Performance audit, Department of Administration, Building and Planning Services Section and Construction Services Section

              PERFORMANCE AUDIT
DEPARTMENT OF ADMINISTRATION
Building and Planning Services Section
and Construction Services Section
Report to the Arizona Legislature
By the Auditor General
October 1993
93- 9
. L
DOUGLAS R. NORTON, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
DEPUTY AUDITOR GENERAL
October 29, 1993
Members of the Arizona Legislature
The Honorable Fife Symington, Governor
Mr. J. Elliott Hibbs, Director
Department of Administration
Transmitted herewith is a report of the Auditor General, A Performance Audit of the
Department of Administration, Building and Planning Services Section and
Construction Services Section. Ths report is in response to a December 13, 1991,
resolution of the Joint Legislative Oversight Committee and is the second of six audits
scheduled on the Department.
The report addresses the effectiveness and efficiency of the Building and Planning
Services Section and Construction Services Section. We found that a lack of funding
and inefficient management have rendered many State buildings in need of major
repairs. We also found that DOA can improve its handling of agency relocations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on November 1, 1993.
Sincerely,
~ o u aRs. Norton
Auditor General
2910 NORTH 4 4 T H STREET 1 SUITE 410 1 PHOENIX, ARIZONA 85018 1 ( 602) 553- 0333 . FAX ( 602) 553- 0051
SUMMARY
The Office of the Auditor General has conducted a performance audit of the
Department of Administration ( DOA), Building and Planning Services Section and
Construction Services Section, pursuant to a December 13, 1991, resolution of the Joint
Legislative Oversight Committee. The audit was conducted as part of the Sunset
Review set forth in Arizona Revised Statutes 9541- 2951 through 41- 2957 and is the
second of six audits scheduled on the Department.
Located within DOA's General Services Division, the Building and Planning Services
Section and the Construction Services Section have oversight responsibility for the
State's buildings. The mission of these sections is to provide safe, efficient, and
accessible facilities for State employees, agencies, and the public. Their responsibilities
and activities include inspecting State- owned buildings, determining the use of space
in State facilities, planning for major maintenance and capital improvements, and
project management for construction of new facilities.
Many State- Owned Buildings Are In Need
Of Major Repair ( see pages 7 through 14)
Many State facilities need major repairs and renovation. Numerous problems exist,
including overloaded electrical systems, structurally unsafe cooling systems, leaking
roofs, and insufficient fire- safety systems. For example, in a State office building ( the
former State Compensation Fund Building) interior walls are cracking, chipped, and
stained from rainwaters leaking through the roof. Many of these problems stem from
the deferral of building renewal projects.
Tight State budgets have resulted in limited funding for building renewal. In 1986,
legislation was passed requiring the Joint Committee on Capital Review to develop
a uniform formula for computing the annual funding needs for building renewal.
Applying the formula established by the Committee, approximately $ 60 million should
have been appropriated for building renewal between fiscal years 1987 and 1993, yet
only $ 30 million has been actually appropriated. As a result, building renewal projects
have been deferred to the point that more costly repairs may be needed. Without
increased funding, the State's capital assets, valued at over $ 1 billion, will further
deteriorate and people using the facilities could be endangered.
In addition to the need for increased funding, DOA also needs to improve its
management of the State's assets. For example, DOA lacks basic information for State
buildings, such as historical operating costs and the amount of money required to
address necessary repairs. Without such information, DOA is limited in making cost-effective
decisions regarding repairs and replacement of major building systems and
renovations to the building itself. In addition, DOA does not track individual building
renewal projects and thus, no cumulative listing exists of deferred projects. The
Department also generally fails to use its building inspection information to identify
or confirm building renewal needs.
DOA Needs To Improve Services
To Agencies Involved In
Relocations ( see pages 15 through 19)
DOA needs to improve in its role as a service organization to those agencies it
relocates. Since September 1990, DOA has been relocating agencies into vacant space
which became available due to new construction and the purchase of additional
properties. To evaluate DOA's effectiveness in its efforts, we surveyed 43 agency
officials that had undergone a move between September 1990 and June 1993. Although
many agencies felt that DOA had performed adequately, it was evident that steps
could be taken to improve the process. We found that DOA has not adequately
assessed agency needs prior to making the decision as to which agencies will be
moved and to where. Many agencies we surveyed encountered problems during their
relocations which could have been avoided had DOA taken a more service- oriented
approach to coordinating the move. Areas of concern included not informing agencies
of their move responsibilities, inadequate coordination of contracted services, poor
communications, and not having construction completed at the time of the move.
TABLE OF CONTENTS
INTRODUCTION AND BACKGROUND . . . . . . . . . . . . . . . . . . .
FINDING I: MANY STATE- OWNED BUILDINGS
ARE IN NEED OF MAJOR REPAIR . . . . . . . . . . . . . . . . . . .
State Buildings In
Need Of Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State's Building Renewal
Formula Not Met . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DOA Needs To Improve
Its Management Of State Buildings . . . . . . . . . . . . . . . . . . . .
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINDING II: DOA NEEDS TO IMPROVE SERVICE
TO AGENCIES INVOLVED IN RELOCATIONS . . . . . . . . . . . .
Competing Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Agency Input Needed Before
Making Relocation Decisions . . . . . . . . . . . . . . . . . . . . . . . .
DOA Needs To Ensure
Successful Moves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AGENCY RESPONSE
APPENDIX A
Page
1
7
TABLE & FIGURES
Page
Table 1 Characteristics Of Buildings In The
Department Of Administration Building System
Fiscal Year 1992- 93 . . . . . . . . . . . . . . . . . . . . . .
