's construction cost. This
system computes the estimated cost of the building by comparing it to
similarly sized courthouses and adjusts for differences in local market
conditions and the number of years expected to complete the project.
The benchmark is used to estimate the construction costs that will be
submitted in the prospectus. To help ensure that courthouse projects
can be built within authorized budgets, GSA develops independent cost
estimates for each new courthouse at three milestone dates--during the
preliminary planning, design development, and construction document
phases. GSA also facilitates stakeholders' involvement, another
recognized leading practice, by encouraging regular partnership
meetings between the judiciary and GSA and by using courtroom mock-ups
to encourage greater judicial feedback on the design of the courthouse
facilities.
Since the courthouse construction program began in the early 1990s,
budgetary constraints faced by GSA and the courts have affected the
program's progress, putting some planned courthouse construction
projects on hold for extended periods. In response to recommendations
by the 1993 National Performance Review, GSA initiated a "time-out and
review" of all prospectus-level new construction projects, including
courthouse projects, in 1993 and 1994. During this time-out and review,
GSA reevaluated the costs of new construction projects to ensure that
proposed projects were justified and cost effective and that
alternatives had been adequately considered. Funding requests for
courthouse projects were not included in the President's budget in 4 of
the last 10 fiscal years (1998, 1999, 2000, and 2004). Congress did not
provide funding for courthouse projects in fiscal years 1998 and 2000.
Most recently, in September 2004, the Judicial Conference adopted a 2-
year courthouse construction moratorium on planning, authorizing, and
budgeting courthouse construction projects. This moratorium affects 42
out of the 57 projects listed on the judiciary's 5-year plan. According
to judiciary officials, the moratorium was necessary to seek remedies
for its own budgetary shortfalls, resulting in part from the increase
in the total rent it pays to GSA for the space it occupies. According
to the judiciary, rent currently accounts for just over 20 percent of
its operating budget and is expected to increase to over 25 percent of
its operating budget in fiscal year 2009 when the costs of new court
buildings already under way are included. During this moratorium, AOUSC
officials said that they plan to reevaluate the courthouse construction
program, including reassessing the size and scope of projects in the
current 5-year plan, reviewing the Design Guide's standards, and
reviewing the criteria and methodology used to prioritize projects.
Judiciary officials also said that they plan to reevaluate their space
standards in light of technological advancements and opportunities to
share space and administrative services.
Actual Costs of Courthouse Projects Can Vary Significantly from
Estimates Provided to Congress, and Changes Are Not Consistently
Explained:
The actual costs for courthouse construction projects completed since
fiscal year 1998 varied from the estimates provided to Congress at the
design and construction phases. As expected, the variation was greater,
on average, for the design phase estimates than for the later, more
refined construction phase estimates. For many projects, the estimated
cost and proposed building size changed between the design and
construction phases, but GSA often did not indicate that these changes
had occurred or explain the reasons for them in the prospectuses and
fact sheets it supplied to Congress.
As shown in figure 2, GSA provided Congress with at least two separate
total cost estimates for 24 of the 38 projects. Of the remaining 14
projects, GSA provided Congress with a single, total-cost estimate for
11 of the projects and provided no formal estimate prior to the
appropriation of funds for 3 of the projects. The single estimates were
for design-build projects, for which all funding was requested at one
time, or for projects for which GSA did not provide a total project
cost estimate when requesting funds for design. In all, for the 38
projects we reviewed, GSA provided Congress with a total project cost
estimate at the design phase for 27 projects and at the construction
phase for 32 projects. The project cost estimates that GSA provides to
Congress typically include all costs associated with acquiring the site
and designing and constructing the courthouse.[Footnote 7] These
estimates do not include estimates for items that the tenant agencies
fund for the new courthouse, such as space alterations above the
standard normally provided by GSA.
Figure 2: Breakdown of Estimates Provided to Congress by GSA for 38
Projects:
[See PDF for image]
Notes: Estimate provided at design for 27 projects.
Estimate provided at construction for 32 projects.
[End of figure]
For the 27 projects that had a total cost estimate provided to Congress
at the design phase, the actual cost, including claims, exceeded the
estimate by an average of 17 percent and ranged from 23 percent below
to 115 percent above the estimate.[Footnote 8] The actual cost compared
more favorably with the estimate at the construction phase, which is
provided to Congress an average of 2 years after the initial design
phase estimate. This improved accuracy is expected because more
information is available to estimate the cost of the project as its
design moves forward and becomes more fully defined. For the 32
projects that had a total cost estimate provided to Congress at the
construction phase, the actual cost exceeded the estimate by an average
of 5 percent and ranged from 25 percent below to 52 percent above the
estimated cost. The actual cost exceeded this estimate by more than 10
percent for 9 of these 32 projects. The construction industry commonly
uses 10 percent as a benchmark for the expected variance between the
actual cost and the construction estimate. Figure 3 illustrates the
numbers of projects whose actual costs fell short of or exceeded
estimates at both the design and construction phases. See appendix II
for additional details on the estimated project costs provided to
Congress and the actual costs for all projects we examined.
Figure 3: Comparison of Actual and Estimated Costs:
[See PDF for image]
[End of figure]
The Public Buildings Act of 1959, as amended, requires GSA to seek
approval from Congress if the estimated maximum expenditures for a
project exceed the amount appropriated for the project by more than 10
percent. We found that GSA obtained approval from Congress for those
projects where the estimated cost exceeded appropriated amounts by more
than 10 percent.
Project cost estimates and proposed building sizes often changed
between GSA's submissions to Congress of the design and construction
phase documents. According to prospectuses and fact sheets provided to
Congress, 29 of the 38 projects experienced changes in cost, building
size, or both after the initial estimated project cost at design was
submitted. As shown in figure 4, for 16 projects, both the proposed
building size and the estimated project cost changed between the design
phase and the construction phase. For another 7 projects, only the cost
estimate changed, and for the other 6 projects, the building size
changed; but only one estimate was provided to Congress, so we could
not determine if the estimated cost changed. The building size changes
ranged from small additions or subtractions of tenant space to
substantial changes in overall square footage. For example, the
proposed size of the Hammond, Indiana, courthouse increased by nearly
two-thirds because the need for additional space was identified during
a long-range planning process initiated after the initial funding
request was submitted to Congress. By contrast, the proposed size of
the Omaha, Nebraska, courthouse was reduced by approximately 11 percent
after funds were requested for design because of a re-evaluation of
construction projects completed as part of GSA's time-out and review
process.
Figure 4: Changes between Design and Construction Funding Requests:
[See PDF for image]
[A] For these six projects, we were unable to determine if the
estimated costs had changed because only one estimated total project
cost was provided.
[End of figure]
As we have explained in a previous report on funding capital projects,
an important factor reinforcing the decision-making process is the
availability of good information.[Footnote 9] Although changes in the
proposed building size and estimated cost of a project during its
design phase are not unexpected, GSA did not consistently identify or
explain project changes in the prospectuses and fact sheets it
submitted to Congress. For 17 of the 29 projects that changed after the
design phase, no description or explanation of the change was provided
in later construction phase documents submitted to Congress. In some
cases, significant changes in building size, estimated cost, or both
were not explained. For example, a comparison of documents submitted at
the design and construction phases for the Jacksonville, Florida,
courthouse shows a total estimated cost increase of over $11 million
(13 percent) and an increase in total building size of approximately
9,000 square feet (2 percent), yet these changes are not described or
explained. Similarly, an increase in the estimated unit construction
cost of $55 per square foot--which increased the estimated total costs
by over $3 million (11 percent) for the Greeneville, Tennessee
courthouse--was not explained in the fact sheet provided to Congress.
