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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:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-334]
GAO Highlights:
Highlights of GAO-05-334, a report to the Chairman, Subcommittee on
Interior, Environment, and Related Agencies, Committee on
Appropriations, House of Representatives.
Why GAO Did This Study:
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.
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.
Figure: Cost over Initial Budget for Selected Kennedy Center Projects.
{See PDF for Image]
Source: GAO analysis of Kennedy Center Data.
[End of Figure]
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.
What GAO Recommends:
GAO recommends here and in April 6, 2005, testimony that the Kennedy
Center increase oversight, better comply with fire code, and conform to
project management best practices. The Kennedy Center believes that it
is in compliance with fire code, but agrees to seek third-party review.
It agreed with our recommendation to improve oversight and management
practices, but contended its financial controls were adequate.
[Hyperlink, http://ww.gao.gov/cgi-bin/getrpt?GAO-05-334]
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Mark L. Goldstein at (202) 512-2834 or
goldsteinm@gao.gov
[End of Section]
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:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: Appropriations to the Kennedy Center for Capital Repairs
amd Alterations:
Appendix III: Status of Previous GAO Recommendations to the Kennedy
Center:
Appendix IV: February GAO Management Letter Sent to The Kennedy Center:
Appendix V: Comments from the John F. Kennedy Center for the Performing
Arts:
GAO Comments:
Appendix VI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Table:
Table 1: Appropriations to the Kennedy Center for Capital Repairs and
Alterations under the CBPs:
Figures:
Figure 1: Diagram of the Kennedy Center's Plaza-Level Public Spaces and
Theaters:
Figure 2: Kennedy Center Organizational Chart for Selected Positions
and Offices:
Figure 3: Scope of Key Kennedy Center Capital Projects:
Figure 4: Budgets and Actual Costs for Selected Kennedy Center Capital
Projects:
Figure 5: Opera House Unforeseen Site Condition:
Figure 6: Kennedy Center Communication Methods:
Figure 7: Exit Routes from the Kennedy Center's Major Theaters:
Figure 8: Millennium Stage Located at the End of the Grand Foyer
outside the Eisenhower Theater:
Figure 9: Selected Disabled Access Improvements to the Kennedy Center
Made as Part of the Comprehensive Building Plan:
Figure 10: Best Practices for Managing Capital Projects:
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:
Letter April 21, 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.[Footnote 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 million[Footnote 2] in federal funds
from fiscal years 1995 through 2005 for capital repairs and
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.[Footnote 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.[Footnote 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).[Footnote 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 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.[Footnote 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 management[Footnote 7] 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.
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.[Footnote 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.[Footnote 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 Act[Footnote 10] (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
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:
[See PDF for image]
[End of figure]
In a 1972 agreement with the Department of the Interior, the Kennedy
Center Board of Trustees[Footnote 11] 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.[Footnote 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.[Footnote 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.[Footnote 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 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.[Footnote 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 facility.[Footnote 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.
Figure 2: Kennedy Center Organizational Chart for Selected Positions
and Offices:
[See PDF for image]
[End of figure]
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:
[See PDF for image]
[End of figure]
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.[Footnote 17]
Figure 4: Budgets and Actual Costs for Selected Kennedy Center Capital
Projects:
[See PDF for image]
[End of figure]
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 drawings[Footnote 18] 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 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:
[See PDF for image]
[End of figure]
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.[Footnote
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.[Footnote 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 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 agencies[Footnote 21] 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.[Footnote 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 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. §§ 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,[Footnote 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 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:
[See PDF for image]
[End of figure]
[A] Members 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.[Footnote 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.
The following examples illustrate untimely and inaccurate communication
on the projects we reviewed:
* 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.
* 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.
* 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.[Footnote 25] Reasons for
the project's delay were not evident in the records that we reviewed.
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 Not Appear to Comply with Fire Safety Code:
While the Kennedy Center has worked to address fire life safety
deficiencies, and improvements are ongoing, on the basis of an
assessment performed by an independent expert that we hired, we found
that the Kennedy Center does not appear to meet some fire life safety
requirements.[Footnote 26] Over the past decade, several internal
Kennedy Center reports have also identified other fire life safety
deficiencies--such as exit 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:
[See PDF for image]
[End of figure]
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.[Footnote 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.
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:
[See PDF for image]
[End of figure]
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.[Footnote 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.
Figure 9: Selected Disabled Access Improvements to the Kennedy Center
Made as Part of the Comprehensive Building Plan:
[See PDF for image]
[End of figure]
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.[Footnote 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.[Footnote 30] In recent years,
the Kennedy Center has begun to take steps to implement some of these
best practices and improve its project management.
Figure 10: Best Practices for Managing Capital Projects:
[See PDF for image]
[End of figure]
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.
* 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.[Footnote 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.
* 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 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.
* 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.[Footnote 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.[Footnote
33] We found 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.[Footnote 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.