Figure 1 Department Of Administration
Building Renewal Formula Amounts vs.
Appropriation Received
Fiscal Years 1987 Through 1993
( General Fund & COSF) . . . . . . . . . . . . . . . . . .
Figure 2 Department Of Administration
Building Renewal Formula Amounts vs.
Appropriation Received
Fiscal Years 1987 Through 1993
( Other Funds) . . . . . . . . . . . . . . . . . . . . . . . .
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance audit and Sunset
Review of the Department of Administration, Building and Planning Services Section
and Construction Services Section, pursuant to a December 13, 1991, resolution of the
Joint Legislative Oversight Committee. The resolution called for a review of DOA's
Facilities Management Division. However, since that time the division has been
reorganized into the two sections named above which are located within DOA's
General Services Division. The audit was conducted as part of the Sunset Review set
forth in Arizona Revised Statutes ( A. R. S.) 5541- 2951 through 41- 2957, and is the second
of six audits scheduled on the Department.
DOA Oversight Of
State- Owned Facilities
One of DOA's major responsibilities is the oversight and maintenance of the State's
public buildings. State- owned facilities represent a substantial asset to Arizona, with
over 3,000 buildings on the Statewide inventory1 and a total replacement cost
exceeding $ 1 billion. Currently, the average age of State- owned buildings is 22 years.
Table 1 ( page 2) describes the Statewide inventory by characteristics, such as square
footage and replacement value.
Building svstems - State- owned buildings are organized into building systems.
Currently, there are only three designated building systems: State university facilities
assigned to the Board of Regents, Arizona Department of Transportation facilities, and
all other State facilities assigned to DOA. A. R. S. 541- 790 defines a building system as
"... a group of buildings which together constitute a single unit fm purposes of planning, land
acquisition, construction m building renewal. "
DOA has direct management responsibility for more than 40 buildings. These
buildings consist of the majority of the buildings located in the Capitol Mall Complex,
the Tucson State office building complex, and two buildings recently acquired through
DOA's purchase of distressed properties. General Services handles the daily
maintenance function for these buildings. However, for all other buildings,
management and maintenance is the tenant agency's responsibility.
1. This figure does not include the State's university facilities or approximately 700 items, such as light
poles, etc., which are included on the Statewide inventory data base but are not deemed to be a
building.
-
Table 1
Characteristics Of Buildings In The
Department Of Administration Building System
Fiscal Year 1992- 93
Buildings Valued At
Characteristic All Buildinps $ 500,000 Or More
Number of Buildings 3,183 384
Average Age 22 years 21 years
Total Replacement Cost $ 1,010,785,139 $ 785,241,367
Average Replacement Cost $ 317,557 $ 2,044,899
Total Square Feet 16,478,705 11,117,591
Average Square Feet 5,177 28,952
Source: Auditor General staff analysis of the Department of Administration's fiscal year 1992- 93
Inventory of State- owned building data.
Mission And
Responsibilities
Withn DOA's General Services Division, the Building and Planning Services Section
and the Construction Services Section have oversight responsibility for the State's
buildings. The sections' mission is to provide safe, efficient, and accessible facilities for
State employees, agencies, and the public.
Specifically, the Building and Planning Services Section performs the following
functions:
Oversees DOA space allocation, real estate acquisitions, and agency relocations;
Maintains a listing of the Statewide inventory;
Performs inspections of construction projects, statutory reviews of contracts, plans
and specifications, and Statewide building inventory inspections;
Assists all agencies in meeting statutory requirements through the review and
approval of construction and leases; and
Plans and designs the construction of tenant improvements in DOA- managed
buildings.
In addition to these responsibilities, Building and Planning Services is also charged
with capital improvement and building renewal1 planning for State- owned buildings.
Each October, DOA must present to the Governor the Capital Improvement Plan,
which contains the capital improvement plans prepared by DOA and the Board of
Regents for their respective building systems. Within the DOA building system,
individual agencies submit both capital improvement and building renewal requests
for their specific buildings. In fiscal year 1993- 94, 17 agencies submitted 458 project
requests to DOA totaling $ 189 million for capital projects and $ 21.8 million for 251
building renewal projects. DOA evaluated and prioritized the requests based on
established criteria ( such as whether the projects would correct fire and life safety
issues, were critical to the continued operations of an agency, or would generate a
savings) and anticipated funding. The Plan ultimately submitted to the Governor
requested a total of $ 39 million for capital improvement and building renewal projects.
The Construction Services Section performs the following functions:
Contracts for archtectural and engineering design for proposed or State- owned
buildings;
Construction project management for State building construction projects, largely
correctional facilities; and
Corrections inmate construction program.
Budget And Personnel
For fiscal year 1992- 93 the two sections were appropriated approximately $ 1.48 million.
Of this amount approximately $ 500,000 was designated for agency relocation, $ 346,000
was designated to administer the construction of prison facilities, and $ 635,000 was
designated for the Building and Planning Services Section personnel and operations.
The sections receive no General Fund monies. Instead, funding for the $ 1.48 million
1. As identified in A. R. S. 541- 790.2, "... building renewal means major activities that involve the repair or
reworking of a building, including the upgrading of systems which will result in maintaining a building's
expected useful life. "
3
appropriation was received from two separate funds: the Capital Outlay Stabilization
Fund ($ 1,135,200), and the Corrections Fund ($ 346,000).
The sections combined have a total of 32 FTE positions. Construction Services consists
of 11 positions and Building and Planning Services has 21 FTEs. In addition to these
positions, DOA lures project staff for specific prison construction projects; however,
these staff are exempt employees and are employed for the project duration only.
