Kennedy Center: Improvements Needed to Strengthen the		 
Construction Process (10-SEP-03, GAO-03-1141T). 		 
                                                                 
In the mid-1990s, John F. Kennedy Center for the Performing Arts 
(Kennedy Center) officials recognized a need for additional	 
parking and better site access. As a precursor to a planned	 
project to construct an 8-acre plaza and two additional buildings
at the site, the Kennedy Center is currently in the process of	 
constructing a garage expansion and site improvement project.	 
Because of congressional concerns over project delays and costs  
as well as challenges the Kennedy Center faces as it pursues this
major construction effort, GAO was requested to examine (1) the  
garage expansion and site improvement project's current costs,	 
time frames, and scope compared to estimates provided to	 
congressional stakeholders in 1997 and 1998 and (2) challenges	 
the Kennedy Center faces in managing large construction projects.
GAO issued its findings in a report entitled Kennedy Center:	 
Improvements Needed to Strengthen the Management and Oversight of
the Construction Process, GAO-03-823 (Sept. 5, 2003). This	 
testimony is based on that report.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-1141T					        
    ACCNO:   A08393						        
  TITLE:     Kennedy Center: Improvements Needed to Strengthen the    
Construction Process						 
     DATE:   09/10/2003 
  SUBJECT:   Construction costs 				 
	     Facility construction				 
	     Parking facilities 				 
	     Planning						 
	     Projections					 
	     Policies and procedures				 
	     John F. Kennedy Center for the			 
	     Performing Arts (DC)				 
                                                                 

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GAO-03-1141T

Testimony Before the Chairman, Subcommittee on Economic Development,
Public Buildings, and Emergency Management, Committee on Transportation
and Infrastructure, House of Representatives

United States General Accounting Office

GAO For Release on Delivery Expected at 10: 00 a. m. EDT Wednesday,
September 10, 2003 KENNEDY CENTER

Improvements Needed to Strengthen the Construction Process

Statement of Mark L. Goldstein, Acting Director Physical Infrastructure
Issues

GAO- 03- 1141T

As of July 2003, Kennedy Center officials estimated that the garage
expansion and site improvement project would cost $88 million, the garage
expansion would be completed in December 2003, the site improvements would
be completed in summer 2004, and the project would include 525 parking
spaces and various traffic flow improvements. These estimates vary
substantially from estimates that Kennedy Center officials provided to
congressional stakeholders in 1997 and 1998. At that time, Kennedy Center
officials estimated that the project would cost $28 million, would be
completed by August 2000, and would include between 900 and 1, 000 parking
spaces. According to Kennedy Center officials, the initial estimates were
preliminary in nature and were based on some unrealistic assumptions. They
acknowledged that they should have done a better job of informing Congress
of the preliminary nature of the estimates and the subsequent events in
the project*s planning and bidding phases that affected the costs, time
frames, and scope. Kennedy Center officials said they now hold monthly
meetings with Congress about the status of ongoing projects.

The Kennedy Center faces certain challenges in managing large construction
projects. Specifically, the Kennedy Center lacks (1) adequate policies and
procedures to guide the planning and management of the construction
process, (2) some timely construction data on schedules and costs for
effectively overseeing construction projects and measuring results, and
(3) key human capital resources and expertise that would be useful in
managing the construction process. In its September 2003 report, GAO
recommended

that the Kennedy Center develop comprehensive project management policies
and procedures, ensure development and use of timely data, and ensure that
the needs for human capital expertise are met. Kennedy Center officials
are now working to address these challenges.

The John F. Kennedy Center for the Performing Arts

In the mid- 1990s, John F. Kennedy Center for the Performing Arts (Kennedy
Center) officials recognized a need for additional parking and better site
access. As a precursor to a planned project to

construct an 8- acre plaza and two additional buildings at the site, the
Kennedy Center is currently in the process of constructing a garage
expansion and site improvement project.

