Performance audit, Department of Corrections, Facilities and Construction Division

              DOUGLAS R. NORTON. CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
February 1, 1985
Members of the Arizona Legi sl ature
The Honorable Bruce Babbitt, Governor
James G. Ricketts, Ph. D.
Director, Department of Corrections
Transmitted herewith is a report of the Auditor General, A Performance
Audit of the Department of Corrections Facil i t i e s and Construction
Division. This report is i n response to the November 16, 1984, resolution
of the Joint Legislative Budget Committee.
My staff and I will be pleased to discuss or clarify items in the report.
Respectfully submitted,
~ ouglys R. Norton
Auditor General
Staff: William Thomson
A r t h u r E. Heikkila
Deborah A. Bal dwin
Jayne M. Hewitt
Cindy G. Whi taker
Margaret E. Cawley
Michael J. Friedman
Vivian A. Look
Barbara C. Nienstedt
Philip C. Shultz
Richard V. Proulx
Enclosure
t 1 1 WEST MONROE SUITE 600 PHOENIX. ARIZONA 85003 ( 602) 255- 4385
SUMMARY
The Office o f the Auditor General has conducted a performance audit o f the
Arizona Department o f Corrections ( DOC), D i v i s i o n o f Facil i t i e s and
Construction. This audit was conducted i n response t o a November 16,
1984, resolution o f the J o i n t Legislative Budget Committee, and i n
accordance with Arizona Revi sed Statutes ( A. R. S. ) $ 41 - 1 279.
From 1973 t o January 1, 1985, the Department o f Corrections had a Division
of F a c i l i t i e s and Construction t h a t was responsible f o r the planning,
construction and maintenance o f a l l prison f a c i l i t i e s . On January 1,
1985, most Division responsi b i 1 i t i e s and personnel were transferred t o the
Department of Administration ( DOA), because it was believed t h a t transfer
t o an independent department would expedite prison construction. The
transfer divided the D i v i s i o n ' s duties between DOC and DOA. DOA assumed
r e s p o n s i b i l i t y f o r directing, managing, and coordinating major prison
construction and renovation projects. DOC retained r e s p o n s i b i l i t y f o r
overseeing minor construction projects, maintenance e f f o r t s and long- range
planning f o r construction.
The transfer o f the D i v i s i o n occurred i n the midst o f a massive
construction program designed t o meet needs caused by substantial inmate
population growth. The Legislature passed two b i l l s re1 ating t o prison
construction during a 1983- 84 Special Session. House B i l l 2003
appropriated $ 1 5,819,700 for faci 1 i t i e s operation and construction, and
Senate B i l l 1027 established a Corrections Fund, from which $ 72 m i l l i o n
was appropriated f o r prison f a c i l i t i e s construction.
The Department o f Corrections has not adequately planned t o provide
permanent inmate housing. DOC used inmate population forecasting methods
t h a t 1 acked 1 ong- term re1 i a b i l i ty. Linear projection model s used p r i o r
t o 1982 consistently underestimated inmate popul ation growth. I n
addition, several unforseen factors such as changes i n the criminal code
and i n the age of majority accelerated inmate population growth, making
o r i g i n a l projections even less accurate. Although current models are
improvements over previous methods, long- term forecasts could be improved
by combination with qua1 i t a t i v e methods such as the Delphi technique. DOC
i s a1 so unable t o make i nformed f a c i l i t i e s decisions, because the
f a c i l i t i e s master plan it presently uses contains incorrect and incomplete
information. Moreover, DOC has not followed i t s own p o l i c y for updating
t h e p l a n annually. Current data now show t h a t prisons w i l l remain
overcrowded even a f t e r completion o f t h e c u r r e n t construction program.
DOC should: 1) supplement i t s current inmate population projection models
w i t h q u a l i t a t i v e methods, 2) develop a new f a c i l i t i e s master plan t o
include information t h a t would allow DOC t o make informed decisions, and
3) update t h i s plan annually as required by Department policy.
The Department o f Corrections Does Not Have Adequate Prison Site
Eva1 uation And Budget Development Processes ( see pages 19- 31 )
DOC'S prison s i t e evaluation process needs improvement. Even though DOC
has developed c r i t e r i a f o r s i t e selection, recent prison s i t e s were
selected without s u f f i c i e n t s i t e evaluation. As a r e s u l t , decisions on
prison s i t e s have been revised causing projects t o be delayed and
additional costs t o be incurred. The budget development process should
also be improved, demonstrated by the f a c t t h a t recent DOC construction
budgets were not based on r e a l i s t i c cost estimates. A lack of technical
input, inadequate funding for the construction o f additional beds and
other incidents made the budgets f o r t h e Douglas and the $ 72 m i l l i o n
construction program projects i n s u f f i c i e n t . Budget l i m i t a t i o n s have
required the imp1 ementation o f extensive cost saving measures, i n c l uding
the constant redesign o f f a c i l i t i e s t o reduce costs and the reduction or
elimination o f support buildings i n plans.
The Legi sl ature should consider appropriating funds for new prison
f a c i l i t i e s i n two phases. The f i r s t appropriation should be allocated for
obtaining a construction manager, architectural and engineering services
to evaluate the s i t e , program the project, design the f a c i l i t i e s , and
prepare a detai 1 ed budget estimate. Several a1 ternative plans and funding
1 eve1 s for 1 egi sl ative consideration coul d be prepared a1 ong with detai 1 ed
budgets. The second appropriation should be a1 1 ocated for actual
construction based on the detailed budget of the plan selected. The
Department of Corrections should ensure adequate s i t e evaluation by
requiring a soil, water and sewer analysis prior to budget preparation.
The State's $ 72 Mil 1i on Pris- o - n C- o n- s. t r- u - c - t i. o - n
Program May Be el ayed ( see pages 33- 41 1
The schedule for the $ 72 million construction program may not be met.
Projects may not be completed within the contract time frame because
schedules are overly optimistic and the projects have already been delayed
significantly. Delays could increase project management fees because the
current contract does not require the project manager to perform
additional services if any schedule delays occur; instead i t allows for
the release of the project manager from any obligations i f the project i s
delayed. Furthermore, delays may exacerbate the temporary bed problem by
increasing DOC'S need for additional temporary facil i ties.
The State of Arizona should require that future project manager contracts
grant the State the option to retain the project manager for a reasonable
period of time. DOC should ask the project manager to evaluate
alternatives for using more private contractors and less inmate labor.
DOC should also evaluate the effects of delays on their needs for inmate
housing and make provisions to meet those needs.
DOC Does Not Exercise Adequate Controls Over
Construction- Re1 ated Activities ( see pages 43- 59)
DOC does not exercise sufficient controls over construction. This has
1 imited the capacity of DOC and other responsible parties to control DOC
construction. DOC has not consistently complied w i t h statutes requiring
DOA review and approval of f a c i l i t i e s construction plans, which has
resulted i n unapproved and possibly unsafe construction. DOC ' s decision
to act as i t s own project manager and contractor has also hampered DOA and
responsible design professional s i n their attempts to ensure that
construction i s done according to approved plans and specifications.
Using inmate labor i n c r i t i c a l construction a c t i v i t i e s has further
restricted DOC's capacity to control construction. In addition, 1 ow
inmate productivity and inmate sabotage have contributed significantly to
construction delays and additional costs. Insufficient control over
project activity costs and inventories further 1 imi ts Department control
over construction. DOC does not use a financial information system such
as that used by private companies to properly monitor costs. The current
systems do not provide adequate information on project costs. Finally,
DOC improper1 y used Arizona Correctional Enterprises ( ARCOR) for
construction of Arizona State Prison - East, which resulted i n the
improper use of the ARCOR revolving fund, the circumvention of State
purchasing requirements, and the unnecessary expenditure of 1 and,
b u i l d i n g , and improvement funds. ARCOR also double billed DOC i n some
instances. The extent to which the recent transfer of DOC's Facilities
and Construction staff to DOA will alleviate these problems i s unknown.
The Department of Corrections should: 1 ) i n s t i t u t e procedures to ensure
that all construction and changes to construction are reported to DOA for
review and approval, 2) implement a satisfactory construction cost
information system and proper inventory controls, 3) 1 imit i t s role i n
acting simul taneously as construction manager, contractor/ buil der and
agency i n charge of construction, 4) limit i t s use of inmate labor to
a c t i v i t i e s that would not delay project completion, and 5) not use ARCOR
to construct prison facil i ties.
TABLE OF CONTENTS
Page
INTRODUCTION AND BACKGROUND . . . . . . . . . . . . . . . . . . . . . . 1
FINDING I: BECAUSE THE DEPARTMENT OF CORRECTIONS' LONG RANGE
PLANNING FOR INMATE HOUSING NEEDS HAS BEEN INSUFFICIENT.
OVERCROWDING MAY CONTINUE BEYOND 1987 . . . . . . . . . . . . . . . 5
DOC ' s Inmate Population Forecasting Methods
Have Lacked Long- Term Re1 i a b i l i ty . . . . . . . . . . . . . . . . . 5
DOC Has Not Developed And Maintained An Adequate.
Comprehensive Facil i t i e s Master P l an . . . . . . . . . . . . . . . . 8
Arizona Is P r is ons May Remain Overcrowded . . . . . . . . . . . . . . 1 2
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . 17
FINDING 11: THE DEPARTMENT OF CORRECTIONS DOES NOT HAVE
ADEQUATE PRISON SITE EVALUATION AND BUDGET PROCESSES . . . . . . . 19
Prison Site Evaluation Has Been I n s u f f i c i e n t . . . . . . . . . . . 19
Recent DOC Prison Construction Budgets Have Been U n r e a l i s t i c . . . . . . . . . . . . . . . . . . . . . . . . . 22
Two- Phase Appropriations Could Improve Budget Accuracy . . . . . . 27
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1
FINDING 111: THE STATE'S $ 72 MILLION PRISON CONSTRUCTION PROGRAM MAY BE DELAYED . . . . . . . . . . . . . . . . . . . . . . 33
Projects May Not Be Completed Within Contracted Time Frame . . . . . . . . . . . . . . . . . . . . . . . 3 3
Delays May Result I n Increased Costs . . . . . . . . . . . . . . . . 36
Delays May Extend The Temporary Bed Problem . . . . . . . . . . . . 3 9
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . 41
TABLE OF CONTENTS ( Cont. )
Page
d
FINDING IV: THE DEPARTMENT OF CORRECTIONS DOES NOT EXCERCISE
ADEQUATE CONTROLS OVER CONSTRUCTION- RELATED ACTIVITIES . . . . . . . 43
Unauthorized Construction And Other Problems
HLiatvtel Lei Cmointterdo lC onOtvreorl COovnesrt rCuocntsitornu Ccotsitosn APnrdo jeIncvtesn t. or. ie. s. ............. 45 13 *
The Use Of ARCOR In ASP- East Construction Was Not Proper . . . . . . 5 4
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4
OTHER PERTINENT INFORMATION . . . . . . . . . . . . . . . . . . . . . . 59
AREAS FOR FURTHER AUDIT WORK . . . . . . . . . . . . . . . . . . . . . . 63
AGENCY RESPONSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
APPENDICES
I FORECASTING METHODS
I I REVIEW OF PROJECT MANAGEMENT SCHEDULES
I11 LEGAL ANALYSIS OF PROJECT MANAGER CONTRACT
IV LEGISLATIVE COUNCIL MEMORANDUM DATED DECEMBER 26, 1984
V LEGISLATIVE COUNCIL MEMORANDUM DATED JANUARY 4, 1985
LIST OF TABLES AND FIGURES
TABLE 1 - aDnedp aCrtomnesnttr uocft ioCno, r r1e9c8ti4o- 8n5s , BDudivgiesti o. n . of. F. a. c i. l i t. i e. s . . . . . . 3
TABLE 2 - Projected Inmate Population Versus Actual Population,
1982 Through 1984 . . . . . . . . . . . . . . . . . . . . . . 6
TABLE 3 - Funds Appropriated Or Expended On Short- Term Solutions 1980 Through 1984. . . . . . . . . . . . . . . . . . . . . . 1 5
TABLE 4 - $ 72 Mill ion Projects By Facility, Number And Type Of Beds . . . . . . . . . . . . . . . . . . . . . .2 5
TABLE 5 - Crisis In Corrections Estimates For Tucson And Florence Prison Construction . . . . . . . . . . . . . . 2 6
TABLE 6 - Contract Schedules Versus Probable Schedules . . . . . . . . 34
TABLE 7 - Projected Cost Resulting From Project Delays. . . . . . . . 36
TABLE 8 - Possible Operating Capacity And Inmate Projections July 1986 Through June 1987. . . . . . . . . . . . . . . . . 4 0
LIST OF FIGURES
FIGURE 1 - Projected Inmate Population Versus Beds 1984 To 1986 . . . . . . . . . . . . . . . . . . . . . . . 13
FIGURE 2 - Projected Inmate Population Versus Beds 1987 To 1992 . . . . . . . . . . . . . . . . . . . . . . . 14
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance audit of the
Arizona Department of Corrections ( DOC) Division of Facil i ties and
Construction in response to a November 16, 1984, resolution of the Joint
Legislative Budget Committee, and i n accordance w i t h the provi sions of
Arizona Revised Statutes ( A. R. S. ) $ 41 - 1 279.
Division H i story
Before January 1, 1985, the Department of Corrections had a Division of
Facil i ties and Construction responsible for the planning, construction and
maintenance of all prison f a c i l i t i e s . The Division was created w i t h i n the
Department i n 1973, and supervised a1 1 prison construction except
cellblocks five and six a t Florence. However, on January 1, 1985, most
Division responsi bi 1 i ties and personnel were transferred to the Department
of Administration ( DOA), and it is now referred to as the DOA- Prison
Construction Divi sion. The transfer occurred because of the perception
that construction could be expedited by giving the authority to an
independent department. DOA already oversees construction for most State
agencies.