* 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 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. 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.
2. 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:
* 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;
* complete, up-to-date costs for construction and other services are
recognized and used to prepare quarterly financial reports and manage
project costs;
* reasonable efforts are made to match invoices with inspection reports
and previously paid invoices to prevent or detect duplicate payments;
* contractors' invoices meet minimum requirements and contain
sufficient detailed information to clearly support the accuracy and
validity of invoices; and:
* 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 [Hyperlink, http://www.gao.gov.].
If you or your staff has any questions, please contact me at (202) 512-
2834 or [Hyperlink, goldsteinm@gao.gov]. See appendix VI for a list of
the major contributors to this report.
Sincerely yours,
Signed by:
Mark L. Goldstein:
Director, Physical Infrastructure Issues:
[End of section]
Appendixes:
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.[Footnote 35] 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).[Footnote 36]
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 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 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.[Footnote
37] 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.
[End of section]
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: 1995;
Amount appropriated: $8,982,810[A].
Fiscal Year: 1996;
Amount appropriated: $8,983,000.
Fiscal Year: 1997;
Amount appropriated: $12,400,000[B].
Fiscal Year: 1998;
Amount appropriated: $9,000,000.
Fiscal Year: 1999;
Amount appropriated: $20,000,000.
Fiscal Year: 2000;
Amount appropriated: $19,924,000[A].
Fiscal Year: 2001;
Amount appropriated: $19,956,000[A].
Fiscal Year: 2002;
Amount appropriated: $19,000,000.
Fiscal Year: 2003;
Amount appropriated: $17,485,600[A].
Fiscal Year: 2004;
Amount appropriated: $15,802,848[A].
Fiscal Year: 2005;
Amount appropriated: $16,107,082[A].
Source: GAO analysis of federal appropriations for capital projects.
[A] In 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.
[B] In fiscal year 1997, the Kennedy Center received an additional $3.4
million for capital projects to address antiterrorism requirements.
[End of table]
[End of section]
Appendix III: Status of Previous GAO Recommendations to the Kennedy
Center:
Recommendations from [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
04-933]:
* 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 [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
03-823]:
* 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 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.
* 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.
* 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.
[End of section]
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. § 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 has chosen the second approach and used its 2003 egress
and fire modeling study[Footnote 38] 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 exits[Footnote 39] 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.[Footnote 40] 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.
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
[Hyperlink, goldsteinm@gao.gov].
Sincerely yours,
Signed By:
Mark L. Goldstein:
Director, Physical Infrastructure Issues:
[End of section]
Appendix V: Comments from the John F. Kennedy Center for the Performing
Arts:
The John F Kennedy Center for the Performing Arts:
April 4, 2005:
Mr. Mark L. Goldstein:
Director, Physical Infrastructure Issues:
United States Government Accountability Office:
441 G St. NW:
Washington, DC 20458:
Dear Mr. Goldstein:
On behalf of the Trustees and the staff of the John F. Kennedy Center
for the Perfonning Arts, we want to thank you and your team from the
Government Accountability Office for forwarding the draft report,
"Stronger Oversight of Fire Safety Issues, Construction Projects, and
Financial Management Needed", received March 21, 2005, with
modifications received March 28, 2005.
We appreciate the time and thoughtfulness of the GAO team that
completed this evaluation and we acknowledge the extraordinary effort
the team has given this project over the past 15 months. We acknowledge
that this review will assist us in our continuing efforts to improve
all aspects of Kennedy Center management. However, the report also
includes many sweeping statements, surrounded by qualifiers, which are,
therefore, misleading. In addition, in our opinion, many of the
conclusions are inaccurate.
The Board of the Kennedy Center take seriously its responsibility to
keep our building, a Federal asset and a Presidential memorial, in the
best condition possible.
Maintaining a safe, accessible and functional building is essential
since, each year, the Kennedy Center reaches over 2 million people with
more than 2,000 performances in all performing arts disciplines.
The Center has completed a vast majority of the projects outlined in
its initial comprehensive building plan developed in 1995 and continues
to implement the plan which has been updated most recently in November
2004. The implementation plan and the associated budgets are fluid
documents. Projects are evaluated and re-prioritized continually
throughout the year as specific details and drawings are developed for
each project and more detailed and accurate budgets are developed. The
Center makes every effort to spend its appropriated funds prudently and
expeditiously. As the environment, appropriations levels, the economy
and Center programming changes, the renovation plan is changed
accordingly.