By contrast, GSA fully explained the reasons for a nearly 40-percent
decrease in the proposed size of the Youngstown, Ohio, courthouse,
along with a 27-percent decrease in the project's estimated cost. For
the Tucson, Arizona, courthouse, GSA submitted a fact sheet describing
numerous changes made in building size and estimated costs since the
initial funding request, but it did so in response to a congressional
staff request.
Changes in Scope and Postponement of Planned Construction Start Dates
Resulted in Cost Changes for Selected Projects:
For the seven projects we reviewed in detail, changes in scope and the
postponement of planned construction start dates resulted in
differences between estimated and actual project costs.[Footnote 10]
Several factors contributed to changes in scope, including issues
associated with site selection, historic preservation requirements,
changes in tenants' requirements, and the need for additional security
after the Oklahoma City bombing. Depending on circumstances unique to
each project, some changes increased, while other changes decreased,
the project's total costs. Postponing the start of construction for
five of the seven projects increased their cost because of inflation,
since GSA's project cost estimates are based on an expected
construction start date.
The actual costs for the seven projects we reviewed in detail varied
from 5 to 56 percent above the cost estimates provided to Congress at
the design phase and from 2 percent below to 25 percent above the cost
estimates provided at the construction phase. Table 1 compares the
estimated costs with the actual costs for these seven projects.
Table 1: Changes between Estimated and Actual Costs for Seven Projects:
Dollars in millions.
Albany, GA[A];
Estimate at design: N/A;
Estimate at construction: $12.2;
Actual cost: $13.1;
Change between estimate at design and actual cost: N/A;
Change between estimate at construction and actual cost: 7.9%.
Cleveland, OH;
Estimate at design: $199.2;
Estimate at construction: $170.5;
Actual cost: $213.3;
Change between estimate at design and actual cost: 7.1%;
Change between estimate at construction and actual cost: 25.1%.
Denver, CO;
Estimate at design: $76.2;
Estimate at construction: $93.5;
Actual cost: $99.1;
Change between estimate at design and actual cost: 30.0%;
Change between estimate at construction and actual cost: 5.9%.
Erie, PA[B];
Estimate at design: $21.5;
Estimate at construction: $34.0;
Actual cost: $33.4;
Change between estimate at design and actual cost: 55.8%;
Change between estimate at construction and actual cost: -1.8%.
Gulfport, MS;
Estimate at design: $52.1;
Estimate at construction: $52.4;
Actual cost: $59.3;
Change between estimate at design and actual cost: 13.8%;
Change between estimate at construction and actual cost: 13.2%.
Las Vegas, NV[C];
Estimate at design: $99.0;
Estimate at construction: N/A;
Actual cost: $103.7;
Change between estimate at design and actual cost: 4.7%;
Change between estimate at construction and actual cost: N/A.
Seattle, WA[B];
Estimate at design: $164.4;
Estimate at construction: $216.1;
Actual cost: $214.7;
Change between estimate at design and actual cost: 30.6%;
Change between estimate at construction and actual cost: -0.6%.
Source: GAO analysis of GSA data.
Note: N/A = Not applicable.
[A] GSA submitted only one prospectus to Congress on February 23, 1995.
The prospectus noted that Congress had included design funding in GSA's
fiscal year 1992 budget and construction funding in GSA's fiscal year
1993 and fiscal year 1995 budgets.
[B] Additional costs are likely for the Seattle and Erie projects
because of outstanding claims.
[C] The Las Vegas courthouse project was procured using the design-
build method, thus requiring only one prospectus.
[End of table]
Multiple Factors Led to Changes in Project Scope:
For each of the seven projects we reviewed, the scope changed and
contributed to differences between the estimated cost provided to
Congress and the actual cost. The term "scope" refers both to building
size and to the amount of work or number of tasks required to complete
the project. Factors that caused changes in scope included site
selection issues, the need to address historic preservation
requirements, changes in tenants' requirements, and the need for
additional security provisions. Although some scope changes changed
both the building size and the amount of work to be done, other scope
changes, such as those necessary to comply with historic preservation
requirements and certain improvements requested by tenants, increased
only the amount of work to be done. Table 2 identifies the factors that
contributed to changes in scope for each of the projects we reviewed.
Table 2: Factors That Caused Scope Changes for Seven Selected Projects:
Project: Albany, GA;
Additional security needs.
Project: Cleveland, OH;
Changes in tenants' requirements;
Additional security needs.
Project: Denver, CO;
Changes in tenants' requirements;
Additional security needs.
Project: Erie, PA;
Historic preservation requirements.
Project: Gulfport, MS;
Site acquisition issues;
Historic preservation requirements.
Project: Las Vegas, NV;
Additional security needs.
Project: Seattle, WA;
Site acquisition issues;
Changes in tenants' requirements.
Source: GAO analysis.
[End of table]
Site Selection Issues:
Difficulties with finding and acquiring a site for a new courthouse
increased the scope of two projects, adding to their costs.
The scope of the Gulfport project increased when GSA faced community
resistance to the preferred site and had to purchase a larger site and
close a street to accommodate the new courthouse. According to GSA
officials and the project files we reviewed, procuring the only site
that was suitable and acceptable to the community required GSA to
purchase more land than it had planned in order to accommodate the
preservation of a historic high school building that was on part of the
property. The site cost $3.63 million, or 94 percent, more than GSA had
planned when it submitted its design funding request.
In Seattle, GSA had to redesign the courthouse to include three more
courtrooms when it could not locate the new courthouse adjacent to the
existing courthouse as planned. Under the new plan, the circuit
courtrooms remained in the existing courthouse building and the
bankruptcy courts were included in the new building. This change was
required after GSA was unable to reach an agreement with the city of
Seattle on relocating the city library, which was located on the
preferred site.
Historic Preservation:
The scope of two courthouse projects increased to provide for historic
preservation work that GSA had not anticipated when it requested design
funding for the projects. The original design concept for the Erie
courthouse project called for the preservation and incorporation of a
historic public library building into the courthouse design. According
to GSA officials and the project files we reviewed, additional
preservation work was required when an old clothing store on the site
became eligible for historic status. Rather than demolish the store as
originally planned, GSA incorporated it into the project design. This
decision increased the project's total cost by about $1.3 million.
Procuring the Gulfport project site, as discussed above, was contingent
on preserving a historic high school. This requirement increased the
scope of work for both the design and construction phases because, as
shown in figure 5, three of the old school's four exterior walls had to
be preserved. According to our analysis of GSA data, preserving the
exterior walls and retrofitting a new structure within the walls of the
old school increased the project's design costs by 14 percent.
