Kennedy Center: Improvements Needed to Strengthen the Management and Oversight of the Construction Process
Published: 2003-09-05T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In the mid-1990s, John F. Kennedy Center for the Performing Arts (Kennedy Center) officials recognized a need for additional parking and better site access. As a precursor to a planned project to construct an 8-acre plaza and two additional buildings at the site, the Kennedy Center is currently in the process of constructing a garage expansion and site improvement project. GAO did this study because of congressional concerns over project delays and costs as well as challenges that the Kennedy Center faces as it pursues this major construction effort. GAO's objectives were to (1) compare the garage expansion and site improvement project's current costs, time frames, and scope with the estimates provided to congressional stakeholders in 1997 and 1998 and (2) identify what challenges the Kennedy Center faces in managing large construction projects.
section_title: What GAO Found
paragraphs: As of July 2003, Kennedy Center officials estimated that the garage expansion and site improvement project would cost $88 million, the garage expansion will be completed in December 2003, the site improvements will be completed in summer 2004, and the project will include 525 parking spaces and various traffic flow improvements. These estimates vary substantially from estimates that Kennedy Center officials provided to congressional stakeholders in 1997 and 1998. At that time, Kennedy Center officials estimated that the project would cost $28 million, would be completed by August 2000, and would include between 900 and 1,000 parking spaces. According to Kennedy Center officials, the initial estimates were preliminary in nature and were based on some unrealistic assumptions. They acknowledged that they should have done a better job of informing Congress of the preliminary nature of the estimates and the subsequent events in the project's planning and bidding phases that affected the costs, time frames, and scope. Kennedy Center officials said that they now hold monthly meetings with Congress about the status of ongoing projects. The Kennedy Center faces certain challenges in managing large construction projects. Specifically, the Kennedy Center lacks (1) adequate policies and procedures to guide the planning and management of the construction process, (2) some timely construction data on schedules and costs for effectively overseeing construction projects and measuring results, and (3) key human capital resources and expertise that would be highly beneficial in managing the construction process. Kennedy Center officials are now working to address these challenges. Although making improvements in these areas is no guarantee of project success, these types of improvements would strengthen the construction program and reduce risk by providing greater effectiveness in managing and overseeing projects and measuring results.

section_title: Letter
paragraphs: This report responds to your request that we review certain aspects of the  John F. Kennedy Center for the Performing Arts’ (Kennedy Center) garage  expansion and site improvement project. The Kennedy Center facility,  which opened in 1971 in Washington, D.C., was established as both a  national cultural arts center and a memorial to the 35th President. In 1994,  responsibility for management of the Kennedy Center facility was  transferred from the Department of the Interior to the Kennedy Center,  which has a Board of Trustees and a management staff headed by the  Kennedy Center President. In the mid-1990s, on the basis of a survey of  patrons, Kennedy Center officials sought to provide additional parking and  improve access to the Kennedy Center site. To address these needs, the  Kennedy Center is currently constructing a garage expansion and site  improvement project that will create 525 new parking spaces and, among  other things, make improvements to the sidewalks, roads, and landscaping  and to the marble walkways and exterior wall coverings. In addition, over  the next 10 years, the Kennedy Center plans to pursue a major expansion  that includes the following: an 8-acre plaza that is intended to improve  pedestrian access and link the center to the surrounding area, two new  buildings to house administrative offices and arts education programs,  facilities for free outdoor performances, and exhibition space to educate  the public about the history of performing arts in America.
As agreed with your offices, our objectives were to (1) compare the garage  expansion and site improvement project’s most recent costs, time frames  for completion, and scope with the estimates provided to Congress in 1997  and 1998 and (2) determine what challenges, if any, the Kennedy Center  faces in managing large construction projects. To do this work, we  analyzed project documents; examined existing policies and procedures,  the organization structure, and construction data systems; and interviewed  Kennedy Center and U.S. Army Corps of Engineers officials.
subsections: section_title: Background
paragraphs: The John F. Kennedy Center for the Performing Arts, which was  established in 1964 as both a national cultural arts center and a memorial to  the 35th President, opened in September 1971 as an independently  administered bureau of the Smithsonian Institution. Shortly thereafter, in  1972, the Secretary of the Interior, through the National Park Service,  assumed responsibility for maintenance and all other services related to  the administration of the Kennedy Center facility. In 1994, legislation was  enacted that transferred responsibility for operations and maintenance of  the facility to the Kennedy Center Board of Trustees. The 1994 legislation  also required the Kennedy Center to develop and update annually a  comprehensive building needs plan that details the condition of the  Kennedy Center facility and planned renovations. The Kennedy Center  receives annual appropriations to fund operations and maintenance as well  as construction. For example, in fiscal year 2003, Congress appropriated  $16.2 million for the Kennedy Center’s operations and maintenance and  $17.5 million for construction. The Kennedy Center has other sources of  funds to finance capital improvements in addition to annual  appropriations, such as charitable donations and the ability to borrow  funds. The John F. Kennedy Center Act, as amended, provides that no  changes may be made to the grounds of the Kennedy Center without the  approval of Congress and the Secretary of the Interior. The John F.  Kennedy Center Parking Improvement Act of 1997 gave the Kennedy  Center approval to design and construct the parking garage expansion and  site improvements.