The Center believes that we have made significant strides to improve
the management of capital projects. The tone and content of the report
implies that the Center is not addressing previous recommendations made
by GAO and that there continue to be pervasive problems with capital
project management. The Center has learned a significant amount in the
past ten years regarding project management, the existing conditions of
the building, the development of budgets and the resources available to
assist in maintaining strong oversight. Several of the projects
referenced in the report were initiated in the early stages of the
project management office. The infancy of the department contributed to
incomplete budget development and cost overruns due to expansion of
scope of work after the project contract was awarded. For example,
budgets for three of the four projects singled out in the report
included no contingency. By our own admission, such tight budgets were
irresponsible, because unknown conditions, errors and omissions and
owner changes are a fact of life in all construction projects. That
being said, however, the Center's expenditures for projects were
neither irresponsible nor wasteful. Cost and schedule changes were
fully controlled; it was simply a case of naive budget development.
Our budgets are now developed using a comprehensive approach that
allows all elements of a project to be considered and that includes
design, construction and owner contingencies. In this ever-changing
economic climate, such contingencies are particularly important. As
design and construction progresses on a project, the budget is
continually tested and revised as necessary. For these purposes, the
Center utilizes expert construction estimating, budgeting and
scheduling consultants for assistance.
The Center will continue to improve its management and policies and
procedures. We anticipate that independent oversight through strategic
and annual audits will assist in strengthening controls and management.
The Center's financial management controls are strong, and the
financial information is accurate and complete. Federal resources are
being appropriately safeguarded and the Center's financial reporting is
designed to ensure complete, accurate and transparent information for
its stakeholders.
The report also makes recommendations to ensure the safety of the
Center. We strongly disagree with the supposition that the Kennedy
Center is out of compliance with the fire safety code. A fire modeling
study, conducted by registered fire protection engineers, was completed
in November 2003 and showed that a performance-based approach would
meet the goals and objectives of the code. More specifically, the
Kennedy Center's egress and fire modeling study showed that the goals
and objectives of the code would be met without additional exits or the
addition of a smoke evacuation system or sprinklers throughout the Hall
of States, Hall of Nations and Grand Foyer (including the Millennium
Stages). The Center is currently implementing the recommendations of
the modeling study and is undertaking a complete survey of doors to
assure they provide adequate fire separation.
The Kennedy Center has consistently used Registered Fire Protection
Engineers (the highest qualification in the field) to perform fire
protection and life safety assessments and designs. However, it is
noted that GAO's consultants, upon whose conclusions the report is
based, are not Fire Protection Engineers. Additionally, the Center has
engaged the Smithsonian Institution's Office of Safety and
Environmental Management to conduct an independent review of the issues
raised by GAO in their report. Specifically, the review will include an
assessment of the performance-based design for the Grand Foyer, Hall of
States, and Hall of Nations, and the dead end issue at the Millennium
Stages.
The details of the GAO draft report are addressed below.
Fire Life Safety:
The Kennedy Center was originally constructed between 1966 and 1971 in
accordance with applicable building codes. Since that time, the codes
and standards to which it conformed have been substantially modified.
As a federal entity, the Center is its own authority having
jurisdiction over the property, and as such, adopts the particular
codes and standards that it will follow. In October 2004, it formally
adopted a list of updated building codes. This policy, in line with the
requirements of the Public Buildings Amendments of 1988, 40 United
States Code (U.S.C.) 3312, requires that any construction or renovation
project at the building shall, to the extent feasible, be in compliance
with up-to-date nationally recognized model building codes. In general,
this does not mean that existing portions of the building need to be
modified each time new versions of the building codes are released.
Rather, at the time of design contract award, the Center will follow
the current version of the codes for the portion of the building in
design for construction or renovation.
Given the above, it is incorrect to suggest that the Center is out of
compliance where it is voluntarily upgrading existing life safety and
fire protections systems (e.g., sprinklers) to meet the current
building code requirements for new construction. The Life Safety Code
(NFPA 101), which includes some retroactive standards for existing
buildings, recognizes that there might be situations where applying
such requirements to existing situations is not practical. To address
this issue, the code provides the authority having jurisdiction with
the latitude to modify standards and/or phase their implementation as
needed.
The Center's 2002 Comprehensive Building Plan identified several fire
and life safety deficiencies based on current building codes and
standards. Center management decided, where feasible, to systematically
bring the entire building up to current life safety and fire protection
standards. These upgrades are occurring through a phased process of
comprehensive renovations (e.g., the Opera House renovation) and a life
safety improvement project that addresses life safety issues not
covered by the discrete renovation projects.
NFPA 101 provides two options for achieving compliance:
1. A prescriptive-based life safety design is the traditional approach.
Each applicable requirement is met individually, after which the
resultant level of life safety is deemed to meet the overall goals and
objectives of the code.
2. A performance-based life safety design is exempt from the myriad
prescriptive, specification-based requirements of the code (with the
exception of a few retained provisions) and uses complex fire and
egress modeling to show that the design meets the overall goals and
objectives of the code.
The Center is using both prescriptive-based and performance-based
solutions to address the identified deficiencies, although most could
be fixed using prescriptive code solutions. For example, prescriptive
code solutions are being used to provide fire separations between the
main theaters and the Hall of States, Hall of Nations and Grand Foyer
and will be completed during the Eisenhower Theater renovation and Life
Safety Improvement projects.
