District of Columbia: D.C. Public Schools' Modernization Program 
Faces Major Challenges (25-APR-02, GAO-02-628T).		 
                                                                 
The District of Columbia school system, with help from the U.S.  
Army Corps of Engineers (Corps), has made considerable progress  
in fixing roofs, replacing windows, repairing bathrooms, and	 
completing other maintenance work that has been neglected for	 
years. The D.C. school system is now addressing the more complex 
task of modernizing--either through renovation or through new	 
construction--virtually every public school in the city. In April
1998, the school system entered into an agreement with the Corps 
for engineering, procurement, and technical assistance. In	 
December 2000, the D.C. Board of Education approved a facility	 
master plan that would modernize 10 schools annually over 10 to  
15 years at a cost of $1.3 billion. Historically significant	 
buildings cannot be razed, however, and are costly to redesign.  
So far, construction costs are running significantly higher than 
estimated by the facility master plan. The scope of the work has 
been expanded to recognize community needs for some special	 
facilities. In examining the Washington Gas Light Company's	 
records of quality inspections for the work it managed for the	 
school system, GAO found that  77 percent of all projects lacked 
evidence of quality inspections. The school system sought help	 
from the Corps in fiscal year 1999 to comply with EPA		 
requirements and spent $60.5 million on asbestos management and  
abatement activities.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-628T					        
    ACCNO:   A03170						        
  TITLE:     District of Columbia: D.C. Public Schools' Modernization 
Program Faces Major Challenges					 
     DATE:   04/25/2002 
  SUBJECT:   Construction contracts				 
	     Construction costs 				 
	     Environmental monitoring				 
	     Facility construction				 
	     Facility maintenance				 
	     Internal controls					 
	     Public schools					 
	     Safety regulation					 
	     Service contracts					 

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GAO-02-628T
     
United States General Accounting Office

GAO Testimony

Before the Subcommittee on the District of Columbia, Committee on
Appropriations, House of Representatives

For Release on Delivery Expected at 10:00 a.m.,

Thursday, April 25, 2002

DISTRICT OF COLUMBIA

D.C. Public Schools' Modernization Program Faces Major Challenges

Statement of David E. Cooper, Director, Acquisition and Sourcing Management

GAO-02-628T

Mr. Chairman and Members of the Subcommittee:

Thank you for inviting me to participate in today's hearing. At your
request, we have been evaluating the District of Columbia's plans to
modernize and renovate its public schools. In the past few years, the school
system, with the assistance of the U.S. Army Corps of Engineers (the Corps),
has made considerable progress in fixing roofs, replacing windows, repairing
bathrooms, and addressing maintenance projects that had been neglected for
years.

Now that many of the emergency repairs have been completed, the school
system is turning its attention to the more complex task of modernizing-
either through renovation or through new construction-virtually every public
school in the District of Columbia. In fact, several new school construction
projects are underway. My remarks will focus on challenges the school system
faces in this formidable task. Specifically, I will address

* increases in the cost of modernizing the schools,

* delays in completing the schools,

* quality inspection problems, and

* concerns about managing asbestos hazards.

                                 Background

In April 1998, the school system entered into a memorandum of agreement with
the Corps for engineering, procurement, and technical assistance to ensure
that construction contracts were awarded and managed so that the schools
could open that year. Under the Fiscal Year 1999 District of Columbia
Appropriations Act, Congress expanded the Corps' role by authorizing it to
provide the school system with engineering, construction, and related
services. Through the years, the school system has renewed its working
relationship with the Corps by signing yearly updates to the support
agreement.

To modernize the schools, the school system generally plans to build a new
school and demolish the old one or to completely renovate an entire school.
The Corps and the school system each have responsibility for managing a
certain number of new school modernization projects. Because all of the
schools are not modernized at the same time, component replacements are
needed to replace major building systems- such as boilers, chillers, roofs,
and windows-that have reached the end of their useful lives. The Corps has
taken responsibility for the majority of these projects. In the past, the
school system used an areawide utility contract with the Washington Gas
Light Company to perform some types

Modernization Projects Are Costing More Than Planned

of repairs, such as electrical, heating, and air conditioning work,
painting, and carpeting. We reported in September 2001 that the school
system had improperly used this contract.1 The school system is no longer
using Washington Gas and has taken steps to implement new contracting
mechanisms for this work.

