Kennedy Center: Stronger Oversight of Fire Safety Issues,
Construction Projects, and Financial Management Needed
(22-APR-05, GAO-05-334).
Since fiscal year 1995, the John F. Kennedy Center for the
Performing Arts (Kennedy Center) has received nearly $203 million
in federal funds to complete capital projects and intends to
request an additional $43 million in appropriations through
fiscal year 2008. The Kennedy Center's Comprehensive Building
Plan identifies these capital projects as necessary to renovate
the center and meet or exceed relevant life safety and disabled
access regulations. GAO was asked to examine (1) the progress the
center has made in completing key capital projects within
estimated costs, and how it communicated this progress; (2) the
current status of the center regarding fire and life safety and
disabled access requirements; and (3) what best practices could
help the center improve planning and management of capital
projects.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-334
ACCNO: A22077
TITLE: Kennedy Center: Stronger Oversight of Fire Safety Issues,
Construction Projects, and Financial Management Needed
DATE: 04/22/2005
SUBJECT: Building codes
Construction (process)
Construction costs
Cost analysis
Cost effectiveness analysis
Facility construction
Facility management
Federal funds
Federal regulations
Financial management
Internal controls
Repair costs
Safety
Safety regulation
Safety standards
Strategic planning
Fire safety
Kennedy Center Comprehensive Building
Plan
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GAO-05-334
United States Government Accountability Office
GAO Report to the Chairman, Subcommittee on Interior, Environment, and
Related
Agencies, Committee on Appropriations, House of Representatives
April 2005
KENNEDY CENTER
Stronger Oversight of Fire Safety Issues, Construction Projects, and Financial
Management Needed
a
GAO-05-334
[IMG]
April 2005
KENNEDY CENTER
Stronger Oversight of Fire Safety Issues, Construction Projects, and Financial
Management Needed
What GAO Found
Although the Kennedy Center has achieved its goal of renovating the Opera
House, Concert Hall, and plaza-level public spaces, each of these projects
exceeded budget estimates, some by substantial amounts. Project cost
growth resulted from modifications made during the renovation process,
due, in part, to the Kennedy Center's lack of knowledge of the building's
site conditions. Modifications led to overtime charges paid to meet tight
construction schedules. Also, the center may have paid higher costs than
necessary by negotiating contract modification values after work was
completed. A lack of comprehensive policies and procedures limited the
Kennedy Center's ability to adequately safeguard federal funds.
Furthermore, our review of communication documents showed that Kennedy
Center management did not always timely or accurately convey project cost
growth and delays to its Board of Trustees or Congress.
Cost over Initial Budgets for Selected Kennedy Center Projects
The Kennedy Center has complied with disabled access requirements in
renovated areas. However, GAO identified three areas where the center does
not appear to meet fire safety code requirements: (1) the center has not
taken steps to ensure that exit paths through the Grand Foyer, Hall of
Nations, and Hall of States provide adequate protection from fire; (2)
doors in critical areas do not provide adequate protection from fire; and
(3) the Millennium Stages have exit deficiencies and lack sprinkler and
smoke evacuation systems required by code. In addition, it does not appear
that the center clearly informed the board or Congress of its decision not
to install sprinklers or other fire suppression systems in the plaza-level
public spaces.
Given the ongoing project management issues GAO has identified, the
Kennedy Center could benefit from considering best practices for project
management. In February 2004, GAO identified components of a best
practices framework that include (1) conducting comprehensive planning,
(2) assessing risks, (3) comprehensively managing project finances, (4)
establishing accountability for and oversight of federal resources, and
(5) incorporating stakeholders' interests.
United States Government Accountability Office
Contents
Letter
Results in Brief
Background
Key Capital Projects Completed, but Costs Exceeded Budget
Estimates and Were Not Timely or Accurately Reported
The Kennedy Center Does Not Appear to Meet Some Fire Safety Code
Requirements but Exceeds Disabled Access Requirements
Several Best Practices Could Assist the Kennedy Center in
Addressing Project Management Problems Conclusions Recommendations Agency
Comments and Our Evaluation
1 4 7
12
24
32 39 40 42
Appendixes
Appendix I:
Appendix II:
Appendix III:
Appendix IV:
Appendix V:
Appendix VI:
Scope and Methodology
Appropriations to the Kennedy Center for Capital Repairs amd Alterations
Status of Previous GAO Recommendations to the Kennedy Center
February GAO Management Letter Sent to The Kennedy Center
Comments from the John F. Kennedy Center for the Performing Arts
GAO Comments
GAO Contacts and Staff Acknowledgments
GAO Contacts
Staff Acknowledgments
44
47
48
50
53 65
70 70 70
Table Table 1: Appropriations to the Kennedy Center for Capital
Repairs
and Alterations under the CBPs 47
Figures Figure 1: Diagram of the Kennedy Center's Plaza-Level Public
Spaces and Theaters 8
Figure 2: Kennedy Center Organizational Chart for Selected
Positions and Offices 11
Figure 3: Scope of Key Kennedy Center Capital Projects 13
Contents
Figure 4: Budgets and Actual Costs for Selected Kennedy Center
Capital Projects 14 Figure 5: Opera House Unforeseen Site Condition 17
Figure 6: Kennedy Center Communication Methods 22 Figure 7: Exit Routes
from the Kennedy Center's Major
Theaters 25 Figure 8: Millennium Stage Located at the End of the Grand
Foyer outside the Eisenhower Theater 28
Figure 9: Selected Disabled Access Improvements to the Kennedy Center Made
as Part of the Comprehensive Building Plan 31
Figure 10: Best Practices for Managing Capital Projects 33
Abbreviations
ADA Americans with Disabilities Act
CBP Comprehensive Building Plan
GSA General Services Administration
JFMIP Joint Financial Management Improvement Program
NFPA 101 National Fire Prevention Association Life Safety Code
OIG Office of the Inspector General
OMB Office of Management and Budget
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
A
United States Government Accountability Office Washington, D.C. 20548
April 22, 2005
The Honorable Charles Taylor
Chairman, Subcommittee on Interior, Environment, and Related Agencies
Committee on Appropriations House of Representatives
Dear Mr. Chairman:
The John F. Kennedy Center for the Performing Arts (Kennedy Center) opened
in 1971 as a national cultural arts center and presidential memorial.
Every year, millions of people visit the Kennedy Center to view the center
and memorial or attend one of the center's performances. Since at least
1990, the Kennedy Center facility has needed substantial capital repairs.
Officials from both the Kennedy Center and the National Park Service,
which at that time shared responsibility for managing the Kennedy Center,
acknowledged that the center had reached a seriously deteriorated state.
In 1994, Congress gave the Kennedy Center sole responsibility for managing
the facility. As part of those responsibilities, Congress also required
the Kennedy Center to develop, and annually update, a comprehensive
building needs plan. In response, the Kennedy Center developed a
Comprehensive Building Plan (CBP) in 1995 that included an assessment of
the facility and identified the capital projects it believed were
necessary to repair the center and bring it into compliance with current
fire life safety and disabled access codes.1 The plan consisted of a
long-term capital repair and upgrade project that, among other things,
envisioned the center's meeting or exceeding relevant fire life safety
regulations by 2008 and that addressed disabled access needs. To implement
its CBP, the Kennedy Center has received almost $203 million2 in federal
funds from fiscal years 1995 through 2005 for capital repairs and
1The National Fire Prevention Association Life Safety Code deals with life
safety from fire and like emergencies. The code covers construction,
protection, and occupancy features to minimize danger to life from fires,
smoke, fumes, or panic before buildings are vacated. The Americans with
Disabilities Act prohibits discrimination on the basis of disability in
employment, services rendered by state and local governments, places of
public accommodation, transportation, and telecommunications services.
2This amount is comprised of a $35.3 million beginning balance, which is
the value of transfers from the National Park Service and the Smithsonian
Institution, and approximately $167.6 million in federal appropriations.
alterations, and Kennedy Center officials said that additional
appropriations totaling $43 million through fiscal year 2008 are needed to
complete the planned projects.
For more than a decade, we have identified shortcomings in, and made
recommendations to improve, the Kennedy Center's construction, planning,
and management processes. In the 1990s, we reported that the Kennedy
Center did not have sufficient staff capability to effectively manage its
capital improvement plans.3 In 2003, we reported that the Kennedy Center
needed to strengthen the management and oversight of large construction
projects, such as the garage expansion and renovation project.4 In 2004,
we reported that the Kennedy Center had implemented most of the projects
in its CBP but would likely not complete its plan by 2008, given the
number and size of the renovation projects that remained to be done,
anticipated future appropriations, and the likelihood that project budgets
may increase as designs are completed (see app. I).5
To assist the subcommittee in its oversight role and in making future
funding decisions, you asked that we discuss in this report (1) the
progress the Kennedy Center has made in completing key capital projects
within estimated costs, and how it communicated information about this
progress to its Board of Trustees and Congress; (2) the center's current
status regarding fire life safety and disabled access requirements; and
(3) what best practices, if any, could help the center improve its capital
projects planning and management process. We also included information on
the Kennedy Center's federal appropriations for capital repairs and
alterations in appendix II and the status of the center's implementation
of previous GAO recommendations in appendix III.
To determine the Kennedy Center's progress in completing key projects, we
reviewed the center's audited financial statements and a selection of the
invoices found in project, contracting, and finance files for five of the
3GAO, Kennedy Center: Information on the Capital Improvement Program,
GAO/GGD-93-46 (Washington, D.C.: Feb. 9, 1993) and Kennedy Center:
Information on Facility Management Capability, GAO/GGD-98-56 (Washington,
D.C.: Mar. 25, 1998).
4GAO, Kennedy Center: Improvements Needed to Strengthen the Management and
Oversight of the Construction Process, GAO-03-823 (Washington, D.C.: Sept.
5, 2003).
5GAO, Kennedy Center: More Information on Project Status and Budgets
Needed to Understand the Impact of Future Funding Decisions, GAO-04-933
(Washington, D.C.: Sept. 15, 2004).
largest projects-the renovation of the Concert Hall, Opera House,
Eisenhower Theater, and plaza-level public spaces and the installation of
a new fire alarm system-to the extent that they existed. These projects
represent the three largest theaters at the Kennedy Center, the largest
public spaces, and the most expensive fire life safety improvements
completed to date. We also reviewed federal authorization and
appropriation laws; the Public Buildings Act, as amended, and implementing
regulations; the John F. Kennedy Center Act, as amended; the Americans
with Disabilities Act, as amended; and the Economy Act. To determine how
the Kennedy Center communicates with stakeholders, we reviewed minutes
from the Board of Trustees' meetings, minutes and agendas of the board's
Operations Subcommittee meetings, the CBPs published since 1995, annual
center budget justifications to Congress since 1995, and testimonies
before Congress over this same time period. To assess the center's
compliance with fire life safety and disabled access requirements, our
staff of licensed professional engineers toured the site, and we
contracted with an independent expert to assess the Kennedy Center's
compliance with applicable fire life safety code and disabled access
requirements.6 For the purposes of our analysis of the Kennedy Center's
fire life safety code compliance, we took the center's ongoing and planned
fire life safety upgrades into consideration when identifying
deficiencies, and we did not identify deficiencies for cases where
upgrades or improvements were planned. To identify best practices for
project management, we synthesized information from our previous work on
best practices in capital project management7 with other independent
sources. During our review, we interviewed numerous Kennedy Center senior
managers and officials in the Project Management, Contracts, Finance, and
President's Offices and officials from the Smithsonian Institution's
(Smithsonian) Office of the Inspector General (OIG), the General Services
Administration's (GSA) National Capital Region, and the office of the
District of Columbia (D.C.) Fire Marshal. We also determined that the data
used in this report were sufficiently reliable for the purpose of our
review. We conducted our review from August 2004 to March 2005 in
accordance with generally accepted government auditing standards.
