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October 26, 2014

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Auditors scrutinize library cost overruns

When it comes to problems surrounding the Lied Library at UNLV, all roads seem to lead to the Public Works Board, which is why state auditors and claims analysts descended on their offices last week to find answers.

The state is now facing up to $5.6 million in unpaid labor charges on the construction project. But how much of that the state will actually owe is being calculated by the team of independent claims analysts.

Only $446,000 is left in a state account to pay existing claims, according to Mark Winebarger, chief deputy controller for the state.

In addition, the state attorney general is refusing to release $500,000 in money owed to contractors until the job is finished, according to Dan O'Brien, the Public Works Board manager who inherited the Lied Library problem when he came on 12 weeks ago.

"There is a final change order that is still pending for work directed by the state," O'Brien said. "We still have punch list items out there that they haven't completed, and that's why we haven't released the money."

One of the problems still existing is a generator that is not working. During a power outage two weeks ago, the library was pitch dark for several minutes without the benefit of a working backup generator. And a number of items still need to be painted, O'Brien said.

The conflict over the outstanding bills centers around delays that moved the opening date 193 days past the original Oct. 22, 1999. The library opened Jan. 8.

Typically contractors commit to a completion date and are charged daily fines if the project is not finished on time. Tibesar Construction, the general contractor, would have had to pay a $5,350 fine each day the project was late.

Since the Public Works Board effectively sanctioned the time delays by approving change orders -- 30 in all -- Tibesar did not have to pay late fees, O'Brien said.

Now Tibesar is contending that the state owes it money for each day of those delays.

"We feel that we have already paid for those delays," O'Brien said. "What they're saying is that all of these change orders caused them to lose other jobs."

About $3.6 million worth of change orders were approved. The outstanding labor bill of $5.6 million is separate from those.

The question remaining for claims analysts is, did the board approve change orders without having the money to pay for them, or did the contractors submit bills that were not approved expenses? The answer lies in a three-foot stack of documents that sits in the Public Works Board offices.

The first team of claim auditors from Pinnacle One, a private auditing firm, will look at each bill to see which expenses are legitimate. The team should calculate by the end of next week the total that the state owes.

The second team of state auditors is expected to take about two months to see if the board followed procedures.

When the smoke clears, state officials hope that they will have an answer on how a project that was originally estimated at $40.4 million jumped to $53.4 million and counting -- up to $62.8 million including furnishings and equipment.

The Public Works Board partly blames design flaws by architect Leo A. Daly, for delays and cost overruns. Daly blames the board and Tibesar Construction. Tibesar points to the state board.

"Every single day of that delay was added to our contract by the Public Works Board," Puls said. "The state essentially agreed that the Public Works Board was responsible for the delay on the project."

"As far as I know, the cost overruns were more a construction issue," Kathleen Richards, business develop manager for Leo A. Daly. "The process is so long that things change with the nature of the project. A lot of it was owner-initiated change."

Answers from the Public Works Board are harder to come by, because two of the key players in those decisions, former board Manager Eric Raecke, and project manager Patrick Batte, no longer work for the state. Their signatures appear on most of the change orders.

One of the first problems occurred when bookshelves chosen by the university were heavier than the library's floors were designed to handle, Richards said.

Instead of choosing lighter shelves, the university ordered stronger floors at an additional cost.

Then officials discovered the bookshelves were higher than the wall outlets. That meant rewiring all of the electrical outlets at a cost of $3,123, Juanita Fain, UNLV's vice president of administration, said.

Then a series of other design glitches cropped up: The library didn't have a loading dock for the books, which added $27,000; fireproofing was needed at $427,000; and elevators and escalators were added at $776,000.

All told, 30 change orders were filed before the job was finished. The roughly 400 items totaled $3.58 million.

While auditors sort out the numbers, contractors are waiting impatiently to find out when they are going to get paid.

But the state may have a legal net to fall back on. Nevada law states that a project is not to exceed 10 percent of the originally awarded contract, which would limit the Lied's overruns to just $4 million.

In the meantime, the contractor is getting impatient.

"They keep giving me the run-around on items they they've agreed on. I think the state has run out of money," Puls said.

O'Brien said they hope that auditors can expedite the matter so it won't end up in court.

Whether auditors also will find his agency at fault is another matter. In the meantime, the governor has recommended that $2 million, which was originally taken back by the state, be returned to pay existing claims. He also recommended that the Public Works Board be better staffed to avoid such problems.

As for where the blame lies, O'Brien said, "I think the jury is still out on this one. I think there's things we probably could have done better."

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