In December 2000, the District of Columbia Board of Education approved a
facility master plan to rebuild and update the District's public schools. It
is an ambitious plan calling for the modernization of 10 schools annually
over a 10- to 15-year period. Based on this plan, a $1.3 billion capital
budget to modernize the public schools was approved in June 2001. However,
in November 2001, the school system revised its spending plan. Because the
District's capital plans require 6-year budget projections, we evaluated the
fiscal year 2002 through 2007 projections in the approved budget and in the
revised plan. We found that the cost to execute the modernization effort has
increased significantly-about $848 million in the 6-year period. Figure 1
shows how the costs have increased over the period.

1 U.S. General Accounting Office, District of Columbia: D.C. Public Schools
Inappropriately Used Gas Utility Contract for Renovations, GAO-01-963
(Washington, D.C.: Sept. 28, 2001) and U.S. General Accounting Office, GSA's
Guidance
and Oversight Concerning Areawide Utility Contracts, GAO-02-56R (Washington,
D.C.:
Dec. 17, 2001).

Figure 1: Comparison of the School System's Approved Budget and Revised Plan

Source: GAO analysis.

According to school system officials, costs increased for a number of
reasons, including the following:

* historically significant buildings cannot be razed and have to be
redesigned at higher costs,

* experience to date shows that construction costs are running significantly
higher than the estimates used in the facility master plan, and

* the scope has been expanded for some projects to recognize community needs
for special facilities.

As an indication of how costs are increasing, we reviewed the cost estimates
in the facility master plan and the revised estimates for the first 22
schools to be modernized.2 These schools are currently in the planning,
design, or construction phase. We found that the costs for these schools

2 Oyster elementary  school,  funded through  a public-private  partnership,
opened in September 2001.

have increased by about $170 million. Appendix I lists the original and
revised estimates for the 22 schools.

These cost increases present a significant challenge. On March 22, 2002, the
District's Office of the Chief Financial Officer advised the school system
that due to the District's current debt position and limited borrowing
capacity, it must meet its capital improvement needs within its currently
approved budget. School system officials are considering options to deal
with the cost increases. However, such a huge increase will likely result in
stretching out the modernization program. If that happens, some schools will
have to be maintained longer than currently planned, which will add costs to
a program that is already over budget.

The facility master plan approved by the Board of Education set ambitious
completion dates for modernizing the schools. Generally, 3 to 4 years are
required to conduct feasibility studies,3 design the schools, and complete
construction. To meet the master plan's construction completion dates, time
frames were compressed. However, most of the first 22 schools to be
modernized will not be completed on time. Recognizing that the schedule in
the facility master plan cannot be achieved, school system and Corps
officials are developing more realistic schedules for some of the schools.
Appendix II contains a list of the first 22 schools with facility master
plan and current completion dates. It shows that

Modernization Efforts Are Taking Longer Than Planned

* 10 schools are experiencing delays ranging from 3 to 15 months,

* 1 is ahead of schedule,

* 3 are on time, and

* the schedules for 5 schools are being revised.

In addition, three schools are ahead of the facility master plan schedule,
but they have not met accelerated schedules established by the school system
and Corps. The scheduled construction completion dates for four elementary
schools-Key, Miner, Randle Highlands, and Barnard-were accelerated to show
the community tangible results quickly. Accelerated completion of the
schools involves a high-risk acquisition strategy. For example, in some
cases, construction began before the designs were

3Feasibility studies are used to develop the initial design of a school,
based on the educational specifications. These studies involve extensive
input from the community.

complete. The accelerated schedule also required at least $700,000 in
additional costs. None of the 4 schools have met the accelerated schedule.
The delays in meeting the accelerated schedules were caused by difficulties
in obtaining required permits from other District agencies, incorrect
assumptions about the time required to get materials, design changes, and a
bid protest. At Key elementary, persistent contractor performance problems
continue to delay completion of the project.

Our work also shows that delays have occurred with some repair projects. For
example, completion dates for 9 boiler replacement projects slipped from
October 2001 to March 2002 and 1 slipped to August 2002.4 Also, 17 of 22
bathroom renovation projects were delayed.5 Reasons for the delays in the
boiler and bathroom projects included problems in obtaining required
permits, time required for asbestos inspections and removal, and a contract
award protest.