6UNICCO Government Services, Inc., Life Safety, Fire Alarm System and ADA
Assessment of the John F. Kennedy Center For The Performing Arts
(Centreville, VA: 2005).
7GAO, Intercity Passenger Rail: Amtrak's Management of Northeast Corridor
Improvements Demonstrates Need for Applying Best Practices, GAO-04-94
(Washington, D.C.: Feb. 27, 2004).
Results in Brief Although the Kennedy Center has achieved its goal of
renovating the Opera House, Concert Hall, and its plaza-level public
spaces, and installed a buildingwide fire alarm system, each of these
projects exceeded its budget estimates by amounts ranging from 13 to 50
percent, and it does not appear that center officials always timely or
accurately communicated the cost growth and delays to its Board of
Trustees or Congress. Cost growth in these projects resulted from
unanticipated modifications made during the renovation process and
condensed schedules. Such modifications were necessary, in part, because
the Kennedy Center lacked knowledge of the building's site conditions. The
project modifications, in turn, led to overtime charges paid to meet tight
construction schedules. For example, the Kennedy Center paid $560,000 in
overtime charges during the Opera House renovation to complete the work on
schedule. The center also may have paid higher-than-necessary costs to
contractors by routinely negotiating the value of project modifications
after contractors had already completed the work. In addition, the absence
of comprehensive policies and procedures across the project management,
contracting, and finance departments has impeded effective project
management and diminished the oversight of federal funds. Finally, our
review of the communications documentation showed that the Kennedy Center
management did not always timely or accurately communicate cost overruns
and schedule changes to its Board of Trustees or Congress. For example,
the Concert Hall renovation resulted in cost growth of $6.2 million, or 41
percent, over the original budget; however, Kennedy Center officials
repeatedly testified before Congress, several years after renovations were
complete, that the project was completed within budget estimates.
The Kennedy Center does not appear to meet some fire safety code
requirements, but the center has complied with, and exceeded in some
instances, disabled access requirements in renovated areas of the center.
After requesting and obtaining funds from Congress to address fire code
deficiencies, such as the need for fire suppression systems, the Kennedy
Center decided against its plan to meet fire safety code requirements by
installing sprinklers and smoke evacuation systems in the Grand Foyer, the
Hall of States, and the Hall of Nations. The Kennedy Center reversed its
decision to install these systems without having its decision
independently reviewed or clearly informing its Board or Congress that it
was not
spending the funds as planned.8 To identify and mitigate fire protection
issues concerning exit paths through the Grand Foyer, the Hall of States,
and the Hall of Nations, the Kennedy Center commissioned and used the
results of a fire-modeling study. The center has not implemented some of
the study's recommendations, nor did it seek peer review of the study even
though the fire code provides for third-party validation and support for a
study's assumptions and conditions. Third-party validation is particularly
important in this instance because the Kennedy Center's fire safety
decisions are not subject to external review. In addition, we identified
two deficiencies, based on fire code, that are of immediate concern.
First, the doors in critical areas, such as the fire pump room and the
Fire Command Center, do not provide adequate separation from fire as
outlined in the fire safety code. Second, fire-safety-related problems
exist with the Millennium Stages. The stages located at the ends of the
Grand Foyer could pose exit problems in the event of fire.9 Furthermore,
the Millennium Stages do not have sprinkler and smoke control systems as
required by fire code. Officials from the Kennedy Center said that they
believe that all fire safety code requirements are being met but agreed to
add fire protective doors and document their key decisions. Due to the
critical nature of fire safety issues, on February 4, 2005, we sent the
Kennedy Center President a letter outlining the apparent code deficiencies
(see app. IV). Regarding disabled access projects, we concluded that the
Kennedy Center meets or exceeds the requirements outlined in the Americans
with Disabilities Act10 (ADA) on the basis of our independent expert's
review. For example, disabled patrons can now access all tiers of the
Concert Hall and Opera House, and ushers receive special training for
assisting disabled patrons.
Given the ongoing management problems we have identified, the Kennedy
Center could benefit from considering best practices for project
management. In February 2004, we identified components of a best
8In accordance with fire code, the Kennedy Center conducted an egress and
fire-modeling study to determine if occupants could safely exit the
building in the event of a fire. The modeling study predicted that patrons
would be able to escape the Kennedy Center safely in the event of a fire
before conditions became untenable provided that the center took steps to
minimize evacuation delays and limit storage of combustible materials. The
study also recommended that the Kennedy Center install sprinklers in the
Millennium Stages for added protection.
9Fire code defines means of egress as a continuous and unobstructed way of
travel from any point in a building to a public way consisting of three
separate and distinct parts: (1) the exit access, (2) the exit, and (3)
the exit discharge.
1042 U.S.C. S: 12101 et. seq.
practices framework. These components include (1) conducting comprehensive
project planning, (2) assessing risks and identifying mitigation measures,
(3) comprehensively managing project finances, (4) establishing
accountability for and oversight of projects, and (5) incorporating
stakeholders' interests in planning and implementing projects.
Comprehensive planning helps manage and control project implementation.
Assessing risks and identifying mitigation measures assist in meeting
project goals by recognizing and responding to problems early.
Comprehensively managing project finances is important for estimating and
controlling project costs. Establishing accountability for and oversight
of projects better ensures the prudent use of resources, including federal
resources. Incorporating diverse stakeholders' interests helps facilitate
projects' successful implementation by ensuring a clear understanding of
roles, responsibilities, and potential concerns. Related to these best
practices, the Kennedy Center has begun to take steps to improve its
project management approach, but additional improvements are needed.
GAO recommends here and in testimony on April 6, 2005, that the Chairman
of the Kennedy Center Board of Trustees (1) strengthen oversight of center
management through the Board of Trustees and external entities, such as an
Inspector General; (2) take steps to better comply with fire safety code
and seek peer review of its use of modeling studies; and (3) better
conform to best practices regarding stakeholder communications, financial
management, and document retention.
We provided a draft of this report to the Kennedy Center for its review
and comment. The Kennedy Center stated that it had made a number of
significant management improvements in recent years and will continue to
do so. The Kennedy Center further noted that the scope of our current work
may not have reflected these changes. In conducting our work, we reviewed
the details of recent management changes that the Kennedy Center has made,
but we were unable to gauge the impact of some of these changes since they
are relatively recent in nature or still in development. The Kennedy
Center agreed with several of our recommendations, but disagreed with
others. The Kennedy Center believes that it is in compliance with fire
code, but agreed to seek third-party review of its approach to certain
fire code deficiencies. The Kennedy Center agreed that it could improve
its information about capital projects, its document retention practices,
and its knowledge of site conditions at the center. However, the Kennedy
Center disagreed that it needed to strengthen its financial controls in
the way that we recommended. For example, the center believes that its
information is up to date, and it plans to fully comply with the Economy
Act. We continue to believe the Kennedy Center needs to strengthen its
financial management controls in order to improve the quality of its
financial records and better safeguard federal funds. The Kennedy Center
also provided technical comments that we incorporated in this report as
appropriate.
Background The Kennedy Center opened in 1971 and is located on 17 acres
along the Potomac River in Washington, D.C. The center houses four major
theaters and several smaller theaters, five public halls or galleries,
educational facilities, rehearsal spaces, offices, and meeting rooms in
about 1.1 million square feet of space. The plaza level is the primary
focus for patrons and tourists, including three main theaters, the Grand
Foyer, the Hall of States, and the Hall of Nations. Access to other areas,
such as the roof terrace level, is provided through the Grand Foyer, Hall
of States, and Hall of Nations. Figure 1 provides a diagram of the Kennedy
Center's plaza level.
Figure 1: Diagram of the Kennedy Center's Plaza-Level Public Spaces and Theaters
In a 1972 agreement with the Department of the Interior, the Kennedy
Center Board of Trustees11 retained responsibility for all performing arts
activities at the Kennedy Center, but services not related to the
performing arts were assumed by the National Park Service. Under this
arrangement, the Kennedy Center facility incurred a backlog of capital
repairs, in part, because responsibility for identifying and completing
capital repairs and improvements at the center was unclear. Legislation
was enacted in 1990 that directed the National Park Service and the Board
of Trustees to enter into a cooperative agreement clarifying
responsibilities related to maintenance, repair, and alteration of the
center, but the parties were unable to reach an agreement. In 1994,
legislation was enacted that gave the Board of Trustees sole
responsibility for carrying out capital improvements at the Kennedy
Center. A purpose of the legislation was to provide autonomy for the
overall management of the Kennedy Center, including better control over
its capital projects, and to renovate the center. The legislation further
required the Board of Trustees to develop and annually update a
comprehensive building needs plan.12
In response to the 1994 legislation, the center published its first CBP in
1995 describing the goals of the renovation, including addressing fire
life safety and disabled access code deficiencies-such as installing
sprinklers throughout the center, replacing inefficient building systems,
and improving visitor services. The law the Kennedy Center follows
regarding facility construction or alteration requires that it be in
compliance with nationally recognized model building codes and other
applicable nationally recognized fire safety codes to the maximum extent
feasible.13 As in the case of federal agencies, the Kennedy Center is the
authority having jurisdiction for making a final determination on whether
the center is complying with fire safety code.14 The Kennedy Center policy
on building codes states that, where feasible, it will comply with the
International Building Code (2003), International Fire Code (2003), as
well as selected provisions of the National Fire Prevention Association
Life Safety Code (NFPA 101) (2003). In 1995, the Kennedy Center
anticipated undertaking
11The Kennedy Center Board of Trustees currently consists of 23 government
positions, including congressional members, as well as 36 general trustees
appointed by the President of the United States. Each general trustee
serves a term of 6 years.
1220 U.S.C. S: 76j(a)(1)(F).
1340 U.S.C. S: 3312.
14For purposes of certain laws, the Kennedy Center is treated as a federal
agency.
critical fire life safety projects by the end of fiscal year 1999.
However, to minimize disruption to performances, the Kennedy Center
changed its approach to making capital improvements. Rather than
undertaking broadscale projects that could disrupt the entire center, the
Kennedy Center chose to renovate the center incrementally while keeping
the rest of the center open and operating. For example, rather than
installing a new sprinkler system for fire suppression throughout the
entire center, which would have closed multiple theaters simultaneously,
the center is installing sprinklers in each theater as it is renovated.
Thus, only one theater is closed at a time. According to center officials,
this approach minimizes the disruptions to ongoing operations in other
areas of the Kennedy Center that could result in lost revenue. When the
Opera House was renovated, for example, it was closed for almost a year,
but performances continued in all of the other theaters.
The Kennedy Center is a bureau of the Smithsonian Institution. The John F.
Kennedy Center Act Amendments of 1994, amended the Kennedy Center Act to
designate the center as a "federal entity" for purposes of the Inspector
General Act of 1978 (IG Act), as amended.15 The Kennedy Center Act states
that only federally appropriated funds are subject to the requirements of
a federal entity under the IG Act. The Kennedy Center Act authorizes the
Smithsonian OIG to audit and investigate activities of the Kennedy Center
involving federal appropriated funds, on a reimbursable basis, if
requested by the Board of Trustees. To date, the Kennedy Center has not
requested that the Smithsonian OIG conduct an audit or investigation of
its activities.
