Case Study: University Health Care System Controls Costs with Construction Audit
Client Background
A university health care system that is undergoing significant capital improvement projects ranging from $1 million to more than $650 million at many of its health and educational facilities.
Its projects include campus expansions and numerous specialty clinics, academic facilities, parking garages, thermal energy plants, fit-out projects, and other auxiliary space projects.
The client has a robust annual internal audit program and an active facilities and construction team that proactively hires consultants to perform project construction audits.
The Situation
Similar to many organizations with large capital improvement budgets, additional oversight was sought to mitigate the risks of large projects, including, but not be limited to:
- Excessive change orders. Significant increases in construction project value from original budget
- Cost escalation. Increases in supplies, material, labor, or subcontractor costs from initial bids as a result of market conditions or inaccurate bids
- Unreconciled cost reports. Differing values among project billings and contractor and owner accounting system reports and records
- Overcharges and cost duplication. Contractually unallowable costs
- Schedule delays. Unanticipated or unexplained duration increases and lack of recovery schedules
- Limited competition for construction manager. Limited construction manager availability for work of a similar size or value for the area may have potentially impacted budget
The Solution & Results
Moss Adams was able to provide services to assist the client with review of contractor bids and proposals for compliance with the construction contract, 100% review of all monthly payment applications and change orders, and cost reconciliation support.
The client benefited from services in the following aspects:
- Objective oversight and cost validation, resulting in millions of dollars of cost recovery, cost prevention, and reduction in errors and overcharges
- Early risk detection and mitigation strategies to minimize impacts of escalation, delays, and cost overruns
- Contract compliance and process improvement
- Tighter internal controls and project controls for managing cost, change orders, and reporting
The overall benefit to the client included enhance project controls for the owner and contractor, cost recovery and prevention, and improved financial reporting and cost transparency.
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