Concerns about Quality Inspections

In our September 2001 report to you, we raised a number of concerns about
the school system's use of a Washington Gas Light Company contract,
including concerns about quality inspections. In a follow-up to our report,
we examined the gas company's records of quality inspections for the work it
managed for the school system. From August 2000 through March 2001, the
school system paid Washington Gas $25 million for 609 repair projects. Based
on the results of a random sample of projects, we estimate that 77 percent
of all projects lacked evidence that quality inspections were performed.6
Without evidence of inspections, the school system has no assurance that the
work was properly completed and its money was well-spent.

4According to Corps officials, temporary heating systems were available in
the schools in October 2001 for 7 of the projects. Three of the projects
were substantially completed in October 2001, but additional time was needed
to finish remaining work.

5An additional three projects did not have scheduled completion dates due to
an administrative error, so we could not assess timeliness of these
projects. The basis for our analysis was the Corps' fiscal year 2001 project
list, dated February 2001, and subsequent updates.

6Estimates were made using a 95-percent confidence level. We considered
evidence of inspection to be the Washington Gas inspector's initials or
signature on subcontractor invoices or proposals.

Concerns about Managing Asbestos Hazards

School system officials advised us that they are negotiating with the
company about the fee they paid the company to manage the repair projects.

To ensure compliance with legal requirements, the school system must be ever
vigilant in dealing with asbestos problems. In September 1998, the
Environmental Protection Agency (EPA) notified the District of Columbia of
serious issues of noncompliance with federal asbestos law at the public
schools. EPA's primary concern was the lack of required asbestos management
plans and periodic updates of the plans at each school. The plans are
required to show where asbestos is located in the schools so that it will
not be accidentally disturbed. To deal with the issues raised by EPA, the
school system sought assistance from the Corps in fiscal year 1999. The
Corps helped achieve compliance with EPA requirements and, as of February
2002, had spent $60.5 million on asbestos management and abatement
activities in the schools.

From October 1999 through May 2001, 13 inadvertent asbestos releases
occurred in the schools. Most of these releases were caused when contractors
and school custodians failed to consult the asbestos management plans and to
follow proper procedures for dealing with asbestos in the schools.7
According to District of Columbia Department of Health officials, asbestos
tests at the schools revealed that, while some of the releases were serious,
the health of District school children was not affected.

Concerns remain about whether the school system plans to adequately fund
continued compliance with asbestos mandates and additional asbestos
management activities. In addition, the Department of Health did not
promptly pursue enforcement actions against the contractors who were at
fault for the asbestos releases.

The school system's fiscal year 2002 to 2007 capital improvement plan
includes only $1 million per year for asbestos management. Based on past
experience and ongoing requirements, this level of funding is insufficient
to meet asbestos management needs. According to Corps officials, a much
higher level of funding is needed to (1) maintain compliance with EPA

7When it was discovered that many of these incidents occurred during boiler
replacement projects, the District of Columbia Department of Health
temporarily shut down 17 boiler replacement projects throughout the school
system.

requirements to keep the asbestos management plans updated, (2) conduct
assessments of asbestos areas before starting renovation work, and (3)
manage asbestos abatements.

The school system identified an additional $12 million from other sources to
fund asbestos activities for this year. However, Corps officials told us
they need an additional $1.6 million by mid-May or they will have to curtail
some of their asbestos activities. They also estimate that asbestos
activities will require about $17 million in fiscal year 2003.

Our review of asbestos activities also raises concerns about the Department
of Health's role in taking enforcement action against contractors who failed
to (1) follow the asbestos management plans in the schools before starting
renovation work and (2) properly deal with asbestos-containing materials
once the releases occurred. Department of Health officials told us that they
did not pursue enforcement actions because the Department's inspectors had
not collected adequate documentation.8 Specifically, inspection reports had
not been prepared which would have included information on laboratory
reports, the sequence of events and key players, a technical analysis of the
information collected at the scene, and a record of witness interviews.

After our inquiries, Department of Health attorneys began looking into some
of the 13 incidents where contractor errors caused the asbestos releases.
After gathering additional documentation from the Corps, earlier this month
the Department issued a notice of noncompliance and fined the contractors
involved in one of the release incidents. The Department plans to issue
additional notices soon. Department officials told us that noncompliance
notices will be issued for such things as failures to

* notify the District and receive proper approval to start a renovation

project involving asbestos materials, * obtain and pay for an asbestos
abatement license,

* show evidence of proper asbestos abatement training,

* provide protective clothing for employees engaged in asbestos abatement,

* display caution signs, and

* enclose work areas with airtight plastic sheeting.

8One enforcement action taken by the Department was to suspend a
contractor's license for 30 days.