Recognizing that an existing exit discharge deficiency could not be
resolved through prescriptive code solutions without detracting from
the uniqueness and landmark nature of the building, the Center's fire
protection consultants recommended an egress and fire modeling study to
determine whether a performance-based approach would meet the goals and
objectives of the code for the Grand Foyer, Hall of States, and Hall of
Nations. In simple terms, this type of study looks at existing
conditions and uses the results to determine the fire and life safety
improvements that would be necessary to allow for the safe evacuation
of building occupants in a fire emergency. The Center's plan to conduct
a performance-based engineering evaluation of the building, including
fire modeling analysis and timed egress studies, to develop and confirm
the design recommendations was stated in Michael Kaiser's testimony of
September 10, 2003 before the House Subcommittee on Economic
Development. Public Buildings and Emergency Management.
The modeling study, completed in November 2003, showed that, with the
assumptions and approximations noted in the report, a performance-based
approach would meet the goals and objectives of the code. More
specifically, the Center's egress and fire modeling study showed that
the goals and objectives of the code would be met without the addition
of a smoke evacuation system or sprinklers throughout the Hall of
States, Hall of Nations and Grand Foyer (including the Millennium
Stages). As such, the performance-based design for this area does not
include prescriptive solutions such as sprinkler and smoke control
systems at the Millennium Stages. The results of the study changed our
approach to fire safety, in certain instances, from those outlined in
previous comprehensive building plans, the majority of which were
conducted before performance-based design was an option. The
installation of sprinklers throughout the rest of the building is still
scheduled for completion by planned renovations, e.g., Eisenhower
Theater project and the Life Safety Improvements Project.
It should be noted that this study included a second trial design that
was conducted for the South Millennium Stage fire scenario (as part of
a sensitivity analysis). For this second trial design, the heat release
rate of the fire was increased significantly to represent a much larger
fire. While this fire size was not considered a credible fire for the
Millennium Stage, it demonstrated that the design would likely require
a fire three times the size of the worst credible fire to have the
first performance criterion (i.e., visibility in the Grand Foyer) fail.
Additionally, the fire loading of the Millennium stages is very
limited; the stages do not have the overhead stage rigging capability
or wing space that could potentially store significant quantities of
scenery or drops.
The validity of the study's conclusions rely on the correction of some
of the prescriptive code deficiencies outlined in the 2002
Comprehensive Building Plan, as well as those specifically retained by
NFPA 101 for performance-based solutions. Some of these deficiencies
are being addressed in the planned renovation projects such as the
Eisenhower Theater renovation. The remaining deficiencies are being
addressed in the Life Safety Improvements Project. In addition, the
Center's consultants provided recommendations to reduce evacuation
time, limit fuel load, and maintain the building's fire protection
systems. All of these items are in progress.
It should be recognized that GAO's reference to the Society of Fire
Protection Engineers survey, when trying to illustrate that "code
officials are hesitant or reluctant to accept performance-based
designs," offers statistics that are not particularly relevant. The
Society of Fire Protection Engineers survey was completed at the
conclusion of awareness-level workshops conducted in 2000, only months
after performance-based design was introduced as a compliance option
for NFPA 101. Presumably, the workshops represented the introduction of
performance-based design concepts for the responding participants, of
which only 10% were engineers or designers. Therefore, it is not
surprising that the majority of the respondents did not characterize
themselves as being comfortable with performance-based design.
It should also be noted that GSA accepts a performance-based approach.
In its 2003 Facilities Standards for the Public Buildings Service (P
100), Chapter 7, Fire Protection Engineering, GSA outlines its
technical fire protection requirements and design criteria for GSA
facilities. In Section 7.1; General Approach, the section on
applicability states that, far from being hesitant or reluctant to
accept performance-based designs, "Performance-based designs are
encouraged." The same section later states "Deviations from established
requirements are allowed when the Design Team's registered fire
protection engineer performs an assessment that analyzes the risks. "
In fact, performance-based designs have been used for both new and
existing federal buildings in the Washington, D.C. area.
The Center does not agree that the Millennium Stages are located at
dead ends as stated in the draft report received on March 21". A dead
end is described in NFPA 101, Annex A as a situation where "an occupant
enters a corridor thinking there is an exit at the end and, finding
none, is forced to retrace the path traveled to reach a choice of
egress paths." In the case of the Millennium Stages, the Grand Foyer is
not a corridor and a situation does not exist where a person would
enter the area thinking there is an exit at the end and, finding none,
would be forced to retrace the path traveled to reach a choice of
egress paths. Qualified architects and registered fire protection
engineers have conducted multiple life safety studies at the Center and
none of these experts considered these spaces to be dead ends.
