Contract Management – Paratransit Services
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August 2020 Contract Management – Paratransit Services AUDIT REPORT – INTERNAL AUDIT {This page was intentionally left blank} Contract Management Audit- Paratransit Services Report To: Councilmember Robin Arredondo-Savage, Chair, Tempe Mayor Kate Gallego, Phoenix Vice Mayor Bill Stipp, Goodyear Councilmember Lauren Tolmachoff, Glendale Councilmember Francisco Heredia, Mesa The purpose of this report is to communicate the results of the Contact Management review of the Paratransit Services contract. The audit was part of Valley Metro’s Fiscal Year 2019/2020 Internal Audit Plan. The report includes the following sections: Objective, Scope and Methodology, Background, Areas Reviewed, and Results. Based on Internal Audit’s review, no material exceptions were noted. Therefore, this report contains no recommendations but provides a summary of the items reviewed. During this audit, individuals from the Agency Business, Technology & Services Division, particularly the Paratransit Mobility Service area and the Finance Division, particularly the Contracts and Procurement area assisted the auditors. Team members provided process information and documentation for the contract and contract monitoring processes and supplied evidence for testing. Their support is appreciated. If you have any questions or would like further clarifications, please contact me at 602-322- 4452. Jennifer Davis, CIA Senior Internal Auditor Audit report approved by Scott Smith, CEO ____________________________Scott Smith (Aug 31, 2020 20:06 PDT) Performed by: Vickie Murphy and Jennifer Davis Senior Internal Auditors Distribution Scott Smith, Chief Executive Officer Alexis Tameron-Kinsey, Chief of Staff/Senior Advisor Jim Hillyard, Chief Administrative Officer Paul Hodgins, Chief Financial Officer Michael Minnaugh, General Counsel 1 Contract Management Audit- Paratransit Services Report Objective Determine if the paratransit services contract was awarded in accordance with agency policies and the contract’s performance was monitored and managed. Scope The review focused on the Transdev Regional Paratransit Services Contract (16013-RPS). Internal Audit reviewed the initial procurement practices leading up to the contract award in early 2017 and all contract amendments through January 2020. The audit period covered May 2016 through January 2020 and reviewed contracting monitoring and financial payments since the inception. Items incurred prior to or carried over from this timeframe and that fall into the scope timeframe or assist with achieving the audit objectives were included. Methodology To achieve our audit objectives, Internal Audit’s review focused on the following areas: • The Contract award processes to include: Request for Proposal (RFP) and the required contract language, and • Contract monitoring processes to include: Change orders, incentive/disincentive tracking, and pay applications. The following Valley Metro policy, manuals, and Federal Transit Administration (FTA) regulations were the basis for the review to determine compliance: • RPTA Purchasing / Procurement Policy (v. 06/16/11) • FTA Circular 4220.1F, Revision 3 (v. 02/2011) • FTA Circular 4220.1F, Revision 4 (v. 03/2013) • Joint Internal Procurement Manual (v. 06/25/18) • Joint Internal Procurement Manual (v. 05/08/19) To achieve the audit objectives, Internal Audit performed the following audit procedures: • Obtained from Contracts and Procurement, the physical and electronic files for the Transdev Regional Paratransit Services Contract (16013-RPS). Based on the policy in place at the time [RPTA Purchasing / Procurement Policy (v. 06/16/11)], determined: o 33 applicable steps/requirements for the RFP and contract award process, and o 51 applicable clauses for inclusion in the contract verbiage. For each item, Audit reviewed the procurement files provided to determine if the step/action/clause was documented. • Reviewed the physical and electronic files for the Transdev Regional Paratransit Services Contract (16013-RPS) to determine if change orders were: o Executed in accordance with policy, o Obtained Board of Directors approval, if required, o Approved by appropriate Valley Metro and Transdev staff, and o Maintained supporting documentation. 