Figure 5: Historic Preservation for the Gulfport Courthouse Project:
[See PDF for image]
[End of figure]
Tenants' Space Requirements:
Changes in tenants' space requirements increased the scope of work for
three of the projects we reviewed. The U.S. Marshals Service (USMS)
provides security for the federal judiciary, including physical
protection of courthouses and prisoner transport, and was a tenant in
each of the courthouses we reviewed. The U.S. Attorneys Offices are
also often located in courthouse facilities. In Cleveland and Seattle,
the U.S. Attorneys Offices initially resisted relocation to the new
courthouses because they preferred their current leased spaces. In
addition, for the Seattle U. S. Attorneys, there were questions of
whether they would have to move again at a later date as the courts'
space needs grew. In Denver, the USMS revised its plans for the amount
of office space it would occupy in the new courthouse. For these three
projects, GSA had to redesign space to meet the tenant agencies' needs.
According to GSA's project manager, to preserve the Cleveland project's
schedule, the project moved forward after an agreement could not be
reached with the U.S. Attorneys Office on the design of its space. The
U.S. Attorneys determined that the original space was not large enough
and received authorization from the Department of Justice for
additional space in the courthouse. This change required five floors of
the courthouse to be redesigned to meet the U.S. Attorneys Office's
requirements.
In Seattle, according to the GSA project manager, the redesign effort
was minimized because GSA anticipated the inclusion of the U.S.
Attorneys in the courthouse and included an option in the construction
contract to build out the required space. In Denver, the USMS revised
its occupancy plan for the Denver courthouse during the design phase,
prompting a redesign effort. The USMS decided to occupy office space in
the new courthouse rather than remain in the existing, adjacent
courthouse as planned. According to the GSA project manager, this
change in the tenant's requirements led to redesigning and allocating
most of the third floor to the USMS.
GSA now has a policy to obtain signed agreements from the tenant
agencies specifying how much space they will occupy in a new building
before construction begins. These agreements, called occupancy
agreements, also specify the rent that the agencies will pay for their
space. According to the project managers we spoke with, the occupancy
agreements have helped tenant agencies understand the rent commitments
they are entering into and have helped GSA resolve occupancy issues
before starting construction.
Security Enhancements:
Enhancements made to building security required scope changes for four
of the seven projects we reviewed. According to the GSA project
managers for the Denver and Albany projects, these enhancements were
made in response to the 1995 Oklahoma City bombing and reflected
updates to the U.S. Marshals' Design Guide. Thus, additional security
features were added to those projects that were in design or under
construction between 1995 and 1999.
Changes to the design criteria for federal buildings increased the
scope of work for the Las Vegas courthouse project and resulted in a
claim against the project. This was the first federal courthouse
designed after the Oklahoma City bombing. For security purposes, the
building was reinforced with additional steel, increasing the project's
costs. In addition, because this was a new security design, the
contractor had not correctly anticipated the amount of steel that would
be needed and filed a claim to recoup the cost of the additional steel.
According to the GSA project manager, the project's budget was
increased by $4.7 million to meet the enhanced security requirements;
and after the construction was complete, the contractor was paid $3.2
million to settle his claim for the additional work and materials
associated with blast proofing the exterior walls.
Changes made to the U.S. Marshals' Design Guide increased the costs of
projects in Cleveland, Albany, and Denver. Among other things, these
changes modified the type of materials used in the prisoners' holding
cells.
Postponing Construction and Changes in Local Market Conditions
Contributed to Changes in Project Costs:
Postponing the start of construction and changes in local market
conditions contributed to changes in costs for five of the seven
projects we reviewed. GSA had to postpone its schedule for starting
construction on five projects. Of these five projects, two were built
in highly competitive local construction markets whose volatility also
contributed to increases in the projects' costs. Local market
conditions are driven by the supply of skilled construction labor,
materials, and the relative number of construction projects within a
locality.
Courthouse construction takes place in a dynamic and constantly
changing economic environment. Postponing construction schedules
exposes a project to cost changes caused by annual inflation or
deflation rates and increases the risk that the assumptions used to
establish the project's budget may not keep pace with changing local
market conditions. Yet, even if construction is not postponed, the 2
years that typically elapse between the development of a prospectus and
the actual funding of a project provide ample time for local market
conditions to drift from the conditions assumed in developing the
estimates in the first place. Thus, postponing construction schedules
for reasons as diverse as the timing of appropriations or the
judiciary's current moratorium increase the probability that estimated
and actual costs will diverge.
The Erie project illustrates the effect that not receiving funding when
anticipated and postponing construction can have on a project's costs.
The design prospectus for the Erie project was submitted in March 1994.
When a fact sheet was submitted in March 1999--5 years after the
prospectus--the design concept had changed, as discussed earlier,
increasing the scope of historic preservation work and adding to the
design costs. Furthermore, appropriations for construction funding were
not provided until fiscal year 2002. Primarily because of inflation and
the scope increase, the project's estimated total cost increased 59
percent in nominal dollars over the estimate provided in the 1994
prospectus.
Construction on two projects, Gulfport and Seattle, were postponed as a
result of site acquisition issues, as discussed earlier. In addition,
according to the GSA project manager, the booming local construction
market in Seattle contributed to increased project costs. The Seattle
project also illustrates the uncertainty involved in anticipating local
market conditions. GSA's benchmark used an escalation factor of 3
percent to estimate construction costs, but the project manager said
that the escalation in Seattle was closer to 3.9 percent.
According to GSA's project manager, the Denver courthouse also was
constructed in a highly competitive economic environment that increased
the project's cost. During the project's development, the project
manager said that Denver experienced a construction boom that caused
construction prices to rise sharply and contributed to construction
bids for the project that came in approximately $10 million over
budget. Although one floor was removed from the design and other cost-
saving measures were implemented, the persistent, ongoing competition
in the local construction market contributed to actual costs that were
6 percent higher than the estimated costs submitted with the
construction funding request.
Other Factors Caused Project Costs to Change:
Other factors that were unique to specific projects we reviewed also
caused costs to change. For example, costs increased for the Denver
project when GSA headquarters decided that the Denver courthouse
project would serve as a demonstration project to showcase a number of
sustainable design features, such as solar panels, light shelves, and
automated heating and air-conditioning controls. These project changes
increased the estimated cost of construction by $5 million.[Footnote
11]
According to the Cleveland project manager, problems with contractors
and a design error increased the actual costs of the project. Although
the project was originally intended to use design-bid-build
procurement, because of design delays, the construction schedule was
divided into three phases, and construction started before the design
was completed. When the contractor fell behind in the second phase, GSA
followed the advice of its construction manager and became the general
contractor for the final construction phase in an effort to avert
potential claims arising from the second phase delays. GSA managed over
10 contracts in the final construction phase. According to the GSA
claims attorney involved in the project, GSA's taking on the role of
general contractor accounted for the large number of claims paid on the
project. GSA settled the claims for approximately $20.8 million, or 12
percent of the estimated total cost that was submitted with the
construction prospectus. In addition, construction costs increased when
a design error that underestimated the size of certain steel beams was
corrected, and special beams had to be manufactured and imported from
an overseas supplier.