To allay GAO's concerns about fire and life safety in the building, the
Center shall utilize the Smithsonian Institution's Office of Safety and
Environmental Management to conduct an independent review of the issues
raised by GAO in their report. Specifically, the review shall include
an assessment of the performance-based design for the Grand Foyer, Hall
of States, and Hall of Nations, and the dead end issue at the
Millennium Stages.
In regards to the acceptance of the modeling study, the Center agrees
that further documentation is required. However, NFPA 101 does not
require the Center management to document that the modeling study
establishes equal or superior protection to the use of a fire
suppression system and smoke evacuation system to address the exit
issue, as stated in the GAO report. Rather, the Center must document
that the design meets the life safety goals and objectives outlined in
NFPA 101, Sections 4.1 and 4.2. The Center must also document: (1)
approval of the building as a performance-based design with certain
specified design criteria and assumptions; and (2) the need for
required re-evaluation and re-approval in cases of remodeling,
modification, renovation, change in use, or change in established
assumptions. This documentation will be finalized before construction
completion and operational control implementation.
GAO also questioned whether certain fire doors have an appropriate fire
rating, in part because several of the doors inspected have paint over
their rating labels. The Center recognizes that this condition exists
in various areas throughout the building. Therefore, the Center will
engage a qualified contractor to conduct a survey of all fire door
assemblies so they can be repaired, replaced, or re-certified and re-
labeled.
To provide for third-party review and assistance on significant future
life safety and fire protection issues, the Center shall set up an
inter-agency agreement with the Smithsonian Institution's Office of
Safety and Environmental Management. This office has the requisite in-
house resources for this task and has a solid understanding of the
particular needs of historic/landmark structures and cultural
activities.
Financial Reporting:
One of the overriding goals of the Center's finance office is to
provide complete and accurate accounting information to the Center's
stakeholders, including management. To this end, the Center has
established procedures for recording financial transactions in the
general ledger. These written procedures were provided to GAO during
their engagement. GAO expressed concern about a lack of a comprehensive
set of policies and procedures. While the Center can always improve the
documentation of procedures and is working with the project management
and contracting office to complete a comprehensive policies and
procedures manual for construction activity, the existing procedures
were evident and utilized by Center personnel in the execution of their
duties.
The Center's existing financial systems and reporting considerations
were developed with the needs, and in some cases the specific requests,
of the Center's stakeholders in mind.
For example, summarized financial information pertaining to capital
project obligations is periodically provided to OMB and Congress.
The Center's stakeholders exhibit financial oversight of the Center
mainly through the review of the Center's annual financial statement
audit. The Center's audit committee reviews the Center's comprehensive
GAAP financial statement audit annually. The annual financial statement
includes a complete accrual of all costs, including construction costs,
incurred through the end of the fiscal year. GAO has suggested that
interim status reports could include construction costs that have not
yet been invoiced; we believe it is more helpful to include those funds
that have been obligated.
To best safeguard federal assets and use these precious resources most
expediently, the Center monitors project activity primarily through
obligations, which track contractual commitments. By the time expenses
are incurred through work completed it would be far too late to make
any adjustments to a project in order to manage the budget. The time
for those adjustments would be before obligations are made. Therefore,
monitoring project budget obligations is more meaningful than
monitoring expenses incurred.
GAO expressed concerns that certain transactions with the U.S. Army
Corps of Engineers (the Corps) were not properly supported when paid by
the Center and that the Center did not follow the guidelines of the
Economy Act to ensure that costs charged to the Center by the Corps
reflect actual costs incurred.
The Center engaged the Corps to manage the Fire Alarm Project on behalf
of the Center through an interagency agreement. The Corps, in turn
engaged Johnson Controls to perform the project. Johnson Controls
submitted invoices to the Corps for payment throughout the project. The
Center would review the Johnson Controls invoices for reasonableness
prior to the Corps remitting payment. The Corps would then invoice the
Center for reimbursement (along with overhead incurred by the Corps).
The invoices submitted to the Center by the Corps were summarized
invoices, which were certified complete and accurate by the Corps.
These amounts were reviewed and approved by the Center's Project
Management Office and the Contracting Office for reasonableness, based
on its knowledge of the project status and review of the Johnson
Controls invoices. This procedure allowed the Center to reject payments
if the Corps invoices were deemed unreasonable. Based on this review,
the Center believes the Corps invoices were appropriately supported and
management exhibited the appropriate diligence in relinquishing payment
for these invoices.
In addition, a provision of the Economy Act states that "A bill
submitted or a request for payment is not subject to audit or
certification in advance of the payment. Proper adjustment of amounts
paid in advance shall be made as agreed to by the heads of the agencies
or units on the basis of the actual costs of goods or services
provided." The responsibility for ensuring that Johnson Controls
invoices were adequately supported initially fell to the Corps. The
Center's decision to pay the Corps' summarized invoices (based on the
Center's knowledge of the underlying Johnson Control invoices and
related project) was justified. We believe the provisions of the
Economy Act support such treatment.