Audit Scope
Our audit focused on the Building and Planning Services Section and its functions.
The report contains findings in two areas of the Building and Planning Services
Section's responsibility:
The Section's effectiveness in preventing deterioration of State- owned buildings, and
The Section's effectiveness in relocating State agencies.
Although the Construction Services Section was also within the resolution's scope, we
did not review it at ths time. The Construction Services Section is responsible for
overseeing State construction projects. However, in recent years, State construction
projects have primarily been limited to projects within the Department of Corrections.'
In 1991, we conducted an audit of the Department of Corrections prison maintenance
and construction program ( see Performance Audit Report No. 91- 12), which included
a review of DOA's efforts in this area. We found that DOA has built prisons for
substantially less than the cost of prisons built by other states and the Federal
government. Prison construction was considered to be relatively timely as well.
Because of the technical nature of the maintenance issues addressed in this report, we
solicited the help of a consultant, Leo Mortenson, as part of our Office's Volunteer
Program. Mr. Mortenson has over 20 years' management experience in institutional
maintenance, including directing the maintenance program for the Boeing Corporation,
and he currently serves as a consultant to the Greyhound Corporation. Mr. Mortenson
spent numerous hours inspecting State- owned buildings, interviewing maintenance
personnel, and reviewing maintenance files and reports. His contributions, in the form
of assessments and recommendations, are incorporated in Finding I.
1. During the most recent fiscal year, DOA saw an increase in projects outside the Department of
Corrections due to its improvements of recently purchased properties.
Our audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the Director of the Department
of Administration and the staff of the Building and Planning Services and
Construction Services Sections for their cooperation and assistance during the audit.
( This Page Intentionally Left Blank)
FINDING I
MANY STATE- OWNED BUILDINGS
ARE IN NEED OF MAJOR REPAIR
A lack of funding and inefficient management have rendered many State buildings in
need of major repair. Many State- owned facilities need repairs and renovations to be
safe and operationally efficient. Based on the statutorily required formula, approx-imately
$ 60 million should have been devoted to major repair projects between fiscal
years 1987 and 1993; instead, only $ 30 million was appropriated. Without increased
funding, the State's buildings will continue to deteriorate. In addition to funding, the
Department of Administration ( DOA) needs to take steps to improve its management
of the State's buildings.
State Buildings In
Need Of Repairs
Many State- owned facilities need major repairs and renovations. Based on interviews,
document reviews, and inspections, we found that needed repairs are prevalent. We
also found that many building renewal projects identified in previous years have not
been addressed.
Problems are mevalent - Building renewal needs are widespread. In the fiscal year
1994 Capital Improvement Plan, agencies submitted 251 requests for building renewal
projects. 1 These requests came from 16 agencies, and affect facilities located throughout
the State. Projects ranged from life and safety issues, such as upgrading the fire alarm
system in the Child Development Center, to repairing plumbing items at the Adobe
Mountain Juvenile Institution. The estimate for the 251 building renewal projects was
$ 21.8 million.
However, the total amount actually needed for repairs and renovation is not known.
Some agencies may submit only a portion of their needs, identifying only the most
substantial ones. In addition, some agencies submit building renewal projects as capital
improvement requests because they have not been funded as building renewal
projects in past years. Also, although DOA conducts triennial inspections of
State- owned buildings, the inspections are not used to assess the extent or cost of
needed repairs.
To establish and substantiate the condition of some of Arizona's buildings, we
inspected 10 State- owned facilities, conducted interviews of DOA staff and building
1. Capital projects are not included in this analysis. Capital projects include land acquisition, facility
design, and new construction.
maintenance staff in other State agencies, and reviewed maintenance records,
inspection reports, and budget and planning documents. In selecting the ten facilities
for our inspection, we considered the following factors: size, age, location, and
whether the building was managed by DOA or another agency. ( See Appendix A for
a list of these buildings and their characteristics.)
We saw buildings that have exposed and deteriorating asbestos, indoor air quality
problems, and inadequate fire- safety systems, including insufficient fire sprinklers and
alarms, and inoperable emergency lighting. Heating and cooling systems are outdated
and inefficient; some are even structurally unsafe. Several buildings need new roofs
or roof repair; the fiscal year 1994 building renewal requests identified 32 separate
roofing projects. Also, because they were not designed to function with today's
technology, many buildings have overloaded electrical systems. The following
examples illustrate the types of problems we found during our review.
OCCUPATIONALLI CENSINBGU ILDING
1645 W. Jefferson, Phoenix;
Size - 66,308 square feet; Date of Construction - 1973.
It was estimated by our engineer that this building would require approximately
$ 6 million to repair. Major problems in this building include an electrical system
loaded to capacity; an obsolete elevator; a poorly designed chilled water system
that does not allow for proper cooling; and settling of the exterior building piers,
causing a noticeable slope in the floor. Poorly designed window frames that cause
the glass to pop out when it expands pose a serious safety problem. This condition
is considered to be extremely hazardous to individuals walking around the
building's perimeter, and Risk Management recommends restricting pedestrian
access. Ths problem has been investigated since 1986, but was not funded until
fiscal year 1994 as a capital appropriation. DOA was appropriated $ 400,000 to
replace the windows; however, it estimated $ 750,000 would be needed to address
the problem.
STATEO FFICEB UILDING ( Former State Compensation Fund Building)
1616 W. Adams, Phoenix;
Size - 90,000 square feet; Date of Construction - 1961.