Finally, a general contractor's inability to maintain the construction
schedule and meet its obligations to building material suppliers caused
the construction phase of the Albany project to be extended 3 years
beyond its anticipated completion. Eventually, the general contractor's
surety company, which guaranteed the contractor's ability to perform
the work, took over the management of the project and brought it to
completion. GSA still had to settle claims brought against the project
by the contractor's surety. Although GSA was able to limit the actual
cost increase to 7.9 percent over the estimate submitted to Congress,
the relatively small building took 5 years to construct.
Several project managers also noted the effect that GSA's time-out and
review initiative had on the early planning for the projects. The
principal motivation of GSA's time-out and review initiative was to cut
costs, reevaluate priorities, and improve the management of the federal
buildings program. For the courthouse construction program, GSA
reevaluated priorities and trimmed the costs of existing projects,
identifying savings of $324 million from 43 courthouse projects. For
example, as a result of time-out and review, the estimated cost of the
Cleveland project was reduced by $63 million or about 26 percent.
However, in this project, much of the savings were not realized and had
to be added back into the project during construction.
Departures from the Design Guide Had Little Impact on Project Costs:
In 1991, the judiciary issued the U.S. Courts Design Guide, which
specified the judiciary's criteria for designing new court facilities.
The Design Guide provides specific guidelines for the size, design
requirements, security, and other features of courtrooms, judges'
chambers, and other court-related space. Significant departures from
the Design Guide criteria must be justified by the district courts and
approved by the Circuit Judicial Council for the judicial circuit where
the project is located. The Design Guide has been revised several times
in response to economic constraints and is being reevaluated during the
judiciary's current moratorium to determine if additional revisions are
appropriate.
Departures from the Design Guide are often thought to increase
courthouse project costs. However, we found few departures from the
Design Guide in the projects we reviewed, and most of them were made to
increase the building's functionality. The project managers said none
of the departures resulted in an increase in the building size. We were
not able to quantify the costs associated with the departures, but
according to the project managers, their impact on cost was minimal.
* In the Albany courthouse, ceilings were lowered by 1 to 2 feet, which
reduced costs and allowed the magistrate judge courtrooms on the floor
above to be built to the size of district courtrooms to meet future
expansion needs.
* In Gulfport, the judiciary obtained approval to include a special
proceedings courtroom in the new courthouse. These courtrooms are 600
square feet larger than a traditional district courtroom and are used
for multidefendant trials or special events, such as naturalization
ceremonies.
* In Cleveland, increases in the size of the grand jury suite and
magistrate judges' courtrooms were accommodated within the planned size
of the building by reducing the size of other court spaces.
GSA Used Several Strategies to Reduce and Control Costs of Selected
Projects:
For the seven projects we reviewed in detail, GSA project managers used
several strategies to reduce costs and keep them within budget. These
strategies included value engineering, modified contracting methods,
and a variety of approaches for involving and communicating with tenant
agencies. On the basis of estimates provided by GSA, Congress
authorizes and appropriates funds for individual courthouse
construction projects. GSA sets each project budget according to the
appropriated funds and seeks to manage each project to the specified
budget.
Value Engineering Used to Bring Costs within Budget:
For the seven projects we reviewed, GSA project managers used value
engineering during the design phase to identify cost-saving changes and
to reduce costs. Project managers also used value engineering as the
primary method to reduce costs to meet the budget when the initial
construction bids exceeded the project's budget. Value engineering is
an organized effort to analyze the functions of systems, equipment, and
facilities for the purpose of achieving the essential functions at the
lowest cost possible while maintaining performance, reliability,
quality, and safety. Changes resulting from value engineering ranged
from using less expensive materials than originally planned to making
changes in scope that affected the features built into the courthouse.
Some changes made as a result of value engineering permanently reduced
building costs while other changes deferred costs to later years.
In a commitment to continue cost reduction after the time-out and
review process of the mid-1990s, GSA emphasized the use of value
engineering as a method to reduce costs below the approved budgets. The
Office of Management and Budget requires executive branch agencies to
use value engineering as appropriate to reduce program and acquisition
costs while maintaining necessary quality levels. For the projects we
reviewed, GSA project managers generally hired outside consultants to
perform value engineering studies during the design phase to identify
potential areas for cost savings. Project managers used value
engineering again for four of the seven projects, when the construction
bids exceeded the project's budgets. The estimated cost at construction
or the construction bids exceeded the budget by $2 million to $16
million, or 6 to 18 percent, for these four projects. The project
managers tasked the contractors that were bidding on the construction
phase of the project to submit ideas for cutting costs. This approach
allowed GSA to reduce the bids to within the budget without redesigning
the building. Having to redesign the building, then going through
another bidding process is time consuming; and as discussed earlier,
starting construction later than planned can lead to cost increases.
Many relatively small changes were often made as a result of value
engineering to reduce projects' costs. The most common change for all
seven projects was substituting less expensive materials for more
expensive materials that were originally called for in the design. For
example, using commercially available products rather than custom-made
materials lowered costs. These material substitutions often had no or
minimal impact on the appearance and functionality of the building. For
example, in two courthouse projects, wainscoting was used in place of
full-height wood paneling. For the Seattle project, GSA removed the
copper cladding from the roof after determining that its removal would
not negatively affect the appearance or durability of the building.
The court officials involved in the seven projects told us that they
participated in the value engineering sessions and agreed with the
changes to reduce the construction costs. These officials understood
that there was a limited budget and made trade-offs to get the features
they wanted the most. For example, in Las Vegas the judges agreed to
reduce the amount of limestone used on the outside of the building so
that they could keep wood paneling in the courtrooms.
Other value engineering changes resulted in the elimination or
reduction of spending on some features, such as building systems, to
reduce projects' costs. While these changes lowered the construction
costs, some could increase future operating and maintenance costs. In
Las Vegas, a window-washing platform was eliminated to save $250,000.
According to the GSA building manager, it now costs about $30,000 to
wash the courthouse's windows, because special equipment is needed. As
a result, the windows are seldom washed. For two projects, GSA
eliminated the funds for heating and air-conditioning systems from the
construction contracts and entered into energy savings and performance
contracts (ESPC) to procure these systems. Under an ESPC, the
contractor purchases and installs the heating and air-conditioning
systems and GSA pays for the systems over the life of the contract, for
as long as 25 years, from its operating budget. It is expected that the
contractor will install a more energy-efficient system than would have
been installed without the ESPC and that the cost of the system will be
paid for from the savings attributed to a more efficient system. In new
construction, energy savings are estimated using many assumptions about
energy usage and costs, since there are no actual systems and costs on
which to base estimates of expected savings.
In December 2004, we reported that using ESPCs to install heating and
air-conditioning systems is more expensive than funding the
installation of such systems up front as part of the construction
costs.[Footnote 12] In that review, we estimated that the use of an
ESPC for the Gulfport Federal Courthouse might cost about $2.5 million,
compared with about $1.6 million if the system had been installed as
part of the construction. This is an increase of about 56 percent in
the cost of the heating and air conditioning system. We found that GSA
focused on reducing the construction costs, so that it could award the
construction contract, rather than on the long-term cost implications
of using an ESPC.
Modified Contracting Methods Used to Control Costs:
On three projects, project managers identified the contracting method
as a strategy they used to help control costs and keep the project on
schedule. One project involved the construction contractor in the
design phase of the project while another included incentive award
clauses in the construction contract. The third project used versions
of both of these approaches.