The Center has just begun project closeout procedures with the Corps on
this project. To ensure further compliance with the provisions of the
Economy Act, the Center will reconcile amounts paid to the Corps to
ensure that all amounts paid reflect actual costs of goods and services
provided. This review will determine whether Johnson Controls costs are
properly supported and that Corps overhead charges reflect actual
charges incurred by the Corps.
In summary, the Center believes that the financial information for
projects reviewed by GAO was accurate and complete, and that federal
resources were appropriately safeguarded.
Project Management:
The mission of the Kennedy Center, based on its enabling legislation,
is to be a living memorial to the nation's 35 `h President while also
being the national center for the performing arts. The Center, with the
knowledge and input of its Board of Trustees, prioritizes the capital
needs of the Center, while taking into consideration: (1) the
disruption to the overall Center caused by construction; (2) the
comfort and safety of our patrons; and (3) the need to be accountable
to our stakeholders, who provide the necessary resources to help us
meet our mission. The uniqueness of the Center and its operations
present unique constraints and challenges and must be considered when
formulating general recommendations.
The GAO draft report provides criticism of the Kennedy Center's project
management practices in terms of cost control and communication. The
basis for this criticism is a detailed investigation of four
construction projects. The last major construction work for each of the
four projects examined was completed in December 2003, with the
exception of a small phase of the Public Space Improvements project. We
therefore take exception to the validity of these findings as a state
of current project management at the Kennedy Center and the assertion
that a number of significant "ongoing" issues remain. (The Eisenhower
Theater renovation project was also briefly examined but since the
planning for this project is in its early stages, no conclusions were
drawn.)
The Kennedy Center has made significant strides in the improvement of
its capital project management program. Since the issuance of the 2003
and 2004 reports, the Center has hired a Director of Capital Projects
with responsibility for overseeing the capital project activity of the
Center. The Center has also modified its budgeting processes and has
drafted a comprehensive policies and procedures manual for capital
projects that covers much of the subject matter discussed in the GAO
draft report. This draft document consists of over 100 pages of
standard design and construction procedures, financial management
considerations, and dozens of additional pages of applicable standard
forms. The best practices noted by GAO in their draft report are
considered in this manual and have been utilized by the Center in the
management of current activities and construction projects currently
underway, which were not reviewed by the GAO.
We acknowledge that the Opera House, Concert Hall, and Fire Alarm
projects experienced cost overruns due to modifications during
construction. We do not defend the magnitude of the changes nor do we
dispute the need to improve upon the performance of those projects. In
fact, we have taken many steps to better our management methods, some
of which are acknowledged in the report, but many of which are not.
The earliest project referenced is the Concert Hall project. The
construction phase for this project occurred in 1997, over seven years
ago. The senior management team has changed substantially since that
time. We acknowledge that some issues of cost control existed for this
project, the first theater renovation conducted by the Kennedy Center,
but stress that many improvements in our practices have been made since
that time. Because the Kennedy Center's project management office had
recently been created, the U.S. Army Corps of Engineers was retained to
manage the work and some reliance was placed upon them for technical
advice and expertise. The Fire Alarm project, also a U.S. Army Corps of
Engineers project, experienced significant cost growth for a variety of
reasons, including unexpected asbestos abatement requirements and an
inability to re-use existing system components as originally planned.
As with the Concert Hall, this project predates the September 2003 GAO
report.
Of the projects discussed, the GAO report provides the most detailed
information describing the issues and challenges related to the Opera
House project. We cannot stress enough the unique nature of this
project. Completing an entire Opera House renovation in just 1 I months
minimized the amount of foregone perfonnance and education programming
and ticket revenue. In our opinion, overtime charges were warranted in
order to meet our schedules and to deal with the unforeseen conditions
encountered in the project.
The GAO draft report states that the Kennedy Center "may have" overpaid
for change orders and project modifications due to the practice of
negotiating the price after the work was complete. GAO did not perform
any analysis of change order pricing or negotiation. No cost estimating
was performed by GAO, and no schedule analysis was conducted to
determine the impact of delay to the critical path of individual
changes. GAO did not review or evaluate information related to change
order proposals, such as the contractor's submitted amount versus the
final negotiated values. The report does not provide facts that support
a conclusion that the Kennedy Center overpaid.
We also do not agree that our practices have led to overpayment. The
Kennedy Center followed the most fiscally responsible avenue for
managing the construction given the constraints related to the
projects. We agree that this method should not be standard practice for
all situations, and in fact there are many instances on the theater
projects where prices were negotiated prior to work implementation. The
Kennedy Center works very diligently on all negotiations to ensure fair
and reasonable pricing for the Government.