Our engineer met with two DOA Tenant Services employees to discuss the needed
work for this building. Together, they estimated that at least $ 1.5 million was
needed for repairs. Repairs on the roof have been deferred to the extent that it
now needs to be replaced. In addition, rainwater seeping through the roof has
caused the interior cement to chip and crack. Other examples of needed repairs
and renovations include new boilers, asbestos removal, replacement of plumbing,
major repairs for the heating, ventilation, and air conditioning ( HVAC) system,
electrical system updates, elevator upgrades, and installation of a fire sprinkler
system.
STATEO FFICEB UILDING ( Former Department of Economic Security Office Building)
1300 W. Washington, Phoenix;
Size - 60,180 square feet; Date of Construction - 1979.
An engineering report completed for DOA estimated the renovation costs for ths
building could range from $ 1.5 to $ 1.9 million1. Some of the problems noted
included severely damaged duct work systems, an inefficient air handling system,
dirty and damaged ceiling tiles, and frayed and torn carpet. In addition, because
the building was undergoing renovation, improvements had to be made to the
building's plumbing and electrical systems, fire sprinklers, and its disability access
in order to meet existing building code requirements2
Many of the building's problems had been identified earlier but were deferred. For
example, the Department of Economic Security ( DES), the tenant in 1989, sent a
memo to DOA identifying some of these same problems. According to DOA
officials, staff attempted to make repairs; however, they were limited by scarce
resources. In addition, they decided to defer major maintenance items in
anticipation of DES vacating the building upon completion of the DES West
building. Nevertheless, a building less than 20 years old should not require
complete renovation if proper building renewal and maintenance occurs.
State's Building Renewal
Formula Not Met
Although statutes establish a formula for computing building renewal needs, given the
State's fiscal constraints in recent years, this amount has never been fully funded.
From fiscal years 1987 and 1993, the formula calculated approximately $ 60 million for
building renewal needs, but only one- half of that amount was appropriated. Ths has
led to building renewal projects being repeatedly deferred, some to the point that
more costly repairs may be required. Without increased funding, building conditions
will continue to decline and future repair costs may increase.
Building- renewal formula - During the 1986 Session, legislation was passed ( A. R. S.
541- 793.01) requiring the Joint Committee on Capital Review to develop a uniform
formula for computing the annual funding needs for building renewal.
1. Funds were appropriated in fiscal years 1991- 92 and 1992- 93 to renovate the building. Actual
renovation work began in the spring of 1993 and was still in process at the time of our review.
Agencies began to occupy the building in June 1993.
2. Statutorily, public State buildings must comply with building code requirements existing at the time
of construction. In addition, DOA will also bring buildings up to building code requirements if a
building is undergoing renovation.
The formula established by the Committee considers both the replacement value' and
the age of each State- owned building, and arrives at an annual building renewal
amount that should be used for the major repair or renovation of the building2. The
formula generates an amount slightly less than 1 percent of the total replacement
value of all buildings. This amount is consistent, although conservative, with an
industry standard we reviewed that suggests 1 to 3 percent of the building's
replacement value be allocated for building renewal.
The derived building renewal amount is presented to the Legislature by DOA in its
annual Capital Improvement Plan. Ths plan recommends funding levels and sources
and lists building renewal projects in order of their priority. In fiscal year 1994, DOA
requested $ 9.2 million for building renewal, and was appropriated $ 4.8 million.
Fundin- g sources - Several sources provide building renewal funds for facilities in the
DOA building system. The two main sources are the General Fund ( GF) and the
Capital Outlay Stabilization Fund ( COSF) 3. Approximately 1,570 buildings ( representing
approximately 80 percent of the total replacement value of all buildings) are
dependent upon these two sources for building renewal funds. Although there are
other funding sources, they support fewer buildings, and their use is restricted to
buildings occupied by the fund's beneficiary agency4.
historic all^ underfunded - The DOA building system has never received the entire
formula- stipulated amount. In fiscal year 1987, the DOA Building System received $ 6.2
million as its first formula- driven appropriation for building renewal. While ths
amount may appear significant, it was 20 percent less than the formula required. In
particular, buildings solely supported by the General Fund/ COSF have been hardest
hit. During fiscal year 1991 General Fund/ COSF appropriations dropped to $ 500,000
instead of the required $ 7 million formula amount. By fiscal year 1993, appropriations
1. Replacement value is equal to the estimated cost to construct the building today. Replacement value
changes each year and is calculated using the original construction cost, and a construction market
index that reflects the current construction costs for Phoenix compared to the original cost.
2. Based on the current application of the formula, in order for a building to be eligible for renewal
funds, it must have a replacement value of at least $ 11,000. However, certain types of structures
are not eligible for renewal funds even if their value is greater than $ 11,000; these noneligible
structures include water systems, and sewage treatment plants.
3. COSF monies are generated by charging a rental fee to agencies that occupy State- owned space in
the Capitol Mall Complex and in Tucson. l h s fund has been used in the past to support both
capital projects and building renewal projects. Currently, this fund generates approximately $ 7.7
million, and pays for utilities ( approximately $ 6 million), part of the operating budget of DOA-General
Services ( approximately $ 1 million), and building renewal ( with monies remaining after
paying for the other two items).
4. Other funds provide support for approximately 825 buildings ( representing about 20 percent of the
total replacement value of all buildings). There are about eight other funds in any given year. Two
examples are the Lottery Fund and the Highway User Fund. Appropriations from these funds must
be used by the Lottery, and the Arizona Department of Transportation, respectively.
from the two funds had risen but still equaled only 30 percent of the formula amount.
( See Figure 1.) Buildings that receive funds from other sources have fared better than
those reliant on General Fund/ COSF - appropriations from other funds. While
starting behnd requirements, they are now appropriated close to the formula level.