GSA traditionally approaches a new construction project by designing
the building and then soliciting bids to construct the building based
on the design. This is referred to as the design-bid-build method of
contracting. In this traditional method, the construction contractor is
not involved in the design process and often has questions about the
design, which can lead to changes during construction. To reduce the
risk of changes during construction and accelerate the project's
schedule, the Las Vegas project manager used a design-build bridging
contract method. Under this contracting method, the project began with
a traditional design phase to develop the concept for the building. The
concept design identified the basic structure of the building,
including the layout of courtrooms and chambers on each floor. GSA then
advertised for a contractor to complete the detailed building design
and construct the building. The winning contractor was a joint venture
between an architectural firm and a general contractor. This approach
allowed construction to begin as soon as the design was completed, thus
saving time and reducing the chances of the tenants' requirements
changing between the time of design completion and the start of
construction. In addition, the architect and builder were with the same
firm, so when issues came up during construction, each had an interest
in arriving at solutions rather than finger-pointing and blaming each
other. According to the project manager, as a result of this
contracting method, relatively few changes were made on the project
during construction.
For the Gulfport courthouse project, GSA hired the general contractor
during the design stage when the building's design was only 35 percent
complete. The project manager believed that involving the general
contractor in the development of the design and construction documents
would minimize the number of questions the contractor would have about
the design and thus minimize the number of change orders. Change orders
on a project may increase the time needed to construct the building and
increase the cost of construction. The project manager believed that
this was a successful approach because there were few questions about
the design during construction and relatively few change orders due to
design issues.
GSA used construction contracts with incentive award clauses for the
Gulfport and Seattle courthouses. The incentive awards required
periodic reviews of the contractors' performance throughout the
projects, which ensured a certain level of communication. The project
manager for the Seattle courthouse said that this method forced the
stakeholders to communicate and address issues that, without the
incentive award, might not have been addressed until the end of the
project. The use of incentive awards is intended to increase
communication and help control the projects' overall costs. The
contractor on the Gulfport project earned 85 percent of the incentive
award, and the contractor on the Seattle project earned about 92
percent of the incentive award.
Tenant Agency Involvement and Communication Identified as Keys to
Projects' Success and to Controlling Costs:
GSA project managers and judiciary officials said the involvement of
tenant agencies and open and continual communication with them on the
projects we reviewed were important to the successful completion of the
projects and to controlling their costs.[Footnote 13] Judges at each of
the courthouses said the new buildings met their requirements, and they
were all very happy with the new courthouses. GSA project managers used
a variety of strategies, such as regular meetings and courtroom mock-
ups, to identify changes prior to construction, to involve tenant
agencies in planning the courthouse projects, and to keep them informed
about the progress of the projects. The judiciary also generally hired
its own project manager to oversee each of the projects and to
facilitate communication between GSA and the judiciary. In addition,
many of the project managers used a Web-based project management tool
to facilitate communication among the construction contractors.
Involving tenant agencies and incorporating their interests into a
project, particularly during the planning stages, is one of the five
components of a leading practices framework. Project managers agreed
that working with tenant agencies to define their requirements and
keeping tenants informed about the project were important to getting
the agencies' "buy-in" on the project and to minimizing changes during
construction. Making changes during a project's design to ensure that
tenants' requirements are met is generally less costly than making
changes during construction. Leading practices in capital project
management suggest frequent communication and involvement through such
means as meetings and correspondence. GSA project managers and
judiciary officials who represented the various courts' interests said
that judiciary officials were actively involved from the conception of
the projects. Project documents show that other tenant agencies were
also involved throughout the projects.
While all of the project meetings included tenant agency
representatives, GSA and judiciary officials said that using courtroom
mock-ups and having a judicial project manager were important
strategies used to facilitate communication. All project managers used
courtroom mock-ups in which a full-size model of a courtroom was
constructed and the judges and other courtroom participants evaluated
the model for such things as sight lines and the placement of
furniture. The courtroom mock-ups resulted in changes to courtroom
designs, and, according to GSA, no major changes were required during
or after the construction of the courtrooms to correct deficiencies.
Thus, the courtrooms met the judges' requirements, and costs were
avoided by making necessary changes prior to construction.
According to judiciary officials, there was open communication between
the judiciary and GSA on six of the seven projects. These officials
said that the collegial relationships they developed with GSA
facilitated communication and allowed them to work together to control
and, when necessary, to reduce costs in a constructive way. For these
six projects, the judiciary had its own project manager, who interacted
with GSA on a regular basis. The judges said that it was critical for
them to have this project manager, who was knowledgeable about
construction, and could advise the judges on suggested changes and
facilitate communication with GSA.
The USMS and the U.S. Attorneys Office were also major tenants in most
of the courthouses we reviewed. According to GSA project managers,
these agencies were involved in the projects to a lesser extent than
the judiciary. USMS officials said that their level of involvement
varied, depending on the project and the project manager involved. As
discussed, some of the cost increases during construction resulted from
the USMS's and the U.S. Attorneys Office's requirement changes. USMS
changes primarily resulted from increases in security standards, which
could not have been anticipated prior to construction. Changes
involving the U.S. Attorneys Office more often resulted because of its
decisions about moving to the new building. As noted, GSA's policies
and procedures have changed over the last several years, and GSA now
requires tenant agencies to sign occupancy agreements prior to
construction. Such agreements define the amount of space the tenant
will occupy and the rental cost for the space. This policy should
eliminate last minute questions about which tenants will occupy the
building and the amount of space they will occupy.
Finally, GSA used commercially available Web-based project management
tools for several of the projects to facilitate communication among the
contractors. These tools facilitate communication by reducing
paperwork; electronically assigning responsibility for tasks; tracking
changes, questions, and answers; and providing all contractors with
access to the same information as appropriate. For example, if a
contractor has a question about the design of a particular building
element, it can submit a question to the architect; and GSA can track
the question and response to ensure that the question is resolved as
quickly as possible. The Seattle project manager highlighted the
importance of having clearly defined design and construction
requirements. The manager said that in Seattle, he was able to reduce
the construction bid by meeting with the subcontractors to answer their
questions about the building requirements. If subcontractors do not
fully understand an aspect of the design, they will build in additional
costs to cover their risk. By clarifying the building requirements, GSA
was able to reduce the subcontractors' risk and thus reduce their bids
on the project.
Recent GSA Program Improvements:
During the last decade, GSA has implemented a number of initiatives to
enhance and improve the performance of the courthouse construction
program. Among these initiatives are enhancements to the benchmarking
system, the use of courtroom mock-ups, and the ongoing development of
project management practice through the Project Management Center of
Expertise. GSA's Center for Courthouse Programs is also conducting
independent cost estimates and quality control reviews at three points
during the design phase of projects to help ensure that courthouse
projects can be built within budget and the quality of the buildings is
not being sacrificed to stay within budget. While the results of some
of these initiatives were apparent in the seven projects we reviewed,
such as with the courtroom mock-ups, the effects of the more recent
efforts to enhance the program are not captured in our data collection.
This situation occurred because many of the projects in our universe
were already fairly advanced by time the more recent initiatives were
introduced.