2 Contract Management Audit- Paratransit Services Report • Interviewed applicable Paratransit Mobility Service staff and documented the contract monitoring process to determine if internal controls over the review of information were evident. • Obtained from Paratransit Mobility Service staff, the incentive/disincentive tracking spreadsheets from January 2018 through January 2020 and determined if contract monitoring efforts were evident. • Obtained from Finance, the Pay Applications and adjustment payment records from July 2017 through October 2019 and determined if items were approved, accurate, and supported. Background Valley Metro’s Fiscal Year 2019/2020 Internal Audit Plan included contract management audits to determine whether the contracts were awarded, monitored, and/or closed according to policy. The paratransit contract was selected for this review. The review will focus on the contract award process and the contract management processes. All public transit agencies that provide fixed-route bus and rail services are required to provide Paratransit services under American with Disabilities Act (ADA). It is a door-to-door transportation option that is provided to people with disabilities that are unable to use the fixed-route bus and rail services. The ADA requires Paratransit services be available within three-quarters of a mile of bus routes and light rail stations. Valley Metro also offers RideChoice, which is a subsidized ride share program to augment the Paratransit program. Since the RideChoice program is not required under ADA, it will not be included in the scope of this audit. Request for Proposal (RFP) and Contract Clauses Prior to 2017, Valley Metro had multiple contracts for paratransit services with different compensation approaches. Given the complexity of two separate contracts and the increase in demand for services, Valley Metro decided to terminate the contracts and issue an RFP to consolidate these services into a single contract. In May 2016, the Board of Directors approved this approach and approved a federally compliant RFP for a base period of five years with five (5) one-year extensions, up to a total of ten years to operate the East Valley, Northwest Valley, and regional paratransit services. An RFP was issued with the following evaluation criteria: Points Criteria Possible Firm Qualifications and Experience 100 Qualifications/Experience of Assigned Personnel 200 Understanding of the Scope of Work 300 Price 400 Total 1,000 3 Contract Management Audit- Paratransit Services Report Valley Metro received proposals from five firms. Although Transdev did not propose the lowest base price, it was recommended to the Board of Directors for contract for the lowest overall cost and “Best Value” to the agency. In February 2017, Valley Metro requested and received board approval to execute a contract with Transdev for a total of five years not exceed $124.47 million, which included a contract cost of $108.34 million and a contingency of $10.83 million. There was also a projected fuel reimbursement costs for $5.3 million. The contract was signed in April 2017 for services to start July 1, 2017. Based on the policy in place at the time of the RFP process [RPTA Purchasing / Procurement Policy (v. 06/16/11)] and the related FTA regulations, Internal Audit determined the requirements for the RFP process and the applicable contract clauses. To determine policy and regulation compliance, Internal Audit reviewed documentation for the 33 applicable steps/requirements for the RFP process and the 51 required clauses for the Transdev Regional Paratransit Services Contract (16013-RPS). Some verified items included: • Method of procurement rationale • Full and open competition • Selection of the contract type • RFP advertised time period • The basis for contractor selection • Determine if multiple vendors replied • The basis for contract price • Board of Director approval Documents evidencing the completion of the 33 applicable steps/requirements and the inclusion of the 51 clauses for the Transdev Regional Paratransit Services Contract (16013-RPS) were located in the SharePoint files, referenced documents, or within the contract itself. Internal Audit noted no exceptions or opportunities for improvement for the RFP process or the contract language for this contract. Change Orders Internal Audit's review of the physical and electronic files for the Transdev Regional Paratransit Services Contract (16013-RPS) determined four change orders were drafted. Internal Audit noted only three change orders were executed and two of which added subcontractors available for Transdev's use and clarified requirements. The third reflected the changes needed to address the major differences between trip numbers and lengths included in the RFP and the actual demand and distances experienced upon implementation. In January 2020, a presentation was made to the Regional Transportation Advisory Group (RTAG), providing an analysis of the third change order's net impact. The presentation included the chart below and noted a reduction in total regional paratransit costs (both within and outside the contract) by $744,800 over the five years. 4 Contract Management Audit- Paratransit Services Report Internal Audit reviewed if the change orders required approval from