Because of congressional concerns over project delays and costs as well as
challenges the Kennedy Center faces as it pursues this major construction
effort, GAO

was requested to examine (1) the garage expansion and site improvement
project*s current costs, time frames, and scope compared to estimates
provided to congressional stakeholders in 1997 and 1998 and (2) challenges
the

Kennedy Center faces in managing large construction projects. GAO issued
its findings in a report entitled Kennedy Center: Improvements Needed to
Strengthen the Management and Oversight of the Construction Process, GAO-
03- 823 (Sept. 5, 2003). This testimony is based on

that report.

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 1141T. To view the full product,
including the scope and methodology, click on the link above. For more
information, contact Mark L. Goldstein, (202) 512- 2834, or goldsteinm@
gao. gov. Highlights of GAO- 03- 1141T, a testimony

before the Subcommittee on Economic Development, Public Buildings, and
Emergency Management, Committee on Transportation and Infrastructure,
House of Representatives

September 10, 2003

KENNEDY CENTER

Improvements Needed to Strengthen the Construction Process

Page 1 GAO- 03- 1141T Mr. Chairman, Ranking Minority Member, and Members
of the Subcommittee:

We welcome the opportunity to testify before you today on our work related
to selected aspects of the Kennedy Center*s construction program.
Specifically, my testimony will discuss the (1) differences between the
current costs, time frames, and scope estimates of the garage expansion
and site improvements project and the 1997 and 1998 estimates provided to
congressional stakeholders; and (2) challenges that the Kennedy Center
faces in managing large construction projects. As you know, on September
5, 2003, we issued a report to you and the Ranking Minority Member on
these issues. 1 Therefore, my statement today will be short and primarily
focus on the report*s major findings and recommendations.

Let me begin by giving you a brief overview of the Kennedy Center*s
construction program and the garage expansion and site improvements
project.

The John F. Kennedy Center for the Performing Arts, which was established
in 1964 as both a national cultural arts center and a memorial to the 35th
President, opened in September 1971 as an independently administered
bureau of the Smithsonian Institution. Shortly thereafter, in 1972, the
Secretary of the Interior, through the National Park Service,

assumed responsibility for maintenance and all other services related to
the administration of the Kennedy Center facility. In 1994, legislation
was enacted that transferred responsibility for operations and maintenance
of the facility to the Kennedy Center Board of Trustees. 2 The 1994
legislation also required the Kennedy Center to develop and update
annually a comprehensive building needs plan that details the condition of
the Kennedy Center facility and planned renovations.

1 U. S. General Accounting Office, Kennedy Center: Improvements Needed to
Strengthen Management and Oversight of the Construction Process, GAO- 03-
823 (Washington, D. C.: Sept. 5, 2003).

2 The Kennedy Center Board of Trustees is composed of 36 general trustees
who must be U. S. citizens and who are appointed by the President of the
United States, 13 trustees designated ex- officio representatives of the
executive branch and other government branches, and 10 congressional
representative trustees. Each appointed trustee serves a

term of 6 years. Overview

Page 2 GAO- 03- 1141T The Kennedy Center receives annual appropriations to
fund operations and maintenance as well as construction. The Kennedy
Center also has

other sources of funds to finance capital improvements in addition to
annual appropriations, such as charitable donations and the ability to
borrow funds. The John F. Kennedy Center Parking Improvement Act of 1997
gave the Kennedy Center approval to design and construct the parking
garage expansion and site improvements project. 3 The garage expansion is
being funded through a loan from the District of Columbia, which issued
revenue bonds to provide the related funding, 4 and the site improvements
are being funded through annual appropriations. To assist in the
construction of the garage expansion, the Kennedy Center has hired a
construction management firm. For the site improvements, the Kennedy
Center is using construction- contracting services available to federal
entities through a Corps of Engineers indefinite- delivery,
indefinitequantity contract. The Corps of Engineers is also providing
limited management assistance to the project.