Conclusions:
Courthouse construction is a process that evolves over many years and
includes multiple stakeholders. Many factors can affect the cost of a
courthouse project as it moves from planning and design to
construction. Our work showed that the most significant cost changes
occurred between the time of GSA's request for design and its request
for construction funding. Some reasons for cost increases, such as the
need for additional security or changing market conditions, affected
several projects and could not have been easily anticipated. Other
reasons for cost changes were unique to individual projects. It is
important to provide decision makers with information about the costs,
risks, and scope of projects before resources are committed. Such a
practice would be consistent with our past work on leading practices in
capital decision making. In the case of courthouse projects, GSA does
not consistently explain project changes in documents provided to
congressional decision makers. These changes may only be apparent if
congressional decision makers compare the information submitted with
the construction funding request to the information submitted,
sometimes years earlier, with the design funding request.
Recommendations for Executive Action:
To improve the usefulness of the information on courthouse construction
projects that GSA provides to Congress, we recommend that the
Administrator of GSA, when requesting funding for those projects,
identify and explain changes in estimated costs and building size from
the information provided to Congress in prior project prospectuses or
fact sheets.
Agency Comments:
We provided a draft copy of this report to the Administrator of the
General Services Administration and the Director of the Administrative
Office of the U. S. Courts for their review and comment. On June 24,
2005, GSA provided us with written comments and concurred with our
recommendation (see app. III). GSA noted that in 2004 it began
notifying Congress when significant changes in scope and budget
occurred in courthouse projects. While GSA started notifying the
authorizing committees of significant changes to projects in 2004, it
has not been notifying the appropriation committees of these changes.
We believe that all the stakeholders should have the same information,
and changes to the project should be included in the prospectuses as
part of the funding process. GSA also noted changes it has made over
the years to how it plans, budgets, and manages courthouse projects and
provided technical clarifications, which we have incorporated in this
report as appropriate. AOUSC provided technical clarifications, which
we have incorporated as appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to the appropriate congressional committee, the Administrator of GSA,
and the Director of the Administrative Office of the U.S. Courts.
Copies will also be made available to other interested parties on
request. In addition, the report will be available at no charge on
GAO's Web site at [Hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-6670 or [Hyperlink, GoldsteinM@gao.gov].
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. GAO staff who
made major contributions to this report are listed in appendix IV.
Signed by:
Mark L. Goldstein:
Director, Physical Infrastructure Issues:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
The objectives of our report were to (1) compare estimated and actual
costs for recently completed courthouse projects, (2) identify factors
that contributed to differences between the estimated and actual costs
of selected projects, and (3) identify strategies that were used to
help control the costs of selected projects. To address these
objectives, we reviewed project prospectuses and courthouse expenditure
data; interviewed General Services Administration (GSA) and judiciary
officials; and conducted a detailed review of seven completed
courthouses around the country.
We identified a total of 38 new courthouse construction projects
completed since 1998 from information supplied by GSA's Center for
Courthouse Programs (CCP). We chose 1998 as a starting date to exclude
the projects we had considered in our previous report on the courthouse
construction program and to include only those projects that were
designed and built during the period when a number of changes were made
to the program, such as the implementation of 5-year plans by the
Administrative Office of the U.S. Courts (AOUSC) and the establishment
of the CCP.
To determine estimated costs, we examined prospectuses and fact sheets
submitted to Congress during the appropriations process.[Footnote 14]
For 35 of the 38 projects completed since 1998, at least one estimate
of total project cost was provided to Congress. Three projects did not
go through the typical approval and funding process. GSA typically
submits two requests for funding, one in the prospectus for design
funding and another in the prospectus for construction funding, but
this is not always the case. For some projects, the initial estimate
was submitted in the form of a "Report of Building Project Survey,"
sometimes called an 11(b) report after the section of the Public
Buildings Act of 1959, which provides for such a report. In other
cases, the estimate was submitted in the form of a one-page fact sheet
either as a supplement to or in lieu of a prospectus. Prospectuses and
fact sheets typically contain an estimated total project cost as the
sum of separate estimates for site acquisition, design, management and
inspection, and construction. For some projects, we added the
construction cost estimate to the amounts previously appropriated for
design and site acquisition to arrive at a total project cost estimate.
To determine changes in proposed building size and parking, we compared
documents submitted for the construction phase funding with those
submitted for the design phase funding.
To determine actual costs, we used data provided by GSA's Public
Building Service (PBS) Budget Office for all courthouse projects
completed since 1998. We defined actual costs as all obligations
recorded against each project through the end of fiscal year 2004 plus
any claims paid from the U.S. Treasury Department's Judgment Fund.
According to information supplied by the PBS Budget Office, 13 of the
38 projects that we examined had at least one claim paid from the
Judgment Fund, ranging from $65,000 on the St. Louis courthouse to over
$20 million on the Cleveland courthouse. Claims are paid from the
Judgment Fund when there are no funds left available in the project
budget to pay the claims. The reported actual costs of the courthouse
projects include only funds budgeted by GSA and specifically authorized
by Congress for new construction and exclude items funded by the tenant
agencies. We also reviewed appropriation acts for fiscal years 1993
through 2005 to identify funding appropriated for new courthouse
construction projects and other relevant legislation relating to GSA's
construction authority.
To compare actual with estimated costs, we calculated the percentage by
which actual costs differed from estimates of the costs. When more than
one estimate was provided for a project, we compared the actual costs
with the initial and latest estimates. For example, when an 11(b)
report was prepared for a project, we used this document as a source
for the original estimate. Similarly, when a fact sheet was submitted
after a construction prospectus for a project, we used the estimate
provided in the fact sheet.
To identify factors that contributed to differences between estimated
and actual costs and to identify the types of strategies used to
controls costs, we selected seven courthouses whose construction was
completed between 2000 and 2004: Albany, Georgia; Cleveland, Ohio;
Denver, Colorado; Erie, Pennsylvania; Gulfport, Mississippi; Las Vegas,
Nevada; and Seattle, Washington. To select these courthouses, we
considered a number of factors, including the range and scope of the
cost changes, the size of the project, and the geographic location. For
each of these seven courthouses, we obtained estimated and actual cost
information by reviewing prospectuses, 11(b) reports, and fact sheets
submitted to Congress and budgetary expenditure data provided by GSA.
During our visits to the seven courthouses, we reviewed the relevant
project files from GSA. We looked specifically for documentation of
factors that contributed to or helped control cost changes, such as
scope modifications, contractor and bid documents, change orders, and
claims. We also interviewed GSA and judiciary officials responsible for
each courthouse project, including judges, project managers,
contracting officers, and other individuals involved during the design
and construction phases of the courthouse. We also interviewed
judiciary officials associated with the projects including
Administrative Office of the U.S. Courts (AOUSC) officials and judges.
From the interviews and project file reviews, we obtained information
on the extent of and reasons for the cost changes. We also reviewed GSA
and AOUSC documents related to management controls, policies,
procedures, and guidance for courthouse construction projects.