( See Figure 2, page 12.)
Figure 1
Department of Administration
Building Renewal Formula Amounts vs. Appropriation Received
Fiscal Years 1987 through 1993
( General Fund & COSF)
Formula
1 1987
Calculation 6.0
OFormula Calculation
WAppropriation
Appropriation 4.9 5.5 3.0
Source: Auditor General staff analysis of the Capital Appropriations and Department of Administration's
Inventory of State- owned building data for fiscal years 1987 through 1993.
3.2 0.5 0.8 2.2
Orml
Figure 2
Department of Administration
Building Renewal Formula Amounts vs. Appropriation Received
Fiscal Years 1987 Through 1993
( Other Funds)
OFormula Calculation
Source: Auditor General staff analysis of the Capital Appropriations and Department of Administration's
Inventory of State- owned building data for fiscal years 1987 through 1993.
Without adequate GF/ COSF appropriations, buildings supported by those funds will
continue to deteriorate. As noted previously, deferring roof repairs on the former State
Compensation Fund Building has now led to interior damage and the need to replace
the roof. Similarly, some building systems have not been replaced and are now
antiquated. Consequently, repairs are more costly because parts are not available and
must be adapted or reconstructed.
DOA Needs To Improve Its
Management of State Buildings
Although funding will be required to fix many of the building problems, DOA should
make some improvements in its management of the State's assets. DOA does not
maintain sufficient expenditure and funding information to make cost- effective
decisions regarding building repairs. It also does not track projects or use its building
inspections to identify and verify necessary repairs. In addition, our review suggests
that DOA's preventative maintenance program for DOA- managed buildings is very
limited.
Critical expenditure and fundin- g in- formation lacking - DOA does not consistently
track information critical for building management decisions. During our review we
found that DOA lacked basic information for State buildings, such as historical
operating costs and estimated amounts required to address necessary repairs. Failure
to track expenditures on a building- by- building basis limits DOA's ability to provide
reliable figures regarding funding needed to maintain and operate State buildings. For
example, a Legislative Committee was recently established and charged with
determining the costs of maintaining State buildings during the past three years.
However, because DOA internally lacks the information the Committee needs, DOA
has had to seek this information from individual agencies. In addition, without basic
cost information DOA is unable to determine whether it is more cost- effective to
replace major building components ( i. e., HVAC, electrical systems, etc.) or continue to
repair existing systems. Lack of information also restricts DOA's ability to decide
whether operating costs for particular buildings have reached the point that it is no
longer feasible to retain the building.
Tracking status of individual projects - Although DOA provides the Legislature with
a list of repair projects in its annual Capital Improvement Plan, no tracking is done
to determine which projects were completed or had to be deferred. Unless completed
projects and expenditures are tracked, adjustments cannot be made to the building
renewal formula. Our review suggests the formula requires such adjustments to better
reflect the building's age and value. In addition, without a cumulative listing of
outstanding building repair projects, it is unclear what types of projects are being
deferred and for how long. As previously mentioned, continued deferral of projects
contributes to further deterioration, increased operating costs, or, in cases of safety
issues, increased potential liability for the State.
Linking of building inspections - DOA does not generally link its inspection data with
building renewal requests. DOA conducts inspections of State buildings on a triennial
basis. However, the information collected typically has not been used to determine the
validity of agency repair requests or to identify additional needed building repairs.
While an agency may submit a request for a new roof, a building inspection may
indicate that resurfacing would be adequate. Further, DOA inspections may identify
additional needed repairs that are not included in agency building renewal requests,
but are vital to the building's continued safe and efficient operations.
Preventative maintenance program limited - Through interviews and our inspections,
we discovered that DOA's preventative maintenance program' is limited. Preventative
maintenance work is performed by maintenance staff within the Tenant Services
Section of DOA's General Services Division. The maintenance staff's work is primarily
responding to repair requests; it was estimated that 80 percent of staff time is
allocated to " fixing what breaks." DOA reported they routinely perform only the most
basic preventative maintenance work, due to resource constraints.'
Failure to perform preventative maintenance work increases the amount of building
renewal monies needed. It is universally accepted that a good preventative
maintenance program forestalls deterioration. Our engineer consultant stated that such
a maintenance program can extend the life of a building's components, as well as save
money. For example, he stated that the life of a building roof can be extended up to
ten years if it is annually inspected and repaired. Also, a Wisconsin report states, " one
estimate widely accepted among facility management professionals is that every dollar spent
on preventative maintenance programs results in reducing future repair and replacemen t costs
by five dollars. "
RECOMMENDATIONS
1. General Fund/ COSF Appropriations for Building Renewal should be increased to
match, as nearly as possible, the formula- generated amount.
2. DOA should maintain all necessary information on a building- by- building basis to
ensure adequate identification, tracking, and planning for building renewal needs.
1. Preventative maintenance means the periodic inspection of buildings and systems, and the minor
repair or replacement of worn- out parts to prevent future breakdown and forestall deterioration.
2. The scope of this audit did not include a thorough assessment of DOA's preventative maintenance
program, as this program will be reviewed in an upcoming audit of the Tenant Services Section of
DOA's General Services Division.
3. Department of Administration and University of Wisconsin, " An Evaluation of Building Maintenance
and Construction Supervision," January 1991, Report No. 91- 3.
FINDING II
DOA NEEDS TO IMPROVE SERVICE TO
AGENCIES INVOLVED IN RELOCATIONS
DOA needs to improve in its role as a service organization to those agencies it
relocates. To do so, DOA needs to blend the sometimes competing goals of " filling
office space" with that of meeting agency needs. Although most relocated agencies
considered DOA's efforts to be adequate, DOA has tended to make relocation
decisions with limited agency input, and has not taken the necessary steps to ensure
agencies a successful move.