Transfer Divides Duties
The transfer agreement divided prison construction duties between DOA and
DOC. DOA assumed the responsibility for major prison construction and
renovation projects. Two bureaus within the DOC Prison Construction
Division execute these responsibilities. The Construction Support Bureau
plans, coordinates and manages a variety of activities i n support of
current projects. The Construction Management Bureau directs general
contractors and inmate labor groups in the completion of construction and
renovati on projects.
The Department of Corrections will continue to oversee m i nor construction
projects and a1 1 maintenance. In addition, DOC wi 11 retain responsi bi 1 ity
for 1 ong- range pl anni ng.
New Prison Construction
Arizona has i n s t i t u t e d a massive construction program t o meet the
substantial increase i n inmate population. Inmate population has I,
increased since September 1983 through December 1984 a t a r a t e o f
approximately 75 inmates per month, and i s forecasted t o increase a t the
same rate over the next few years. Several factors have contributed t o
t h i s increase, including a lower age o f m a j o r i t y and a s t r i c t e r criminal d
code.
To address the problem o f the need f o r additional beds f o r t h e prison
system, the Legislature met i n the 1984 F i r s t Special Session and passed S
two b i l l s , House B i l l 2003 and Senate B i l l 1027. House B i l l 2003
appropriated $ 1 5,819,700 f o r construction and operation o f prison
f a c i l i t i e s i n t h e f o l l o w i n g areas.
Faci 1 i ty Number And Types O f Beds
Douglas F a c i l i t y
Doug1 as Facil i ty
Douglas DWI # 1
Douglas DWI # 2
Flamenco Mental Heal t h
Treatment Unit
Picacho
100 M i nimum Security
800 Medium Security
150 DWI
100 DWI
200 Medium Security
100 Minimum Security
Senate B i l l 1027 established a corrections fund, from which $ 72 m i l l i o n
was appropriated f o r construction o f prison f a c i l i t i e s by July 1, 1988, i n I)
the f o l l owing areas.
F a c i l i t y Number And Types Of Beds
Arizona State Prison 768 Maximum Security
Arizona Corrections Training Center 744 Medium Security
W i nsl ow Conservation Camp 150 Minimum Security
Yuma Conservation Camp 150 Minimum Security
Winslow F a c i l i t y 400 Medium Security
W i nsl ow Faci 1 i ty 100 Minimum Security
Y uma Faci 1 i ty 100 Minimum Security
Budaet And Personnel
P r i o r t o i t s transfer t o DOA, DOC F a c i l i t i e s and Construction D i v i s i o n had
10 budgeted f u l l - time equivalent positions ( FTEs) plus two positions
funded by Juvenile Services and 24 1 imited appointments working on the
three major D i v i sion- managed construction projects. The D i v i s i o n budget
f o r f i s c a l year 1984- 85 i s shown below.
TABLE 1
DEPARTMENT OF CORRECTIONS
DIVISION OF FACILITIES AND CONSTRUCTION
1 984- 85 BUDGET(^ )
FTE s 3 6
Personal Services $ 869,600
Employee Re1 ated 220,500
In- State Travel 7,500
Other Operati ng 20,000
Total $ 1,114.600
( 1) Budget data f o r previous years i s not available. P r i o r t o f i s c a l
year 1 984- 85 Division responsi b i 1 i t i e s were i ncl uded w i t h i n various
DOC administrative organizations and not separated i nto
construction- re1 ated s t a f f i n g .
Source: DOC budget information and interviews with DOC s t a f f
Audit Scope And Purpose
Our audit focuses on t h e D i v i s i o n ' s a b i l i t y t o perform i t s statutory
functions i n an e f f i c i e n t and e f f e c t i v e manner. The a u d i t r e p o r t presents
findings and recommendations i n four major areas.
e The effectiveness o f DOC's long- range planning f o r construction;
@ The a b i l i t y o f DOC t o adequately evaluate and budget f o r
construction sites;
@ The f e a s i b i l i t y o f the p r o j e c t schedule and the appropriateness
o f the p r o j e c t manager contract f o r DOC's $ 72 m i l l i o n
construction program; and
@ The adequacy o f DOC's construction and expenditure controls.
Due t o severe time constraints, we were unable t o address a l l potential
issues i d e n t i f i e d during our prel iminary audit work. The section Areas
For Further Audit Work describes these potential issues.
The Auditor General and s t a f f express appreciation t o both DOC and DOA
staff f o r t h e i r cooperation and assistance during the audit.
FINDING I
BECAUSE THE DEPARTMENT OF CORRECTIONS ' LONG- RANGE PLANNING FOR INMATE
HOUSING NEEDS HAS BEEN INSUFFICIENT, OVERCROWDING MAY CONTINUE BEYOND 1987
The Department of Corrections has not adequately planned to provide
permanent housing for inmates. Previous inmate population forecasting
methods have 1 acked 1 ong- term re1 iabil i ty. In addition, the Department of
Corrections has not maintained an adequate, comprehensive f a c i l i t i e s
master plan. As a result, even w i t h the current construction program
prisons may remain overcrowded for the foreseeable future.
Planning to provide sufficient inmate housing is not a new problem facing
the Arizona Department of Corrections ( DOC). In October 1981 DOC had
approximately 51 2 inmates housed i n temporary facil i ties. A1 though DOC
created 3,207 new beds for male inmates between January 1978 and March
1982, the number of inmates housed i n temporary f a c i l i t i e s was
approximately 626 by January 1983. * A t the close of 1984 DOC had 1,260
inmates i n temporary beds, and was approximately 20 percent over i t s
permanent bed capacity. During the 1984 F i r s t Special Session, the
Legislature approved approximately $ 88 million for the construction of
3,862 new beds, which DOC estimates will meet inmate housing needs through
1987.
DOC ' s Inmate Population Forecasting
Methods Have Lacked Lona- Term Re1 iabil i tv
DOC ' s past methods of forecasting i nmate popul ation have 1 acked 1 ong- term
r e l i a b i l i t y . Events prior to 1982 and models used by outside consultants
i n devel opi ng the 1982 Facil i t i e s Master Pl an provided inaccurate, 1 ow
forecasts. A1 though DOC ' s current inmate population forecasts are
developed from superior quantitative model s , t h e i r 1 ong- term appl ication
may be limited.
* All projections and analyses presented i n t h i s finding are based on
DOC'S male inmate population.
DOC Used Inaccurate Projections - DOC's i nmate population projections
p r i o r t o 1982 provided inaccurate forecasts due t o two factors. F i r s t ,
l i n e a r models were used t o p r o j e c t Arizona's inmate population. I n a
addition, the models d i d not consider several factors t h a t l e d t o an
unexpected increase i n i nmate popul ation.
The l i n e a r models used t o p r e d i c t inmate population growth p r i o r t o 1982 ' a
did not provide accurate forecasts. These models did not meet s t a t i s t i c a l
requirements f o r acceptance, such as standards f o r b u i l d i n g the models and
conditions c a l l ing f o r no s i g n i f i c a n t relationships among the
variables.* As a r e s u l t , DOC used low forecasts from the 1982 F a c i l i t i e s a
Master Pl an i n devel opi ng i t s budget requests. ** The consul tants'
projections f o r 1982 through 1984 were well below the actual inmate
population, as shown i n Table 2.
TABLE 2
PROJECTED INMATE POPULATION VERSUS ACTUAL POPULATION, 1982 THROUGH 1984
Projected Popul a t i on Actual Population Difference
4
Source: Compiled by Auditor General s t a f f from DOC'S 1982 Facil i t i e s 0
Master Plan and inmate population reports
Several additional factors compounded the forecasting problem. The
amended criminal code requiring mandatory sentencing and confinement f o r a
c e r t a i n crimes became e f f e c t i v e i n 1978. The age o f m a j o r i t y was lowered
t o 18 i n 1979, placing 18- through 20- year- olds i n the adult system.
Also, work furlough programs were r e s t r i c t e d i n 1982. These factors,
1 argely external t o the corrections system, 1 ed t o s i g n i f i c a n t l y increased #
* For a more detailed explanation o f the forecasting models see Appendix
I.
** The 1982 inmate population projections and the F a c i l i t i e s Master Plan
were prepared f o r DOC by the consulting groups o f Rosser, White,
Hobbs, Davidson, McClellan, Kelly, Inc. and Justice Systems, Inc. a
inmate population. These factors combined with the 1 imitations o f the
models used a t t h a t time prevented DOC from planning f o r the major changes
t h a t were on the horizon.
Current Model Superior, But Has Limitations - Although DOC'S present
inmate population forecasting method uses superior method01 ogy f o r 2- year
forecasts, i t s 1 ong- term accuracy may be 1 imi ted. The projections shoul d
be combined with qua1 i t a t i v e methodology t o improve forecasts beyond a
2- year period.
ARIMA model s* are able t o successfully deal with the s t a t i s t i c a l
assumptions violated when l i n e a r models are used f o r prison forecasting.
Therefore, they are superior f o r forecasting prison popul ation. Since
l a t e 1981 DOC has been using ARIMA models t o forecast inmate population.
DOC used univariate ARIMA models from 1981 through 1983. A b i v a r i a t e
ARIMA model was developed i n early 1983,** and i n 1984 DOC began using
mu1 t i v a r i a t e ARIMA models. The e r r o r r a t e f o r these models between July
1983 and December 1984 was 1.3 percent, an exceptionally 1 ow rate.
The mu1 t i v a r i a t e ARIMA models provide accurate short- and
i ntermedi ate- term forecasts, however, t h e i r accuracy beyond a 2- year
period may be 1 imited f o r two reasons. F i r s t , according t o 1 eading
a u t h o r i t i e s on forecasting, q u a n t i t a t i v e appl i c a t i o n s are general 1y
l i m i t e d t o short- or medium- term forecasts. Additionally, several f a c t o r s
outside DOC ' s c o n t r o l g r e a t l y i nf 1 uence the State ' s inmate popul ation.
Actions by t h e c o u r t system, prosecutors, par01 e boards, 1 aw enforcement
agencies, and the l e g i s l a t i v e and executive branches affect the number o f
commitments and the length o f an inmate's stay. For example, a change i n
parole p o l i c y could r e s u l t i n fewer inmates leaving t h e system than
anticipated and lead t o an i ncreasing prison population.
* ARIMA i s an acronym f o r Auto Regressive Integrated Moving Average
s t a t i s t i c a l model s. For f u r t h e r explanation see Appendix I. ** This model provided the population projections upon which C r i s i s i n
Corrections i s based.
To ensure more precise inmate population forecasts beyond a 2- year period,
the ARIMA model s shoul d be combined with qua1 i t a t i ve methods. Several
methods could improve long- term inmate population projections by promoting
greater coordi nation among criminal j u s t i c e agencies. A1 ternatives
include using the Delphi technique,* establishing a Governor's Special
Task Force, or establishing a Criminal Justice Coordinating Commission.
According t o an expert i n the f i e l d o f c r i m i n a l j u s t i c e , it i s imperative
t h a t experts i n a l l f i e l d s o f criminal j u s t i c e be included so complete
information i s obtained. A 1983 National I n s t i t u t e o f Corrections report,
Towards A Nationwide Corrections Pol i c y , stated that:
" Accomplishing the purpose o f e f f e c t i v e operations
requires a criminal j u s t i c e coordinating body
established a t several level s o f government. . . . The
corrections component - probation, i n s t i t u t i o n s ,
par01 e , and community programs - are interdependent
elements, and must be cooperative and supportive of
each other."
Methods used i n other states t o improve coordination among criminal
j u s t i c e agencies or supplement q u a n t i t a t i v e model s include:
@ Texas' Criminal Justice Coordinating Council, which c o l l e c t s and
analyzes information from the e n t i r e criminal j u s t i c e system;
Delaware's Sentencing Accountabi 1 i ty Connni ssion, which determines
guide1 i nes f o r sentencing sanctions and probation, and
a l t e r n a t i v e s t o incarceration; and
e North Carol ina' s Crime Commi ssion, which coordinates criminal
j u s t i c e a c t i v i t i e s by bringing together members of d i f f e r e n t
criminal j u s t i c e agencies.
DOC Has Not Developed And Maintained An
Adequate, Comprehensive F a c i l i t i e s Master Plan
The Department of Corrections has not maintained a complete and current
f a c i l i t i e s master plan. The 1982 F a c i l i t i e s Master Plan does not include
* For an explanation of the Delphi technique see Appendix I.
8
sufficient information to provide for informed facil i ties decisions. In
addition, DOC has not updated the plan annually, as required by its own
policy. Master planning is essential for a successful prison system. The
lack of long- range plans has resulted i n crisis management i n prison
systems across the nation, according to the president of a national prison
consulting firm. For example, one California corrections official
attributes their current overcrowding to the 1 ack of 1 ong- range faci 1 i ties
plans. Thus, corrections official s must address long- term needs and
problems to develop solutions to prevent future crises.
1982 Master Plan Insufficient - DOC'S 1982 Facilities Master Plan does not
provide sufficient i nformation for faci 1 i ties decisions. The plan does
not contain accurate and adequate information necessary for a complete
plan. Compounding this problem, while DOC used the plan extensively to
develop Land, Building and Improvement ( LB& I) requests, funds were not
appropriated to meet the projected needs.
The 1982 Facil i ties Master Pl an contains incorrect and i ncompl ete
information. The forecasts for inmate population are well below the
actual inmate popul ation. As a result, future facil i t i e s requirements are
understated. In addition, the plan lacks the necessary information i n the
following areas to provide direction for f a c i l i t i e s decisions.