For the estimated costs of the 38 courthouse projects, we relied on the
original source documents, including the prospectuses that GSA provided
to Congress. We assessed the reliability of actual cost data provided
by GSA's PBS Budget Office by (1) reviewing documents describing
policies and procedures for the administrative control of funds, (2)
interviewing knowledgeable agency officials about the data, and (3)
reviewing an independent auditor's report. We determined that the data
were sufficiently reliable for the purposes of this report. We also
corroborated much of the testimonial information provided by GSA and
judiciary officials during our seven courthouse reviews by obtaining
documentation of project management and cost changes during our file
reviews. Because we selected a nonprobability sample of courthouses to
review in detail, our findings are not generalizable to the 38
projects.
[End of section]
Appendix II: Timelines and Costs of Courthouse Projects Completed Since
1998:
Figure 6: Timelines of Courthouse Construction Projects:
[See PDF for image]
Note: Project initiation refers to the fiscal year for which funds were
first requested from Congress, an 11(b) report was submitted, or funds
were first appropriated.
[End of figure]
Table 3: Summary of Estimated and Actual Costs:
Project location: Albany, GA;
Design ETPC[A]: N/A;
Construction: ETPC[B]: $12,163,000;
Total obligations[C]: $13,127,344;
Actual cost: $13,127,344.
Project location: Albuquerque, NM;
Design ETPC[A]: N/A;
Construction: ETPC[B]: $56,794,000;
Total obligations[C]: $50,146,643;
Actual cost: $50,146,643.
Project location: Beckley, WV;
Design ETPC[A]: N/A;
Construction: ETPC[B]: N/A;
Total obligations[C]: $35,677,860;
Actual cost: $35,677,860.
Project location: Boston, MA;
Design ETPC[A]: $163,005,000;
Construction: ETPC[B]: $202,005,000;
Total obligations[C]: $230,671,501;
Claims: $4,250,000;
Actual cost: $234,921,501.
Project location: Brownsville, TX;
Design ETPC[A]: $35,027,000;
Construction: ETPC[B]: $33,813,000;
Total obligations[C]: $32,708,650;
Actual cost: $32,708,650.
Project location: Central Islip, NY;
Design ETPC[A]: N/A;
Construction: ETPC[B]: $227,009,000;
Total obligations[C]: $215,629,990;
Claims: $700,000;
Actual cost: $216,329,990.
Project location: Charleston, WV;
Design ETPC[A]: $80,406,500;
Construction: ETPC[B]: N/A;
Total obligations[C]: $80,754,535;
Actual cost: $80,754,535.
Project location: Cleveland, OH;
Design ETPC[A]: $199,203,000;
Construction: ETPC[B]: $170,537,000;
Total obligations[C]: $192,497,198;
Claims: $20,790,000;
Actual cost: $213,287,198.
Project location: Columbia, SC;
Design ETPC[A]: $55,960,000;
Construction: ETPC[B]: $55,961,000;
Total obligations[C]: $63,721,116;
Actual cost: $63,721,116.
Project location: Corpus Christi, TX;
Design ETPC[A]: $33,740,000;
Construction: ETPC[B]: $33,056,000;
Total obligations[C]: $34,244,915;
Actual cost: $34,244,915.
Project location: Covington, KY;
Design ETPC[A]: $20,858,000;
Construction: ETPC[B]: $21,791,000;
Total obligations[C]: $22,155,221;
Actual cost: $22,155,221.
Project location: Denver, CO;
Design ETPC[A]: $76,211,000;
Construction: ETPC[B]: $93,504,000;
Total obligations[C]: $99,052,566;
Actual cost: $99,052,566.
Project location: Erie, PA;
Design ETPC[A]: $21,450,000;
Construction: ETPC[B]: $34,039,000;
Total obligations[C]: $33,412,332;
Actual cost: $33,412,332.
Project location: Fargo, ND;
Design ETPC[A]: N/A;
Construction: ETPC[B]: N/A;
Total obligations[C]: $19,328,942;
Actual cost: $19,328,942.
Project location: Ft. Myers, FL;
Design ETPC[A]: N/A;
Construction: ETPC[B]: $29,796,000;
Total obligations[C]: $25,897,340;
Actual cost: $25,897,340.
Project location: Greeneville, TN;
Design ETPC[A]: $28,043,000;
Construction: ETPC[B]: $31,165,000;
Total obligations[C]: $31,056,543;
Actual cost: $31,056,543.
Project location: Gulfport, MS;
Design ETPC[A]: $52,093,000;
Construction: ETPC[B]: $52,391,000;
Total obligations[C]: $59,287,053;
Actual cost: $59,287,053.
Project location: Hammond, IN;
Design ETPC[A]: $28,028,000;
Construction: ETPC[B]: $59,061,000;
Total obligations[C]: $60,316,073;
Actual cost: $60,316,073.
Project location: Jacksonville, FL;
Design ETPC[A]: $85,305,000;
Construction: ETPC[B]: $96,680,000;
Total obligations[C]: $96,591,397;
Actual cost: $96,591,397.
Project location: Kansas City, MO;
Design ETPC[A]: $114,476,000;
Construction: ETPC[B]: $112,181,000;
Total obligations[C]: $113,860,442;
Claims: $232,665;
Actual cost: $114,093,107.
Project location: Knoxville, TN;
Design ETPC[A]: N/A;
Construction: ETPC[B]: N/A;
Total obligations[C]: $39,709,609;
Actual cost: $39,709,609.
Project location: Lafayette, LA;
Design ETPC[A]: $34,409,000;
Construction: ETPC[B]: $34,607,000;
Total obligations[C]: $34,314,536;
Actual cost: $34,314,536.
Project location: Laredo, TX;
Design ETPC[A]: $23,194,000;
Construction: ETPC[B]: $36,531,000;
Total obligations[C]: $42,579,078;
Actual cost: $42,579,078.
Project location: Las Vegas, NV[D];
Design ETPC[A]: $99,041,000;
Construction: ETPC[B]: N/A;
Total obligations[C]: $100,491,555;
Claims: $3,200,000;
Actual cost: $103,691,555.
Project location: London, KY;
Design ETPC[A]: $15,808,000;
Construction: ETPC[B]: $16,642,000;
Total obligations[C]: $19,018,809;
Actual cost: $19,018,809.
Project location: Montgomery, AL;
Design ETPC[A]: $53,638,000;
Construction: ETPC[B]: $48,335,000;
Total obligations[C]: $60,115,326;
Claims: $13,178,171;
Actual cost: $73,293,497.
Project location: Omaha, NE;
Design ETPC[A]: N/A;
Construction: ETPC[B]: $67,194,000;
Total obligations[C]: $65,579,829;
Claims: $5,300,000;
Actual cost: $70,879,829.
Project location: Phoenix, AZ;
Design ETPC[A]: N/A;
Construction: ETPC[B]: $111,063,000;
Total obligations[C]: $114,030,705;
Claims: $11,152,007;
Actual cost: $125,182,712.
Project location: Sacramento, CA;
Design ETPC[A]: N/A;
Construction: ETPC[B]: $173,249,000;
Total obligations[C]: $130,509,658;
Actual cost: $130,509,658.
Project location: Santa Ana, CA;
Design ETPC[A]: N/A;
Construction: ETPC[B]: $134,902,000;
Total obligations[C]: $125,861,026;
Claims: $18,080,137;
Actual cost: $143,941,163.
Project location: Scranton, PA;
Design ETPC[A]: $41,679,000;
Construction: ETPC[B]: $36,188,000;
Total obligations[C]: $35,553,938;
Actual cost: $35,553,938.