Competing Goals
DOA is responsible for ensuring State- owned space is used as efficiently as possible.
At the same time, however, DOA must also strive to meet agency needs when
relocations occur. Based on our surveys of agencies involved in relocations, DOA has
performed adequately in some areas, yet needs to improve its service to those agencies
being moved.
DOA char- g ed with efficient space utilization - DOA is responsible for the allocation
of space in public buildings1. This task includes identifying, recording, and planning
for the use of vacant office space. DOA has named this assignment the " Backfill
Plan/ Relocation Program." This program has been ongoing since September 1990, and
resulted from a large amount of vacant space whch became available due to new
construction and the purchase of several distressed properties. 2 While DOA's goal is
to attain a 100 percent occupancy rate, as of April 1, 1993, it reported an 85 percent
occupancy rate. DOA expects the occupancy rate to rise by the end of 1993, as several
relocations are scheduled.
While DOA is responsible for ensuring State space is fully utilized, it is also
responsible for ensuring that agencies experience a successful move by providing
expertise and assistance to those selected to relocate. Typically, agencies move
infrequently and therefore, have limited in- house knowledge of what a move entails.
In contrast, DOA has been involved in approximately 60 relocations in the past three
1. A. R. S. 841- 791. This applies only to DOA- managed buildings.
2. The Legislature appropriated $ 15 million and authorized DOA to purchase distressed properties
with the intent of reducing the number of private sector leases. Distressed properties were defined
as those properties that were being sold at a price not exceeding 40 percent of the estimated
replacement value.
years. DOA needs to use tlus knowledge to ensure agency needs are met and that an
agency encounters as little disruption in its operations as is possible.
Sumw results are mixed - As part of our evaluation of DOA's relocation efforts, we
conducted a survey of 43 agency move coordinators randomly selected from moves
that had occurred between September 1990 and June 1993.' Our survey indicates that
most agencies felt that DOA performed adequately in its efforts to relocate their
offices. It was evident that when DOA took a service approach and involved agency
staff, established good communications with the agency, and attempted to meet agency
needs, the agency was very positive about DOA's efforts and the move.
In contrast, those agencies that were the least satisfied with DOA's performance
indicated that DOA failed to work well with them. For example, one agency move
coordinator described DOA's approach as " we're in charge, we will tell you what to
do and you will comply." In addition, he stated that DOA showed little sensitivity
regarding the agency's own move responsibilities and its on- going operations. Survey
results indicated two primary sources of dissatisfaction - DOA's tendency to make
relocation decisions with limited agency input, and its failure to provide services once
the decision to relocate an'agency had been made.
Agency Input Needed Before
Making Relocation Decisions
DOA has made some poor relocation decisions because it generally does not consult
with agencies prior to making the decision as to which agencies will be moved and
to where. Problems that surfaced due to the failure to obtain this information were
most evident in the relocations involving distressed properties. DOA based many of
its decisions primarily on the amount of space the agency was leasing. DOA then
notified agency officials of the scheduled moves. Agency officials were quick to point
out flaws in DOA's plans because of its failure to obtain agency- specific needs before
making its decisions. The following case examples illustrate specific problems that
resulted from the lack of adequate agency assessments prior to making relocation
decisions.
DOA made the decision to relocate several regulatory boards into one facility
without conducting initial assessments of them. When DOA informed the boards
of its intent, they objected to ths " unilateral" decision. They questioned the
cost- effectiveness of the relocation, the security of the premises, and the ability
to meet the needs of their clients. For example, one board estimated they would
be required to pay almost $ 3.00 per square foot more in this facility. Because the
board is solely funded by licensing fees, it anticipated that an increase in fees or
1. Of the agencies we surveyed, DOA initiated the relocation for 63 percent of the respondents, 28
percent of the respondent agencies requested the move, and 9 percent were unsure who had
Initiated the move.
a reduction in its operational budget would be necessary to pay the higher rent.
Due to the issues raised by the boards, DOA concluded that this plan would not
work, and had to identify another agency to fill the space.
DOA made the decision to relocate several agencies with high lease rates into
one building. Space allocation in this building was made using the amount of
space an agency leased in the private sector. With these figures, DOA was able
to accommodate six agencies in the building, making the purchase appear
cost- effective. However, once DOA visited these agencies during the relocation
process, it was obvious that some of them worked in crowded conditions and
needed additional space. Because DOA did not conduct an initial assessment, and
an error was made in calculating the amount of usable space, DOA had to alter
its decision. Now only four agencies will be able to occupy the building, and one
agency will be required to lease additional space for a short period of time. These
changes reduce the cost- effectiveness of purchasing the building, because a fewer
number of agencies must cover the cost and two agencies remain leasing space.
The decision to relocate a division of one agency had to be revised three times
because DOA did not seek sufficient information prior to making the decisions.
The original site proved to be inadequate when DOA learned that another
scheduled tenant was expecting an increase in its number of employees. The
facility would not be able to accommodate both tenants. After a second location
was decided upon, it was later determined that it too was inadequate. Although
the amount of space the division leased was comparable to the space available
in the second location, they felt that differences in the configuration of space
rendered the new facility inadequate. None of this information could be gleaned
from the leasing information used to make these space allocation decisions.
Ultimately, DOA decided to split the division and house it in two separate
facilities. According to the division, ths arrangement will hinder efficient
communication and operations and cost more, as well as negatively affect
employee morale.