The Kennedy Center conducts capital projects primarily through three
offices-Project Management, Contracts, and Finance. Figure 2 provides an
organizational chart for these three offices within the Kennedy Center.
The center receives federal appropriations annually for capital repair and
restoration to implement its CBP and for the operations, maintenance, and
security of the facility. In fiscal year 2005, the Kennedy Center received
approximately $16.1 million in federal funds for capital improvement
projects and $16.9 million for operations, maintenance, and security of
the
1520 U.S.C. S: 76l (d).
facility.16 The Kennedy Center receives appropriated funds to support its
CBP as a lump sum and not on an individual project-by-project basis. In
addition, the Kennedy Center's appropriated funds for capital projects
remain available until expended. Federal appropriations represent less
than one-half of the center's total revenue. The Kennedy Center generates
the majority of its revenues from performances at the center,
contributions, and investments. Federal funds, not the Kennedy Center's
private funds, are used for capital improvements in the CBP. Federal
appropriations are not used for performance-related expenses. The Kennedy
Center's total operating expenses in fiscal year 2003 were about $118
million.
16The Kennedy Center's appropriation for fiscal year 2005 is contained in
the Consolidated Appropriations Act of 2005, Public Law 108-447, 118 Stat.
2809 (2004). Public Law 108-447 appropriated to the Kennedy Center
$16,334,000 for capital improvements and $17,152,000 for operations and
maintenance. There are two rescissions in the 2005 appropriations act that
reduced the final amount provided to the Kennedy Center for capital
improvements and operations and maintenance. The first is an
across-the-board rescission of 0.594 percent for Interior and Other
Related Agencies, which applied to the Kennedy Center. The second is an
additional across-the-board rescission of 0.8 percent for most agencies,
which also applied to the Kennedy Center.
Figure 2: Kennedy Center Organizational Chart for Selected Positions and Offices
Source: GAO analysis of Kennedy Center data.
Key Capital Projects Completed, but Costs Exceeded Budget Estimates and
Were Not Timely or Accurately Reported
The Kennedy Center has completed many renovation projects (see fig. 3),
but each of the projects we reviewed exceeded its budget due to contract
modifications that added work to projects. Many changes were necessary
because the Kennedy Center did not have good knowledge of the building's
site conditions. Additionally, the absence of comprehensive policies and
procedures has impeded effective management of federal funds. Finally, the
information on cost growth and delays has not always been timely or
accurately communicated to the Kennedy Center Board of Trustees or
Congress.
Figure 3: Scope of Key Kennedy Center Capital Projects
Sources: Kennedy Center (data) and GAO (photos).
The Kennedy Center Has Completed Many Renovations, but Contract
Modifications Increased Project Costs
The Kennedy Center has completed renovations to the Opera House, Concert
Hall, and its plaza-level public spaces and installed a buildingwide fire
alarm system, but the actual costs of the projects we reviewed exceeded
the original budgeted costs. Specifically, costs exceeded budget estimates
by about 41 percent for the Concert Hall renovation, 21 percent for the
Opera House renovation, 50 percent for the fire alarm system renovation,
and 13 percent for the plaza-level public space renovations (see fig. 4).
These findings are consistent with our finding, reported in 2003, that the
costs of the Kennedy Center's garage expansion and site improvements
projects greatly exceeded the estimates.17
Figure 4: Budgets and Actual Costs for Selected Kennedy Center Capital Projects
Millions of dollars 25
41% 21% increase
20
15
10 5
0
Concert Hall renovation
Opera House renovation
Fire alarm system
Public space modifications
Eisenhower Theater renovation
Estimated budget Actual cost
Source: GAO analysis of Kennedy Center data.
17GAO-03-823.
Renovation projects like those undertaken by the Kennedy Center are
difficult to complete due to associated challenges with refurbishing as
opposed to new construction. For example, according to the Kennedy Center,
renovation projects are susceptible to cost increases stemming from
unexpected site conditions. This is consistent with our finding that a
primary cause of cost growth in the projects we evaluated were contract
modifications resulting from the Kennedy Center's lack of knowledge of the
building's existing conditions. The Kennedy Center lacked knowledge of
site conditions because (1) it does not have as-built drawings18 that show
how building components were originally constructed and (2) schedule and
building conditions at times limited the center's ability to conduct
detailed investigations during project design stages. According to a
Kennedy Center official, given the nature of construction, installed work
often differs from what is indicated on the original architectural plans,
sometimes in significant ways. Without accurate drawings, designers could
not ascertain certain current building conditions, and inaccuracies were
inadvertently built into project plans and designs.
Architects and engineers additionally lacked sufficient access to the
project sites during the design phase. According to Kennedy Center
officials, because the Kennedy Center focused on maximizing its theaters'
operating time, designers were at times limited in their ability to survey
the project site and document its condition. This type of exploration
often requires the removal of some portion of the existing finishes to see
what is behind them. Because invasive surveys were not completed,
designers did not identify utilities and structural components shielded
behind walls, floors, and ceilings. In cases where the unforeseen
conditions affected construction, contract modifications were needed.
Kennedy Center officials said that they did not allow exploratory design
work in order to preserve the building's aesthetics. Kennedy Center
officials indicated that they are working to improve the design of future
projects by using noninvasive exploratory methods, such as X-ray
technology, to better ascertain site conditions.
According to the Kennedy Center, about $1 million of the Concert Hall's
contract modifications and $1.5 million of the Opera House's contract
modifications were the result of actual conditions that differed from
those shown on design drawings. In the Opera House renovation, the Kennedy
18As-built or record drawings show the work as it was actually installed,
which is often different from how it was designed to be installed or
built.
Center attributed the following unexpected site conditions to absent
as-built drawings and resulting in contract modifications: (1) the ceiling
crawl space was not as large as the drawings indicated, (2) steel
reinforcement that was not shown on the drawings existed in the balconies,
and (3) a large steel-reinforced concrete beam in the orchestra floor was
not depicted on existing drawings. Figure 5 provides a description of the
concrete beam and shows how it contributed to cost growth on the Opera
House renovation project.
Figure 5: Opera House Unforeseen Site Condition
Source: GAO analysis of Kennedy Center data.
In attempting to maintain its construction schedule while minimizing the
impact on its performance schedules, the Kennedy Center incurred a
considerable amount of overtime charges. Since the Kennedy Center relies
on proceeds from ticket sales, programs, and contributions, center
managers sought to limit the disruption to major performance venues, such
as the Opera House and Concert Hall. In planning the Opera House
renovation, for example, the Kennedy Center set a firm goal of completing
work by December 2003 to ensure that the work would be completed in time
to host the annual Kennedy Center Honors.19 Over $560,000 of the $4
million cost growth for the Opera House renovation resulted from overtime
pay to contractors completing the renovations.
The Kennedy Center also may have paid contractors more than necessary
because it routinely negotiated the value of project modifications after
contractors had already completed the work. For example, contractors
performed about $2.2 million worth of work in the Concert Hall renovation
and about $2.1 million worth of work in the Opera House rehabilitation
without negotiating the value of the modifications with the Kennedy Center
beforehand. Center officials said that this was necessary to maintain
tight schedules. The practice of establishing cost after work has been
completed is discouraged in federal contracting regulations. Our previous
work has shown that contractors have limited incentive to control costs
until firm prices are negotiated for contract changes, and the government
does not have an opportunity to consider more efficient construction
methods or management controls if work is completed before the price is
established.20
Lack of Clearly Designed, Comprehensive Policies and Procedures Undermined
Effective Project Management
While it was beyond the scope of this engagement to conduct a
comprehensive financial review of the Kennedy Center's procurement
process, we found some deficiencies in procurement operations for capital
improvement projects. During a review of a limited selection of the
Kennedy Center's capital expenditures, we found that the center did not
maintain complete and accurate financial records, which could impact the
safeguarding of federal funds. These deficiencies can be attributed, in
part, to the center's lack of a comprehensive set of documented policies
and
19Begun in 1978, the Kennedy Center Honors is an annual ceremony that
recognizes artists with lifetime achievement awards. The ceremony also
serves as a major fund-raising event.
20GAO, NASA Procurement: Challenges Remain in Implementing Improvement
Reforms, GAO/NSIAD-94-179 (Washington, D.C.: Aug. 18, 1994).
procedures to guide the various activities related to the acquisition of
goods and services for its capital improvements program. As a result, the
Kennedy Center may not be able to properly account for or report financial
transactions to Congress and other interested parties.
According to the guidance for federal agencies21 contained in the Joint
Financial Management Improvement Program's (JFMIP) Framework for Federal
Financial Management Systems and Office of Management and Budget (OMB)
Circular No. A-127, Financial Management Systems, effective financial
management depends on appropriate control of financial transactions and
timely recording of financial information in a manner that satisfies
multiple users. Requirements for internal controls over financial
operations can be found in both OMB Circular No. A-123, Management
Accountability and Control, and GAO's Standards for Internal Controls in
the Federal Government.22 Federal agencies are required to establish
financial controls; ensure that reliable and timely information is
obtained and maintained; and produce accurate, consistent, and complete
financial data to enable cost-effective mission achievement and risk
mitigation. The Kennedy Center's policy is to rely on contractor invoices
to establish the dates the services were performed and make specific
reference to the invoices in its receipt certifications. Because the
center does not record the date or period that services were performed at
the time of occurrence, it is unable to establish and maintain reliable
up-to-date accounting records. This lack of real-time data hampers the
center's ability to prepare reliable quarterly financial reports regarding
the status of funds and budget execution and to manage project costs. When
status reports are required, construction costs could be recognized before
invoices are received by recording an estimate of costs incurred on the
basis of a percentage of completion of the projects that are in progress,
or some other systematic process that approximates actual up-to-date
costs.
OMB guidance and GAO standards for internal controls state that agencies
need to properly document their transactions. The documentation should be
clear and complete and show sufficient information to adequately account
for the disbursement. During our review of a selection of 224
21The Kennedy Center is an independent establishment of the executive
branch of government as defined in OMB Circular A-127 and, as such, is
subject to OMB guidance regarding financial management and internal
controls.
22GAO, Standards for Internal Controls in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
Kennedy Center capital expenditures-dating from September 2000 to
September 2004-we found that 63 of the contractor invoices (28 percent)
paid by the center did not contain enough detailed information to support
their accuracy and validity. Furthermore, without current and accurate
information to substantiate payments, the Kennedy Center may be hampered
in its ability to detect erroneous or improper payments. For example, we
found a duplicate payment that may have been prevented if the center had
better information available.
Of the invoices that lacked sufficient detail, nearly all were related to
services the Kennedy Center received from the U.S. Army Corps of Engineers
(Corps). The center's transactions with the Corps are governed by the
Economy Act (31 U.S.C. S:S: 1535 and 1536), which authorizes an agency
acquiring goods or services from another agency to reimburse the
performing agency only for its actual costs of providing the goods or
services. The Kennedy Center did not have sufficient procedures in place
to ensure that it was being charged for costs consistent with its Economy
Act agreement. We found, for example, that invoices from the Corps
generally identified separate total amounts for the agreed-upon services
(as billed by the Corps' contractors) and overhead and labor costs
incurred by the Corps, but that the invoices did not provide any details
regarding the basis for the claimed costs, such as overhead rates. We were
unable to determine, from either the Corps invoices submitted to the
Kennedy Center for reimbursement or the information accompanying them,
whether the costs being claimed for work performed were for actual costs
consistent with the Economy Act agreement. This lack of detail on invoices
subjects the Kennedy Center to risk of paying the Corps amounts
inconsistent with the Corps' actual costs, as agreed to.