Project location: Seattle, WA;
Design ETPC[A]: $164,407,000;
Construction: ETPC[B]: $216,082,000;
Total obligations[C]: $214,730,651;
Actual cost: $214,730,651.
Project location: St. Louis, MO;
Design ETPC[A]: $251,772,000;
Construction: ETPC[B]: $230,863,000;
Total obligations[C]: $250,234,082;
Claims: $65,000;
Actual cost: $250,299,082.
Project location: Tallahassee, FL;
Design ETPC[A]: $23,472,000;
Construction: ETPC[B]: $29,129,000;
Total obligations[C]: $30,556,900;
Claims: $721,684;
Actual cost: $31,278,584.
Project location: Tampa, FL;
Design ETPC[A]: $84,561,000;
Construction: ETPC[B]: $81,161,000;
Total obligations[C]: $69,487,426;
Claims: $1,253,605;
Actual cost: $70,741,031.
Project location: Tucson, AZ;
Design ETPC[A]: $98,625,000;
Construction: ETPC[B]: $81,708,000;
Total obligations[C]: $83,765,867;
Claims: $9,050,776;
Actual cost: $92,816,643.
Project location: Wheeling, WV[D];
Design ETPC[A]: $29,303,000;
Construction: ETPC[B]: N/A;
Total obligations[C]: $28,324,368;
Actual cost: $28,324,368.
Project location: Youngstown, OH;
Design ETPC[A]: $21,534,000;
Construction: ETPC[B]: $15,799,000;
Total obligations[C]: $16,517,999;
Actual cost: $16,517,999.
Source: GAO Analysis of funding requests submitted to Congress.
Note: N/A = not applicable.
[A] ETPC = estimated total project cost.
[B] For some projects, additional funds were requested after the
construction ETPC was submitted.
[C] Total obligations are through the end of fiscal year 2004.
[D] These projects were procured using the design-build process, so
only one ETPC was provided to Congress.
[End of table]
[End of section]
Appendix III: Comments from the General Services Administration:
GSA:
GSA Administrator:
JUN 24 2005:
Mr. Mark L. Goldstein:
Director, Physical Infrastructure:
Government Accountability Office:
Washington, DC 20548:
Dear Mr. Goldstein:
The General Services Administration (GSA) appreciates this opportunity
to review and provide the enclosed comments on the Government
Accountability Office's (GAO's) draft Report to the Chairmen, Committee
on Environment and Public Works and Subcommittee on Transportation and
Infrastructure, U.S. Senate, Courthouse Construction: Information on
Project Cost and Size Changes Could Enhance Oversight (GAO-05-673).
The report recommends that GSA, when requesting funding for new
courthouse projects, identify and explain changes in estimated costs
and building size from the information provided to Congress in prior
project prospectuses or fact sheets.
GSA concurs with this recommendation and has made significant changes
in how it plans, budgets, and manages these projects that, in many
cases, began more than 10 years ago. For example:
* A "verification of preparedness" checklist is administered to ensure
that project teams are prepared to begin design phase;
* Design start meetings reinforce the requirements of scope, schedule,
and budget;
* Design management evaluations by independent consultants are
performed to ensure that scope, program, and budget requirements are
met;
* Construction start meetings confirm that the most effective
construction delivery method is used and that project's scope and
program can be delivered on schedule and within budget; and,
* Controls were established on how to issue construction change orders.
In 2004, GSA began notifying Congress when significant changes in the
scope and budget occurred in courthouse projects that had been
previously authorized and had funding appropriated for design. GSA is
also working with the judiciary to better define and confirm space
requirements for future courthouse projects during the planning phase.
Detailed space programming studies will be conducted and confirmed by
signed occupancy agreements prior to the design prospectus.
In addition, beginning in fiscal year 2007, GSA will request design
funding sufficient to incorporate interoperable building information
modeling using Industry Foundation Classes into the design of new
courthouse projects. This system will allow automated standards
checking and cost estimating during design to better control project
scope and cost.
Should you have any questions, please contact me. Staff inquiries may
be directed to Mr. Robert Andrukonis, Director, Center for Courthouse
Programs, Public Buildings Service, at (202) 501-1517.
Sincerely,
Signed for:
Stephen A. Perry:
Administrator:
Enclosure:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Mark L. Goldstein, (202) 512-2834:
Staff Acknowledgments:
In addition to those named above, Lindsay Bach, Maria Edelstein, Bess
Eisenstadt, Daniel Hoy, David E. Sausville, Dave Stikkers, and Dorothy
Yee made key contributions to this report.
(543106):
FOOTNOTES
[1] The $4.5 billion does not include all rescissions that affected the
total funding available for the 78 projects.
[2] This range is for the 27 projects that GSA provided a total project
cost estimate to Congress at the project design phase.
[3] This range is for the 32 projects that GSA provided a total project
cost estimate to Congress with the construction funding request.
[4] Under the Public Buildings Act of 1959, as amended, prospectuses
are submitted to the Senate Committee on Environment and Public Works
and the House committee on Transportation and Infrastructure for the
proposed construction, alteration, or acquisition of a public building
that exceeds a certain annually adjusted cost threshold. The prospectus
threshold for projects in fiscal year 2005 was $2,360,000.
[5] Some courthouse projects are procured using the design-build
method, which typically requires only one prospectus to be submitted to
Congress because funding for the site, design, and construction are
requested at the same time.
[6] GAO, Executive Guide: Leading Practices in Capital Decision-Making,
GAO/AIMD-99-32 (Washington, D.C.: Dec. 1998) and GAO, Intercity
Passenger Rail: Amtrak's Management of Northeast Corridor Improvements
Demonstrates Need for Applying Best Practices, GAO-04-94 (Washington,
D.C.: Feb. 27, 2004).
[7] GSA accounts for inflation in estimates by escalating the project's
cost to reflect the anticipated construction start date.
[8] Claims are paid out of available project funds until the funds are
exhausted. If additional funds are needed, they are paid out of the
U.S. Treasury Department's Judgment Fund.
[9] GAO/AIMD-99-32.
[10] These seven projects represent a nonprobability sample. Results
from nonprobability samples cannot be used to make inferences about a
population, because in a nonprobability sample, some elements of the
population being studied have no chance or an unknown chance of being
selected as part of the sample. For details on how these projects were
selected, see appendix I.
[11] GSA did a life-cycle cost analysis that showed the sustainable
design features may lower the energy related life cycle costs.
[12] GAO, Capital Financing: Partnerships and Energy Savings
Performance Contracts Raise Budgeting and Monitoring Concerns, GAO-05-
55 (Washington, D.C.: Dec. 16, 2004).
[13] The courthouse projects that we reviewed often included space for
the district, magistrate, and bankruptcy courts; U.S. Attorneys Office;
USMS; Probation and Pretrial Services; and congressional offices.
[14] Under the Public Buildings Act of 1959, as amended, prospectuses
are submitted to the Senate Committee on Environment and Public Works
and the House Committee on Transportation and Infrastructure for the
proposed construction, alteration, or acquisition of a public building
that exceeds a certain annually adjusted cost threshold. The prospectus
threshold for construction projects in fiscal year 2005 was $2.36
million.
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