The garage expansion is being funded through a loan from the District of  Columbia, which issued revenue bonds to provide the related funding, and  the site improvements are being funded through annual appropriations. To  maintain a separation between the appropriated and nonappropriated  funds, the Kennedy Center arranged for separate construction management  and general contractors for the two parts of the project—the parking  garage expansion and the site improvements. The Kennedy Center also  maintains separate accounting for the garage expansion and the site  improvements. To assist in the construction of the garage expansion, the  Kennedy Center has hired a construction management firm. For the site  improvements, the Kennedy Center is using construction-contracting  services available to federal entities through a Corps of Engineers  indefinite-delivery, indefinite-quantity contract. The Corps of Engineers is  also providing limited management assistance to the project. Figure 1  shows the Kennedy Center building and adjacent area.
section_title: Garage Expansion and Site Improvement Project Estimates
paragraphs: As of July 2003, Kennedy Center officials estimated the cost of the garage  expansion and site improvement project at $88 million. This estimate  includes $43 million for the site improvements and $45 million for the  garage expansion, including revenue bond issuance costs and capitalized  interest payments. The garage expansion is to include 525 new parking  spaces. The site improvements are designed to improve vehicle and  pedestrian access to the Kennedy Center and include repairs and changes  to the sidewalks, roads, and landscaping surrounding the Kennedy Center  site. Regarding the garage expansion, 104 spaces are open and operating,  and the remainder will open in December 2003. Kennedy Center officials  estimated that the site improvements will be completed in the summer of  2004.
These current estimates reflect changes made after the 2001 contract  award and include such things as an approximately 1-year increase in time  frames and a $3.3 million, or 15 percent, increase in the garage expansion  costs since the time of award. These increases were primarily due to (1)  changes to the project design required by the National Capital Planning  Commission and the Commission of Fine Arts; (2) large amounts of snow  and rain during the winter and spring of 2003 that caused project delays;  and (3) unforeseen site conditions, such as deteriorated concrete and  greater-than-expected amounts of soil contamination. Kennedy Center  officials told us that the site contains petroleum and coal-tar  contamination. Although the Kennedy Center performed a soil test before  construction began, the extent of the contamination was greater than  expected. The costs associated with removing this soil contamination  account for over half of the 15 percent increase over the awarded base  contract amounts.
The July 2003 estimates of the project’s costs, time frames, and scope vary  substantially from estimates that the Kennedy Center provided to Congress  in 1997 and 1998. At that time, Kennedy Center officials estimated that the  garage expansion would cost $25 million and would include 900 to 1,000  parking spaces, and that the site improvements would cost $3 million and  include construction of a new front-entry driveway. Kennedy Center  officials estimated that the project would be completed by August 2000.  Table 1 summarizes the differences between the current and the 1997 and  1998 estimates of the project cost, scope, and schedule.
In addition, at the time that the Kennedy Center officials were planning the  garage expansion and site improvement project, they were also planning to  construct a large format movie theater at an additional cost of $7 million to  $10 million. This portion of the project was later dropped due to cost  considerations. It was anticipated that repayment of the loan from the  District of Columbia would come, in part, from parking fees and movie  theater revenue. Kennedy Center officials recognize that the reduction in  planned parking spaces from approximately 1,000 to 525, as well as  elimination of the movie theater revenue, will result in a reduced amount of  revenue available for loan payments. However, they said they are confident  that given planned increases in parking prices over the next 30 years, they  will still be able to pay off the loan with revenue from the new parking  spaces. A table of the Kennedy Center’s projected parking revenue is  included in appendix I. Kennedy Center officials told us that they have  reevaluated some planned capital projects, and that making these changes  allowed them to expand the scope of the site improvements portion of the  project. These officials said that they decided to (1) eliminate two projects  involving the installation of a mezzanine in the Grand Foyer and windows  in the building facade; (2) delay the construction of a curtain wall; and (3)  construct planned repairs to elevators and an expansion of the sprinkler  and fire suppression systems in phases, rather than simultaneously.