The overriding factor on the theater renovation projects is time. If
the Kennedy Center had negotiated prices prior to work, delays to the
project would have occurred. Delaying the projects to negotiate change
orders before proceeding with the work would lead to charges from the
contractor for extending the project schedule or for working overtime
to make up for the delay. GAO has not provided an analysis of this
tradeoff. A proper assessment of this situation would consist of an
evaluation of each change as it relates to the critical path of the
project, an estimate of the amount of time required to perform an
Independent Government Estimate and to negotiate, and the resultant
delay to the project. Subsequently, the contractors' general conditions
costs could then be calculated on a per-day basis to determine the cost
of the delay. That cost would undoubtedly be substantial over the
course of the project, and in our opinion, it would far outweigh any
potential savings that might occur from establishing a fixed price
prior to performing the work. No quantitative analysis of these
considerations was provided in the draft report.
In general, on the topic of change order negotiations and overtime
payments, the unusual and pervasive issues related to the unique nature
of our theaters, their renovations, and the constraints involved have
not been considered in the report. Kennedy Center theater renovation
project schedules simply cannot be extended when a problem is
encountered in order to perform negotiations that would possibly, but
not definitely, save a fraction of the modification costs. The Center
believes that its actions were appropriate and in accordance with
industry practice.
The report states that the Kennedy Center does not have as-built
drawings of the existing construction. This is partially true. As-built
drawings from the original construction do exist, but not for all
areas, and in the case of the Opera House and Concert Hall renovation
projects, the drawings were not completely accurate. Going into the
projects, there was little reason to believe that the drawings in our
possession were inaccurate, so new design was based upon the
information provided. It is simply not cost effective to discount the
as-built drawings and implement a full destructive investigation of the
area prior to construction. Such an undertaking is not standard
practice in the industry, regardless of the age of the facility.
The report implies that the architects were not allowed access to
certain areas by the Kennedy Center and that the Center actively
prevented the architect from performing investigative activities during
design. This implication is a simplification of a very complex issue.
Every renovation project will include an existing conditions survey of
the space to be renovated, and every renovation will have a limit to
how much destructive investigation can be implemented. Our limit for
active spaces, such as the Opera House and Concert Hall, is that the
finishes must remain intact. We believe this constraint to be self-
evident and reasonable. After the surveys were completed during the
design process, the theaters remained in service for several months
prior to the start of construction. The Kennedy Center is a preeminent
performing arts center, and we will not deliberately conduct
performances with patched holes in the walls, floor, or other
compromises to the aesthetic or acoustic integrity of the space.
Regarding accurate and timely communications, we acknowledge that
improvements could be made. However, the referenced communications
predate the GAO report of September 2003 and provide no insight into
our current communication methods. The 2004 Comprehensive Building Plan
update includes a new section that outlines changes since the last
update and reasons for the changes. This section will continue to be
incorporated in further updates. The Kennedy Center also submits
monthly reports to the Office of Management and Budget that detail
project budgets, schedules, and financial activity. In the event of a
change to any budget or schedule details, the OMB report for that
project is updated and specifically footnoted to explain the change.
In addition, we have both formal and informal meetings with
Congressional representatives and their staffs, including Operations
Committee meetings, staff briefings, and formal testimony. As an
example, the stakeholders were kept apprised of the changing renovation
plans for the Opera House and the resulting changes in schedule and
design as a result of The Washington National Opera's decision to stay
at the Kennedy Center. As the Subcommittee will recall, during the time
frame indicated in the GAO report, The Washington National Opera was
involved in a years-long process to detennine whether it would move to
a new facility. The Center had to proceed, to the extent possible, with
its design plan for renovation of the facility, but was not a party to
The Washington National Opera's deliberations. It was not until
September of 1999 that The Washington National Opera notified the
Center that it would not be leaving. A few months later, the Center
informed this subcommittee of the change in plans and the delay of the
project in writing:
"EXCERPT FROM QUESTIONS FOR THE RECORD-May, 2000:
Several years ago, The Washington Opera was contemplating leaving the
Kennedy Center. Now that they have agreed to stay, how will that impact
your renovation program?
After the Washington Opera announced its intention to move, the Kennedy
Center's architects/engineers designed modifications to the Opera House
as were required to bring the 30-year old facility up to current
standards for life safety, accessibility and functionality. To meet
these objectives in the most cost-effective manner, the space was to be
renovated to accommodate expanded usage for amplified performances and
lesser usage for unamplified operatic performances. The repair and
renovation design included changing the rake of the auditorium floor.
It also called for mezzanines in the Hall of States, Hall of Nations
and Grand Foyer to bring patrons up to what would then be the new main
entrances for the space at the box tier level, which was to be the new
entrance to the Hall. When the Washington Opera cancelled its plans to
move to a new space, the Kennedy Center implemented changes in design
to accommodate the changed usage. The floor and entrance configuration
under the previous design, while well suited to meeting accessibility,
life safety and functionality objectives for non-operatic uses, would
have reduced the volume of the facility and changed the acoustics of
the space to the detriment of live, unamplified operas. These design
changes have delayed the project from its original schedule. Redesign
of the repairs and renovations is underway, in consultation with The
Washington Opera."