The July 2003 estimates of the garage expansion and site improvements
project costs, time frames, and scope vary substantially from estimates
that the Kennedy Center provided to Congress in 1997 and 1998. Current
estimates show that the garage expansion is estimated to cost $45 million,
include 525 parking spaces, and be completed in December 2003. The site
improvements are estimated to cost $43 million; include various

improvements to the sidewalks, roads, and landscaping; and be completed in
the summer of 2004. In contrast, in 1997 and 1998, Kennedy Center
officials estimated that the garage expansion would cost $25 million and
include 900 to 1,000 parking spaces. The site improvements were estimated
to cost $3 million and include construction of a new front entry driveway.
At that time, Kennedy Center officials estimated that the garage expansion
and site improvements project would be completed by August 2000.

3 20 U. S. C. 76i( b). 4 On December 15, 1999, the District of Columbia
issued $34 million in District of Columbia revenue bonds and loaned the
proceeds to the Kennedy Center for the purpose of constructing the garage
expansion. The bonds are secured by parking revenues from the garage
expansion. Payments of principal and interest on the bonds are insured by
Ambac Assurance Corporation. Garage Expansion

and Site Improvements Project Estimates

Page 3 GAO- 03- 1141T According to Kennedy Center officials, the initial
garage expansion estimates were preliminary in nature and were based on
some unrealistic

assumptions related to comparable construction projects, the failure to
consider the need for year- round operations, and construction market
conditions. In addition, Kennedy Center officials said that the final
scope of the site improvements portion of the project increased
significantly from the early estimates because they decided to accelerate
the scheduling of some planned repairs in hopes of expediting the work and
reducing the number of contractors, thus simplifying project coordination
efforts. These officials acknowledged that they should have done a better
job of informing Congress of the preliminary nature of the estimates and
the subsequent events in the planning and bidding phases of the project
that affected the costs, time frames, and scope. Kennedy Center officials
said they are now holding monthly meetings with congressional stakeholders
regarding the status of Kennedy Center projects.

In addition to problems associated with the planning phases of the
projects, we also noted that the Kennedy Center faces a number of
challenges in managing large construction projects. The Kennedy Center
lacks (1) adequate policies and procedures to guide the planning and
management of the construction process, (2) some timely construction data
on schedules and costs for effectively overseeing construction projects
and measuring results, and (3) key human capital resources and expertise
that would be highly beneficial in managing the construction process. Let
me elaborate on these three challenges.

 Policies and procedures* Although the Kennedy Center had some limited
construction- related guidance, such as safety plans developed by the
construction management contractor, it does not have formal, written
project management policies and procedures to help guide and administer
construction projects in various areas such as project organization,
quality control and assurance, project execution, and day- to- day
contract administration. Such policies and procedures would help ensure
overall project oversight of all Kennedy Center construction projects,
including the garage expansion and site improvements project.

 Timely construction data* The Kennedy Center does not always receive
timely construction data on schedules and costs that are necessary for
monitoring construction costs and measuring results, such as estimated
total project costs. For example, regarding the garage expansion, the
Kennedy Center decided to waive submission of key timely written project
management reports from the construction manager and rely instead on
Kennedy Center

Faces Challenges in Managing its Construction Program

Page 4 GAO- 03- 1141T weekly meetings. These weekly meetings are no
substitute for timely written reports typically used in construction
project management*

reports that would have provided additional detailed information on
schedules and costs that could have been helpful in project oversight.

 Human capital resources and expertise* Kennedy Center officials lack key
human capital resources and expertise that would be highly beneficial in
managing the construction process. For example, the Kennedy Center
experienced significant turnover in both in- house staff and contractor
personnel during the design stages of the garage expansion and site
improvements project, which has contributed to reduced institutional
knowledge of the project and has increased the time necessary to finalize
design decisions. The President of the Kennedy Center told us he
recognized that the Kennedy Center continues to lack adequate staff or
expertise to manage its upcoming plaza and buildings project. However,
Kennedy Center officials have since noted that they are in the process of
filling key positions of director of capital projects and project manager,
have engaged an architect and developer firm, and now feel that they do
have sufficient staff and expertise.