Facility location alternatives - The plan contains few new
facil i ty a1 ternatives. Site selection can significantly impact
cost considerations, however, the facil i t i e s are not eval uated on
this basis. In addition, staff availability for proposed and
existing f a c i l i t i e s is not addressed i n any detail.* If a
community's work force has not been thoroughly eval uated, funds
may be committed to a facilty that cannot be staffed. For
example, a1 though DOC ' s new Florence faci 1 i ty has sufficient 1 and
for expansion, some DOC personnel have questioned whether the new
facility can be adequately staffed. According to the president of
* According to DOC officials, some economic and labor force data has
been used to evaluate staff avail abil i ty, however, this i nfomation i s
not included i n the plan.
a national prison consul ti ng f i rm, because crimi nal justice
policy changes can have rapid, long- standing effects, it i s
necessary to have current information for evaluating f a c i l i t i e s
a1 ternatives.
a Alternatives to incarceration - These factors should be
considered because of their impact on f a c i l i t i e s decisions. In
addition, i nformati on on possible changes i n 1 aw enforcement,
judiciary and corrections activities is necessary to determine
how these changes may affect the prison population and the need
for f a c i l i t i e s . These alternatives need to be included and
considered i n a f a c i l i t i e s master plan because of the impact they
can have on f a c i l i t i e s requirements. Both Kansas and North
Carolina use simulation models to show their legislatures how
various a1 ternatives have affected or will affect inmate
population growth and facil i ties needs. The I1 1 inoi s corrections
department uses simulation model s to devel op i t s faci 1 i ties
action plans, evaluating criminal justice policy changes outside
of the department.
a Activities of other entities - Information about the activities
of other entities is necessary to identify current or proposed
actions that affect projections and create additional needs or
negate perceived needs. For exampl e, a1 though the Perryvill e
facility was originally planned to contain 1,600 inmates,
legislation has limited the facility to 1,400 inmates.
Therefore, the facility cannot be expanded beyond the 1,400
statutory 1 imitation.
A1 though DOC used the 1982 Facilities Master Plan to develop its fiscal
year 1983- 84 budget request, funds for several priority facil i ties were
not approved. During this time the State was facing a severe budget
crisis and the Governor ordered all agencies to cut their budgets by
approximately 10 percent. DOC'S LB& I requests for the following projects
necessary to meet the needs identified by the plan did not receive funding:
Arizona Correctional Training Center - Tucson - request for
approximately $ 26 million for the addition of 576 beds*
Arizona State Prison - request for $ 1.4 million for architectural
and engineering fees for 384- bed closed security facility
Alhambra Reception Center - request for $ 1.3 million for
architectural and engineering fees for 324 bed facility
Master Plan Not Updated - DOC has failed to maintain an updated master
plan and, therefore, does not have a current f a c i l i t i e s master plan to
assist i t i n making long- term f a c i l i t i e s decisions. Although DOC has
established a policy to update the master plan each year, this has not
been done. The most recent plan developed by DOC, Crisis i n Corrections,
serves only as an action plan and contains limited information.
Consequently, DOC i s operating w i t h outdated or i ncompl ete faci 1 i ty
information.
A1 though DOC has an established policy to update its master plan annually,
DOC has not updated its f a c i l i t i e s master plan since 1982. DOC Policy 105
requires that the plan be updated annually, however, this has not been
done since the Facilities Master Plan was prepared i n 1982. In fact,
DOC's f a c i l i t i e s master planning committee has not even met for more than
1 year. Meetings were discontinued in October 1983 by executive staff
when DOC's attention was focused on the overpopulation situation and the
1984 First Special Session.
The forecasts of increasing inmate population and the lack of funding for
a construction program providing 1 ong- term solutions led to the inmate
housing crisis. DOC developed Crisis i n Corrections as an action plan to
guide the Legislature i n its funding decisions during the 1984 First
Special Session. DOC ' s more sophisticated projections showed that by
June 30, 1987, DOC would have 4,923 more inmates than permanent beds. A t
that time, DOC's only long- term solution to the bed requirements was the
Tucson project.
* was appropriated for architectural and engineering fees for
Tucson for fiscal year 1983- 84.
Because Crisis i n Corrections was developed as an action plan i t does not
provide all the information necessary for a complete f a c i l i t i e s master
plan. While Crisis i n Corrections was based on superior models, i t was
specifically developed to identify short- and long- term solutions to the
current and anticipated overcrowding problems through 1987. For this
reason, Crisis i n Corrections does not evaluate the existing f a c i l i t i e s ,
conditions, a1 ternatives to i ncarceration, or the impact that changes i n
the criminal justice system would have on the overpopulation problems.
Without a current master plan, DOC is operating w i t h outdated facility
information. For example, since the 1982 Facilities Master Plan was
prepared, the Legi sl ature passed the mu1 tipl e confinement 1 aw requiring
that more than one inmate be confined i n a cell except i n specific
instances. However, the plan i s s t i l l largely based on the premise of one
inmate per cell.* In addition, several f a c i l i t i e s now require funding to
meet code requirements, b u t without a current, comprehensive plan these
needs cannot be prioritized re1 ative to other facil i t i e s ' needs.
Arizona ' s Prisons May
Remai n Overcrowded
Because previous projection models were not accurate and the Department
lacked a comprehensive plan, the State's prison system may remain
overcrowded into the foreseeable future. DOC currently has approximately
1,260 inmates i n temporary beds, and DOC's ARIMA projections indicate an
increasing inmate population through 1992.** In addition, some permanent
beds will need premature replacement. As a result, DOC may face problems
w i t h inmates and outside intervention over the next two decades.
1,260 Inmates In Temporary Beds - Currently, 1,260 inmates are in
temporary beds, b u t by 1986 DOC expects to have all inmates in permanent
beds. However, DOC's inmate population projections show a need for
approximately 1,200 additional beds each year from 1987 through 1992.
* Since the implementation of this law DOC's LB& I requests have been
based on mu1 tipl e confinement.
** DOC i s no longer overseeing the prison construction program, however,
DOC is s t i l l responsible for long- range facility analysis and new
f a c i l i t y planning. DOC plans to begin updating the f a c i l i t i e s master
plan during 1985, according to DOC officials.
A1 though DOC is currently housing approximately 1,260 inmates i n temporary
beds, DOC expects to provide permanent beds to a1 1 inmates by November
1986, as shown in Figure 1. DOC's plans are based on current construction
projects, which should provide the Department with 3,962 new beds between
1 984 and 1 986. *
FIGURE 1
PROJECTED INMATE POPULATION VERSUS BEDS
1984 TO 1986
Legend: Beds -=- m- m-
Population -
Source: Prepared by Auditor General staff from DOC's i nmate projections
and construction schedules
* The number of inmates i n temporary beds until 1986 i s largely
dependent upon the scheduled completion of the $ 72 million
construction projects. If these facil i ties are not completed on
schedule, DOC will be faced w i t h a greater number of inmates in
temporary f a c i l i t i e s . The current projected completion dates for the
$ 72 million projects are questionable, as indicated in Finding 111,
page 33.
DOC'S forecasts point to steadily increasing inmate population from 1987
through 1992. A1 though these projections shoul d be combined w i t h
qua1 i tative methods to evaluate the need for additional facil i t i e s , the
projections, i f accurate, show that inmate population will continue to
increase steadily. The State has not made any provi~ ions for new beds
past 1986.* As a result, as early as March 1987 DOC may face another
inmate population c r i s i s , as shown i n Figure 2.
FIGURE 2
PROJECTED INMATE POPULATION
VERSUS BEDS - 1987 TO 1992
Legend: Beds -
Inmates -
Source: Prepared by Auditor General staff from DOC'S inmate projections
and DOC ' s pl anned operating capacity
* DOC included LB& I needs through 1991 i n " Information for t h e J o i n t
Select Committee on Corrections," dated October 24 and 25, 1983.
However, these projects were not funded and DOC has not subsequently
requested funds for facil i t i e s beyond 1986.
F a c i l i t i e s Require Premature Replacement - Because some o f the new and
proposed prisons have shorter useful 1 ives, DOC w i l l have t o replace these
prisons prematurely. Because no long term solutions were funded, DOC has
used quonset huts and preengi neered bui 1 dings t o provi de additional
operating capacity i n a r e l a t i v e l y short time. Although they provide
permanent housing f o r the inmates, the useful l i f e o f these structures i s
shorter than t h a t of other prison f a c i l i t i e s . I n addition, inmates
destroyed two quonset huts i n less than a year. Prisons b u i l t from
precast concrete have a 1 i fe expectancy o f approximately 60 years, while
quonset- type structures w i l l need replacement i n approximately 10 years.
Because o f the shorter l i f e o f less expensive structures, the State w i l l
have t o replace approximately 1,416 beds over the next 25 years, as shown
i n Table 3. ( Five hundred o f these beds w i l l be due f o r replacement i n
approximately 10 years). These replacements w i l l be i n addition t o any
construction needed t o meet the increasing inmate population projected i n
Figure 2.
TABLE 3
FUNDS APPROPRIATED OR EXPENDED ON SHORT- TERM SOLUTIONS
1980 THROUGH 1984
Year Funds Approved Projected Year
And Total Dollars Number O f Beds Faci 1 i ty O f Rep1 acement
1981 - 82 $ 3,450,000 270 ASP- East Uni t- Phase I 1992
1982- 83 30, OOO1( ) 36 Safford
1982- 83 1,614,000 21 0 ASP- East Uni t- Phase I I 1995
1983- 84 752,800 1 00 Doug1 as 2009
1 983- 84 6,975,500(~) 8 00 Doug1 as 201 0
( 1 ) These structures were b u i l t with operating funds.
( 2) Additional funds w i l l be required t o complete t h i s f a c i l i t y ( see
Finding 11, page 25).
Source: Compiled by Auditor General s t a f f from DOC F a c i l i t i e s Documents
and Appropriations Reports
DOC Faces Continued Problems - Because of the overcrowding problem DOC
faces problems with inmate security, court orders and State agency
intervention. DOC estimates that as of January 1985 approximately 240
inmates are i n temporary beds that are not considered manageable." DOC
expects to have approximately 1,035 inmates i n temporary unmanageabl e beds
by July 1985.
Temporary beds decrease DOC's control over the inmates. If DOC officials
need the isolation rooms to keep unmanageable inmates away from the
others, they are prevented from doing so. In addition, these inmates
would be in close proximity to other inmates and could s t a r t a 9
disturbance. DOC estimates that as of February 1985, 239 inmates will be
housed i n temporary unmanageable beds, and 71 6 inmates will be housed i n
tents and quonsets. This could create problems because of the large
number of inmates in close quarters. According to DOC's director, i f the
Department needs to lock a facility down,** i t cannot do so w i t h these
structures.
Overcrowding at DOC's correctional f a c i l i t i e s could a1 so 1 ead to court and
State agency intervention. The courts have he1 d that confinement in
extremely small and/ or crowded spaces can be construed as " cruel and
inhumane" punishment i n viol ation of the inmates' Eighth Amendment rights
guaranteed by the U. S. Constitution. Mu1 tiple occupancy aggravates this
problem because no assurance can be made concerning the compatabil ity of
inmates who might be confined together in 1 imited space. Filling prisons
beyond their design capacity and housing inmates in temporary faci 1 i ties
can also violate State codes. For example, Arizona Center for Women has
been cited for f i r e code violations because of the overcrowded conditions.
* DOC differentiates between temporary manageable beds and temporary
beds. Temporary manageabl e beds i ncl ude tents, trai 1 ers, mu1 ti pl e
occupancy rooms and dayrooms. Other temporary beds, not classified as
manageabl e because the inmates cannot be properly supervised, i ncl ude
placing several inmates i n isolation rooms, laundry cages and
audi tori ums. These beds wi 1 1 be referred to as temporary unmanageabl e
for purposes of discussion.
** A lock- down exists when the inmates are restricted to their cells.
When cells are not available f o r a l l inmates, the only real control
DOC officials have over the inmates are the fences, according to DOC's
director.
The Center houses several inmates i n each room, thus increasing the f i r e
hazard and preventing the inmates from e x i t i n g the b u i l d i n g quickly.
CONCLUSION
DOC has not s u f f i c i e n t l y planned t o provide necessary housing f o r inmates.
Inmate population forecasts have been low and inaccurate. I n addition,
DOC has not maintained a comprehensive f a c i l i t i e s master plan t o a s s i s t i n
eval u a t i ng i t s funding needs and making recommendations about f a c i l i t i e s .
As a result, DOC'S prison system may remain overcrowded i n t o the
foreseeabl e future.
RECOMMENDATIONS
1. DOC shoul d supplement i t s i nmate population projections with
q u a l i t a t i v e methods. This can be accomplished through the use o f
consensus b u i l d i n g methods such as the Delphi technique. I n addition,
the Governor should consider establishing a Special Task Force made up
o f experts i n a l l f i e l d s o f criminal j u s t i c e , or the Legislature
shoul d consider establ i shi ng a Criminal Justice Coordinating
Commission t o provide qual i t a t i v e input t o supplement s t a t i s t i c a l
forecasts.
2. DOC should develop a new f a c i l i t i e s master plan, taking i n t o account
the mu1 t i p 1 e confinement law, and update t h e p l a n annually as required
by Policy 105. The plan should address new f a c i l i t y needs and
replacement based on the inmate population projections i n combination
with qual i t a t i v e method01 ogy. I n a d d i t i o n t o the types o f i nformation
included i n the 1982 F a c i l i t i e s Master Plan, the new plan should
include:
a. Several a1 ternate 1 ocations for new f a c i l i t i e s and comparative
costs f o r the a1 ternatives. I n addition, construction costs and
operating costs over the 1 i f e of a f a c i l i t y should be compared.
The plan should s p e c i f i c a l l y analyze the advantages and
disadvantages o f 1 ong and short- term solutions.
b. A s t a f f i n g needs analysis f o r t h e a l t e r n a t i v e s i t e s and the
a v a i l a b i l i t y o f s t a f f from the community.
c. Information on and an evaluation o f the measures taken by
agencies outside DOC and the e f f e c t s these actions w i l l have on
DOC's f a c i l i t i e s needs.
d. Information on the alternatives t o incarceration. DOC should use
simulation models t o present the e f f e c t s these alternatives may
have on DOC's f a c i l i t i e s needs.
