Originally posted on CityStink
Tuesday, August 21, 2012
The author, Al M. Gray was President of Cost Recovery Works, Inc., a provider of Cost Avoidance and Cost Recovery for America’s leading companies, businesses and governments desiring Superior Returns. Cost Recovery Works is no longer in business, as of December 31, 2020.
As we told you yesterday, a special called meeting of the Augusta Commission is scheduled today at 4:30pm to once again try to approve the Reynolds Street Parking Deck management agreement between the city and Augusta Marriott hotel owners, Augusta Riverfront, LLC. A closed door legal session has also been requested by Augusta General Counsel to discuss the deck deal. Representatives from Augusta Today and CityStink.net will be in commission chambers today to observe these proceedings. Of course, if commissioners vote to go into a legal session, those proceedings will be off limits to the public and the media.
Al Gray, a cost-recovery specialist and a contributor to CityStink.net (now defunct) site, who has done extensive analysis of the deck contracts, plans to be at today’s meeting. Al Gray cautions commissioners from once again rushing into approving any last minute deal and he left the following remarks on why this contract needs to be tabled and what MUST be included for any contract to be approved:
The Mayor, Administrator, and Commissioner Jerry Brigham are set to RAM THROUGH disastrous Parking Deck Management and lease agreements that, at last review, contain the following flaws.
1) The Annual Plan was only a guide. The REAL AUTHORITY is the contract language defining costs that are allowed. The Annual Plan is a SMOKESCREEN. They are putting out the total and utter B.S. that the Commission will have approval for overages or costs beyond the Plan, but the CONTRACT LANGUAGE WILL FORCE PAYMENT!
Like the Jefferson County Alabama deals with Wall Street that bankrupted that county, unless this agreement has been amended SUBSTANTIALLY, it is an OPEN CONDUIT of UNLIMITED Augusta funds. The Manager can SELL THIS AGREEMENT and the agreement allows the Manager to set its own budget, like this agreement did the last time the public saw it. An agreement that allows unlimited billings would have unlimited value! LET US SEE THE AMENDMENT THAT ELIMINATES THIS!
Then there is the matter of the LLC getting 100% of the income for 150 spaces while Augusta gets 100% of the expenses. The LLC is being compensated with a like # of spaces, but didn’t the LLC pay the COSTS of the old spaces? Taxes, lighting, etc.?
Here are the rights of Audit I recommended that Augusta is apparently rejecting:
WHY NEEDED? TO DETERMINE THAT COSTS ARE ACTUAL COSTS traceable to the Managers records, that all discounts come back to the OWNER. The “Financial Audit” now in there is a RUBBER STAMP snapshot at the end of the year.
INSPECTION AND AUDIT – Manager’s “records” shall upon reasonable notice be open to inspection and subject to audit and/or reproduction during normal business working hours. Such audits may be performed by an Owner’s representative or an outside representative engaged by Owner.
The Owner or its designee may conduct such audits or inspections throughout the term of this contract and for a period of three years after final payment or longer if required by law. Manager’s records as referred to in this contract shall include any and all information, materials and data of every kind and character, including without limitation, records, books, documents, subscriptions, recordings, agreements, purchase orders, leases, contracts, commitments, arrangements, notes, daily diaries, management reports, drawings, receipts, vouchers and memoranda, and any and all other agreements, sources of information and matters that may in Owner’s judgment have any bearing on or pertain to any matters, rights, duties or obligations under or covered by any Contract Document.
Such records shall include (hard copy, as well as computer readable data if it can be made available), written policies and procedures; time sheets; payroll registers; payroll records; cancelled payroll checks; subcontract files (including proposals of successful and unsuccessful bidders, bid recaps, etc.); original estimates; estimating worksheets; correspondence; change order files (including documentation covering negotiated settlements); backcharge logs and supporting documentation; invoices and related payment documentation; general ledger entries detailing cash and trade discounts earned, insurance rebates and dividends; and any other Manager records which may have a bearing on matters of interest to the Owner in connection with the Manager’s dealings with the Owner (all foregoing hereinafter referred to as “records”) to the extent necessary to adequately permit evaluation and verification of:
(a) Manager compliance with contract requirements,
(b) compliance with Owner’s business ethics policies.
Contractors get away with ENORMOUS overbillings from misapplied labor burdens. I got back $millions from this source.
NEED LABOR BURDEN DEFINED LIKE THIS:
Insert – When computing actual costs chargeable to the Cost of the Work for payroll taxes, the Manager shall give proper consideration to the annual limitations of the wages subject to certain payroll taxes. The Manager may accomplish this through the use of an accounting system which computes actual costs for payroll taxes when incurred up to the wage limit cut-off and allocated same to all jobs by individual based on the time worked on each job by the individual. Alternatively the Manager may use an estimated net effective payroll tax percentage to allocate payroll tax costs during the year and make appropriate adjustments at the end of the year or at the end of the project (whichever is more appropriate) to adjust the costs to actual net payroll tax cost. Using the latter approach, if 50% of the wages paid to an employee during the year were chargeable to the Cost of the Work, then only 50% of the actual annual costs of payroll taxes would be allocated to the Cost of the Work, etc.
Insert – Cost of the Work shall include the actual net cost to the Manager for worker’s compensation insurance attributable to the wages chargeable to the Cost of the Work per this agreement. The actual net cost of worker’s compensation shall take into consideration all cost adjustments due to experience modifiers, premium discounts, policy dividends, retrospective rating plan premium adjustments, assigned risk pool rebates, etc. The Manager may charge an estimated amount for worker’s compensation insurance costs, but will make appropriate cost adjustments to actual costs within 30 days of receipt of actual cost adjustments from the insurance carrier.
Insert – Any payroll burden related costs to be reimbursed which are not required by law shall be subject to advance written approval by Owner to be considered reimbursable. Fringe benefit costs typically falling into this category include but are not limited to pension, employee stock option plans, bonuses, medical and dental benefits, life and accident insurance, etc. The Manager shall be required to submit a detailed breakdown of all such payroll burden costs along with all representation as to how the proposed actual billable cost will be computed. Such information must be reviewed and approved in writing by Owner before Manager may include such items as reimbursable costs.
All such payroll burden costs shall be billable as reimbursable costs at actual verifiable cost subject to provisional maximums agreed upon in writing in advance by both parties. It should be noted that certain fringe benefit costs such as funding of pension or profit sharing funds in excess of the minimum amounts required by law may not be considered reimbursable payroll burden costs by Owner, and those fringe benefit items which are not approved in advance in writing by Owner will be considered as nonreimbursable overhead cost to be covered by the Manager’s Fee. During the job and prior to contract close-out, adjustments will be made to account for actual costs which may be less than the provisional maximum costs previously billed.**************