Furthermore, in commenting on a draft of this report, Kennedy Center  officials noted that the scope of the site improvements has increased  substantially since the 1997 estimate, and that the scope now includes  repairs and improvements to pedestrian walkways, the underground  building service tunnel, garage exhaust systems, and the marble walkways  and exterior wall coverings. Table 2 shows the scope of the components of  the current site improvements. Kennedy Center officials said that they  were initially planning on making these repairs at a later date. However, by  including them with the site improvements, they hoped to expedite the  work, achieve a more uniform architectural design, and reduce the number  of contractors involved, thereby simplify scheduling and coordination  efforts. Kennedy Center officials said these scope changes account for  $38.6 million of the difference between the $88 million actual cost and the  $28 million 1997 estimate.
Kennedy Center officials were unable to provide a detailed explanation of  how they arrived at the preliminary 1997 and 1998 cost and schedule  estimates because they had experienced high staff turnover since the  estimates were developed, and records were either not available or not  retained. Despite this fact, these officials said that it appeared that the  estimates were based on some unrealistic assumptions. For example, they  said the initial estimates  were incorrectly based on construction costs of garages outside the  District of Columbia, which was a poor comparison because they are  less expensive to construct;  did not adequately consider the need to keep the Kennedy Center open  365 days per year, which had an effect on construction phasing and  coordination issues and subsequently on the estimated costs and time  frames; and  did not account for the unusually expensive, busy, and competitive  construction market conditions during this period.
Furthermore, the project was delayed for approximately 2 years as  Kennedy Center officials worked through multiple efforts to design and bid  the project and reduce project costs. For example, as part of the National  Capital Planning Commission and the Commission of Fine Arts project  review process, the Kennedy Center was required to redesign some  portions of the project to comply with their decisions regarding design  elements, finishes, landscaping, and the elimination of planned valet  parking on top of the semi-elliptical terrace. In addition, budget  constraints led the Kennedy Center to undertake various efforts in an  attempt to lower the project cost, such as (1) redesigning portions of the  project, (2) performing value engineering to identify and eliminate  unnecessary costs, and (3) rebidding the project after initial contractor  bids far exceeded the Kennedy Center’s expectations and it was  unsuccessful in negotiating with the lowest bidder. Kennedy Center  officials acknowledged that they should have better informed Congress of  the preliminary nature of the 1997 and 1998 estimates and the subsequent  events in the planning and bidding phases of the project that affected the  project’s costs, time frames, and scope. As a result, these officials said that  they now have monthly meetings with congressional stakeholders to  discuss the status of ongoing construction projects.
section_title: Kennedy Center Faces Challenges in Managing Its Construction Program
paragraphs: In addition to problems associated with the planning and bidding phases of  the project, we found that the Kennedy Center faces a number of  challenges in managing large construction projects. The Kennedy Center  lacks (1) adequate policies and procedures to guide the planning and  management of the construction process, (2) some timely construction  data on schedules and costs for effectively overseeing construction  projects and measuring results, and (3) key human capital resources and  expertise that would be highly beneficial in managing the construction  process. More specifically:  Policies and procedures. Although the Kennedy Center had some  limited construction-related guidance, such as safety plans developed by  the construction management contractor, it does not have formal,  written project management policies and procedures to help guide and  administer construction projects. A typical project management guide  would include policies and procedures on the organization of the  project, quality control and assurance standards, project execution  procedures, and requirements for day-to-day administration of  contracts, all of which would help to ensure overall project oversight.  Other federal agencies that manage construction projects, such as the  General Services Administration, the Department of State, and the  Architect of the Capitol, use such guidance.
Timely construction data. The Kennedy Center does not always receive  timely construction data on schedules and costs. These data are  necessary for monitoring construction costs and measuring results,  such as estimated total project costs. For example, the Kennedy  Center’s construction manager told us that he provided cash flow  reports only when requested, and that, at times, he provided the reports  at a rate of once every 3 months, instead of on a monthly basis as  required by the contract. In addition, the Kennedy Center decided to  waive the submission of key timely written project management reports  from the construction manager and to rely instead on weekly meetings.  In commenting on a draft of this report, Kennedy Center officials said  that they had received timely scheduling data on the garage project, on a  weekly and monthly basis, at various meetings. However, these  meetings were no substitute for timely written reports, which are  typically used in construction project management and would have  provided additional detailed information on schedules and costs that  could have been helpful in project oversight. Kennedy Center officials  agree that they should have obtained monthly project management  reports and are now doing so.