The Department of Health also plans to train its inspectors on the types of
documentation they need to prepare, such as inspection reports, to enable
contractor violations to be promptly pursued.

Our work also shows that communication between the Department of Health, the
Corps, and the school system needs to be improved. In some cases, the
Department of Health was unaware of asbestos releases in the schools.
Department of Health officials told us that they are working to improve
communications with the school system and the Corps and increase the
Department's oversight of renovation work being done in the schools.

In summary, Mr. Chairman, the school system, with the Corps of Engineers'
assistance, has accomplished much in the last few years. However, it must
now come to grips with a modernization program that will cost significantly
more and take longer to accomplish than originally projected. We believe the
school system needs to revise its modernization plans to reflect these
realities. We also believe the school system needs to fully fund asbestos
management activities this year and ensure that sufficient funding is
budgeted in future years.

Mr. Chairman, this concludes my prepared statement. I will be happy to
respond to any questions you or other Members of the Subcommittee may have.

Contacts and Acknowledgments 
For further information about our work or the issues discussed in this
statement, please contact David E. Cooper at (202) 512-4841. We will make
copies of this statement available to other interested parties upon request.
This testimony is also available on GAO's Web site at www.gao.gov. This
effort was conducted under the direction of Michele Mackin. Other
individuals making key contributions were Charles D. Groves, John D. Heere,
Gary L. Middleton, William Petrick, Jr., Russell R. Reiter, Rebecca

L. Shea, and Adam Vodraska.

(dollars in millions)

School

                                                                                                                                                                Appendix I: Original and Current Cost Estimates for First 22 Schools to be Modernized
  Cost in   master
 facility   plan a

                    Current              Key                      Randle              Barnard               Miner             Kelly-Miller           Patterson  
                  estimateb  IncreaseElementary  $8.7$11.9 $3.2 Highlands  14.220.8 Elementary  12.823.9 Elementary  15.322.0    Middle    20.625.2 Elementary  14.018.3 Elementary  10.216.5 Elementary  9.112.2 
                                                               Elementary                                                                                       

                                                                                                                                                                
                                                                                                                                                                
           Brightwood Elementary                 10.9           18.5                7.6
              Cooke Elementary                   14.0           19.3                5.3
                Hardy Middle                     20.6           24.9                4.3
                Sousa Middle                     17.1           20.1                3.0
                   Total                        $364.8         $534.3            $169.5

aCost reported in the facility master plan dated December 20, 2000.

bEstimates reported in the fiscal year 2003-2008 capital spending plan dated
November 30, 2001.

cPhelps High School was not listed in the December 2000 facility master plan
as a planned renovation.

Appendix  II: Original  and  Current Schedules  for First  22 Schools  to be
Modernized

School

Facility master plan
completion datea Current completion dateb Delay (months)

        cKey Elementary           September 2002   December 2002          3
  cRandle-Highlands Elementary      April 2003      August 2002     8 months early
      cBarnard Elementary           April 2003     November 2002    5 months early
       Miner Elementaryc            April 2003     December 2002    4 months early
      Kelly-Miller Middle           April 2003       July 2003            3
      Patterson Elementary           July 2003       July 2003            0
        Noyes Elementary             July 2003       July 2003            0
      Cleveland Elementary           July 2003       July 2003            0
    McKinley Technology High      September 2003      May 2004            8
       Thomson Elementary            July 2003     December 2003          5
       Bell/Lincoln High          September 2003     July 2004           10
          Phelps High                    d            Unknown       Not applicable
       Birney Elementary          September 2003   December 2004         15
       Thomas Elementary          September 2003     July 2004           10
    Walker Jones Elementary       September 2003     July 2004           10
      Wheatley Elementary         September 2003     July 2004           10
        Luke Moore High           September 2004     July 2004      2 months early
          Woodson High            September 2005   December 2005          3

e

Brightwood Elementary September 2003 Unknown Unknown

e

Cooke Elementary September 2003 Unknown Unknown

e

Hardy Middle September 2004 Unknown Unknown

e

Sousa Middle September 2004 Unknown Unknown

aCompletion  dates reported in  the facility master plan  dated December 20,
2000.

bCompletion dates in  Army Corps of Engineers status reports as of April 11,
2002.

cAt  the request of the school system, the  schedules for these schools were
fast tracked for completion by July 2002.

dPhelps was not included in the original facility master plan.

eCurrent completion estimates are under review.
*** End of document. ***