It should also be noted that Michael Kaiser began his tenure at the
Kennedy Center on January 16, 2001. One month later, on February 15,
2001, he personally met with the staff of the House Subcommittee on
Interior and Related Agencies to inform them of the changes to the
Center's renovation program. He was accompanied by the Center's former
project executive, Brad Faughn, and our liaison to congress, Jared
Barlage. This very project was discussed. While it was not a "formal"
communication and minutes of this meeting were not recorded, the staff
was fully briefed.
Regarding record retention, the Kennedy Center is currently developing
a formal policy that will govern this topic. While our retention policy
can be strengthened, it should be noted that much of the information
referenced as missing or incomplete is old enough to be well beyond any
reasonable statute of limitations for financial or construction data.
In summary, we agree that there is always room for improvements in cost
control and communication regarding project data, and we appreciate the
insights provided by GAO. However, the information presented in the
report is skewed toward older projects and practices that have already
been enhanced. As an example, a different project delivery approach is
being pursued for the current Family Theater renovation project. In
addition, budgets are continually being reviewed and reevaluated during
the design and bidding phases of all construction projects.
The Center believes that we have made significant strides to improve
management of capital projects. The tone and content of the draft
report implies that the Center is not addressing previous
recommendations made by GAO and there continue to be pervasive problems
with capital project management. However, the scope and procedures
performed by GAO do not take into account procedures and actions
subsequent to earlier reports. When reviewed in context with earlier
reports, the Center has made significant improvements and will continue
to do so.
Again, we appreciate the time, effort and thoughtfulness of the GAO
team that completed this project and will incorporate many of the
recommendations into our future practices.
Sincerely yours,
Signed by:
Michael Kaiser:
President:
Stephen A. Schwarzman:
Chairman:
The following are GAO's comments on the John F. Kennedy Center for the
Performing Arts' letter dated April 4, 2005.
GAO Comments:
1. 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.
2. 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.
3. 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. § 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. § 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.
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 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-in-progress 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.
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 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.
[End of section]
Appendix VI GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Mark L. Goldstein, (202) 512-2834:
Susan A. Fleming, (202) 512-4431:
Staff Acknowledgments:
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.
(543113):
FOOTNOTES
[1] The 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.
[2] This 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.
[3] GAO, 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).
[4] GAO, Kennedy Center: Improvements Needed to Strengthen the
Management and Oversight of the Construction Process, GAO-03-823
(Washington, D.C.: Sept. 5, 2003).
[5] GAO, 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).
[6] UNICCO Government Services, Inc., Life Safety, Fire Alarm System
and ADA Assessment of the John F. Kennedy Center For The Performing
Arts (Centreville, VA: 2005).
[7] GAO, 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).
[8] In 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.
[9] Fire 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.
[10] 42 U.S.C. § 12101 et. seq.
[11] The 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.
[12] 20 U.S.C. § 76j(a)(1)(F).
[13] 40 U.S.C. § 3312.
[14] For purposes of certain laws, the Kennedy Center is treated as a
federal agency.
[15] 20 U.S.C. § 76l (d).
[16] The 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.
[17] GAO-03-823.
[18] As-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.
[19] Begun 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.
[20] GAO, NASA Procurement: Challenges Remain in Implementing
Improvement Reforms, GAO/NSIAD-94-179 (Washington, D.C.: Aug. 18, 1994).
[21] The 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.
[22] GAO, Standards for Internal Controls in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
[23] GAO-03-823.
[24] GAO-04-933.
[25] Fire alarm system installation was substantially completed in
February 2004.
[26] UNICCO Government Services, Inc., Life Safety, Fire Alarm System
and ADA Assessment.
[27] Ehrenkrantz Eckstut & Kuhn Architects, PC, Egress and Fire
Modeling Study of the Grand Foyer, Hall of States, and Hall of Nations
(Washington, D.C.: 2003).
[28] General 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).
[29] GAO-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).
[30] The 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).
[31] GAO/AIMD-99-32.
[32] Department 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.
[33] See Inspector General Act of 1978, as amended, 5 U.S.C. § app. 3,
section 8G, and 2004 List of Federal Entities, 70 Fed. Reg. 4157 (Jan.
28, 2005).
[34] The 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.
[35] The 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.
[36] All Kennedy Center capital projects were to incorporate life
safety and disabled access improvements.
[37] GAO, 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).
[38] Ehrenkrantz Eckstut & Kuhn Architects, PC, Egress and Fire
Modeling Study of the Grand Foyer, Hall of States, and Hall of Nations
(Washington, D.C., 2003).
[39] NFPA 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.
[40] NFPA 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.
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