These construction management challenges are not new to the Kennedy
Center. In September 1995, a Kennedy Center consultant reported that there
were no clear lines of responsibility within the existing facility
management structure, and that job descriptions were not clearly defined.
5 In addition, the consultant*s report also noted that *An organized
system

should be developed for managing information concerning the facility
operations to be used to monitor performance against established
standards.* Regarding human capital, we reported in 1993 that the Kennedy
Center lacked a federal contracting officer, architects, engineers, or
other professional occupations associated with capital projects. 6 We
concluded that the Kennedy Center did not have sufficient capability to
effectively manage large- capital construction projects. Since 1993, the
Kennedy Center added a contracting department with 5 full- time positions
and an entire project management department consisting of 9 employees* 6
full- time Kennedy Center employees, including 4 project managers and 2
support personnel, plus 3 contract employees.

5 Wiss, Janney, Elstner Associates, Inc., Trammell Crow Company, and
Environmental Systems Design, Inc., Facility Management Assessment, Phase
I (Washington, D. C.: September 1995).

6 U. S. General Accounting Office, Kennedy Center: Information on the
Capital Improvement Program, GAO/ GGD- 93- 46 (Washington, D. C.: Feb. 9,
1993).

Page 5 GAO- 03- 1141T Although it is difficult to determine the extent to
which these challenges have hindered the Kennedy Center*s efforts on the
garage expansion and

site improvements project to date, having adequate policies and
procedures, timely construction data, and qualified human capital would
help to strengthen the overall construction program and reduce risk.
Addressing these challenges will become increasingly important as the
Kennedy Center undertakes the larger, more costly, and more complex plaza
and buildings project. The critical importance of having quality guidance,
data, and human capital was highlighted by the National Research Council*s
2000 report on federal organizations that contract out for construction
management services to acquire and build facilities, such as the Kennedy
Center. 7 The council found that, among other things, these

organizations should have (1) plans, policies, and procedures to define
project goals and develop strategies and methods for achieving those
goals; (2) detailed data to monitor progress and assess risks; and (3)
inhouse staff with sufficient management, financial, and technical skills
necessary for effective oversight of all phases of the project. Effective
policies and procedures would provide a road map for project managers on
how best to estimate project costs, administer the contract, and define
the roles and responsibilities of project staff. Timely data would allow

project managers to effectively oversee project status and measure results
to gauge effectiveness. Qualified human capital and expertise would
improve efforts to control project costs, time frames, and scope.

We recognize that changes in costs, time frames, and scope are not unusual
in construction projects. However, in the case of the Kennedy Center
garage expansion and site improvements project, early estimates proved to
be especially problematic and were based on unrealistic assumptions.
Furthermore, if the Kennedy Center continues to operate without adequate
construction polices and procedures, timely schedule and cost data, and
qualified human capital, the success of its future plaza and buildings
project will be at risk. Although making improvements in these areas is no
guarantee of project success, such improvements would strengthen the
overall construction program and reduce risk by providing greater
effectiveness in managing and overseeing future projects and measuring
results.

7 National Research Council, Outsourcing Management Functions for the
Acquisition of Federal Facilities (Washington, D. C.: National Academy
Press, 2000). The council is the working arm of the National Academy of
Sciences and the National Academy of Engineering, and it carries out
studies to advise the federal government.

Page 6 GAO- 03- 1141T Given this, we recommended in our September 2003
report that the Kennedy Center

 develop comprehensive project management policies and procedures to
guide the construction process;

 ensure development and utilization of timely data to oversee
construction projects;

 ensure that needs for human capital expertise are met. Kennedy Center
officials agreed with our findings and recommendations and acknowledged
the importance of focusing on these areas. The officials said that they
have initiated efforts to improve the overall construction program by (1)
contacting the Federal Facilities Council for assistance with updating and
improving construction management policies and procedures; (2) requesting
monthly written project management reports; and (3) hiring additional in-
house and contractor staff to assist in the upcoming plaza and buildings
project.

Mr. Chairman, this concludes my prepared statement. I would be happy to
respond to any questions you or the other members of the subcommittee may
have at this time.

For future contacts regarding this testimony, please contact Mark L.
Goldstein at (202) 512- 2834. Individuals making key contributions to this
testimony included Terrell Dorn, Casey Brown, and David C. Merrill.

Contact and Acknowledgements (543072)

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