In response to a GAO recommendation,23 the Kennedy Center's Project
Management Office initiated the development of a policy and procedure
manual that is currently in draft form. The manual begins the process of
outlining roles and responsibilities for the project management staff and
defining standard operating procedures for managing projects. However, the
Kennedy Center has not completed this manual, nor has it formalized its
contractual and financial management policies and procedures. This makes
it difficult for people in the different Kennedy Center departments to
understand their roles and requirements in the oversight of federal funds.
In working to improve its management capabilities, the Kennedy Center
23GAO-03-823.
hired a Contracts Chief in March 2003 and is seeking an additional
contracting officer. Also, in March 2004, the Kennedy Center hired a
Director of Capital Projects to lead the Project Management Office.
The Kennedy Center Did Not Always Timely or Accurately Communicate Cost
Growth and Schedule Delays to Its Board or Congress
The Kennedy Center uses several communication methods, both internal and
external to the organization, to convey information about its capital
projects; however, we found that the center sometimes provided untimely or
inaccurate information on projects. Figure 6 illustrates the main
mechanisms the Kennedy Center uses to communicate information about
project schedules, costs, and status to Congress, its Board of Trustees,
and the public. The legislation that authorized the Board of Trustees to
carry out capital improvement projects required the board to develop and
annually update a CBP. However, the Kennedy Center has not consistently
updated the CBP on an annual basis. The center provides budget
justifications and receives federal funding annually for capital
improvement projects based on its CBP, and testifies before various
congressional committees when requested. According to the Kennedy Center,
the center's board oversees the President of the Kennedy Center on the
overall management and direction of the center. Within the board, the
Operations Subcommittee is responsible for ensuring the appropriate use of
federal funds for capital projects and efficient management of the
operations and maintenance of the center. In doing that, it reviews plans
for capital expenditures identified in the CBP and receives status reports
on projects as they are planned and implemented.
Figure 6: Kennedy Center Communication Methods
Source: GAO analysis of Kennedy Center data.
aMembers of Congress serve on both the Kennedy Center Board of Trustees
and the Operations Subcommittee.
Our analysis of officially documented communication using these mechanisms
showed certain inconsistencies in the information the Kennedy Center
presented. For example, in its fiscal year 2001 budget request, which
according to a Kennedy Center official was prepared in 1999, the center
management reported that it planned to obligate $23.3 million for capital
repairs. Operations Subcommittee meetings held over the course of fiscal
year 2001 reported revised obligation amounts ranging between $41.6 and
$44.4 million. The amount actually obligated was $36.4 million. While
planned obligations can change over time, the reasons for these
differences are not clear because the Kennedy Center did not include
sufficient project-level budget information in its budget justifications
to Congress. Rather, as we reported in September 2004, projects are
grouped into broad budget categories, which do not include budget
information for specific projects.24 As a result, it is difficult to
understand or have stakeholders hold the Kennedy Center accountable for
true project costs and schedules, compare the data presented through the
various communications mechanisms, or determine if funds were used as
intended.
24GAO-04-933.
The following examples illustrate untimely and inaccurate communication on
the projects we reviewed:
o Concert Hall. Kennedy Center officials testified to Congress in 1999,
2000, and 2001 that the Concert Hall rehabilitation-completed in 1997-was
"on time and on budget." However, this was inconsistent with a September
1997 Operations Subcommittee Meeting status report, which states that the
project experienced extraordinary interior design changes, all of which
were unbudgeted and contributed to a cost increase of almost $1.2 million.
Also, our analysis of Kennedy Center project documents shows that the
project cost $6.2 million more than its initial budget of $15.1 million.
o Fire suppression sprinklers. The Fiscal Year 2005 Budget Justification
and the 2004 CBP continue to emphasize that the Kennedy Center intends to
install sprinkler systems throughout the entire facility. However, we
determined as part of our review, and verified through interviews with
Kennedy Center officials, that the center does not intend to install
sprinklers in the large parts of the Kennedy Center-specifically, the
Grand Foyer, the Hall of States, and the Hall of Nations.
o Fire alarm system. References to improving the building fire alarm
system are included in Kennedy Center Budget Justifications for fiscal
years 1995 through 2005. Language in these budget justifications refers to
project phases, but start and completion dates change from year to year
without explanation. For example, the completion date for the project was
reported as being scheduled in fiscal year 2002 in the Kennedy Center's
Fiscal Year 2003 Budget Justification, but the center's 2005 Budget
Justification listed the project as being scheduled for completion in
fiscal year 2004.25 Reasons for the project's delay were not evident in
the records that we reviewed.
25Fire alarm system installation was substantially completed in February
2004.
Due to Poor Record Retention, It is Impossible to Determine How Much the
Building Plan Has Changed since 1995
According to a Kennedy Center official, the center does not have a formal
records retention policy and did not retain complete project budget
information previous to the 2002 CBP. CBP updates also do not provide
historical data, such as budget information for past projects or how
changes to those budgets affected the overall plan. Because the Kennedy
Center lacks records, we could not determine how any cost and schedule
changes affected the overall implementation of the 1995 CBP or if federal
funds were used as originally anticipated. However, our finding that
several of the major projects from that period went over their budget
estimates suggests that funds must have been reallocated. Information on
reallocations, reconciliation of estimates to actual spending, and other
project-level accounting of federal funds is not routinely reported to the
board or Congress. In addition, project records for the Concert Hall
renovation were incomplete and the as-built drawings for the Kennedy
Center were missing.
The Kennedy Center Does Not Appear to Meet Some Fire Safety Code
Requirements but Exceeds Disabled Access Requirements
On the basis of an independent expert's assessment, we determined that the
Kennedy Center does not appear to meet some fire safety code requirements.
After requesting and obtaining funds from Congress to meet fire code
deficiencies, such as a lack of fire suppression sprinklers, as well as
other needs, the Kennedy Center decided against its plan to meet fire
safety code requirements and chose not to install sprinklers and smoke
evacuation systems in the Grand Foyer, the Hall of States, and the Hall of
Nations. The Kennedy Center reversed its decision to install these systems
without having its decisions independently reviewed or clearly informing
its board or Congress that it was not spending the funds as planned.
According to our independent expert, the Kennedy Center has met or
exceeded disabled access requirements as part of its renovation.
The Kennedy Center Does While the Kennedy Center has worked to address
fire life safety
Not Appear to Comply with deficiencies, and improvements are ongoing, on
the basis of an assessment
Fire Safety Code performed by an independent expert that we hired, we
found that the
Kennedy Center does not appear to meet some fire life safety
requirements.26 Over the past decade, several internal Kennedy Center
reports have also identified other fire life safety deficiencies-such as
exit
26UNICCO Government Services, Inc., Life Safety, Fire Alarm System and ADA
Assessment.
paths that might not protect occupants from fire-in the Grand Foyer, the
Hall of States, and the Hall of Nations (see fig. 7).
Figure 7: Exit Routes from the Kennedy Center's Major Theaters
Source: Kennedy Center.
NFPA 101 allows two approaches for dealing with fire safety issues: an
entity can (1) adhere directly to the fire safety code (also called a
prescriptive approach), such as installing sprinklers or smoke evacuation
systems, or (2) provide an alternative that allows people to exit the
building safely in case of fire (also called a performance-based
approach). The Kennedy Center chose the second approach and commissioned
an egress and fire-modeling study in 2003 to address the exit issue,
specifically as it pertained to the discharge of occupants from the
facility.27 Due to the results of this study, the Kennedy Center did not
implement its earlier plan of installing a fire suppression system and
smoke evacuation system in the Grand Foyer, the Hall of States, and the
Hall of Nations.
The modeling study indicates that, in the event of a fire, the time needed
for evacuation would be less than the time it would take for these exit
pathways to become untenable, provided certain steps are taken. These
steps include (1) installing sprinklers at the Millennium Stages and (2)
developing and implementing a program to manage the storage of scenery,
props, and other combustible materials. With input from our independent
expert, we concluded that the above steps have not been taken and thereby
invalidate the study's assumptions. Since the Kennedy Center does not meet
the conditions upon which the study was based, it appears to fall short of
providing the level of protection intended by the code. Furthermore,
center stakeholders, such as the Board of Trustees, have not accepted and
adopted the terms of the study as described in NFPA 101. The Kennedy
Center has not documented these determinations, but center officials said
that the key decisions would be documented at the end of the fire life
safety improvements at the center.
We also identified two additional deficiencies, based on NFPA 101, that
are of immediate concern. First, there are no fire-rated doors in some
areas, such as the fire pump room and the Fire Command Center. These
locations contain key emergency systems that would need protection in the
event of a fire. Second, several fire-safety-related problems were evident
with the Millennium Stages. The stages are located at the ends of the
Grand Foyer, a configuration that poses an exit deficiency because it does
not provide two different, marked exit routes for occupants (see fig. 8).
Additionally, NFPA 101 indicates that the stages must have a smoke control
system that is integrated with a sprinkler system and smoke detectors over
the stage area. These systems have not been installed.
27Ehrenkrantz Eckstut & Kuhn Architects, PC, Egress and Fire Modeling
Study of the Grand Foyer, Hall of States, and Hall of Nations (Washington,
D.C.: 2003).
Officials from the Kennedy Center said that they believe that all fire
safety code requirements are being met, but they agreed to make some
changes. For example, the Kennedy Center said that it would install fire
protective doors on the fire pump room and the Fire Command Center, and
that it would document its key decisions once its Life Safety Improvement
Program was completed.
Figure 8: Millennium Stage Located at the End of the Grand Foyer outside
the Eisenhower Theater
Source: GAO photo.
The curtains along the side of the Millennium Stage obscure emergency
exits when closed.
The Kennedy Center Chose Not to Install Sprinklers throughout the Center,
but It Did Not Consult with Independent Experts or Clearly Inform Key
Stakeholders
After requesting the necessary funds from Congress to meet fire code
deficiencies, the Kennedy Center decided not to install sprinklers and
smoke evacuation systems in the plaza-level public spaces as initially
planned on the basis of the findings of the modeling study. In an October
2002 meeting with its trustees, the Kennedy Center reported that design
and first stages of construction of the sprinkler and smoke evacuation
systems would be completed in 2003. The Kennedy Center no longer plans to
install sprinklers in the Grand Foyer, the Hall of Nations, and the Hall
of States or at the Millennium Stages. Recent Kennedy Center documents
continue to state that the funds will be spent to install sprinkler
systems throughout the center.
Furthermore, in deciding not to install sprinklers and smoke evacuation
systems in the plaza-level public spaces, the Kennedy Center did not
consult any independent experts, such as the GSA's Fire Protection
Engineer for the National Capital Region, or any other recognized expert,
about whether this was an appropriate choice. In contrast, NFPA 101
provides for peer review of modeling studies of this nature. In addition,
our independent expert and GSA officials also stated that prevailing
professional practice is to seek external peer review of a modeling study
of this nature. GSA officials said that other federal entities
occasionally consult with them regarding how to approach difficult code
issues, but that the Kennedy Center has not done so about this exit
deficiency.