Preliminary evaluations should solicit information from potential agencies on the
current number of employees, growth trends, adequacy of current space, type of work
performed by the agency, and any special client or location needs the agency might
have. This information should play a vital role in relocation decisions.
DOA Needs to Ensure
Successful Moves
Once the decision to relocate an agency is made, DOA needs to ensure that the move
proceeds as smoothly as possible. Many of the agencies we surveyed encountered
problems during their relocations which could have been avoided had DOA taken a
more organized, aggressive approach to coordinating the move. Areas where agencies
were especially critical of DOA include not informing agencies of their responsibilities,
inadequate coordination of contracted services, not identifying or addressing special
needs, not responding to agency questions or concerns, not having work completed
at the time of the move, and shifting of move dates. The following examples illustrate
these problems.
One agency moved into a building whch had extensive buildouts and
improvements; however, the work was not completed at the time of the move.
According to the agency's move coordinator, office doors were missing, electrical
work was not finished, and the air conditioning was not working adequately. In
h s opinion, there was poor communication throughout the relocation process-he
was not kept abreast of the status of the renovations and he had difficulty in
getting responses to questions and problems he encountered. In addition, the
agency coordinator indicated that he was held responsible for tasks which had
never been brought to his attention by DOA.
Another agency also moved into a building with substantial buildouts that were
not completed by the time of the move. The agency move coordinator stated that
electrical work and wall surfaces were not finished, and doors were missing. He
said that a painter was in the building for weeks after the move and that two
months after the move some work remains unfinished. In addition, the agency's
telephone system was not operational at the time of the move. Further, the
agency had confidential files that had to be moved separately, yet it was not told
who had been awarded the contract to do so until two days prior to the move.
An agency was scheduled to move into a facility by the end of June 1993.
Extensive buildouts and improvements were needed. The agency move
coordinator felt that DOA performed well in securing contracts, but did not
adequately oversee the services delivered from those contracts. As a consequence,
there were problems in coordinating these services and informing the agency of
its responsibilities and a timetable for completion. Construction was not complete
by the end of June and the move was delayed until the end of August. The
agency move coordinator said that he toured the building a week before the
August move date and, although it appeared that a substantial amount of work
remained to be completed, DOA assured him that the building would be ready
to move into as planned. At the time of the move, construction was not complete
and at least another week was needed to substantially finish the work. This
agency also expressed concerns with the lack of a dedicated cooling system
necessary for proper operation of its computer system.'
Some of the problems encountered by agencies were possibly due to the unusually
large number of agencies being relocated under a limited timeframe. Due to
1. Of four agencies located into this facility, only one had its computer cooling needs met.
legislation, DOA was required to move a number of agencies into distressed properties
by July 1, 1993, or assume the lease costs for those agencies not moved by the
deadline. Also, according to DOA officials, the fact that some agencies did not want
to move contributed to some of the problems.
In spite of these factors, DOA needs to take a number of basic steps to improve the
relocation process. It should develop a checklist enumerating tasks associated with
relocating. At the beginning of a move, DOA and the agency should discuss these
tasks and affix responsibility for each one. Throughout the relocation process DOA
should meet with agency representatives to discuss the progress of the move, respond
to agency questions or concerns, and determine if additional actions are needed. DOA
also needs to take an active role in overseeing and coordinating contracted services.
RECOMMENDATIONS
1. Prior to making a decision to relocate an agency, DOA should conduct an initial
assessment of that agency to determine the feasibility of relocation.
2. DOA needs to take a number of basic steps to ensure that the move process
proceeds smoothly, including:
Developing a check list enumerating move tasks,
Meeting with agency officials at the beginning of a move to discuss tasks
and affix responsibility,
Meeting with agency officials on an ongoing basis throughout the move to
discuss the progress of the move, respond to agency questions or concerns,
and determine whether additional actions are needed, and
Taking an active role in coordinating contracted services.
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I Fife Symington
Governor
J. Elliott Hibbs
Director
ARIZONA DEPARTMENT OF ADMINISTRATION
GENERAL SERVICES DIVISION 1700 WEST WASHINGTON STREET, ROOM 600
PHOENIX, ARIZONA 85007
( 602) 542- 1 920
October 22,1993
Mr. Douglas R. Norton, Auditor General
Office of the Auditor General
2910 N. 44th Street, Suite 410
Phoenix, Arizona 85018
Dear Mr. Norton:
The Department of Administration ( DOA) thanks you for the opportunity to
comment on the performance audit of our Building and Planning Services Section of
the General Services Division.
We understand the nature of the audit and concur with the general findings.
We have taken a positive and pro- active approach to the report findings. In fact
several recommendations in the report have already been acted upon, such as better
management of building renewal projects, incorporating the building inspection
reports into the selection of building renewal funding commitments, and a better
management and communication process in the relocation program.
We will focus our response on two primary issues highlighted within the audit
report:
1. Building Renewal Program
The Building Renewal Program is of primary importance to the Department of
Administration's Building System and all state agencies within this system. Beginning
in FY 1994 and with the support of the Governor's Office for Strategic Planning and
Budget and the Joint Legislative Budget Committee ( JLBC), DOA has undertaken an
enhanced management role in the overall program. This has included first time efforts
in the prioritizing of individual agency requests, the use of our staff building inspectors
in determining the most pressing needs, accelerated implementation schedules and set-aside
funding for emergency projects. Agencies that receive a funding commitment for
building renewal will be given four months to begin
Mr. Douglas R. Norton
October 22,1993
Page 2
implementation and an additional six months to complete their respective projects. If
the agency has not shown adequate progress on a project within these time frames the
funding commitment may be revoked and reapplied to the next highest rated priority
project that has not yet been funded. By taking this approach, DOA believes the highest
needs of the Building System will be satisfied in the shortest time frames. Additionally,
DOA will monitor project expenses and activities to ensure timely and proper
expenditure of funds on authorized projects. DOA will also maintain the necessary
information on each building to ensure identification, tracking and planning for future
building renewal needs.
