Denver could be overpaying for construction projects, according to an audit report released Thursday from the city's Auditor's Office.
The report revisits an audit from 2021 that found examples of insufficient oversight of city construction projects.
"Managers seem to be doubling down on their plans to pay the maximum amount possible on contracts, regardless of actual construction costs," said Auditor Timothy O'Brien in a statement Thursday. "It's important to protect every taxpayer dollar to make the city's limited resources stretch as far as possible."
The follow up investigation found that city managers and staff misunderstood the difference between a lump-sum price, which sets a flat price for a project, and a guaranteed maximum price, which sets a maximum price but could ultimately cost less if the project comes in under budget.
The new report found that managers have given guidance encouraging staff to treat guaranteed maximum prices as lump sum payments.
This means that if the project comes in under budget, the city would still have to pay that maximum price. The audit also found that some staff did not verify work costs once projects wrapped.
O'Brien said the city also fails to sufficiently oversee the hiring and contracting process for subcontractors hired by companies contracted with the city. In some cases, subcontracted companies overran the budget.
"I've seen this in many audits in recent years: City managers are too reliant on third parties to make the best use of public resources," he said. "Active oversight is a must, especially with the fast pace of construction and development in the city."
The report also cited improvements from the Department of Transportation and Infrastructure (DOTI) in better validating construction cost estimates.
In a statement to Denverite, DOTI said it remained "committed to maximizing the value of taxpayer investments in capital construction projects. We expanded employee training and partnered with industry experts to develop a best practices guidance document that fosters consistent delivery practices across the department, along with implementing various other processes and independent cost validation improvements."
The statement continued to say that, as current construction manager and general contractor projects reach milestones, DOTI will demonstrate compliance with additional recommendations made in the new audit report.