Peer review may be particularly important for the Kennedy Center for two
reasons. First, the center lacks sufficient on-staff expertise to
adequately interpret and evaluate this type of modeling study. The Kennedy
Center official who is principally responsible for making fire life safety
code compliance decisions said that he does not have formal training or
certification in engineering or fire protection planning, and that he is
not qualified to evaluate modeling studies. Second, the Kennedy Center's
fire safety decisions are not subject to external review. In contrast, GSA
requires a registered fire protection engineer to be heavily involved in
fire safety code compliance decisions for its federal properties, and its
OIG has the authority to review GSA's approach to fire safety issues and
policies. A GSA Fire Protection Engineer said that its OIG has provided
useful guidance on these issues. Specifically, a 1999 GSA OIG report
concluded that the National Capital Region Safety, Environment, and Fire
Protection Branch, generally has taken adequate measures to meet the
mission and goals of its fire safety program, but the report made a
recommendation for
improving building fire safety assessments.28 As previously mentioned, the
Smithsonian OIG has authority to conduct reviews at the Kennedy Center
relating to the expenditure of federal funds, but the Kennedy Center has
not requested assistance from the Smithsonian OIG or any other federal
accountability office in gaining assurance that the center is taking
prudent steps relating to fire safety decisions. Private sector entities
are accountable to the local fire marshal's assessment of their compliance
with fire safety code. In addition, the Kennedy Center Act authorizes the
Board of Trustees to utilize or employ the services of any agency or
instrumentality of the federal government or the District of Columbia on a
reimbursable basis. The Kennedy Center has not sought assistance, as
authorized by law, from relevant federal or District of Columbia officials
on fire safety code compliance.
The Kennedy Center Has Improved Disabled Access to Fully Renovated
Theaters and Public Spaces
Our independent expert concluded that the Kennedy Center's compliance with
regulations outlined in ADA has generally met or exceeded the requirements
of the act in the theaters and public spaces that have been renovated. The
Kennedy Center has added numerous ramps, improved signage, and renovated
several bathrooms and elevators to meet ADA requirements (see fig. 9). In
an attempt to make the center as accessible as possible to disabled
patrons, visitors, and employees, the Kennedy Center has made all levels
of the renovated Concert Hall and Opera House accessible to wheelchairs.
Additionally, the Kennedy Center has hired and trained specialized
personnel to assist patrons and visitors with disabilities. An
Accessibility Manager position is staffed and the Kennedy Center provides
special training to numerous "access" ushers, who help patrons navigate
their way to their seats. In addition, the Kennedy Center's Office of
Accessibility provides details of its special access services over the
telephone, and the center's Web site provides access information and maps
showing entrances, restrooms, and other services for the disabled.
28General Services Administration, National Capital Region Office of the
Inspector General, Audit of National Capitol Region Fire Safety Program,
Report Number: A995174/P/W/R99530 (Washington, D.C.: Sept. 10, 1999).
Figure 9: Selected Disabled Access Improvements to the Kennedy Center Made
as Part of the Comprehensive Building Plan
Source: GAO photos.
ADA improvements at the Kennedy Center include the following (clockwise
from top): disabled access ramp in the Grand Foyer leading to the Opera
House, disabled access ramp in passageway, ADA-compliant signage, and
wheelchair lift.
The areas that the Kennedy Center has not yet renovated have fewer ADA
improvements. For example, the Eisenhower and Terrace Theaters have
limited wheelchair access. The Kennedy Center plans to make additional ADA
improvements centerwide as part of its CBP, but the Terrace Theater
upgrades have been deferred until after fiscal year 2008.
Several Best Practices Could Assist the Kennedy Center in Addressing
Project Management Problems
Given the ongoing problems we have identified at the Kennedy Center,
successfully completing current and future projects within scope, cost,
and schedule will be challenging. In February 2004, we identified
components of a best practices framework to offer guidance for managing
large-scale infrastructure projects.29 This framework includes
comprehensive planning, risk assessment, comprehensive financial
management, accountability and oversight, and stakeholder involvement.
These best practices are shown in figure 10 and described after the
figure. In addition to our framework, we reviewed past GAO recommendations
to the Kennedy Center and project management best practices reported by
the Construction Industry Institute for additional project management
guidance.30 In recent years, the Kennedy Center has begun to take steps to
implement some of these best practices and improve its project management.
29GAO-04-94. This best practices framework is applicable to the management
of various types of projects and was largely based on GAO's Executive
Guide: Leading Practices for Capital Decision-Making, GAO/AIMD-99-32
(Washington, D.C.: December 1998).
30The Construction Industry Institute is a research institute for
engineering and construction that is comprised of more than 90 member
organizations, representing owners, contractors, and suppliers in both the
public and private sectors. Construction Industry Institute,
Implementation of CII Best Practices: Summaries and a Self-Assessment
Guide (Austin: University of Texas, 2002).
Sources: GAO; Nova Development, PhotoDisc, and Corel (photos).
Conduct Comprehensive Project Planning-Comprehensive planning serves as a
foundation for effectively managing capital projects. Such planning helps
manage and control project implementation, cost, schedule, scope of work,
and achievement of goals. As part of comprehensive project planning, a
long-range capital plan documents the specific projects an organization
intends to pursue, documents the resources it expects to use over the long
term to implement those projects, and establishes priorities for
implementation. The time spent on planning can help organizations and
agencies avoid costs and delays. A project management plan is an important
tool for comprehensive planning. It typically uses performance baselines
for goals, costs, schedules, major milestones, and risks to manage and
control a project's implementation. Developing a project management plan
focuses organizations on implementation issues early in the life of a
project. These plans are intended to be flexible and dynamic; during
implementation, the plans are updated and otherwise revised to reflect
changes in the project, such as changes in its cost, schedule, or scope of
work. After a project has been implemented, its success can be measured by
comparing its actual cost, schedule, and other outcomes with those that
were planned. When project management plans are not developed or used,
projects can encounter problems, such as cost overruns and schedule
delays. In addition, the Construction Industry Institute has reported that
preproject planning is a best practice that is essential to develop
sufficient strategic information, decide how to commit resources, and
maximize potential project success.
The Kennedy Center's CBP has served as the central plan to manage its
capital projects and has included project descriptions and background on
the improvements. Unlike the planning best practices, the Kennedy Center
has not used its CBP as a tool to measure project success and progress by
comparing actual costs and schedules with those planned. In commenting on
our September 2004 report, Kennedy Center officials wrote that while the
CBP serves as the primary management tool for capital project planning, it
has not been the primary vehicle for communicating the center's progress
in implementing its renovation work. According to Kennedy Center
officials, other internal planning documents serve to communicate
progress, although we have previously reported that these other planning
documents are limited in not including prioritization of projects or
planned future projects.
The Kennedy Center has taken steps to improve the information included in
its CBP. In September 2004, we recommended that the Kennedy Center
annually update its CBP as required by law, and in November 2004 the
center published an update. According to Kennedy Center officials, the
center now plans to annually update its CBP. Furthermore, as we
recommended, the 2004 CBP includes some prioritization of ongoing projects
and updated project budget information.
o Assess Risks and Identify Mitigation Measures-Risk assessments allow
project managers to identify and manage risks related to a project's
costs, schedules, and other aspects and to develop mitigation measures
that can increase the likelihood of projects meeting established goals.
Early recognition of problems allows for prompt intervention, which
increases the likelihood that corrective action will get the project back
on track before there is significant deviation from
its goals.31 Assessing and mitigating risks reduces the probability of
later encountering problems that can cause cost increases and schedule
delays. Potential risks to projects include cost increases; funding
reductions; schedule delays; and environmental, political, and legal
issues. The Construction Industry Institute has noted that collecting
information on project risks is a part of the preproject planning process.
As previously discussed, the lack of as-built drawings has posed risks to
Kennedy Center project costs and schedules, leading to the discovery of
unexpected site conditions in the Opera House renovation that increased
project costs. According to one Kennedy Center official, future projects
will also face the risk of unexpected site conditions due to the absence
of as-built drawings and a system to track all changes to the facility.
In an attempt to reduce risk to the Kennedy Center, it has entered into a
contract for theater renovation work that shifts much of the project's
risk to the contractor. Under this "construction manager at-risk"
arrangement, a construction management contractor will be hired to
participate in the design process and will then be responsible for hiring
contractors to do the construction. The construction management contractor
will be at risk from the standpoint of being responsible to the Kennedy
Center for managing the construction according to the established cost,
schedule, and scope. However, this method may not reduce costs because
contractors will increase their price to cover the risk shifted to them.
o Comprehensively Manage Project Finances-Accurately estimating and
controlling costs through comprehensive financial management helps to
ensure efficient uses of funds. Estimating and controlling costs is
important because the costs of capital projects can increase
significantly. Best practices suggest that, to improve the accuracy of
cost estimates, managing organizations should review and refine cost
estimates as projects move closer to implementation. One tool for
estimating and controlling costs is a project financial plan, which shows
a project's estimated funding needs, funding sources, and funding
responsibilities. These plans enable project managers to compare actual
costs with planned expenditures, identify deviations, and take actions to
31GAO/AIMD-99-32.
address potential problems. A financial plan can also help control a
project's costs after construction has begun by estimating the amount of
funding needed to complete the project and the availability of that
funding. This information helps an organization assess the impact of
changes that can cause a project's schedule to slip and costs to rise.
Because a financial plan can demonstrate the need for funding at
particular times and the impact of funding delays on the project's costs
and schedule, it can help an organization stay within cost estimates and
keep their project on schedule as well as determine full funding needs.
As previously discussed, we found instances where the Kennedy Center did
not have sufficient information to support the accuracy and validity of
invoice payments, which may hamper the center's ability to detect
erroneous or improper payments. Although challenges remain, the Kennedy
Center has begun to take steps to improve its financial management of
projects. As previously discussed, the Kennedy Center has developed a
draft policies and procedures manual to guide the planning and execution
of the construction process, but the manual is not comprehensive. It does
not establish the minimum documentation requirements to support costs
incurred. Also, as we recommended in September 2004, the 2004 update to
the CBP includes updated budget information for current and future
projects.
o Establish Accountability and Oversight for Prudent Use of Federal
Resources-Best practices suggest that organizations be held accountable
for adhering to planned budgets and schedules, achieving goals, and other
project outcomes in order to ensure the prudent use of federal resources.
By monitoring a project's performance against cost, schedule, and
technical performance goals, as well as establishing incentives to meet
those goals, organizations can increase the likelihood of the project's
successful completion. Organizations can also hold project managers and
other personnel accountable for the project's results. Capital projects
can also face external factors during implementation, such as reductions
in funding from federal, state, or local jurisdictions or changes in
economic conditions that might affect accountability decisions. In such
circumstances, external factors can be recognized and isolated, so project
managers are only held accountable for actions and events within their
control. In addition, the Construction Industry Institute has reported on
accountability best practices that include having a defined, effective,
and accountable project leadership; developing lessons learned; and
facilitating a shared sense of accountability among project team members.
Related to accountability,
independent oversight of a project is a best practice designed to promote
the prudent use of federal resources. Independent assessments help protect
the federal investment in a project by reviewing the implementation of its
plans, monitoring its construction, and reporting problems.
While past staff vacancies and turnover have limited holding staff
responsible for planning and managing projects accountable for project
results, the Kennedy Center has begun to make improvements. In September
2003, we recommended the Kennedy Center work to address human capital
deficiencies, and since that time the center has hired new staff,
including a director of capital projects. In addition, the Kennedy
Center's draft policies and procedures delineates various project
management office staff members' responsibilities and duties, including
those related to project development, communication, and adhering to
planned costs and schedules. This includes describing the responsibilities
of the Kennedy Center's director of capital projects and project managers.
Regarding oversight, the Kennedy Center has had limited external reviews
for how it manages capital projects and maintains assurance for federal
funds. Besides our reports on the Kennedy Center, the Department of the
Interior's OIG completed an audit related to parking garage
improvements.32 As previously discussed, the Kennedy Center has been
authorized to request the Smithsonian OIG to conduct audits related to the
expenditure of federal funds on a reimbursable basis, which could include
project management activities, but to date the center has made no such
request. The Smithsonian Inspector General said that his office would
respond to an audit request by the Kennedy Center and has conducted
similar audit work for other external organizations. Although the IG Act
does not require the Kennedy Center to establish an OIG, the center is
required to report annually to Congress and OMB on its audit and
investigative activities.33 We found
32Department of the Interior, Office of the Inspector General, Costs
Claimed for Equitable Adjustment By Rampart Waterblast, Inc., Under
National Park Service Contract No. 1443CX-3000-93-904, Report Number
98-E-217 (Washington, D.C.: January 1998). This audit resulted from a
contract initiated by the National Park Service before responsibility for
the Kennedy Center was transferred to the center.
33See Inspector General Act of 1978, as amended, 5 U.S.C. S: app. 3,
section 8G, and 2004 List of Federal Entities, 70 Fed. Reg. 4157 (Jan. 28,
2005).
that the Kennedy Center has not complied with this requirement. Kennedy
Center officials said that they were unaware of this requirement but plan
to start complying with it this year.
The Kennedy Center has hired a public accounting firm to conduct yearly
audits of the center's finances, and these reviews include all areas of
Kennedy Center finances, the majority of which are not federal
appropriations. However, the financial statement audit does not include a
review and assessment of internal controls or other oversight typically
performed by an Inspector General. The Kennedy Center Board of Trustees
relies on information from its audit committee, which is part of its
board. Audit committees can play a very important role in enhancing audit
activities for their boards and organizations. Such a committee is a
required element of the governance structure of publicly owned companies
and a best practice for other types of organizations. In the federal
government, audit committees and advisory committees are intended to
protect the public interest by promoting and facilitating effective
accountability and financial management.34 This is accomplished by
providing management with independent, objective, and experienced advice
and counsel, including oversight of audit and internal control issues. In
the case of the Kennedy Center, the audit committee could facilitate the
process of formalizing financial management policies and procedures,
including related internal controls, and preparing for the ongoing
oversight of the center.
In addition, the Kennedy Center Act authorizes the Board of Trustees to
utilize or employ the services of any agency or instrumentality of the
federal government or the District of Columbia on a reimbursable basis. To
date, the Kennedy Center has not contracted with GSA or the D.C. Fire
Marshal to review the center's fire policies.
o Incorporate the Interests of Diverse Stakeholders-Incorporating the
interests of diverse stakeholders into a project can increase its chances
of success. This is especially important during the planning stages, when
considering stakeholders' interests can help project managers identify
34The audit committee of a publicly owned company plays a particularly
important role in ensuring fair presentation and appropriate
accountability in connection with financial reporting and related external
audits and general oversight of an organization's internal control.
needs and problems and develop action plans to address them. Best
practices suggest frequent communication and involvement through means
such as meetings and correspondence. These approaches allow stakeholders
like local governments and others to convey their concerns and problems
and work with project managers to address them. Related to stakeholder
best practices, the Construction Industry Institute has suggested aligning
staff within an organization to share the same set of objectives
throughout a project's life; partnering with other organizations; and team
building to develop shared goals, interdependence, trust, and commitment
and open communication, among other factors.
Currently, the Kennedy Center has not established comprehensive policies
and procedures to include all center stakeholders in project management.
According to Kennedy Center officials, the role of stakeholders in
completing projects has been uncoordinated and responsibilities are
unclear. While challenges remain, the Kennedy Center's drafting of a
policy and procedures manual represents a positive step toward involving
center stakeholders in project management. For example, the draft manual
outlines and describes several center offices' involvement in various
phases of project planning and construction.
Conclusions The Kennedy Center has made major capital improvements to the
center since taking over management control in 1995, but inadequate
management and oversight have at times undermined assurance over processes
and programs for fire safety, construction, and financial management. Of
immediate concern are questions about the Kennedy Center's compliance with
some fire safety codes. Taking steps to better address fire life safety
issues can only heighten confidence of the Kennedy Center and Congress
that visitors are enjoying world-class performances in a safe facility.
Questions also remain about the management of construction costs and
accounting procedures associated with recording and paying for the
renovations. Overtime charges resulting, in part, from aggressive
schedules, a lack of comprehensive information about the construction
sites, and a practice of negotiating the value of contract changes after
the completion of contract work, helped drive the cost of each project we
reviewed over budget.
Although the Kennedy Center has taken steps to improve project management,
key mechanisms to ensure accountability and sound
financial management practices in spending federal funds remain absent or
only partially implemented. Specifically, without more detailed,
transparent, and timely information on how funds have been budgeted and
spent, the Kennedy Center Board of Trustees and Congress will lack timely
and accurate information on projects and thus will lack reasonable
assurance that the center is deploying its resources as intended. In
addition, the Kennedy Center has never made use of any other federal
accountability office-the Smithsonian OIG or another qualified entity-to
review the management of programs employing federal funds. Establishing a
continuing relationship with an OIG and a federal fire safety expert could
help the center to minimize risks that future capital projects will
encounter planning problems, budget overruns, or fire safety code
deficiencies.
Recommendations In testimony on April 6, 2005, and in this report, GAO
recommends the following:
1.
2.
The Chairman of the Kennedy Center Board of Trustees should exercise
greater oversight of the center's management through the board. The
Kennedy Center should work with the Smithsonian OIG, or another
independent federal government oversight organization, to provide
strategic and annual audit plans for ongoing oversight of the center's use
of federal funds based on an analysis of risk, safety, and vulnerability
to internal control weaknesses. These plans should also specify the audits
to be provided on a reimbursable basis by the Smithsonian OIG or another
independent federal government oversight organization.
To ensure the safety of the Kennedy Center, the Chairman of the Board of
Trustees should direct the President of the Kennedy Center to do the
following:
a. The president should take steps to better comply with the fire safety
code. At a minimum, these steps should include fully implementing the
conditions of the modeling study, ensuring that doors in key areas provide
adequate separation from fire, and addressing the code deficiencies at the
Millennium Stages.
b. The president should promptly seek peer review by a knowledgeable
third-party of the egress and fire-modeling study used as a substitute for
prescriptive code solutions and implement any recommendations.
Additionally, the president should consult with
recognized experts, such as GSA, to determine whether the Kennedy Center
is fully adhering to prevailing professional practices regarding fire life
issues.
3. To better align the Kennedy Center's management of capital projects
with best practices, the Chairman of the Board of Trustees should direct
the President of the Kennedy Center to implement the following five
recommendations:
a. provide more timely and accurate information about capital projects by
detailing their budget, scope, cost, and schedule and providing to
stakeholders an annual reconciliation of the status of all planned,
delayed, eliminated, and actual projects;
b. take steps to control cost growth and schedule changes in future
capital projects by setting more flexible schedules and improving its
management of contract modifications;
c. strengthen the Kennedy Center's financial management controls by
designing and implementing comprehensive contract, financial, and project
management policies and procedures in accordance with prescribed federal
guidance-these policies and procedures should ensure that
o the Project Management Office prepares inspection reports, or similar
documents, when services are performed that include a description of the
services performed and the date(s) or period of performance and use this
information to verify the validity of contractors' invoices;
o complete, up-to-date costs for construction and other services are
recognized and used to prepare quarterly financial reports and manage
project costs;
o reasonable efforts are made to match invoices with inspection reports
and previously paid invoices to prevent or detect duplicate payments;
o contractors' invoices meet minimum requirements and contain sufficient
detailed information to clearly support the accuracy and validity of
invoices; and
o for Economy Act transactions, payments to other federal agencies are
for actual costs consistent with the Economy Act agreement;
d. establish and enforce a documents retention policy that allows for
accountability of the Kennedy Center's federal funds; and
e. have relevant Kennedy Center offices develop as-built drawings and
better track future changes to the center.
Agency Comments and Our Evaluation
We provided a draft of this report to the Kennedy Center for its review
and comment. The Kennedy Center stated that it had made a number of
significant management improvements in recent years and will continue to
do so. The Kennedy Center further noted that the scope of our current work
may not have reflected these changes. In conducting our work, we reviewed
the details of recent management changes that the Kennedy Center has made,
but we were unable to gauge the impact of some of these changes since they
are relatively recent in nature or still in development. The Kennedy
Center agreed with several of our recommendations, but it disagreed with
others. The Kennedy Center agrees that more oversight would be useful, but
it is unsure what the best mechanism would be for providing such
oversight. The Kennedy Center also believes that it is in compliance with
fire code, but agreed to seek a third-party review of its approach to
addressing certain fire code deficiencies. We continue to believe that the
Kennedy Center needs to better comply with fire code by fully implementing
the conditions of its fire-modeling study and addressing its fire door and
Millennium Stage issues. The Kennedy Center agreed that it should improve
its information about capital projects, its document retention practices,
and its knowledge of site conditions at the center. However, it disagreed
that it needed to strengthen its financial controls in some of the ways
that we have recommended. For example, it believes that its information is
up to date and plans to fully comply with the Economy Act. We carefully
reviewed the Kennedy Center's concerns, and we continue to believe the
Kennedy Center needs to strengthen its financial management controls in
order to improve the quality of its financial records and better safeguard
federal funds. The Kennedy Center also provided technical comments that we
incorporated in this report as appropriate. The Kennedy Center's comment
letter and our responses appear in appendix V.
We will send copies to the appropriate congressional committees, the
Chairman of the Kennedy Center Board of Trustees, and the President of the
Kennedy Center. We will also make copies available to others on request.
In addition, the report will be available at no charge on the GAO Web site
at http://www.gao.gov.
If you or your staff has any questions, please contact me at (202)
512-2834 or [email protected]. See appendix VI for a list of the major
contributors to this report.
Sincerely yours,
Mark L. Goldstein Director, Physical Infrastructure Issues
Appendix I
Scope and Methodology
To track the John F. Kennedy Center for the Performing Arts' (Kennedy
Center) progress in completing key projects, we analyzed the center's
audited financial statements and the invoices, contracting, finance, and
additional project files for five major projects-the renovation of the
Concert Hall, Opera House, and Eisenhower Theater; improvements to
plaza-level public spaces; and the installation of a new fire alarm
system- to the extent that records existed.1 We chose these projects
because they were among the most costly or important projects related to
fire safety and disabled access improvements included in the Kennedy
Center's Comprehensive Building Plan (CBP).2 Complete files were not
available for the Concert Hall or Eisenhower Theater due to these
projects' construction taking place several years ago or being designated
for future construction. In cases where we had incomplete data, we
conducted follow-up meetings and requested additional information from
Kennedy Center officials. On the basis of these exchanges, we obtained
financial data that allowed us to establish budget estimates for each of
the projects, and against which we could compare actual costs.
To further verify status of the five major projects, we toured the Kennedy
Center to visually examine the theaters, public spaces, and other fire
safety and disabled access improvements. In the case of the Opera House
and Concert Hall construction contracts, we obtained the original contract
award documents and copied the records for each of the contract
modifications (43 modifications were made during the Opera House
renovation, and 58 modifications were made during the Concert Hall
renovation). With this information, we were able to determine specific
reasons for cost growth relative to these two projects. Thus, we
determined that project status and cost data were sufficiently reliable
for the purpose of our review.
We also reviewed federal authorization and appropriation laws; the Public
Buildings Act, as amended, and implementing regulations; the John F.
Kennedy Center Act, as amended; the Americans with Disabilities Act, as
amended; the Economy Act; Kennedy Center budget justifications; the CBP
and its various updates; our past work; and Kennedy Center depreciation
1The Concert Hall renovation was completed more than 7 years ago, and
project records were not complete. Furthermore, the Eisenhower Theater has
limited documentation since it is not planned for construction until 2007.
2All Kennedy Center capital projects were to incorporate life safety and
disabled access improvements.
Appendix I Scope and Methodology
schedules. Sources of these data included the Kennedy Center's CBP
(including updates), the Kennedy Center Finance Office, Kennedy Center's
audited financial statements, Kennedy Center Budget Justifications to
Congress, Kennedy Center Operations Committee Meeting Agendas, and our
past reports on the center. In developing our findings, we corroborated
the capital program's financial data through (1) a comparative analyses of
the data resources, (2) resolving differences and conflicts in the data
sets, and (3) discussing data interpretations with GAO and Kennedy Center
officials. We also met with Kennedy Center officials from the Project
Management, Contract, and Finance Offices to verify our findings related
to the center's financial management and contracts system. Thus, we
determined that the Kennedy Center's financial data were sufficiently
reliable for the purpose of our review.
To evaluate the timeliness and accuracy of the Kennedy Center's
communications, we conducted a comprehensive review of records, including
minutes from the Kennedy Center Board of Trustees' meetings, minutes and
agendas of the board's Operations Subcommittee meetings, all editions of
the CBP published since 1995, annual budget justifications to Congress
since 1995, and center officials' testimony before Congress since 1995. In
addition, we interviewed the Smithsonian Institution's Office of the
Inspector General (OIG) officials to verify what OIG oversight mechanisms
currently exist for the Kennedy Center.
To assess the Kennedy Center's compliance with fire life safety and
disabled access requirements, our licensed engineering staff conducted
site visits, and we contracted an independent expert assessment of the
center's compliance with applicable fire safety code and disabled access
requirements. We followed GAO internal controls for reviewing the expert's
qualifications to conduct the work, reviewing and finalizing the resulting
contract, and verifying the expert's independence. We accompanied the
experts on tours of the Kennedy Center to examine fire safety and disabled
access issues. Our independent experts and we reviewed the Kennedy
Center's Egress and Fire Modeling Study of the Grand Foyer, Hall of
States, and Hall of Nations, but we did not conduct an analysis of the
quality or accuracy of the study and its assumptions. For purposes of our
analysis of the Kennedy Center's fire life safety code compliance, we took
the center's ongoing and planned fire life safety upgrades into
consideration when identifying deficiencies, and we did not identify
deficiencies for cases where upgrades or improvements were planned. In
addition to our expert's work, we reviewed fire safety codes and
Appendix I Scope and Methodology
interviewed officials from the General Services Administration (GSA) and
the D.C. Fire Marshal on fire safety issues.
To identify best practices for managing capital projects, we reviewed our
previous work on best practices for project management.3 We supplemented
our best practices work with past GAO recommendations to the Kennedy
Center-as well as best practices from the Construction Industry Institute.
We determined that these best practices sources were pertinent based on
our previous work on best practices and our past citations of the
Construction Industry Institute related to effective project management.
We conducted our review from August 2004 to March 2005 in accordance with
generally accepted government auditing standards.
3GAO, Intercity Passenger Rail: Amtrak's Management of Northeast Corridor
Improvements Demonstrates Need for Applying Best Practices, GAO-04-94
(Washington, D.C.: Feb. 27, 2004).
Appendix II
Appropriations to the Kennedy Center for Capital Repairs and Alterations
Table 1 lists the appropriations to the Kennedy Center for capital repairs
and alterations under the CBPs.
Table 1: Appropriations to the Kennedy Center for Capital Repairs and
Alterations under the CBPs
Fiscal Year Amount appropriated
1995 $8,982,810a
1996 8,983,000
1997 12,400,000b
1998 9,000,000
1999 20,000,000
2000 19,924,000a
2001 19,956,000a
2002 19,000,000
2003 17,485,600a
2004 15,802,848a
2005 16,107,082a
Source: GAO analysis of federal appropriations for capital projects.
aIn these years, the Kennedy Center's appropriations for capital projects
were reduced by rescissions to the budget authority for most government
agencies and entities receiving appropriated funds.
bIn fiscal year 1997, the Kennedy Center received an additional $3.4
million for capital projects to address antiterrorism requirements.
Appendix III
Status of Previous GAO Recommendations to the Kennedy Center
Recommendations from GAO-04-933 (September 2004)
o GAO recommendation: To help congressional decision makers oversee the
capital projects at the Kennedy Center and make funding decisions, the
President of the Kennedy Center, in conjunction with the Chairman of the
Board of Trustees, should annually update the CBP, as required, and
include (1) the prioritization of projects, (2) project status, and (3)
updated budget information for planned and ongoing projects.
Response: The Kennedy Center agreed with the recommendation. The center
indicated that annually updating and implementing the CBP could help guard
against a recurrence of severe deterioration of the facility and should
ultimately reduce public costs of operations and maintenance. While the
CBP serves as the primary management tool for capital project planning,
the Kennedy Center does not view it as the primary vehicle for
understanding progress in implementing its renovation work.
The Kennedy Center published a CBP update in November 2004. According to
Kennedy Center officials, the center now plans to annually update the plan
as required. Furthermore, the 2004 update of the plan includes
prioritization of ongoing projects, project status, and updated project
budget information. While it also lists projects completed since 2002, the
2004 CBP does not include budgets or expenditures for these or other past
projects completed since 1995.
Recommendations from GAO-03-823 (September 2003)
o GAO recommendation: To help improve the Kennedy Center's ability to
manage and oversee its construction program, the President of the Kennedy
Center, in conjunction with the Chairman of the Board of Trustees, should
develop comprehensive project management policies and procedures to guide
the planning and execution of the construction process.
Response: The Kennedy Center generally agreed with the recommendation and
indicated that it intended to update and strengthen its construction
management policies. The Project Management Office has drafted a policy
and procedure manual, which we received in December 2004. The manual
outlines roles and responsibilities for project management staff and
defines standard operating procedures for managing projects, such as
estimating design
Appendix III Status of Previous GAO Recommendations to the Kennedy Center
and construction costs. However, the policies and procedures remain in
draft form, other groups involved in capital project management, such as
the Contracts Office, have not published policies and procedures, and the
Kennedy Center does not have key overarching policies, such as a document
retention directive.
o GAO recommendation: To help improve the Kennedy Center's ability to
manage and oversee its construction program, the President of the Kennedy
Center, in conjunction with the Chairman of the Board of Trustees, should
ensure development and use of timely data to oversee construction projects
and measure results.
Response: The Kennedy Center agreed to start pursuing monthly project
management reports and detailed information at weekly progress meetings.
o GAO recommendation: To help improve the Kennedy Center's ability to
manage and oversee its construction program, the President of the Kennedy
Center, in conjunction with the Chairman of the Board of Trustees, should
ensure that the needs for human capital expertise are met.
Response: The Kennedy Center generally agreed with the recommendation.
Since the report was issued, the center has hired a Contracts Chief and a
Director of Capital Projects to lead the Project Management Office.
Appendix IV
February GAO Management Letter Sent to the Kennedy Center
United States Government Accountability Office Washington, DC 20548
February 4, 2005
Mr. Michael M. Kaiser
President
John F. Kennedy Center for the Performing Arts
Dear Mr. Kaiser:
As you know, we are currently reviewing the John F. Kennedy Center for the
Performing Arts' (Kennedy Center) Comprehensive Building Plans for the
House Committee on Appropriations, Subcommittee on Interior and Related
Agencies. We are writing this letter to confirm and elaborate on our
January 28, 2005, telephone conversation, in which we raised several
issues related to fire safety at the Kennedy Center. This letter
represents an interim discussion of our concerns, which will be finalized
and provided to you once we have completed our review.
We have determined, based on our expert consultant's assessment, that the
Kennedy Center may not be meeting certain fire safety requirements. The
law the Kennedy Center follows with regard to facility construction or
alteration requires that the Kennedy Center be in compliance with
nationally recognized model building codes and other applicable nationally
recognized fire and life safety codes to the maximum extent feasible. (40
U.S.C. S: 3312) The Kennedy Center policy on building codes states that,
where feasible, it will comply with International Building Code, as well
as selected provisions of the National Fire Protection Association Life
Safety Code (NFPA 101). While conducting our review of the Kennedy
Center's Comprehensive Building Plans, we found that the Kennedy Center
appears not to be complying with certain aspects of NFPA 101, including
those portions of the code relating to exiting the building during a fire.
Over the last decade, several Kennedy Center reports identified fire
safety deficiencies in the Grand Foyer, Hall of States, and Hall of
Nations, including that exit paths through these spaces may not protect
occupants from fire. To address this exit deficiency, NFPA 101 allows two
approaches - to adhere directly to the fire safety code (such as the
installation of a sprinkler or smoke evacuation system) or to provide an
alternative that offers equal or superior protection. The Kennedy Center
Appendix IV
February GAO Management Letter Sent to
the Kennedy Center
has chosen the second approach and used its 2003 egress and fire modeling
study1 as the basis for addressing the exit deficiency, specifically as it
relates to the discharge of occupants from the facility. The study
indicates that, in the event of a fire, the time needed for evacuation is
less than the time it would take for these spaces to become untenable if
certain steps, described below, are taken. Based on the results of this
study, the Kennedy Center has reversed its earlier plan of installing a
fire suppression system and smoke evacuation system in the Grand Foyer,
Hall of States, and Hall of Nations.
To ensure that the actual conditions in the Kennedy Center meet the
assumptions used in the model, the Kennedy Center's study recommends
specific actions, some of which have not been taken. Specifically, we
found no evidence of a policy or program to manage the storage of
combustible materials, nor did we find sprinklers at the Millennium Stages
as recommended in the study. As a result, the Kennedy Center does not meet
the conditions upon which the study was based and, therefore, falls short
of providing the level of protection intended by the code.
Because the Kennedy Center is the authority having jurisdiction for life
safety decisions at the facility, pursuant to NFPA 101, Chapter 5,
management is responsible for determining and documenting that (1) the
modeling study establishes equal or superior protection to the use of a
fire suppression system and smoke evacuation system to address the exit
discharge deficiency; and (2) the Kennedy Center stakeholders, such as the
Board of Trustees, accept and adopt the terms of the study. The Kennedy
Center has not documented that either of these determinations have been
made.
Moreover, our review found that the Kennedy Center has not specifically
addressed the need for additional outside exits2 or the installation of
fire-protected exit passageways, as required by NFPA 101, Chapter 7. We
also identified two additional deficiencies, based on NFPA 101, that are
of immediate concern. First, there are no fire rated doors in critical
areas, such as the exits from the upper assembly areas of the Concert
Hall, the fire pump room, and the Fire Command Center. Second, several
fire-safety related problems were evident with the Millennium Stages. The
stages are located in dead ends of the Grand Foyer, a configuration that
poses an egress deficiency.3 Additionally, NFPA 101, Chapter 13, indicates
that the stages must have a smoke control system that is integrated with a
sprinkler system and smoke detectors over the stage area. These systems
have not been installed.
Although we recognize that the Kennedy Center has discretion in complying
with fire safety codes in that it is required to comply to the maximum
extent feasible, it is our opinion that the seriousness of our findings
and the life safety issues they raise require your immediate attention.
Upon your receipt of this letter, we would be willing to answer any
questions or provide further information to you and your staff.
1Ehrenkrantz Eckstut & Kuhn Architects, PC, Egress and Fire Modeling Study
of the Grand Foyer,
Hall of States, and Hall of Nations (Washington, D.C., 2003).
2NFPA 101 requires that at least half of all exits discharge directly to
outside areas. The Kennedy
Center has less than half of its exits discharging directly to the
outside.
3NFPA 101 defines means of egress as a continuous and unobstructed way of
travel from any point in a
building to a public way consisting of three separate and distinct parts:
(1) the exit access, (2) the exit,
and (3) the exit discharge.
Page 2
Appendix IV
February GAO Management Letter Sent to
the Kennedy Center
In the meantime, we are continuing our review of the Comprehensive
Building Plans
and related fire safety issues. We will include the issues raised in this
letter, and any
actions that you take to resolve them, along with other findings we
present in our
final report.
If you have any questions, please contact me at (202) 512-2834 or at
[email protected].
Sincerely yours,
Mark L. Goldstein
Director, Physical Infrastructure Issues
cc: Debbie Weatherly, Staff Assistant, House Committee on Appropriations,
Subcommittee on Interior and Related Agencies Page 3
Appendix V
Comments from the John F. Kennedy Center for the Performing Arts
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
See comment 1.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
See comment 2.
See comment 3.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
See comment 4.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
See comment 5.
See comment 6.
See comment 7.
See comment 8.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
See comment 9.
See comment 10.
See comment 11.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
See comment 12.
See comment 13.
See comment 14.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
See comment 15.
See comment 16.
See comment 17.
See comment 18.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
See comment 19.
See comment 20.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
See comment 21.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
See comment 22.
See comment 23.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
Appendix V Comments from the John F. Kennedy Center for the Performing Arts
The following are GAO's comments on the John F. Kennedy Center for the
Performing Arts' letter dated April 4, 2005.
GAO Comments 1.
2.
3.
We found that the Kennedy Center has not fully implemented the conditions
of its fire-modeling study. For example, it has not developed and
implemented a program to manage the storage of scenery, props, and other
combustible materials or installed sprinklers at the Millennium Stages,
conditions on which the modeling study was based. Until these conditions
are met, the study's assumptions are invalid. Two additional areas of
concern are (1) doors in critical areas do not provide adequate protection
from fire and (2) the Millennium Stages have exit deficiencies.
Specifically, the Kennedy Center's decision to obscure the nearest
external exits with curtains violates fire code. At the time of our
review, none of these conditions and deficiencies was addressed in the
Kennedy Center's ongoing fire life safety upgrades.
Our independent experts were qualified to assess fire life safety code
compliance. Our principal fire safety expert has a Ph.D. in a related
field, is certified in industrial hygiene, and has conducted life safety
surveys for all three branches of government, including the White House
Communications Agency, the Architect of the Capitol, and the U.S. Supreme
Court, among others. We were not asked to assess the quality or accuracy
of the Kennedy Center's fire-modeling study.
We do not believe the main point is one of voluntary upgrading to the
current code as characterized by the Kennedy Center, but begins with the
statutory requirement found at 40 U.S.C. S: 3312. As recognized by the
Kennedy Center, when it decided to renovate the facility to upgrade fire
life safety systems to current code, it was bound by 40 U.S.C. S: 3312,
which requires the Kennedy Center to be in compliance with nationally
recognized fire and life safety codes to the maximum extent feasible. On
the basis of our work, it appears that the Kennedy Center did not comply
with selected provisions of the code it adopted. Although we recognize the
Kennedy Center has discretion in complying with fire and life safety
codes, and is the final authority on this, because the Kennedy Center's
actions on this matter involve the seriousness of fire and life safety
issues, we believe that the Kennedy Center's decisions should be reviewed
by a knowledgeable third party, which the Kennedy Center has agreed to do.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
4. We do not believe that the Kennedy Center followed a decision-making
process that considered other options regarding its exit deficiency.
Although the Kennedy Center installed sprinkler systems in its renovated
theaters and created fire separations in certain areas, we found no
evidence that the center seriously considered these types of prescriptive
fire code solutions in deciding how to approach its exit deficiency.
5. We support the Kennedy Center's continuing fire life safety upgrades.
However, we did not find any evidence that the Kennedy Center has a plan
to develop and implement a program to manage the storage of scenery,
props, and other combustible materials or installed sprinklers at the
Millennium Stages, which were conditions of the fire-modeling study.
6. We removed references to the Society of Fire Protection Engineers
survey from our report.
7. GSA fire protection officials told us that GSA's philosophy is to do
all that is possible to protect life and property, and that they do not
support the performance models to avoid prescriptive solutions that could
increase the protection of life and property. For example, GSA officials
said that they take every possible step to protect life and property, and
then do fire or smoke modeling to determine if those steps were
sufficient. The Kennedy Center's approach to fire modeling is not
consistent with GSA's philosophy.
8. We removed the reference to "dead end" from the report. However, the
Millennium Stages continue to lack clear, marked exit paths and sprinklers
that are required by fire code.
9. We support the Kennedy Center's decision to seek independent review of
its handling of the center's performance-based design for the Grand Foyer,
the Hall of States, the Hall of Nations, and the Millennium Stages.
However, we encourage the Kennedy Center to implement our full
recommendation to seek peer review of its entire approach to fire life
safety in addition to the issues related to the fire-modeling study.
Third-party validation is particularly important in this instance because
the center's fire safety decisions are not subject to external review.
10. We support the Kennedy Center's intention to conduct a survey of all
fire door assemblies so they can be repaired, replaced, or recertified
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
and relabeled because, in order to comply with fire code, the center must
ensure that the doors in all key locations provide adequate protection
from fire.
11. Although the Kennedy Center has procedures for recording financial
management transactions, we remain concerned that these procedures do not
provide the comprehensive detailed guidance needed for its nonfinancial
staff members to (1) clearly understand their roles and responsibilities
and (2) properly and effectively execute their assigned duties in
examining and verifying the accuracy and validity of underlying supporting
information and approving contractor invoices for payment. We found that
the center's current financial accounting procedures consisted of one page
of bullet points and a memorandum to its external auditors and did not
include fundamental procedures, such as the center's annual accrual
process for year-end work-inprogress or minimum documentation requirements
necessary before payments to vendors are made.
12. The Kennedy Center provides summarized financial information
periodically to the Office of Management and Budget (OMB) and Congress
pertaining to capital project obligations, but this financial information
does not mention budget execution or status of funds. While information
regarding obligations is important, so is information about costs incurred
for work performed in the execution of construction contracts. We agree
that the Kennedy Center should continue to monitor budget obligations on
construction contracts; however, we believe the center should accrue
expenses on construction projects-on at least a quarterly basis-to
determine if such accruals are material to the center's OMB reports. We
continue to believe that, to the extent the Kennedy Center also
periodically reports information on budget execution and status of the
funds it received for capital projects, the center faces increased risk
that such information reported would be in error at times other than at
the end of the fiscal year. In addition, capital investments and key
performance measures are usually expressed in terms of costs.
13. The Kennedy Center's annual audited financial statements are prepared
only once a year. Additionally, they do not provide a breakdown of cost or
budget information by specific project. Consequently, we believe that
these statements provide stakeholders too little information-too late-for
effective oversight on construction projects.
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
14. The Kennedy Center was unable to link specific Johnson Controls'
invoices to U.S. Army Corps of Engineers' (Corps) invoices. Consequently,
we continue to believe that the Kennedy Center did not have assurance that
the Corps' invoices to the center accurately reflected amounts billed by
Johnson Controls, were free of error, and did not represent amounts
previously paid. We found that 1 of 56 invoices from the Corps was
rejected by the Kennedy Center due to a lack of support. When that invoice
was resubmitted by the Corps, it was for an amount 50 percent less than
the amount originally invoiced. For the other 55 invoices from the Corps,
the center paid the invoice without any supporting documentation attached.
15. We support the Kennedy Center's plans to determine if the Corps'
billed costs represented its actual costs and make any necessary
adjustments to comply with the Economy Act agreement during contract
closeout. If the center completes the reconciliation, it can provide the
objective evidence needed to support the Corps' invoices and provide a
strong basis for its conclusions on the accuracy and completeness of the
invoices. However, the Kennedy Center may find it more cumbersome to
reconcile Corps invoices received over the life of the project to
supporting cost information at the end of the project than it would be if
the reconciliation was done each month at the time invoices are received.
16. We disagree. For the reasons previously stated and in the body of our
report, we continue to believe that the center did not maintain complete
and accurate financial records, which could impact the safeguarding of
federal funds.
17. We reviewed these projects because they were the most recently
completed major projects at the Kennedy Center. These projects were also
among the most costly or important projects related to fire safety and
disabled access improvements included in the Kennedy Center's CBP.
18. We support the Kennedy Center's progress toward establishing a
policies and procedures manual. However, the policies manual for capital
projects remains in draft, and the Kennedy Center has not formalized its
contractual and financial management policies and procedures. A
comprehensive set of policies and procedures for managing federal funds
covering the Project Management, Contract, and Finance offices, and the
interaction between them, would help
Appendix V Comments from the John F. Kennedy Center for the Performing
Arts
guide the various activities related to the acquisition of goods and
services for the center's capital improvements program.
19. The Kennedy Center's tight schedules necessitated the overtime
charges. However, Kennedy Center officials said that the overtime charges
and all other cost growth for these projects were paid using federal
appropriations, while the ticket revenue goes into the Kennedy Center's
trust funds.
20. It was not within the scope of our work to conduct a comprehensive
procurement review that would be necessary to assess the full impact of
how the Kennedy Center managed contract modifications. However, our
previous work has shown that contractors have limited incentive to control
costs until firm prices are negotiated for contract changes, and the
government does not have an opportunity to consider more efficient
construction methods or management controls if the work is completed
before the price is established.
21. We do not suggest that existing drawings be ignored in favor of
destructive investigation. However, when existing as-built drawings do not
exist or are proven to be inaccurate, as the Kennedy Center has indicated,
it may help reduce the risk of cost increase or schedule delays to
investigate the actual site conditions, which is sometimes destructive to
building finishes. As discussed with Kennedy Center staff, where
destructive investigation is not feasible, the center should consider
incorporating additional cost and schedule contingencies in its budget
estimates to reflect the increased risk of unforeseen conditions being
discovered during construction.
22. We continue to believe that the Kennedy Center did not always timely
or accurately communicate with its board or Congress. For example, recent
Kennedy Center documents continue to state that the center intends to
install sprinkler systems throughout the entire facility, even though that
is not the case.
23. We removed this example, regarding communication on delays related to
the Opera House renovation, from our report.
Appendix VI
GAO Contacts and Staff Acknowledgments
GAO Contacts Mark L. Goldstein, (202) 512-2834 Susan A. Fleming, (202)
512-4431
Staff Acknowledgments
(543113)
In addition to those named above, Michael Armes, Lindsay Bach, Chris
Bonham, Matt Cail, Keith Cunningham, John Davis, George Depaoli, Tim
Dinapoli, Terrell Dorn, Edda Emmanuelliperez, Colin Fallon, Brandon
Haller, Jack Hufnagle, John Krump, Julie Phillips, Theresa Patrizio,
Robert Preshlock, Susan Michal-Smith, and Carrie Wilks made key
contributions to this report.
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