DOA stron~ lv agrees with the Auditor General's findings that the building
renewal system has been inadequately funded since its inception. Even if the program
is funded at 100° h in the future, we are not certain that the present building renewal
formula adequately provides enough funding for all major deferred maintenance
within the DOA Building System. During the past six years, the DOA Building System
has only been appropriated 50% of the requested formula amount, which translates
into a shortfall of $ 30 million. As a result, major renovation projects have been
postponed because they cannot compete with priority maintenance repairs and
emergency requirements.
2. Agency Relocation Activities
DOA concurs with the Auditor General finding that the Building and Planning
Services Section needs to improve their service orientation to user agencies in
relocations.
DOA has implemented a pre- relocation survey, an initial meeting with agency
heads and staff, a relocation checklist enumerating move tasks and responsibilities,
scheduled update meetings, as well as a post relocation walk- thru and a follow- up
customer satisfaction survey.
We would however, reiterate the comment made in the Auditor General's
findings that DOA is often placed in a conflicting position of control versus service
orientation. As the agency responsible for ensuring efficient use of state owned space,
DOA plans on a global basis which may conflict with individual agency requests and
desires. For example, in the $ 15 million Distressed Property Program, as cited by the
Auditor General, DOA interacted with several agencies that were being relocated from
Class " A" private sector space into renovated state facilities. In many cases, the
relocating agencies were not motivated and displayed reluctance to expeditiously
cooperate because DOA was the only agency being held accountable for the relocation.
In the October meeting of the Joint Committee on Capital Review, this matter was
addressed by the JLBC staff with concurrence that on future agency relocations, DOA
and the relocating agency be held equally accountable for non- performance penalties.
Mr. Douglas R. Norton
October 22,1993
Page 3
We believe this approach will allow greater service orientation and mutual
cooperation while expediting future relocation projects at decreased overall cost.
Finally, it should be noted that space planning, construction renovation and relocations
are a traumatic experience even during the best of circumstances, but during this
relocation program more state agencies ( 14) were moved from lease space( 203,, 277 SF)
in a shorter time frame( 8 months) by fewer DOA staff( 5 FTE) than have ever been
accomplished in the past. To date, DOA has ensured and completed every relocation
project successfully. As of October 22,1993, the occupancy rate for DOA managed office
buildings has increased from the Auditor General's report of 85% to 96%. This major
increase in state space utilization results from the recently completed $ 15 million
Distressed Property Program and the renovation of the 1300 and 1400 West Washington
State Office Buildings.
We would, however, submit that the single most important commentary missing from
the audit is that the Building and Planning Services Section of the General Services
Division of DOA has successfully relocated approximately $ 2,327,533 worth of leases to
state owned buildings. This figure is no longer simply an expense to the State, but goes
toward building asset value for the taxpayer.
Lastly, DOA is pressing forward with the process of continuous improvement. We are
presently conducting process analysis of our planning programs in an effort to better
satisfy our customers.
Sincerely,
f5& J. Elliott Hibbs
Director
We inspected the following State- owned facilities to determine their condition.
Buildings were selected based on the following factors: size, age, location, and
whether the building was managed by DOA or another agency. The descriptive
information presented here and used in selecting the buildings was obtained from
DOA's fiscal year 1992 Inventory of State- Owned Buildings.
DOA- Manaqed Buildinqs:
1) Capitol Center
15 South 15th Avenue
Capitol Complex, Phoenix
Date of Construction:
Replacement Cost:
Square Footage:
Renewal $ Eligible:
2) Law Building
1275 West Waslungton
Capitol Complex, Phoenix
Date of Construction:
Replacement Cost:
Square Footage:
Renewal $ Eligible:
3) State Office Building, Tucson
402 W. Congress
Tucson
Date of Construction:
Replacement Cost:
Square Footage:
Renewal $ Eligible:
4) Occupational Licensing Building
1645 W. Jefferson
Capitol Complex, Phoenix,
Date of Construction:
Replacement Cost:
Square Footage:
1. This is the formula- generated amount the building was eligible for in fiscal year 1992.
Renewal $ Eligible:
DOA- Manaaed Buildings: ( concl'd)
5) State Office Building
( Former Compensation Fund Building)
1616 West Adams
Capitol Complex, Phoenix
Date of Construction:
Replacement Cost:
Square Footage:
Renewal $ Eligible:
Anencv- Manaaed Buildings:
6) Industrial Commission
800 W. Washington
Capitol Complex
Date of Construction:
Replacement Cost:
Square Footage:
Renewal $ Eligible:
7) Department of Economic Security
Office Building
4365 S. Central, Phoenix
Date of Construction:
Replacement Cost:
Square Footage:
Renewal $ Eligible:
8) Game and Fish Administration Office
2222 W. Greenway Road
Phoenix
Date of Construction:
Replacement Cost:
Square Footage:
Renewal $ Eligible:
A~ encv- Managed Buildinas: ( concl'd)
9) Arizona State Hospital
( Juniper Hall),
2500 E. Van Buren
Phoenix
Date of Construction:
Replacement Cost:
Square Footage:
Renewal $ Eligible:
10) Southern Arizona Mental Health
Administration and Clinic
1930 E. 6th Street, Tucson
Date of Construction:
Replacement Cost:
Square Footage:
Renewal $ Eligible: