HomeMy WebLinkAboutC2023-123 - 6/27/2023 - Approved DocuSign Envelope ID:8FC7D6E6-B17A-4CC3-B3C3-30EOD34EEAOD
f.ur:it,�
Amendment# 1
\fir Finance & Procurement
1852
Date: May 24, 2023
Agreement#4594 — Capital Program Operational Risk Assessment
Contractor: Talson Solutions, LLC
Current Amount: $28,200.00
I. Section 2, Term, of the Agreement is deleted in its entirety and replaced with the following
language: "This Agreement is for a term of approximately three years, beginning February 13,
2023, and continuing through February 28, 2026. The parties may mutually extend the term of
this Agreement, provided, the parties do so by execution of a written amendment."
II. Section 3, Compensation and Payment, of the Agreement is amended by increasing the not-to-
exceed amount by $752,800.00; therefore, the revised total amount of the Agreement is
$781,000.00.
III. Section 4, Contract Administrator, of the Agreement, is amended by deleting the contact
information block and replacing it to read as follows:
George Holland, CIA, CISA, City Auditor
City Auditor's Office
(361) 826-3660
GeorgeH3@cctexas.com
IV. Section 13, Notice, of the Agreement is amended by deleting the notification block for the City and
replacing it to read as follows:
IF TO CITY:
City of Corpus Christi
Attn: George Holland, CIA, CISA, City Auditor
1201 Leopard St.
Corpus Christi, TX 78401
V. Subparts (A) and (B) of Section 15, Termination, of the Agreement are amended by adding the
phrase "or City Auditor" following the phrase "City Manager."
VI. Attachment A, Scope of Work, of the Agreement is amended by adding Attachment A-1, the
content of which is attached and incorporated by reference into the Agreement as if fully set out
here in its entirety. Attachment A-1, entitled "Statement of Work — May 2, 2023", adds four
identified construction audits from the City's amended calendar year("CY")2023 annual audit plan
(dated as of April 11, 2023), with a possible fifth construction audit to be subsequently identified
and completed, time permitting.
VII. In addition to the Services to be performed pursuant to Attachment A-1, the Contractor is required
to comply with and complete the following:
Page 1 of 2
SCANNED
DocuSign Envelope ID:8FC7D6E6-B17A-4CC3-B3C3-30EOD34EEAOD
• Plan, execute, and report a minimum of four construction audits for CY 2023 from the approved
annual audit plan; and ensure audits are co-sourced between the parties as mutually agreed,
with a portion of the work being performed by the City Auditor and staff in order to reduce both
the City's and Contractor's costs and to increase efficiencies.
• Present and provide audit workpapers and reports to the City Auditor in a format approved by
the City Auditor. The Contractor shall prepare written reports for each audit and present the
results to the City Council Audit Committee.
• Provide input on construction audits to be considered for incorporation into future annual audit
plans of the City.
• Obtain approval in advance from the City Auditor for all on-site visits prior to travel
arrangements being made. The Contractor shall coordinate with the City Auditor's Office to
resolve any adjustments or modifications affecting pre-approved travel plans and on-site visits.
• Observe and comply with delivery times for Services rendered. Assigned construction audits
must be completed within 12 months of the final execution date of this Amendment. Any
carryover audit projects and/or work beyond the period stated in this provision are at the
discretion of the City Auditor.
VIII. The parties intend to add additional construction audits for CY 2024 and 2025, such future audits
currently unable to be identified but for which an anticipated and appropriate amount of funding
has been included in the not-to-exceed amount stated in paragraph II of this Amendment#1. All
future construction audits to be identified, including a possible fifth audit for CY 2023, shall be
determined by the City Auditor, specified in writing, and mutually agreed to without the necessity
of a formal amendment to the Agreement(unless additional funding is needed), and such writings,
as mutually agreed to, for CY 2024 and 2025 are subject to the same terms, conditions, and
requirements of the Agreement, Amendment#1, and all subsequently executed amendments.
IX. This Amendment #1 is effective upon the date of final execution by the parties, unless an earlier
date is expressly stated within this document.
To the extent the provisions of this Amendment #1 conflict with any provisions of the Agreement and
prior amendments, if any, the provi '•ns of this Amendment#1 shall prevail and govern for all purposes
and al respects. DocuSIgn•dby:
., rokYf 5/25/2023
Josh Cl'onley fir" Contractor Date
Assist.nt Direc • , Finance & Procurement
Ap oved as to legal fo bd-A. ,m: 1
ATTEST: k ' 41 ti
t� ,eet/ RE=SCCA HUERTA
(//i
CITY SECRETARY
Assis City Attorney r
J
ATTACHED AND INCORPORATED BY REFERENCE:
,fig a3-01lAtJ1 HUKids..
Attachment A-1 IT COUNCIL rl13
.... (LILL Page 2 of 2
SECRETARY
DocuSign Envelope ID:8FC7D6E6-B17A-4CC3-B3C3-30EOD34EEAOD,_,tachment A
TJLSON
• SOLUTIONS LLC
Statement of Work— May 2, 2023
City of Corpus Christi— Construction Audit Services
This Statement of Work outlines construction audit services proposed by Talson Solutions, LLC (Talson)
that may be requested by the City of Corpus Christi(City).Talson provides capital project advisory services
that assist clients in mitigating capital program risk by increasing contractor and owner transparency,
enhancing project delivery,and improving financial and project controls.Since 2021,Talson has provided
construction audit services including the facilitation of construction audit training specific to the City and
the completion of a Capital Program Operational Risk Assessment.
Our Understanding
In September 2022, the City adopted a Capital Improvement Plan (CIP) that included the Bond 2022
Initiative and a dedicated 2023 capital budget totaling $592.9 million. The CIP was amended in January
2023 to an increased budget amount of $681.4 million. The City anticipates a significant capital
improvement program over the next 3—5 years for projects in the following areas:
• Public Utilities • Water
• Public Health &Safety • Airport
• Parks&Recreation • Gas
• Streets • Wastewater
• Storm Water
The Projects (shown below for 2023 audit selection) are funded by various sources including revenue
bonds,state and federal loans,grants,sales tax, property taxes,general funds,facility charges and others.
The City wishes to engage Talson to provide construction audit services for the ongoing performance
reviews of select project activities from in-house and external resources including engineering, finance,
project management,general contractors and consultants. The four(4) projects below were selected for
audit with a fifth project as an alternative(time permitting).
"023 Capital Project Selections....
Audit No. 1 Audit No.2 Audit No.3 Audit No.4 Audit No. 5
(Alternative)
No. 21143 No. 18023/ No. E10180 No. 21086 No. 21200
21088
Williams Lift Greenwood Police Packery
Project Stations Junior Beck Dr. WWTP Academy Channel/
Electrical Sidewalk
Restoration
Department Wastewater Streets Wastewater Public Safety Parks& Rec
Construction
Contract Value $11.6 million $4.9 million $6.0 million $21.0 million $14.9 million
(Bid)
Reported Work
Done $2.4 million $2.3 million $5.8 million $0 $1.5 million
May 2023 Statement of Work Page 1 of 6
DocuSign Envelope ID:8FC7D6E6-1317A-4CC3-B3C3-30EOD34EEAOD
TALS ON
SOLUTIONS LLC
Our Approach
Talson's audit approach will ensure that our planning, execution, and deliverables, in coordination with
the City are of the highest quality. Our engagement team will facilitate weekly communications (or as
desired) to ensure potential risks are addressed promptly, and to ensure overall engagement objectives
remain the primary focus. Upon receipt of the Notice to Proceed from the City, Talson will prepare a
document request that commensurate with the contract type and audit phase (i.e., initial, interim,
closeout)to enhance our understanding of the Project,and participate in an engagement kick-off meeting
with key Project stakeholders.A summary of audit engagement activities is as follows:
• Conduct preliminary engagement planning and scheduling'
• Submit an initial request of documents for review
• Prepare the audit work plan and detailed activities required for the respective audit scope
• Prepare and submit draft Audit Reports (separate reports for each audit)
• Review draft reports with City and incorporate revisions and management responses
• Submit the final Audit Report
• Presentation to the City's Board/Audit Committee
Internal Audit Collaboration
As part of our approach,Talson will collaborate and co-source with City Internal Audit staff during integral
stages of the audit. The City Internal Audit staff will assist with logistical planning, document requests,
participate in interviews and contribute to audit planning decisions specific to setting audit objectives and
supplemental work activities. In turn, the City Internal Audit team will facilitate "knowledge sharing"
sessions with other City staff(procurement, engineering, etc.) focused on providing insight to risk based
and smart sampling reasoning throughout the audit. Talson will assist in the preparation of this
presentation and/or lead as needed.
Audit Scope
The audit will utilize a comprehensive risk-based approach to assess compliance to contract provisions
and identify any risks to successful Project completion, within budget and on-time. Talson will assess
Project Management's (e.g., City, selected General Contractor and subcontractors) alignment with
industry best practices throughout the engagement, facilitate knowledge sharing discussions, and
collaborate with the project teams to ensure transparency of the audit work but also maintain
independence. Specific audit scope for the various construction phases shall include:
Initial/Pre-Construction (0%—20%contract invoiced):Focus on verification and compliance of contract
documents, and verification that the construction manager's and subcontractor's proposals is compliant
with the City's standard contract terms and conditions, and that the proposed costs are reasonable,
accurate,and in line with industry standards.Activities include:
1) Verify construction contract compliance to provisions, deliverables and obligations (e.g.,
"cost of work," reimbursable and non-reimbursable costs,change order management,fee
calculation, reporting requirements,contingency and allowance management, insurance
administration, etc.).
Prior to commencing any audit engagement activities,Talson will participate and fulfill any City security and system(i.e.,e-
Builder)virtual training sessions that will be facilitated by the City.
May 2023 Statement of Work Page 2 of 6
DocuSign Envelope ID:8FC7D6E6-617A-4CC3-B3C3-30EOD34EEAOD
TALSON
• SOLUTIONS LLC
2) Assess the construction manager's processes for communication and reporting.
3) Review of the construction manager's professional and field labor staff hourly rates,
including assessing base rate and burden components of the hourly rate build-up to identify
accuracy, potential duplicate components and transparency of expected charges (e.g.,
bonuses,vacations, insurances,training, computers, phones,etc.).
4) Review the construction manager's general conditions forecast for reasonableness of
anticipated construction activity and alignment with typical general condition spend values.
5) Review select subcontractor procurement activities (e.g., de-scoping analysis, bid score,
pricing,sealed bids received and involvement of the City and the construction manager).
6) Verify that select executed subcontractor scope is reasonable and subcontract contains
appropriate flow-down provisions.
7) Assess current insurance premium estimates and methodologies including assessing the
enrollment and other aspects of other insurance administration (e.g.,CCIP,OCIP,SDI,
Builders' Risk, etc.)
8) Review the construction manager's monthly project reporting including all cost reports and
logs (Asset Logs, Rental Tool Logs,etc.)-as applicable
9) Assess the construction mangers cost accounting system and reporting for alignment with
industry standards, including payment application formats.
10) Assess usage and monitoring of allowances,contingencies, holds and buyout savings
11) Review other project documentation (e.g., RFIs,submittals,OAC Meeting Minutes,
schedule,etc.)to determine any potential risks that may warrant further review.
Interim Audit(50%-60%contract invoiced):Focus on adherence to contract documentation, review and
recalculations of insurances, fees, invoices, change orders, claims, and verification of continued
compliance to the contractual terms.Activities include:
1) Conduct a detailed review of select construction manager's monthly payment applications,
inclusive of supporting documentation for subcontractor direct and indirect work including:
lien waivers,general conditions expenditures, insurance premium charges,fee calculations,
taxes,and status of other schedule of value costs.
2) Verify that the construction manager's professional and trade hourly wage rates have been
appropriately applied.
3) Review change orders including:
• Agreement with the construction manager's invoicing and project reporting
• Confirm proper approval
• Reasonability of change is appropriate and not duplicative work
• Includes subcontractor back-up documentation
4) Review the construction manager's monthly project reporting, including cost reports and
notable logs.
5) Assess usage and monitoring of allowances,contingencies, holds and buyout savings.
6) Review other project documentation (e.g., RFIs, submittals,OAC Meeting Minutes,
schedule, etc.)to determine any potential risks that may warrant further review.
7) Assess project administration by the construction manager and the City.
8) Assess status of open observations and management corrective actions.
May 2023 Statement of Work Page 3 of 6
DocuSign Envelope ID:8FC7D6E6-B17A-4CC3-B3C3-30EOD34EEAOD
TALS ON
SOLUTIONS LLC
Closeout Audit (90%—95% invoiced): Continued focus on verification and compliance requirements of
pricing of change orders, invoices,and claims.Assess status of subcontractor and construction manager's
closeout activities, inclusive of cost reconciliations and notable contract deliverables.Activities include:
1) Review construction manager's closeout process of subcontractors to ensure reconciliation
of final costs,allowances, deliverables,warranties,training,etc.
2) Verify reconciliation of anticipated final contract value including ongoing settlement of
change orders,final subcontract values, reconciliation of allowances and contingencies, and
determination of any contract savings,final contractor fees,etc.
3) Verify that all insurance reconciliations have been conducted or are in process, and any
necessary credits have been provided to the City.
4) Review select construction manager and subcontractor monthly payment applications
including approval process, costs/total expenditures to date,subcontractor back-up
documentation, retainage release,general conditions expenditures, insurance premiums,
fee calculations,final lien waivers,etc.
5) Assess final disposition of purchased assets and purchased equipment.
6) Review Project punch list to ensure completion of all obligations prior to disbursement of
final payment and/or assessment of remaining retainage.
7) Assess project administration by construction manager and the City.
8) Assess status of open observations and management corrective actions.
In addition to the defined audit objectives and work scope,Talson will utilize its broad experience to assess
relevant Capital Program internal policies and procedures and correlating processes adapted by the City
for internal compliance and alignment to industry best practices and similar municipalities and/or
industries. As part of our reporting, Talson will provide feedback regarding the audit benchmarking and
the results of the on-going assessment.
Audit Reporting
Upon completion of each audit, Talson will submit comprehensive draft and final Audit Reports, which
will include an executive summary, audit scope, detailed observations, recommendations, potential cost
recoveries, and relevant supporting documentation (i.e., work papers). Talson's audit reports are
presented in a format suitable to include the City and construction manager's management responses.
Talson will include, if applicable, potential City process improvement opportunities that may result in
mitigation of future capital project risks. Talson will facilitate audit closeout meetings prior to preparing
the draft report with City personnel to review preliminary observations, inherent risks, management
responses,and proposed action plans.
Proposed Fee and Schedule
Talson proposes a total estimated fee of$257,600 to fulfill the scope of services and deliverables herein,
inclusive of expenses. Only incurred costs will be invoiced based on Talson's professional hourly rates.
Talson proposes four (4) audits plus an 5th audit as an alternative to be conducted within calendar year
2023 and is prepared to immediately commence audit activities upon notice from the City.
Capital Program Audits(based on 5 audits) Estimated Fee $238,400
Expenses Actual Costs $19,200
$257,600
May 2023 Statement of Work Page 4 of 6
DocuSign Envelope ID:8FC7D6E6-617A-4CC3-B3C3-30EOD34EEAOD
TALSON
SOLUTIONS LLC
Expenses:Talson anticipates conducting one (1) onsite visit for each of the referenced audits and one(1)
in-person presentation to the Audit Committee upon completion of the audit engagement for a total of
six(6)trips to Corpus Christi. Expenses are estimated to be$19,2002.
Talson and City Internal Audit will determine the audit commencement with each audit timeframe lasting
approximately 90 days.We acknowledge that the proposed audit schedule is subject to change based on
actual construction activity and/or at the discretion of City Internal Audit.
The following professional hourly rates by staff members, as stated below, are for construction audit
services. Talson proposes fixed hourly rates for 2023 and then utilize an annual 3% escalation for all
professional hourly rates commencing in January 2024.Anticipated hours by individual are also estimated
and projected below:
wwwwwww—
Name&Position 2023 Hourly Audit Allocation)
• esu Partici
Robert S. Bright, Engagement Director $350 5%
Kenneth J. Brzozowski, CCA,CCP,Sr. Eng. Mgr. $315 20%
Yvette Suarez, CCA Manager $285 25%
Robert Farrow,CCA, CIA,CFE,CPA, Manager $285 25%
Emily Olinsky,Senior Associate/Cost Engineer $255 15%
Associate $205 35%
Administrative $75 1%
City Internal Audit n/a +/-10%
Talson shall submit invoices on a monthly basis. In addition to the proposed fee, if applicable,Talson will
invoice the City for reasonable expenses (e.g., express mail,travel, etc.), which are typical of this type of
engagement. If additional services or attendance to meetings are needed outside the agreed-upon scope,
Talson shall notify the City prior to any fee increase. Terms of payment shall be within 30 days of
submission by Talson.
Benefits of Talson and Co-Sourcing
As a result of the continuing relationship and anticipated collaboration and co-sourcing, Talson was able
to reduce the proposed overall Capital Program Audit fee by 3%. Other benefits include:
• Weekly communication during periods of audit engagements.
• Talson's scope includes on-going assessment of established internal processes and controls
that will be evaluated and compared against other likable client peers and similar projects.
• The proposed engagement team has consistency in auditing capital projects across varying
industries (i.e., infrastructure, transportation, commercial real estate, healthcare,
education, etc.)which will lead to efficiencies in communicating and working with the City
procurement and engineering teams as well as City contractors and consultants.
2 Travel expenses are inclusive of three(3)Talson auditors traveling for three(3)nights and would include airfare,
hotel/lodging and associated daily meal charges.All incurred expenses would be in accordance of the City of
Corpus Christi's travel policy.
May 2023 Statement of Work Page 5 of 6
DocuSign Envelope ID:8FC7D6E6-B17A-4CC3-B3C3-30EOD34EEAOD
T�LSON
• SOLUTIONS LLC
• Talson's staff maintains professional certifications in construction auditing and more. Our
staff engages in continuing education and teaching activities through regular attendance at
regional and national conferences with organizations such as ALGA, IIA and NACA.
• Through collaborative co-sourcing, Talson will utilize City audit staff to offset audit
engagement costs and ensure efficiencies in planning communicating and delivering audit
objectives. Knowledge sharing of City processes as they relate to assessing control
environments and various lines of defense and governance structures will be on-going
throughout the audits with City Internal Audit staff. Talson estimates that of 10% of the
audit(approximately 20 hours)will be allocated to City Internal Audit participation.
• As additional audits are completed, City Infernal Audit participation may increase to allow
for further efficiencies and reduced consultant manhours.
• While maintaining independence Talson will prepare deliverables, including committee
presentations, collectively with City Internal Audit staff thus allowing for enhanced
knowledge sharing opportunities.
• During the course of the four (4) proposed audits, Talson will facilitate a summary
"Knowledge Sharing"discussion with City Internal Audit to further discuss audit observation
trends, potential enhancement of best practices and identification of future audit scope
opportunities.
Most notably, Talson will leverage its invaluable information gained during the recent facilitation of the
Capital Programs Risk Assessment. Robert S. Bright will lead Talson's team serving as Engagement
Director, providing engagement oversight and, on an as-needed basis,will participate in select meetings,
personnel interviews, and project documentation reviews. Kenneth J. Brzozowski will serve as Senior
Engagement Manager and facilitate audit coordination,work plan development,and participate in virtual
and onsite audit activities with the audit team as well as assign supplemental support staff to assist as
needed. Yvette Suarez, Manager, will manage day to day audit activities and regularly communicate via
bi-weekly meetings with City Internal Audit throughout the term of this engagement. Talson will ensure
that all key personnel are 100 percent available for the planned work and that they have the capacity to
perform post-audit follow-up and generate detailed reports for timely submission.
May 2023 Statement of Work Page 6 of 6