State audit blasts Colorado Department of Transportation for lack of transparency and handling of large projects

The Colorado Auditor's Office has released a blistering audit of the Colorado Department of Transportation.

The audit comes after a series of reports by CBS News Colorado regarding how CDOT has awarded some of its biggest contracts over the last decade.

While the agency awards smaller jobs on a strictly low-bid basis, it only allows certain companies to bid on bigger projects. Two out-of-state companies have won most of those jobs over the last decade and many of the projects have ballooned in price.

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State auditors found the agency "lacks sound, consistent and transparent processes" when it comes to awarding those *larger contracts and that the projects often take longer and cost more than expected.

They say CDOT didn't follow its own policies for half the projects reviewed, paid $18 million more than it should have -- based on independent cost estimates -- for 27 projects and awarded $158 million for work related to expired contracts.

Auditors also took the agency to task for a lack of transparency, including how its responded to open records requests. CDOT has refused to release detailed financial data on larger projects and has redacted expenditures as basic as tree and dirt removal.

Some Colorado-based contractors also accuse CDOT of using a subjective process to determine who gets the big jobs. State auditors say the agency does have a checklist for determining how a project should be awarded but they say it often doesn't follow it. They pointed to a memo that recommended an accelerated timeline on one project  "due to the high profile political nature" of it and need to show "elected officials the importance of the project."

Former Republican State Sen. Ray Scott requested the audit, which is 138 pages long and makes 20 recommendations.

"I kind of look at it as -- there were 20 different indictments on CDOT misappropriating and doing things incorrectly," he said. "And they actually plead guilty, basically, to all 20 of the indictments, and that's a win for the people of Colorado because have such finite resources to get out on the highways and roads and bridges, that we can't have mistakes."

The audit is the second in four years of CDOT. The last one found budgeting problems and also made a number of recommendations.

CDOT released the following statement:

"We appreciate the thorough work of the auditors throughout this process, and we embrace these recommendations as productive steps in our ongoing, multi-year work to improve the way we manage and deliver infrastructure projects. CDOT worked closely with the legislature to develop several important transparency and accountability reforms in this area that were passed into law in 2021 and are showing progress with new projects under construction.

For example, CDOT set new requirements for industry outreach, and we now require Transportation Commission approval at a public meeting, including extensive public briefing material, for large projects to access alternative delivery methods. Thanks to collaboration with the legislature, these changes passed through SB21-260 add significant transparency to the front-end of the process.

The findings in this audit indicate that change management should now pivot to back-end contract management, and specifically to risks with longer project timelines and when existing contracts are modified significantly from original scope. CDOT looks forward to continued collaboration with the legislature as we address these findings and build stronger management practices.

The most significant issue, in our view, is the finding that on several older projects, CDOT staff failed to extend end dates when contracts took longer than expected. The vast majority (nearly 80%) of dollars associated with this issue were on the US-34 Big Thompson emergency flood project contract signed in 2015 and managed by CDOT's Region 4 staff, which covers Weld, Larimer and Boulder counties and several more on the Eastern Plains.

To fix these contract end dates required a simple procedural amendment without recompeting the contract. Upon investigation of the issue, it appears that the vast majority of impacted project dollars in region 4 stem from the failure to transfer date-extension requests from project managers into the actual contracts. Subsequent to the OSA finding, the correct documentation was rectified for all relevant projects to the satisfaction of both the AG and the State Controller.  However, we need additional controls so this sort of thing can't happen, and we are taking the necessary steps to do so.

There are several other areas where better standard operating procedures should further streamline certain evaluation benchmarks and processes in alternative delivery. This includes the difference between the construction contract award on CM/GC projects compared to the independent construction cost estimate of 2.2% on average. This results in an amount of approximately $18 million over 27 awarded construction packages with a total construction value of $705 million. As a comparison, the traditional low bid procurement allows construction contract award for projects with a percent difference between the engineers' estimate and the low bid proposal of 10% without escalation to senior management. We agree that this and several other areas noted by the auditor should be better standardized.

We once again thank the Office of the State Auditor for their thorough review and look forward to implementing these improvements quickly and comprehensively."