FINDING I1
THE DEPARTMENT OF CORRECTIONS DOES NOT HAVE ADEQUATE PRISON SITE
EVALUATION AND BUDGET DEVELOPMENT PROCESSES
The Arizona Department of Correction's ( DOC) prison s i t e evaluation and
budget development processes need improvement. Recent prison sites were
selected without proper analyses. In addition, budgets were not based on
realistic cost estimates. DOC should receive construction appropriations
in two phases to conduct needed analyses.
Prison Site Eva1 uation
Has Been Insufficient
The site evaluation process needs improvement. DOC has developed c r i t e r i a
for site selection. However, new prison sites have not been selected
based on sufficient s i t e evaluation. As a result, selection decisions
have been revised, projects have been delayed, and additional costs have
been i ncurred.
DOC Site Selection Criteria - DOC has developed c r i t e r i a f o r s i t e
selection.* According to the 1982 DOC Facilities Master Plan, there are
four main factors in prison s i t e selection. These include: procurement
of vital services, recruitment of qualified staff, support of
institutional mission/ objective, and the limitations of construction
and/ or site. Other criteria developed relating t o s i t e selection are as
follows.
Institutions of 500 inmates require a s i t e of a t least 60 acres.
The site selected shoul d be pub1 icly owned property.
0 The topography of the s i t e should be such that major construction
costs do not result from site work. Drainage and erosion should
be considered i n the evaluation of the topography.
Public power and gas should be available.
* In Arizona, as in other states, the selection of a general area as a
possible new prison s i t e generally a1 so involves significant input
from pol icy making officials a t both the State and 1 ocal levels.
Public sewerage should be available.
r Public water should be available.
Fire protection should be available.
In addition, a DOC Internal Management Policy effective September 1983
requires that a team be developed to conduct s i t e visits and compile
comprehensive reports. The team i s to include representatives from
Facil i ties and Construction, Business and Fi nance, Adult Institutions,
Juvenile Services, and/ or Communi ty Services.
Sites Lack Preselection Analysis - In spite of DOC'S selection criteria
and policy, the Douglas and Winslow prison s i t e s did not have sufficient
presi te selection analyses. Failure to perform sufficient analyses of
specific sites has resulted i n revised s i t e decisions, significant s i t e
preparation costs, and project delays. Problems resulting from
insufficient s i t e evaluation are presented for the Douglas and Winslow
sites.
DOUGLAS
The Douglas prison construction has had significant problems due to the
lack of sufficient presi te selection analysis. DOC originally planned to
use the Douglas airport as a quick- fix solution to ease prison
overcrowding by renovating existing hangars to house i nmates. However, 1
week before the Special Legislative Session that woul d appropriate funds
for the prison s i t e , the Fire Marshal found the hangars unusable due to
f i r e hazard. Therefore, DOC had to develop plans for building the prison
based on new construction rather than renovation. In addition, site
selection analysis conducted after the appropriation was made revealed
that the s i t e had extensive soil, water and sewer system problems.
According to DOC estimates, the soil, water and sewer system problems will
result i n the need for an additional $ 1,906,900. A general lack of
technical i n p u t early i n the site review process prevented these problems
from being discovered sooner.
r - Soil - DOC'S failure to identify soil problems a t the Douglas
site has del ayed construction and increased costs. The Doug1 as
s i t e was approved by t h e Legislature i n October 1983. However,
proposals for a s o i l analysis were not requested u n t i l January
1984. The r e s u l t s o f the analysis, obtained i n March 1984,
showed the s o i l t o be highly expansive. Due t o the s o i l
condition, DOC estimates the additional construction cost a t
$ 321,900. I n addition, the s o i l problems delayed construction
because a decision as t o what a l t e r n a t i v e t o take t o correct the
s o i l problem was not made u n t i l A p r i l 1984. According t o DOC
o f f i c i a l s , the s o i l was not o r i g i n a l l y tested since the e x i s t i n g
hangars were t o be renovated. I n addition, since there were
a1 ready buildings a t t h e s i t e , DOC believed there was no reason
t o question the s o i l condition. However, i f a s o i l t e s t had been
conducted o r i g i n a l ly, the re1 ated problems could have been
incorporated i n t o time and budget estimates.
Water And Sewer System - The Douglas s i t e also had extensive
problems with the water and sewer systems, which were not
i d e n t i f i e d p r i o r t o s i t e selection. A1 though the water system i s
s u f f i c i e n t most o f the year, the system becomes inadequate during
the months when a chi1 i plant located next t o the a i r p o r t i s i n
operation. I n addition, the sewage treatment system was found t o
be inadequate t o handle the sewage f o r both the c h i l i plant and
the prison. Further, leaks were found i n the concrete j o i n t s f o r
the u t i l i t i e s . Expenditures needed t o correct these probl ems
have been estimated by DOC t o be $ 1,585,000. According t o DOC
o f f i c i a l s , DOC had been informed t h a t the water and sewer systems
had been upgraded and would accomodate 8,000 individuals.
However, DOC did not v e r i f y t h e c o n d i t i o n o f these systems.
Lack o f Technical Input - DOC d i d not have i n d i v i d u a l s with
technical expertise v i s i t the s i t e early i n the s i t e review
process. Although DOC has a p o l i c y requiring a representative
from i t s F a c i l i t i e s and Construction section t o be included i n
s i t e v i s i t s , the Facil i t i e s and Construction representative was
not included i n early s i t e v i s i t s . According t o an o f f i c i a l from
the F a c i l i t i e s and Construction section, he may have been able t o
detect the soil, water and sewer system problems had he been
included on a site visit. In addition, the f i r e hazards may have
been detected sooner i f the Fire Marshal had been included on 0
earlier s i t e visits. A1 though DOC staff visited the s i t e i n June
1983, the Fire Marshal did not visit the s i t e until
September 27, 1983.
WINSLOW
DOC failed to evaluate site availability and soils conditions a t the
Winslow site. In Senate Bill 1027 the Legislature prescribed the Winslow a
prison s i t e i n January 1984 and made an appropriation for construction.*
DOC had conducted a preliminary analysis of the s i t e i n November 1983, b u t
did not verify that the site was available. Subsequent to legislative
selection, DOC found the site was too small and had ownership problems.
( I
Therefore, House Bill 2407 was enacted in May 1984 to amend Senate Bill
1027. The new bill allowed the director of DOC to locate a new s i t e i n
the Winslow area. DOC, w i t h the assistance of the Town of Winslow, chose
the new Winslow prison site. The construction manager identified problems
w i t h the s i t e that will necessitate substantial costs to install the
water, sewer, gas and electrical lines. According t o the construction
manager's 1 atest estimates, actual costs wi 11 be $ 420,000 over the
original May 1984 estimates. Due to land conditions i t i s anticipated
that extensive dynamiting may be required to run u t i l i t i e s to the site.
However, as of January 15, 1985, the geotechnical report that would give
the detailed costs of installation had not been completed. According to
the architectural firm overseeing the project, the costs for bringing
u t i l i t i e s to a s i t e are normally $ 15 per 1 inear foot, however, i n Winslow
the costs may be double the normal cost.
Recent DOC Prison Construction
Budsets Have Been Unrealistic
Recent DOC prison construction budgets have not been based on realistic
estimates. Even after excl uding the additional costs resul ting from poor
x The appropriation was a lump sum of $ 72 million to build prison sites @
in Florence, Yuma, Wi nsl ow and Tucson.
s i t e evaluation, the budgets for the Douglas and the Senate Bill 1027
projects ($ 72 million) are not sufficient. The projects would require
significant design changes to stay w i t h i n the original appropriation.
Douglas Prison Budget Problems - The Douglas budget is insufficient for
several reasons. These reasons include failure to revise the i n i t i a l
budget once it was determined the hangars could not be renovated and
inadequate funding for construction of 200 additional beds. Due to the
insufficient budget, extensive cost saving measures have had t o be
imp1 emented.
a Costs Based on Renovation - DOC failed to significantly revise
the initial budget based on new construction rather than
renovation. The i n i t i a l DOC budget estimate i n Crisis in
Corrections* for the 600- bed medium security facility site a t
Douglas airport was prepared by a DOC warden on the assumption
that the airplane hangars would be renovated. The s i t e was not
visited by construction experts prior to selection, nor did any
technical experts contribute to the budget preparation. Once the
Fire Marshal visited the prison s i t e and found the hangars to be
unusable, the budget was not significantly revised based on
construction of new buildings. The Governor had notified the
Legislature prior to the Fire Marshal ' s v i s i t that the cost was
estimated a t $ 5.8 mill ion for the facility. Therefore, according
to DOC officials, they f e l t they needed to stay w i t h i n the
original estimate.
The budget for the Douglas s i t e for new construction was far
be1 ow historical construction costs. As calculated from figures
in Crisis i n Corrections, the cost per bed for hangar renovation
i s $ 9,990. However, when DOC found that the hangars were
unusable and costs would have to be based on new construction,
the cost per bed was not significantly revised. According to a
* DOC prepared the Crisis i n Corrections document for the October 3,
1983, Special Legislative Session. The document contains budget
requests for several prison f a c i l i t i e s .
report by N. R. Cox Associates,* DOC estimated costs per bed for
more recent projects ranged from $ 27,118 per bed to $ 33,045 per
bed for medium security f a c i l i t i e s . The report also indicates
the 1983 national average for medi urn security construction was
$ 51,334 per bed.
Funding For Additional Construction May Not Be Adequate - The
funds allocated for additional bed needs may not be sufficient.
A1 though the i n i t i a l budget was for construction of 600 beds, the
Legislature increased the number of beds t o 800. Prior t o the
increase, 1 egisl ators and 1 egisl ative staff asked the director of
DOC what funds would be needed to increase the Douglas 600 bed
medium security f a c i l i t y by 200 beds. According t o the director
of DOC, as he was under time constraints and was therefore unable
to obtain supporting data, he estimated that the additional beds
would require a $ 2 million increase i n the appropriation.
However, the difference between the original estimate of
$ 5,993,700 for 600 beds, and the final appropriation of
$ 6,975,500 for 800 beds was only $ 981,800.
As a result of the underbudgeting for the Douglas f a c i l i t y , extensive cost
saving measures have had to be implemented. These measures have resulted
i n the elimination of buildings from the plans and constant redesign of
the f a c i l i t y t o reduce costs. As part of the redesign, support f a c i l i t i e s
were cut from the plan since they could not be built w i t h i n the budget.
According to DOC estimates, an additional $ 5,486,000 will be required to
construct needed support facil i ties.** The additional support facil i ty
x N. R. Cox, a Texas consultant, was contracted by DOC t o conduct an
overview of system implementation planning i n response t o the rapid
inmate population growth.
** DOA o f f i c i a l s indicated an additional $ 110,000 would be required to
complete the control tower and to cover contract extensions for inmate
housing construction. Extensions are needed because of delays caused
by use of inmate labor and by weather conditions. These funds, i n
conjunction w i t h the additional funds required for support f a c i l i t i e s
and to correct soil, sewer, and water system problems will raise the
total completion cost of the Douglas s i t e to $ 14,478,400, as opposed
to the $ 6,975,500 original ly appropriated.
funds are needed to complete the f a c i l i t i e s and construct numerous
buildings, including structures for vocational education, Arizona
Correctional Enterprises ( ARCOR), a chapel, a 1 aundry, inmate c r a f t s ,
academic education/ l i brary , additional freezer and col d storage space,
vehicle maintenance, administration complex, a t h l e t i c f i e l d s , and staff
housing.
Senate Bill 1027 Projects' Budget Problems - The budget for the Winslow,
Florence, Yuma and Tucson s i t e s is also inadequate. Senate Bill 1027
enacted i n January 1984 appropriated a lump sum of $ 72 mill ion for prison
f a c i l i t i e s as shown i n Tab1 e 4.
TABLE 4
$ 72 MILLION PROJECTS BY
FACILITY, AND NUMBER AND TYPES OF BEDS
Facility Number And Types Of Beds LB& I
Arizona State Pri son
Arizona Corrections
Training Center
Winslow Conservation Camp
Yuma Conservation Camp
Winslow Facility
Winslow Facility
Yuma Facility
TOTAL
768 maximum security $ 31,314,000
744 medium security 22,521,356
150 minimum security 2,195,000
150 minimum security 2,684,100
400 medium security 9,807,000
100 minimum security 1,599,544
100 mi nimum securi ty 1,879,000
2.41 2 $ 72.000.000
Source: Senate Bill 1027 specified the location and number and types of
beds. The Bill also provided a lump sum appropriation of $ 72
million. The allocation of the $ 72 million land, building and
improvement ( LB& I) monies by f a c i l i t y was obtained from the
Facilities and Construction Division of DOC.
Although preliminary estimates for a l l the above sites were not prepared,
the original budget estimates by DOC for only two of the s i t e s were more
than the total appropriation. According to budget estimates i n the DOC
publication Crisis i n Corrections, DOC staff estimated the f a c i l i t y costs
for the Florence and Tucson s i t e s t o total $ 83,636,000, as shown i n Table
5. The estimate was based on construction of 1,512 beds, or 900 beds less
than the 2,412 contained i n the $ 72 million appropriation.
TABLE 5
CRISIS IN CORRECTIONS ESTIMATES FOR
TUCSON AND FLORENCL PRISON CONSTRUCTION
Faci 1 i ty Number And Types O f Beds LB& I
Arizona State P r i son 768 maximum security $ 53,548,000
Arizona Corrections
Trai n i ng Center 744 medium security 30,088,000
TOTAL 1.512 $ 83.636.000
I n December 1983 a revised budget o f $ 82.7 m i l l i o n f o r these s i t e s was
devel oped by representatives from the J o i n t Legisl a t i ve Budget Committee,
the Executive Budget Office, the Department o f Administration, and the
Department o f Corrections. The $ 82.7 m i l l i o n estimate was based on
construction o f a t o t a l o f 2,237 beds. However, the budget was further
reduced i n the l e g i s l a t i v e process t o $ 72 m i l l i o n and the number o f beds
required was increased by 175 from 2,237 beds t o 2,412 beds.
Effects o f Inadequate Funding - Due t o inadequate funding, f a c i l i t y plans
f o r the prisons t o be constructed with the $ 72 m i l l i o n appropriation have
undergone extensive changes.* According t o a study by N. R. Cox
Associates, the reductions caused s i g n i f i c a n t revisions t o the f a c i l i ty
planning estimates.
". . . The r e s u l t was a considerable reduction i n t o t a l
square footage o f housing, support, and program space
per inmate and a corresponding reduction i n the cost
per bed . . . These reductions were a d i r e c t resul t o f
the l i m i t e d funding appropriated for the construction
o f the 2,412 beds.
Although the reductions meet the cost saving
requirements o f the statutes, the department w i l l be
considerably handicapped i n any attempt t o meet the
requirements f o r t h e p r o v i s i o n o f work opportunities
for inmates once the f a c i l i t i e s are completed. The
reduced space a1 locations do not provide s u f f i c i e n t
areas f o r vocational training, i n s t i t u t i o n a l
mai ntenance or p r i son i ndustries. "
* According t o a DOA o f f i c i a l , i n order t o remain w i t h i n the $ 72 m i l l i o n
appropriation, inmate labor may need t o be used extensively. The
extensive use of inmate labor may impact p r o j e c t time1 iness ( see
Finding I V ) .
26
Even though N. R. Cox has indicated f a c i l i t i e s will be insufficient, the
construction management firm and architects are not clear as to what the
final effects of reduced funding will be. As programming and design of
the f a c i l i t i e s has not yet been completed, the effects of remaining w i t h i n
the appropriation are unknown. However, preliminary indications are that
there could be reduction or elimination of support f a c i l i t i e s . In an
attempt to meet the budget constraints, DOC eliminated four buildings - an
isolation unit, a vocational education building, a maintenance shop and an
administration building - from the plan for the Tucson facility. However,
these buildings were necessary and had to be reinstated, t h u s increasing
design fees. An official from one of the construction management firms
overseeing the projects has indicated that the appropriation may not be
adequate to construct complete f a c i l i t i e s . The inadequate funding may
necessitate size reduction or el imination of support buildings a t Yuma,
Winslow and Florence. In addition, according to an official from the
architectural firm responsible for design of the Tucson f a c i l i t y , there
have been reductions in square footage.
Two- Phase Appropriations Coul d
Improve Budget Accuracy
DOC'S prison construction budgets would be more accurate i f funds were
appropriated in two phases. Currently, appropriations for new prison
construction are appropriated i n a lump sum, w i t h DOC budget estimates
usually based on historical expenditures of costs per bed. Funds should
be appropriated for s i t e analysis, programming, facility design and
budgeting prior to the actual construction appropriation so as to provide
for more reliable and accurate budget requests.
Current DOC Budget Process - DOC generally requests appropriations based
on historical construction costs. DOC i s responsible for prison
population projections, resulting 1 ong- term planning, and developing
prison construction estimates for obtaining appropriations. Construction
cost estimates for new prisons are usually prepared by DOC Facilities and
Construction staff. According to an official from the Division, estimates
are developed based on historical information on costs per bed.* Also
included i n the estimates is an adjustment for the type of security level
for the prison, for actual s i t e conditions, and for economic trends i n the
construction industry. T h i s estimated amount is then requested through
the 1 egis1 ative process for a 1 ump sum construction appropriation. Once
the construction monies are appropriated, DOC hires a construction
manager, and architectural and engineering firms to evaluate the s i t e ,
prepare facility designs and develop a detailed project budget based on
the designs. As DOC does not generally receive funding for hiring
construction managers, architects and engineers prior to submitting budget
construction estimates to the Legislature, detailed budgets are not
developed until after the construction appropriation has been made. As a
result, appropriations have not been based on detailed cost estimations.
DOC Should Obtain Funds Prior To The Construction Appropriation For
Accurate Estimate Preparation - DOC should be appropriated funds for
conducting detailed analyses prior to submitting appropriation requests.
The funds should be used to retain construction manager, architectural and
engineering services as we1 1 as other essential professional services.
The construction manager, architects and engineers shoul d be responsible
for analyzing the s i t e , designing the facil i ties, and preparing detailed
budgets based on the design. These services would increase the accuracy
of DOC'S requests and subsequent appropriations. Some other states have
developed this type of phased appropriation processes.
Preconstruction appropriations shoul d be used for h i r i n g the construction
manager responsible for overseeing the enti re project, incl udi ng s i t e
evaluation, planning, design and budgeting. Technical s i t e evaluation
should be conducted prior to budget preparation since i t impacts s i t e
preparation costs. The s i t e analysis shoul d include thorough review of
util i ties and soi 1 conditions. During planning, the construction manager,
architect and engineer should assist DOC i n technical development of
faci 1 i ty needs and prel imi nary costs. Faci 1 i ty design shoul d i nvol ve the
x A1 though the Facilities and Construction Division i s generally
responsible for budget preparation, the budget for the Douglas
f a c i l i t y was prepared by the warden of the Alhambra Reception and
Treatment Center.
28
development of housing and support buil ding design. These designs should
be prepared by the architect and construction manager. Finally, after
s i t e evaluation, planning and facil i ty designs have been completed, the
information should be used to prepare detailed cost estimates for the
appropriation request.
Hiring construction managers before preparing appropriation requests could
provide for early cost saving measures. Construction managers can
implement cost saving changes i n materials or design during preparation of
designs and preliminary budgets. In addition, the construction manager
can develop several alternatives w i t h resulting projected costs. For
example, a t the Winslow s i t e the construction manager found that
approximately $ 5.6 million could be saved if the Winslow medium and
minimum security prisons were bui 1 t i n Tucson. However, t h i s occurred
after the site had been selected and incorporated i n statute, making i t
far more difficult to change. In fact, when DOC expressed a desire to
move the s i t e , i t was informed that the Governor would veto any
legislation to do so since the Town of Winslow had received a commitment
from the Governor for a facility.
Other states have developed phased appropriation processes that could
improve the budget estimation process i f implemented i n Arizona. Our
Office contacted California, Colorado, New Mexico and I1 1 inois to 1 earn
details of construction budget processes. Although the preconstruction
appropriation methods varied, a l l four states have used phased
appropriations. Summaries of the states' processes are as foll ows.
California - California receives funding for prison construction
i n phases. The initial appropriation is allocated for
architecture and engineering, land acquisition and an
environmental impact report. California uses a private
construction management firm t o a s s i s t the corrections department
and the architects and engineers i n the design of a prototypical
prison and development of a construction budget. This budget i s
then used to obtain the construction appropriation. On recent
projects, the construction manager overseeing the prison budget
provided the Cal i fornia 1 egi sl ature w i t h several design and cost
alternatives before the appropriation amount was finally
determined.
0 Colorado - Colorado receives funds for prison construction i n
phases. The Colorado Department of Corrections employs a
project manager to oversee projects. I t also uses the State
Building Division t o a s s i s t i n project management. The initial
appropriation is used to hire architects and engineers to assist
i n s i t e evaluation and prison design. After designs are
complete, a request i s made for funds to construct the facility.
0 New Mexico - New Mexico also uses phased appropriations. The
Department uses a private construction management firm to oversee
projects. I t a1 so uses the General Services Administration,
another state agency, to deal w i t h architectural and engineering
contracts and design review. Once designs are complete, the
department and the architect develop a prel iminary budget. The
project i s then l e t out to bid. The lowest b i d i s used to
complete the actual construction appropriation request. Site
eval uation i ncl udi ng soi 1 and u t i l i ty analysi s is conducted prior
to final site selection.
I1 1 inois - I1 1 inois receives phased appropriations. An initial
estimate for construction i s prepared by a separate planning
agency. The estimate is used to determine architectual and
engineering fees. Generally, a 1- year appropriation i s then made
for 1 and acqui si tion and architectural and engineering fees. The
architect and engineer develop various alternatives for prison
design. The state planning agency assists the architect and
engineer i n developing a detailed construction estimate, which i s
used i n conjunction w i t h the original state planning agency
estimate for the second- year construction appropriation request.
CONCLUSION
DOC does not have adequate prison s i t e evaluation and budget development
processes. Several of the recent prison sites have insufficient budgets
because of the lack of presite evaluation and a poor budget process. DOC
could improve i t s budget estimation by obtaining construction manager and
architectural and engineering services prior to development of the
construction appropriation request.
RECOMMENDATIONS
1. The Legislature should consider appropriating funds for new prison
construction i n two phases. The f i r s t appropriation should be
a1 1 ocated for obtaining construction manager, architectural and
engineering services to evaluate the site, plan the project, design
the f a c i l i t i e s and prepare a detailed budget estimate. The designs
coul d include a1 ternatives with resulting cost estimations. The
second appropriation should be allocated for construction based on the
detailed budget.
2. DOC should ensure that site evaluation is adequate by requiring a
soil, water and sewer analysis and requiring technical experts to
visit sites prior to preparation of the appropriation request.
FINDING 111
THE STATE'S $ 72 MILLION PRISON CONSTRUCTION PROGRAM MAY BE DELAYED
The schedules f o r the $ 72 m i l l i o n prison construction program may not be
met. The present schedule i s overly optimistic. Any delays i n meeting
t h i s schedule w i 11 resul t i n i ncreased costs. Furthermore, additional
actions may be needed t o address any overcrowding that might r e s u l t from
del ays.
The Department of Corrections ( DOC) hired a project manager ( PM) t o
oversee the $ 72 m i l l i o n prison construction program. Project managers
represent the owner's best interests i n both the design and construction
phases of the project. This includes assisting the owner with architect
selection and program development. During the construction phase the
project manager prepares schedules and budgets, performs engineering, and
coordinates the a c t i v i t i e s of a l l those involved i n the construction
program.
Projects May Not Be Completed
Within Contracted Time Frame
The $ 72 m i l l i o n construction program may not be completed within the
contracted time frame f o r two reasons. F i r s t , schedules are overly
optimistic f o r the project size. I n addition, the schedule has already
been de1 ayed s i g n i f i c a n t l y .
Schedules Are Overly Optimistic - The schedules f o r t h e $ 72 m i l l i o n
prison construction program are very optimistic. An independent
engineering review indicates that the projects may not be completed w i t h i n
the contract time frame.
The Office of the Auditor General retained a consultant t o analyze the
schedules set f o r t h i n the contract between DOC and the PM o f the $ 72
m i l l i o n prison construction program. I n addition, the consultant analyzed
the PM's two most recent schedules dated September 28, 1984 and November
6, 1984. See Appendix I 1 f o r the consultant's report.
The PM's schedules may not be feasible because of the scope of the
projects. Both the Tucson and Florence projects will cost between $ 20
million and $ 25 mill ion to build. For t h i s reason, the schedules may not
be reasonable.* The more probable schedules developed by our consultant
would add 11 months to the total project period. Most of t h i s increase
occurs during the construction phase. According to our consultant, ". . .
a preliminary expected duration of 24 months for the construction effort
is much more r e a l i s t i c than [ the] anticipated 16.5 months, i n fact the 24
month period may be rather optimistic." The more probable completion
dates for each f a c i l i t y would add between 7 and 11 months to each
project's schedule, as shown i n Table 6.
TABLE 6
CONTRACT SCHEDULES VERSUS PROBABLE SCHEDULES
Contract
Completion
Project Date
Y uma 7- 30- 86
Tucson 4- 1 0- 86
Florence 10- 1 0- 86
M i nsl ow 10- 30- 86
Probable
Compl etion Variance
Date ( months)
Source: Compiled by Auditor General staff from DOC/ PM contract and the
consul tant ' s report
Project Has Been Delayed - The $ 72 million prison construction program has
a1 ready been del ayed. DOC del ayed the construction program by withdrawing
i t s request for funds for the architecture contracts. In addition, delays
also resulted from the architects opposition to signing contracts that do
not contain reuse clauses.
DOC withdrew its October 1984 request for funds for t h e a r c h i t e c t s '
contracts from the Joint Legislative Budget Committee ( JLBC) . This request
* Inmate labor and material purchasing are two additional factors that
i f not monitored could delay construction. According to our
consultant, detailed construction schedules for phases using inmate
labor and identification of owner purchased materials should be
completed as soon as possible.
was withdrawn because of concerns surrounding the previously signed PM
contract.*
The PM expressed concern over this delay. In a l e t t e r to DOC dated
October 16, 1984, the PM stated:
" The design phase is very tightly scheduled and i s on
the critical path. Delays i n signing the contract will
result i n delays i n bidding the construction and may
effect the final compl etion dates. We have prepared
the contracts and their execution i s now apparently
being delayed for reasons beyond our control. "**
DOC waited until November 1984 to request the architectural funds.
Another major delay resulted from the architects reluctance to sign
contracts not containing reuse clauses.*** DOC d i d not include reuse
clauses because of legislative concern regarding the reuse clause i n the
architect's contract for a previous project. However, architects believe
these clauses are necessary because of their 1 iability for their designs.
I t took a month of negotiations w i t h the architects before an acceptable
position was reached.**** To protect architects who prepare the original
designs, the State will require the architects who reuse the plans to
assume all liabilty.
* Several questions were raised by 1 egislators and legislative staff
regarding the appropriateness of the project manager sel ection ( see
Other Pertinent Information, page 61). The absence of a penalty
clause i n the contract, provisions for payment to the PM both before
and after the contract period, and a change i n the PM's personnel
were questioned.
** Another factor that could increase the design phase review time i s
the involvement of the The Public Institutions Ad Hoc Committee.
During the design phase of the Arizona Correctional Training
Center - Tucson project, the Committee' s review required
approximately 3 months. A similar situation occurred w i t h the Joint
Legi sl ati ve Prison Committee i n Cal i forni a. For t h i s reason, the
Cal i forni a 1 egi sl ature 1 i m i ted i t s comni ttee' s review time to 30 days.
*** A reuse clause provides the architects with an additional payment
each time their design i s used.
**** According to the PM, this delay was compounded by the fact that the
architects' contracts were signed shortly before the Christmas and
New Years holidays. Thus, the architects were not able to meet w i t h
DOA and DOC personnel to discuss design requirements until after the
f i r s t of the year.
Delays May Result In
Increased Costs
Delays i n the $ 72 mill ion project construction schedule could increase the
project management costs. If the projects are delayed, paying the PM a t
the current contract rate would result i n i ncreased project management
fees. In addition, the contract's provisions release the PM i f the
project i s delayed for any reason. As a r e s u l t , t h e State may be a t a
disadvantage i n obtaining continued project management services.
Increased Project Management Fees- If the PM is paid f o r t h e delays a t
the current monthly r a t e , the cost of the project management services
would increase by 47 percent. The total cost for the project manager's
services would escalate to almost $ 2.5 mil 1 ion, as shown i n Tab1 e 7.*
TABLE 7
PROJECTED COST RESULTING FROM PROJECT DELAYS
Project Variance Monthly Rate Additional Cost
Y uma + 7 months $ 1 0,500
Tucson + 11.67 months 18,000
Florence + I 0.67 months 16,300
Wi nsl ow + 11 months 18,000
Program Mgt. + 11 months 12,977
Total additional costs 798,228
Payment t o PM under current contract 1,698,600
Possible t o t a l cost for PM's services through 12- 1- 87 $ 2,496,828
Source: Compiled by Auditor General staff from consultant ' s probable
schedules and DOC/ PM contract
Delays Release PM From Obligations - Provisions i n the contract release
the PM from any obligations i n the event of delays, and place the State i n
an inferior bargaining position. Although construction contracts
typically obl igate the project manager to provide additional services
resulting from delays, the PM i s not required to provide such services
* Projected costs a r e based on monthly construction and program
management fees, i f the delays are through no f a u l t of the PM and the
post- contract payment provisions are agreed to by DOC and the PM.
under the current contract. As a result, the State is placed i n an
inferior bargaining position i f the projects are delayed. Therefore,
future contracts should bind the project manager for a reasonable period
of time.
The Office of the Auditor General retained an expert in contract law to
analyze the contract between DOC and the PM for the $ 72 million prison
construction program.* The attorney reported that construction contracts
typically require a project manager to provide additional services re1 ated
to the project i f delays occur. According to our attorney, " a
construction contract will typical ly obl igate a project manager or
contractor to perform additional services that are later determined to be
necessary, and will state a t least a general method for determining the
compensation for the additional services. "**
The current contract releases the PM from any obligations i f the project
i s delayed.*** According to our attorney, the most 1 ikely interpretation
of the contract is that:
" PM has no responsibil ty for additional services and
expenditures unless i t voluntarily assumes them by
entering into a separate agreement that amends the
original AGREEMENT. A t most, the original AGREEMENT
may implicitly impose upon the parties a duty to
exercise good faith i n attempting to negotiate an
amendment. However, the AGREEMENT a1 most certainly
does not obligate either party to reach final agreement
on the amendment."
The contract leaves no margin for even insubstantial delays. Any delay
* The contract attorney's analysis is i n Appendix 111.
** According to our attorney, although the additional services and
compensation are indefinite when the contract i s formed, these
provisions woul d be " sufficiently definite to enforce, because the
stated method of determining compensation gives the court a
reasonable basi s for determining each party's obl igations" and
determining a remedy in the case of a breached contract.
*** The provisions releasing the PM from i t s obligations were included
because DOC, 1 egi sl ati ve and gubernatori a1 staff wanted the contract
to limit the PM's fees.
releases the project manager from the project.* According to our attorney:
"[ Olnce a project i s delayed beyond a scheduled
completion date, OWNER must use a different project
manager to supervise the completion of the project,
unless OWNER induces PM to continue i t s services by
negotiating an amendment to the AGREEMENT. '
Because the PM i s not obligated to perform additional services, the PM is
i n a strong bargaining position to obtain higher fees.** According to our
attorney:
" OWNER 1 ikely would find i t s e l f i n a greatly inferior
bargaining position i n negotiating an amendment to the
agreement. For example, i f the additional services are
closely related to the services that PM has agreed to
perform i n the original agreement, a desire for
simp1 ici ty, uniformity , or minimization of transaction
costs would encourage OWNER to retain PM, rather than a
new project manager, for the additional services, even
if that required payment of a premium fee that exceeds
the fee for commensurate services under the original
contract. "
Although the contract contains provisions for payment i f the project i s
delayed, these provisions are not enforceable. According to our attorney:
". . . the AGREEMENT'S provisions for additional
compensation are not enforceable; instead, they are
unenforceable recommendations for the terms of a
subsequent agreement to amend the original AGREEMENT.
If completion of a project or phase of a facility i s
delayed beyond its scheduled completion date, PM would
have no obligation under the original AGREmN l - to
continue performing any services . . . [ m] oreover, even
i f PM and OWNER successfully negotiated an amendment,
neither of them would be obligated by the original
AGREEMENT to agree to the particular ' additional
instal lments' recommended i n the original AGREEMENT;
instead, they could agree upon any compensation
necessary to induce PM to continue its services."
( emphasis added)
* Although the project has already been delayed, the PM i s currently
working on the project without an amended agreement. The PM informed
the Department of the need to amend the contract in a November 21,
1984 1 etter, however, this has not been done..
** If DOC and the PM did not reach an agreement, DOC could hire a new
project manager or be i t s own project manager. In either case, the
disruptions to the project completion schedule may be severe.
3 8
In contrast, most project management contracts provide some flexibility.
For example, contracts typically grant the owner the option to retain the
project manager for a period of 90, 120 or 180 days. In addition, an
option to retain the PM for additional services is enforceable i f i t
obligates:
". . . ( 1) PM to perform the additional services and
incur the additional expenses and ( 2) OWNER to pay for
those services and to reimburse the PM for the
expenditures, both obligations subject only to the
condition that OWNER request those services i n writing
after determining the need for additional services. "
Delays May Extend The
Temporary Bed Problem
Delays i n the prison construction program could extend the temporary bed
problem. DOC's need for additional temporary f a c i l i t i e s may increase as a
result of the construction program's delays. Several alternatives could
be considered to meet DOC's need for inmate housing.
Additional Temporary Facilities May Be Needed - DOC may face a critical
need for additional temporary beds, i f the schedules are not met.* As of
December 1984, DOC had approximately 1,260 male inmates in temporary
beds. However, DOC estimated that all inmates would be in permanent beds
by November 1986 as a result of the current construction program. If the
schedules are delayed, DOC could have approximately 2,367 inmates i n
temporary beds by February 1987, as shown i n Table 8.
* For a discussion of problems w i t h temporary beds, see Finding I ,
page 5.
39
TABLE 8
POSSIBLE OPERATING CAPACITY AND INMATE PROJECTIONS
JULY 1986 THROUGH JUNE 1987
July 1986
August 1986
September 1 986
October 1986
November 1986
December 1986
January 1987
February 1987
March 1 987
April 1987
May 1987
June 1987( 1)
Operating
Capacity
Projected
Popul ation
9,117
9,177
9,240
9,309
9,379
9,470
9,542
9,621
9,715
9,797
9,870
9,939
Temporary
Beds Needed
( 1) Current DOC monthly projections extend to June, 1987. Projections
extending beyond June, 1987 are forecast a t six month intervals.
a
Source: Compiled by Auditor General staff from DOC'S inmate projections
and consultant' s projected completion dates i n Appendix I1
Inmate Housing Alternatives Needed - Several alternatives need to be
examined to determine how inmate housing needs can be met i f projects go
beyond schedules. One a1 ternative woul d be additional use of private
contractors i n place of inmate labor to expedite the construction program.
However, while t h i s a1 ternative would save time, it would a1 so increase
costs. DOC could also make provisions to obtain additional temporary a
housing such a s t e n t s and t r a i l e r s . However, this a1 ternative may strain
the existing f a c i l i t i e s and could create additional problems w i t h inmate
security.
( I
CONCLUSION
The schedules for the $ 72 million prison construction program may not be
met. Delays i n the construction program would result i n increased project •
management costs. Moreover, if the projects are not completed on schedule
additional actions may be necessary t o address the increased prison
overcrowding.
RECOMMENDATIONS
1. The S t a t e should require t h a t f u t u r e project manager contracts include
provisions t h a t grant the S t a t e the option t o r e t a i n t h e project
manager f o r a reasonable period of time.
2. The Department of Administration should ask the PM t o evaluate the
a l t e r n a t i v e of using more p r i v a t e c o n t r a c t o r s and l e s s inmate labor.
This evaluation should be based on time savings and added costs.
3. DOC should evaluate the e f f e c t s t h a t delays will have on their need
f o r inmate housing and make provisions t o meet those needs.
FINDING IV
THE DEPARTMENT OF CORRECTIONS DOES NOT EXERCISE ADEQUATE CONTROLS OVER
CONSTRUCTION- RELATED ACTIVITIES
The Arizona Department of Corrections ( DOC) does not always exercise
sufficient controls over construction. Unauthorized construction and
other construction problems have limited the capacity of DOC and other
parties to control DOC facil i ties construction. Construction cost systems
do not provide adequate financial control i nformation, and control s over
inventory are weak. Further, the Department encountered problems when
using Arizona Correctional Enterprises ( ARCOR) i n the construction of the
East U n i t a t Arizona State Prison ( ASP- East) .
Unauthorized Construction And Other Problems
Have Limited Control Over Construction Projects
Unauthorized construction and other problems have 1 imi ted the ability of
the Department of Corrections and other responsible parties to control and
monitor DOC facil i t i e s construction. A1 though statutes relating to the
Department of Administration ( DOA) require DOA to review and approve plans
and changes to plans, the Department of Corrections has failed to
consistently submit plans and changes for DOA review and approval. In
acting as i t s own construction manager and contractor, DOC has undermined
controls that normally exist among the various parties involved i n pub1 ic
facil i t i e s construction. Moreover, the use of inmate 1 abor i n critical
construction activities has restricted DOC's control over project
progress.
Failure To Comply With Statutes Relating To DOA Review And Approval - The
Department of Corrections has not consistently compl ied w i t h statutes
requiring DOA review and approval of f a c i l i t i e s construction plans. As a
result, DOC has built unapproved structures, some of which may be unsafe.
Poor communication between DOC Facil i ties Construction staff and
Operations staff has been a primary factor limiting DOC's ability to
monitor construction changes and report those changes to DOA.
Statutory requirements mandate that DOA review and approve new
construction projects, improvement projects and changes to construction
work i n progress. Within the Department of Admini stration, review and
approval authority is vested w i t h the Division of Facil i t i e s Planning.
A. R. S. $ 41 - 726. A. states:
" The [ Dlepartment [ of Administration] shall have the
fol 1 owing faci 1 i ti es planning and construction powers
and duties:
. . . 2. Review a l l proposed projects and improvements
of state agencies . . .
3. Review a1 1 architectural , engineering, and
construction contracts prior to submission to the
Department of Law . . .
4. Approve plans and specifications and changes thereof
for all projects and improvements for which funds are
appropriated by the 1 egis1 ature . . .
5. Review and approve all progress payments on all
major projects and improvements . . .
6. Make regular inspections of all projects and
improvements during the course of construction to
insure compl iance w i t h the plans and specifications
approved by the director . . .'
Although changes to plans and specifications during construction are not
uncommon, DOC'S failure to inform DOA of them as required by 1 aw results
i n inadequate review of changes, which may lead not only to unapproved,
b u t also to unsafe construction. For example, DOA inspection of the
Douglas 60- man dormitory revealed several deviations from plans and
specifications. Only one layer of sheet rock was used i n actual
construction, although plans required two layers to comply w i t h f i r e
codes. Specifications also required 20 ampere comnercial outlets for this
f a c i l i t y ; y e t , inspection reports show that 15 ampere residential outlets
were delivered and installed a t the s i t e instead. In expressing their
concerns regarding the abi 1 i ty of residential out1 ets to hol d up during
expected usage, the architectural firm responsible for the project
stated:
" The state has contracted and paid for the preparation
of these drawings and specifications . . . If the state
wishes to deviate from the plans and specifications
without prior approvals, we will not be he1 d
responsible for those items b i d . . . [ Rlesidential
type outlet boxes are not i n keeping with the quality
required by this building type . . . 24 inmates are
sharing approximately 1900 s. f. and each inmate i s
1 iable to have . . . electrical appliances. This i s a
very heavy concentration of electrical usage and
residential type materials are not made f o r t h i s type
usage . . ."
In yet another recent case, DOA discovered that a vent stack to a
gas- fired hot water heater had not been vented to the outside. Rather, i t
appeared to terminate w i t h i n the building, posing a serious f i r e hazard to
future occupants. DOC may not have been aware of and may not have
corrected this hazard had DOA not discovered this problem on routine
inspection. Thus, the degree to which there may have been undiscovered
design changes 1 eading to unsafe construction i s unknown,
Evidence shows that poor communication w i t h i n DOC i t s e l f has limited DOC'S
a b i l i t y t o monitor construction changes and report them to DOA. In August
1984 the DOC director found i t necessary to formally remind staff that no
changes were to be made to projects without specific written authority.
In some cases Operations staff have made changes without informing DOC
Facilities Construction staff. Certain changes to the Doug1 as warden's
house, including the instal 1 ation of an " extravagant" fireplace, were
apparently made without Facil i ties Construction staff being i nformed.*
One case involved not merely a change, b u t the construction of an entire
building without the knowledge or approval of either DOC Facilities
Construction staff or DOA. Facil i ties Construction staff apparently had
no knowledge of construction on a Florence trustee shower building, which
was a1 ready being buil t when DOA inspectors found i t i n mid- 1984. Again,
had DOA not reviewed plans for this building, the welfare of future
occupants could well have been jeopardized. An inmate had drawn the
original plans, which were implemented without review by a design
professional. DOA inspection of the plans revealed that they were
unacceptable. Among other t h i n g s :
* DOC i s currently performing an i nternal misconduct investigation of
the ci rcumstances surrounding these modifications. In yet another
case invol ving construction a t Safford, a DOC official has requested
an internal review to determine whether DOC approved funding for these
construction activities.
a Drawings showed trusses confl i c t i ng with ( going through) the
guard house on top o f the building;
a No specifications accompanied the drawings, thus giving no
i n d i c a t i o n o f q u a l i t y and standards f o r b u i l d i n g material s t o be
used;
a L i t t l e provision f o r 1 i g h t i n g and v e n t i l a t i o n existed even
though t h i s was a windowless building; and
a Plans were neither signed nor sealed by a r e g i s t r a n t o f the
Board o f Technical Registration, as required by A. R. S.
532- 1 42. A.
According t o a DOA o f f i c i a l , DOC has taken steps t o correct these plans.
I n addition, DOC subsequently developed F i e l d Change forms i n an attempt
t o improve i n t e r n a l communication and authorization o f changes r e l a t i n g
t o construction.
Simultaneous Role As " Owner," Construction Manager And Contractor
Undermines External Control - DOC'S decision t o a c t as i t s own project
manager and contractor has undermined checks and balances t h a t o r d i n a r i l y
e x i s t among major p a r t i c i p a n t s i n the construction o f State buildings.
Under normal conditions, each p a r t i c i p a n t contributes i t s own t a l e n t s as
part of the construction team. When DOC acts as i t s own p r o j e c t manager
and contractor, however, DOA Facil i t i e s Planning i s hampered i n
attempting t o ensure t h a t construction takes place according t o approved
plans and specifications. Input from the design professional i s also
l i m i t e d , and i n one case DOC may have violated Board of Technical
Registration statutes. The extent t o which the recent transfer of DOC'S
Facil i t i e s Construction s t a f f t o DOA w i l l a1 l e v i a t e these problems i s
unknown a t t h i s time.
Under ordinary conditions involving f a c i l i t i e s construction, the owner i n
charge o f construction, the architect, the construction manager, the
contractor and DOA F a c i l i t i e s Planning each play special r o l e s i n the
process, making contributions as part of a team. The owner, for example,
makes all decisions after weighing the recommendations of the architect
and the construction manager. The architect conceives and develops
designs for structures subject to the owner's approval. The construction
manager i s responsible for ensuring that the contractor follows plans and
specifications. The contractor performs the actual construction.
Finally, DOA Facil il ties Pl anning reviews and approves plans and changes
i n accordance w i t h A. R. S. 541 - 726. A.
However, when DOC has both overseen construction and built a structure,
DOA is less able to ensure builder compliance w i t h specifications and
plans. DOC has been i t s own construction manager and b u i l der/ contractor
for smaller projects, and for the Douglas project when contract
provisions prohibited DOC from replacing the original construction
management company after its termination. When DOC i s owner,
construction manager and contractor, however, DOA i s 1 i m i ted i n i ts
abi 1 i ty to i nduce compl iance.
Normally DOA can work through the owner, who may refuse to allow
the contractor to go to the next construction phase until the
contractor has made the corrections. In this case, working
through the owner may result i n limited success, because the
owner - i s the contractor.
a Ordinarily DOA can enlist the assistance of the architect, who
may refuse to approve changes to plans made by the contractor.
Working w i t h the architect i s 1 ess effective, however, because
the architect i s under contract w i t h and works for the
owner/ contractor.
Normally DOA can also withhold payments to the contractor until
corrections have been made. Withholding payment to DOC is not
possible i n this case, since State funds have already been
appropriated to the owner/ contractor.
When DOC i s i t s own construction manager, b u i l d e r and agency i n charge o f
construction, the primary a1 ternative DOA has i s t o e f f e c t compl iance
mainly through persuasion.
The design professional i s s i m i l a r l y 1 imited i n ensuring t h a t
construction occurs i n accordance with plans and specifications, which i n
a t l e a s t one case may have l e d t o a v i o l a t i o n o f the Board o f Technical
Registration statutes. I n t h i s case, DOC received a request from the
Doug1 as warden t o expand the dining f a c i l i ty. Drawing modifications
completed by on- si t e personnel without input from the a r c h i t e c t u r a l f i r m
were attached. The f i r m expressed i t s concerns regarding t h i s change
request i n an August 14, 1984, l e t t e r t o DOC.
". . . The o r i g i n a l mechanical and e l e c t r i c a l loads
were based on a capacity o f 50 people. By increasing
the size o f t h e d i n i n g area, these design 1 oads may not
be adequate t o heat, cool and l i g h t the area . . .
Architecture One, Ltd. w i l l not take any responsi b i l i ty
for changes made by the State t o our design without our
review and approval . . . '
However, because DOC was the owner as well as the contractor and
construction manager, it could, and did, override the design f i r m ' s
recommendation. Since DOC has no registered a r c h i t e c t or engineer on
s t a f f , t h i s specific change i s not being made under the auspices o f any
registered design professional. This action i s an apparent v i o l ation o f
Board o f Technical Registration s t a t u t e s re1 a t i n g t o publ i c works ( A. R. S.
932- 1 42. A. ) .
" Drawings, p l ans, specifications, and estimates for
publ i c works o f the state . . . involving architecture,
engineering, . . . landscape architecture or land
surveying, shall be prepared by o r under the personal
d i r e c t i o n of, and the construction o f such works shall
be executed under the d i r e c t supervision o f a qua1 i f i e d
r e g i s t r a n t . . ."
The recent transfer o f the DOC F a c i l i t i e s Division t o DOA may help
a l l e v i a t e some o f these problems, as DOA w i l l assume a more d i r e c t r o l e i n
construction management. However, we cannot p r o j e c t a t t h i s time the
extent t o which the transfer w i l l address the problems due t o the
recentness of the transfer and the f a c t t h a t DOC w i l l continue t o manage
some construction projects.
Use O f Inmate Labor Has Restricted DOC'S Project Control - The use o f
inmate 1 abor has r e s t r i c t e d DOC ' s capacity t o control construction
progress. Legislative i n t e n t mandates DOC t o b u i l d prison f a c i l i t i e s
expeditiously and inexpensively using inmate 1 abor. A1 though use of
inmate labor was o r i g i n a l l y intended t o keep costs down, it has
contributed s i g n i f i c a n t l y t o construction delays and reduced DOC ' s
capacity t o control construction progress e f f e c t i v e l y .
Due t o the urgent need t o enlarge prison capacity i n the State, minimizing
the time t o complete projects and keeping costs down has been most
important. Legislative i n t e n t r e l a t i n g t o T i t l e 41 , A r t i c l e 5
( " Corrections Fund" 1, requires that:
". . . Prison labor be u t i l i z e d t o the f u l l e s t extent
t o help keep costs down and . . . [ t l h e construction
schedule be implemented as expeditiously as
possible . . ."
However, it has been d i f f i c u l t t o both save time and money using inmate
1 abor. According t o knowledgeabl e people, p r o d u c t i v i t y of inmates used
f o r construction projects i s extremely low. For t h i s reason, when time i s
important, inmates should be used only i n a c t i v i t i e s t h a t are not p a r t o f
a " c r i t i c a l path." A c r i t i c a l path consists of those a c t i v i t i e s on which
delays would s i g n i f i c a n t l y affect the completion time of the overall
project. However, DOC has used inmate labor i n c r i t i c a l path a c t i v i t i e s
( presumably t o keep costs down). This has delayed the work of p r i v a t e
contractors working on d i f f e r e n t portions of the same job i n the Douglas
project, r e s u l t i n g i n additional contractor costs t o DOC.
Delays have r e s u l t e d n o t only because of low productivity, but also
because of inmate sabotage. Inmate sabotage has also resulted i n
unnecessary costs when materials must be replaced or equipment must be
rented t o correct damage. For example, inmates torched p l a s t i c plumbing
pipes i n a Florence shower building, r e s u l t i n g i n the warping o f the pipes
and a possible need t o replace or r e p a i r them. I n the Douglas 60- man
dorm, wires were cut where they came out o f the conduit, requiring 2 hours
o f rewiring work f o r each outlet. The delays r e s u l t i n g from t h i s incident
were p a r t i c u l a r l y serious because o f ongoing problems with delays i n
materials procurement. Delay i n obtaining the wire was holding up
completion o f a p a r t i c u l a r job. To expedite job completion, the
superintendent borrowed some wire from Operations personnel a t the site.
A f t e r the sabotage, however, the superi ntendent was unabl e t o obtai n
enough additional wire t o compl ete the job. The superintendent estimated
t h a t t h i s incident held up the job f o r a t l e a s t a month.
Additional supervision required f o r inmate 1 aborers also adds t o the costs
o f using inmate labor. I n one case i n which there was inadequate
supervision, inmates working a t the Douglas s i t e excavated s o i l t o a depth
of 9 f e e t i n some areas rather than the specified 4 feet. As a result,
workers had t o use additional gravel t o f i l l t h e s i t e , requiring more
materials, more time and additional costs. Two additional foremen have
since been h i red i n Doug1 as especi a1 ly t o supervise i nmates.
A. R. S. § 34- 201 . B., re1 a t i n g t o doing work without a d v e r t i s i n g f o r bids,
and A. R. S. $ 41 - 2572. B., r e l a t i n g t o construction o f pub1 i c f a c i l i t i e s by
inmates, both state t h a t inmate labor may be used i f such use would be
advantageous. Yet, Norman R. Cox Associates, i n a consultant report
completed f o r the Arizona Department o f Corrections i n September 1984,
expressed serious doubts as t o whether using inmate labor would
s u b s t a n t i a l l y reduce construction costs.
". . . the use o f inmate labor i n construction may
contribute t o reducing overall costs; however, if
projects performed by inmates take longer t o complete,
those cost savings may be offset . . ." [ emphasis added1
Inmate labor problems have not been 1 imited t o t h i s State. Other states
have recognized some of the problems i n using inmate labor and have
consequently l i m i t e d t h e i r use o f inmate labor. A Colorado o f f i c i a l
characterized one p r o j e c t using inmate labor as a " disaster."
Subsequently, the State used no inmates a t a l l f o r one p r o j e c t and l i m i t e d
i t s use i n another t o the destruction o f e x i s t i n g f a c i l i t i e s . C a l i f o r n i a
r e s t r i c t s i t s use of inmate labor t o jobs such as pouring sidewalks and
painting, i n p a r t because prison overcrowding demands t h a t projects be
completed as quickly as possible. F i n a l l y , Texas correctional o f f i c i a l s
have stated t h a t the Texas inmate labor program has not been nearly as
successful as has been said. I n fact, Texas i s seriously considering
eliminating a l l inmate 1 abor because o f construction delays, sabotage and
problems with the q u a l i t y o f work. Inmate labor has delayed construction
a t a time when Texas, l i k e most other states, i s experiencing overcrowding.
L i ttl e Control Over Construction
Costs And Inventories
The Department does not have enough control over p r o j e c t a c t i v i t y costs o r
inventories. DOC 1 acks the fi nanci a1 information system needed t o control
costs. I n addition, we found inadequate inventory controls a t the Douglas
f a c i l i t i e s site.
Department Lacks Adequate Cost Information System - The Department lacks
an adequate construction cost control system. The Arizona Financial
Information System ( AFIS) and DOC'S manual system do not provide enough
information on p r o j e c t costs. Experts recommend t h a t construction
companies use cost control information systems t o t r a c k d e t a i l e d p r o j e c t
a c t i v i t y costs.
A1 though the f i n a l cost o f a p r o j e c t cannot be determined or forecasted
accurately u n t i l the p r o j e c t i s substantial ly complete, successful cost
control depends l a r g e l y on how well cost control techniques are employed
as management tool s. Forecasting do1 1 a r obl i gations and comparing costs
t o budget amounts or forecasts helps p r o j e c t managers control actual
costs. Information developed by review and analysis of these comparisons
provides both timely and accurate cost data, and helps signal potential
probl ems. *
* Construction Management and Engineering, Principles and Practices,
p, P* 87.
Although DOC uses both AFIS and a manual system t o track costs, AFIS does
not provide a1 1 the information necessary f o r an e f f e c t i v e construction
management information system. Currently, AFIS accumulates expenditures
and encumbrances by p r o j e c t t o t a l only, and supplies monthly reports. I n
addition, the manual system used has not always supplied detailed
budgeted, expended and obligated cost data f o r DOC- managed construction
projects. As a r e s u l t , some Land, Buildings and Improvements ( LB& I)
p r o j e c t budgets do not provide s u f f i c i e n t d e t a i l and costs are not
consi s t e n t l y captured by a c t i v i t i e s w i t h i n a project.
Timely, detailed information by p r o j e c t / a c t i v i t y woul d be useful to:
1) i d e n t i f y variances between budgeted amounts ( actual o r estimated) and
expended amounts ( actual costs) i n the various p r o j e c t areas, and 2 ) allow
p r o j e c t managers t o compare actual costs t o estimated costs. For example,
the a b i l i t y t o track whether a p r o j e c t i s over budget on the heating and
a i r conditioning systems, under budget on fencing, and close t o budget on
the sewer system adds t o p r o j e c t control. The current method, often
simply tracking of t o t a l expenditures by project, a1 1 ows f o r considerable
freedom i n spending and does not provide the comparisons needed t o assess
performance. Further, i nterviews with some DOC emloyees i ndicate t h a t
d a i l y p r o j e c t budget status information i s not available, making it
d i f f i c u l t f o r construction- related personnel t o keep current on a
p r o j e c t ' s f i n a n c i a l status.* For example, during mid- 1984 work was
stopped a t ASP- East f o r several weeks because o f the uncertainty o f the
budget balance. **
* A t the time o f our report, budget/ expenditure amounts by a c t i v i t y f o r
ACW, F1 amenco, and Doug1 as ( medium, mi nimum) were not r e a d i l y
obtainable. However, DOC expects t h i s t o be available once
i n d i v i d u a l l y coded source documents are entered i n t o the new
computerized information system.
** I n a d d i t i o n t o the lack o f a formal cost information system, our
review o f DOC'S cost system indicated t h a t costs a r e n o t always
a1 1 ocated among projects. For example, according t o accounting
personnel, several trucks purchased with ASP- East LB & I funds were
subsequently moved from ASP- East t o other construction s i t e s f o r use.
No a l l o c a t i o n of the trucks' costs has been made between ASP- East and
the other projects now u t i l i z i n g them. A l l equipment purchases are
charged t o the p r o j e c t buying the equipment without regard t o the l i f e
of the p r o j e c t or equipment, or d i r e c t benefits t o other projects
u t i l i z i n g the equipment.
Private construction companies depend on cost control ( information)
systems to ensure proper monitoring of costs. These systems provide
detailed cost information on projects/ activities, including comparisons to
budgets and forecasts. If DOC is to exercise the same level of control as
exercised by private companies it will need control systems that provide
similar information.
DOA's Prison Construction Division i s developing a computerized
construction information system using a personal computer and package
software designed for construction purposes. When functioning, it i s
expected to assist i n tracking expenditures and encumbrances by activity ,
control 1 ing inventory and equi pment, and moni tori ng 1 abor costs and
personnel scheduling. However, because the system i s not yet operative,
we are unable to evaluate i t .
Lack Of Inventory Controls - DOC has insufficient controls over supplies
and material s inventory a t the Doug1 as s i t e . * First, written inventory
listings are not maintained, a1 though more than $ 150,000 of goods were
present during our review of the warehouse. Instead, the construction
superintendent mentally keeps track of inventory on hand because he feels
staff is not available f o r t h i s task. Written 1 istings would he1 p monitor
inventory usage and coul d a1 so provide support for maintai n i ng optimum
supply and material level s. Second, inventory is not properly physically
protected from possi bl e theft or environmental damage. The i nventory
warehouse was not kept locked during the day of our review, which could
allow easy access to unauthorized people. Some large dollar items such as
heaters are being stored outside the warehouse due to lack of storage
space. Access to materials should be restricted to help prevent potential
misuse, and materials should be physically protected from the elements to
prevent deterioration.
* Due to time limitations, we limited our review of inventory to the
Douglas site only.
The Use O f ARCOR I n ASP- East
Construction Was Not P r o ~ e r
The Department o f Corrections improperly used ARCOR f o r the construction
of the Arizona State Prison East Unit. DOC violated two statutes by using
ARCOR t o complete construction o f the Arizona State Prison East Unit i n
Florence. I n addition, DOC unnecessarily paid ARCOR administrative fees
f o r services DOC would normally have performed. I n some instances, ARCOR
doubl e b i l l ed DOC, and there are s t i l l disagreements regarding amounts
owed t o ARCOR.
DOC'S Use O f ARCOR Enterprises - I n l a t e 1982 DOC administration and ARCOR
administration entered i n t o an oral agreement t o have ARCOR take over
construction of the ASP- East f a c i l i t y . DOC s t a r t e d t h e project but f e l t
that usi ng ARCOR woul d f a c i 1 i tate construction because use o f ARCOR ' s
revolving fund would help expedite purchases and payments f o r the project,
and ARCOR has a buyer and a warehouse i n Florence. No w r i t t e n agreement
or contract f o r services to be provided was prepared. However, a DOC
purchase order dated November 30, 1982, l i s t e d ARCOR as the vendor and
provided t h e f o l l o w i n g description.
"[ ARCOR i s t o ] [ plrovide a11 labor, materials,
equipment and necessary plant t o construct a medium
custody u n i t u t i l i z i n g quonset huts provided by the
Department t o ARCOR Enterprises. The F a c i l i t y w i l l be
constructed i n accordance with plans provided ARCOR
that have been approved by the Arizona Department of
Corrections. The Department requires occupancy o f the
f i r s t u n i t by no l a t e r than A p r i l 1, 1983. Total cost
o f t h i s agreement shall not exceed $ 1,500,000.00 and
ARCOR shall be reimbursed on a cost- reimbursement
basis, based on a 1.5% fee f o r administration and
overhead. '
Lack Of Compl iance With Statutes - Two State statutes were violated and
LB& I monies were unnecessarily expended because o f ARCOR's r o l e i n
ASP- East construction. Use o f the ARCOR revolving fund f o r a DOC prison
f a c i l i t y was improper. ARCOR did not always follow State bidding
procedures f o r procuring goods f o r construction. Additionally, DOC paid
ARCOR administrative fees f o r services, resul ti ng i n unnecessary
expenditure o f LB& I monies.
0 Improper Use Of Revolving Fund - DOC'S use of the ARCOR revolving
fund for prison construction violated statutory requirements.
Arizona Revised Statutes $ 41- 1624. A s t a t e s t h a t the ARCOR
revolving fund is to be used to pay expenses " for the purchase of
materials and supplies to be used for the production of food and
other items to be sold by the Department's ARCOR
enterprises . . . [ and] . . . [ flor the purchase or rental of
equipment to be used by the Department's ARCOR enterprises."
ARCOR used the revol vi ng fund to purchase ASP- East construction
suppl i es and material s. DOC reimbursed ARCOR's revol vi ng fund
upon receipt of a claim for payment from ARCOR.
The Legislative Counci 1 i n its Interpretation 0- 85- 4," concluded
that the ARCOR revolving fund was used improperly.
". . . [ Tlhe use of the ARCOR revolving fund for
prison construction unrelated to ARCOR is not
authorized by A. R. S. section 41- 1624. The fund is
for the production of ARCOR products, the
compensation of pri soners employed i n ARCOR
enterprises and re1 ated ARCOR expenses. "
State Purchasing Requirements Circumvented - ARCOR did not always
fol 1 ow State purchasing 1 aws regarding bidding during the
ASP- East construction. In some instances, " written quotesu**
rather than sealed, competitive bids were used to procure goods.
ARCOR used written quotes to expedite the procurement process i n
emergency cases when the project was a t a standstill. Two
exampl es we reviewed i ncl ude an $ 8,900 expenditure for fenci ng
and a $ 6,200 expenditure for security pl umbi ng fixtures.
* Appendix V contains the full body of the Legislative Council
memorandum.
** Written quotes, as defined by the ARCOR purchaser for ASP- East, are
prepared the same as bids except that responses are not sealed or
opened publicly.
For purchases over $ 5,000 A. R. S. $ 41 - 730 requires:
". . . a l l purchases o f supplies, materials,
equipment . . . and contractual services made by
any budget u n i t having an estimated cost i n
excess o f $ 5,000 per transaction shall be based
on sealed, competitive bids . . ."
Section D o f t h i s statute provides f o r a waiver by DOA o f such
bidding.
". . . i f there exists a threat t o public health,
we1 fare or safety . . . The state budget u n i t shall
request approval and provide w r i t t e n documentation o f
the existence o f a threat t o pub1 i c health, welfare or
safety. The budget u n i t shall keep on f i l e the w r i t t e n
documentation and authorization by the director. "
ARCOR did not follow these emergency procedures on t h i s DOC
project. I n cases i n which sealed bidding was not used, project
costs could have increased due t o 1 ack o f competition.
LB& I Funds Expended Unnecessarily - DOC paid ARCOR an administrative fee
f o r services, based on a percentage o f expenditures made f o r ASP- East.
I n i t i a l l y , as indicated i n the November 30, 1982, purchase order, ARCOR
received a fee o f 1.5 percent o f claims submitted t o DOC f o r
reimbursement. Later, t h i s fee was increased t o 3 percent.* According t o
an ARCOR f i s c a l o f f i c e r , an estimated $ 74,000 was received i n
administrative fees** during ARCOR's r o l e with ASP- East construction. Had
DOC used i t s e x i s t i n g employees t o perform t h e d u t i e s it requested of
ARCOR, t h i s LB& I money would not have been spent.
ARCOR Double B i l l e d Some Claims To DOC And Some Financial Disagreements
S t i l l Exist - I n some instances ARCOR b i l l e d DOC twice f o r the same
claims, and disagreements s t i l l e x i s t over monies ( not d i r e c t l y related t o
the double b i l l ings) possibly due t o ARCOR. F i r s t , some claims o f ARCOR
* The increase t o 3 percent was requested by ARCOR because of the large
amount of time spent processing purchase and b i l l ing documents. ** The exact amount was not r e a d i l y available due t o ARCOR's 0
record- keepi ng system.
expenditures regarding ASP- East have been submitted t o DOC f o r
reimbursement more than once. According t o a review o f these double
b i l l i n g s performed by DOA i n mid- 1984, ARCOR double b i l l e d DOC by about
$ 40,000.* Our l i m i t e d t e s t review o f DOA's work supports the conclusion
t h a t double b i l l i n g did occur. Although the exact cause o f t h i s i s not
evident, ARCOR procedures f o r b i l l i n g DOC and f i l i n g ASP- related expenses
may have contributed t o the double b i l l i n g s . According t o an ARCOR
o f f i c i a l , the double b i l l e d receivable has been w r i t t e n o f f , and both DOC
and ARCOR agree t h a t t h i s problem has been resolved.
Secondly, disagreements s t i 11 e x i s t over some c l aims ARCOR submi t t e d t o
DOC f o r payment. DOC claims r e s p o n s i b i l i t y f o r some small labor claims
received from ARCOR. However, according t o ARCOR records about $ 87,000 i n
receivables are due from DOC. Included i n t h i s t o t a l receivable are two
unresolved claims ( b i l l i n g s ) t o t a l i n g $ 26,700 from ARCOR t o DOC f o r
1 aserpl ane 1 and 1 eve1 i ng services during November and December o f 1 982.
DOC contends t h a t an oral agreement was made between ARCOR and DOC'S
D i v i s i o n o f F a c i l i t i e s and Construction t h a t allowed ARCOR t o use f o r i t s
own purposes some equipment rented by DOC i n exchange f o r the use o f
ARCOR's laserplane l e v e l e r f o r the East Unit. Since the agreement was not
i n w r i t i n g , c u r r e n t ARCOR management considers the l e v e l i n g performed f o r
ASP- East an outstanding receivable for services rendered. Due t o time
l i m i t a t i o n s , we were unable t o v e r i f y any amounts t h a t DOC may owe ARCOR.
CONCLUSION
Control o f DOC construction projects i s inadequate. Unauthorized
construction and other problems have 1 imited the a b i l i t y of the Department
and other responsible p a r t i e s t o control and monitor DOC f a c i l i t i e s
construction. Construction cost information and inventory controls are
deficient. Further, DOC weakened controls over ASP- East construction by
improperly using ARCOR.
* This amount i s not exact because DOA performed a review, not an audit,
o f b i l l i n g s .
RECOMMENDATIONS
The Department of Corrections should:
1. Institute procedures to ensure that all construction and changes to
construction are reported to DOA Facil ties Planning for review and
approval.
2. L i m i t its role i n acting simultaneously as construction manager,
contractor/ buil der, and agency i n charge of construction to small and
circumscribed construction projects.
3. Limit i t s use of inmate labor i n construction to those a c t i v i t i e s t h a t
do not affect the overall completion time of projects.
4. Develop and maintain a cost information system to capture all
construction- re1 ated financial information. The system shoul d supply
accurate, up- to- date and detailed information on each construction
project and the activities w i t h i n the projects. Additional ly, it
should include cost estimates and be capable of providing
cost- to- compl ete forecast information.
5. Implement proper internal controls over construction inventories
including:
a. written inventory 1 i s t i ngs, and
b. adequate physical safeguards over inventory i tems by 1 i m i t i n g
access to inventory and by storing i tems inside a warehouse.
6. Not use ARCOR Enterprises to construct prison f a c i l i t i e s .
OTHER PERTINENT INFORMATION
During the audit, we developed pertinent information on the selection of
the project manager for the $ 72 million prison construction program and
the Corrections Fund.
Project Manager Selection
In April 1984 the Department of Corrections ( DOC) issued a request for
proposals ( RFP) for the $ 72 million prison construction program's project
management. DOC issued an addendum to i t s RFP on May 2, 1984. This
addendum included estimated individual project completion dates between
January 1986 and September 1987, a total construction program length of 39
months.
DOC used the appropriate statutes and complied with RFP requirements to
obtai n the project management services. In a memorandum* dated
December 26, 1984, the Legislative Council stated:
" [ tlhe state department of corrections has compl ied
with both the requirement of requesting proposals
outside professional services under ARS section 41- 1051
e t seq. and the estimated time schedule requirements of
ARS section 41- 1052 in implementing the contract for
the project manager . . . "
DOC received 15 proposals i n response to the RFP. Three proposals
included construction program schedules of less than 30 months, two
schedules were between 30 and 35 months, and the remaining proposals
included 38 or 39 month schedules, except for one in which the bidder did
not include a schedule.
A selection committee reviewed the different project management
proposal s. The committee consisted of six members: three DOC personnel ,
an Arizona Department of Transportation empl oyee, a Department of
* See Appendix IV for the Legislative Council Memorandum.
Admini s t r a t i o n empl oyee, and one pub1 i c member.* During i t s i n i t i a l
review the committee analyzed each f i r m ' s previous prison construction
experience, proposed s t a f f , company references, and a b i l i t y t o complete
the job. I n addition, each bidder's schedule was reviewed t o determine
whether it met the 39 month time frame outlined i n the RFP. A f t e r i t s
review, the committee selected the f i v e firms t h a t were determined t o be
the most qua1 i f i e d .
The commi t t e e interviewed representatives