Human capital resources and expertise. Kennedy Center officials lack  key human capital resources and expertise that would be highly  beneficial in managing the construction process. For example, the  Kennedy Center experienced significant turnover in both in-house staff  and contractor personnel during the design stages of the project, which  has contributed to reduced institutional knowledge of the project and  has increased the time necessary to finalize design decisions. In  addition, two key management positions were left vacant for an  extended period. The project executive position became vacant in  September 2001. The person in this position is responsible for directing  and managing all capital repair and construction projects.  Kennedy  Center officials had decided not to fill the project executive position, but  instead to have the executive vice president assume those duties.  However, Kennedy Center officials said that given the complexities and  scale of the upcoming plaza and buildings project, they now plan to fill  this position and have the person report to the executive vice president.  Also, the contracting officer position became vacant in the summer of  2002, and Kennedy Center officials told us that because of difficulties in  finding a qualified candidate, they did not fill this position until March  2003. The President of the Kennedy Center told us he recognized that  the Kennedy Center continues to lack adequate staff or expertise to  manage its upcoming plaza and buildings project, and he detailed plans  to address these shortcomings. In commenting on a draft of this report,  Kennedy Center officials noted that they are in the process of filling the  positions of director of capital projects and project manager, have  engaged an architect and developer firm, and now feel that they do have  sufficient staff and expertise.
These construction management challenges are not new to the Kennedy  Center. In September 1995, a Kennedy Center consultant reported that  there were no clear lines of responsibility within the existing facility  management structure, and that job descriptions were not clearly defined.   In addition, the consultant’s report also noted the following: “An organized  system should be developed for managing information concerning the  facility operations to be used to monitor performance against established  standards.”  Regarding human capital, we reported in 1993 that the  Kennedy Center lacked a federal contracting officer, architects, engineers,  or other professional occupations associated with capital projects.  We  concluded that the Kennedy Center did not have sufficient capability to  effectively manage large-capital construction projects. In commenting on a  draft of this report, Kennedy Center officials told us that since 1993, they  have added a contracting department of five full-time positions and an  entire project management department consisting of nine employees—six  full-time Kennedy Center employees, including four project managers and  two support personnel, plus three contract employees. In addition, these  officials said that full job descriptions have been developed for all  positions.
Although it is difficult to determine the extent to which these challenges  have hindered the Kennedy Center’s efforts on the garage expansion and  site improvement project to date, having adequate policies and procedures,  timely construction data, and additional qualified human capital—even  though the Kennedy Center has enhanced its facility management staff  since our earlier reports—would help to strengthen the construction  program and reduce risk. Addressing these challenges will become  increasingly important as the Kennedy Center undertakes the larger, more  costly, and more complex plaza and buildings project. The critical  importance of having quality guidance, data, and human capital was  highlighted by the National Research Council’s 2000 report on federal  organizations, such as the Kennedy Center, that contract out for  construction management services to acquire and build facilities. The  council found that, among other things, these organizations should have (1)  plans, policies, and procedures to define project goals and develop  strategies and methods for achieving those goals; (2) detailed data to  monitor progress and assess risks; and (3) in-house staff with sufficient  management, financial, and technical skills necessary for effective  oversight of all phases of the project. Effective policies and procedures  would provide a road map for project managers on how best to estimate  project costs, administer the contract, and define the roles and  responsibilities of project staff. Timely data would allow project managers  to effectively oversee project status and measure results to gauge  effectiveness. Qualified human capital and expertise would improve efforts  to control project costs, time frames, and scope. Kennedy Center officials  acknowledged the importance of focusing on these areas. In commenting  on a draft of this report, these officials said that they have initiated efforts  to improve these areas of concern, including (1) contacting the Federal  Facilities Council for assistance with updating and improving construction  management policies and procedures, (2) requesting monthly written  project management reports, and (3) hiring additional in-house and  contractor staff to assist in the upcoming plaza and buildings project.
section_title: Conclusions
paragraphs: Changes in costs, time frames, and scope are not unusual in large  construction projects. However, in the case of the Kennedy Center garage  expansion and site improvement project, early estimates proved to be  especially problematic and were based on unrealistic assumptions.  Furthermore, if the Kennedy Center continues to operate without adequate  construction polices and procedures, timely schedule and cost data, and  qualified human capital, the success of its future plaza and buildings  project will be at risk. Although making improvements in these areas is no  guarantee of project success, such improvements would strengthen the  construction program and reduce risk by providing greater effectiveness in  managing and overseeing future projects and measuring results.
section_title: Recommendations
paragraphs: To help improve the Kennedy Center’s ability to manage and oversee its  construction program, we recommend that the President of the Kennedy  Center, in conjunction with the Chairman of the Board of Trustees,   develop comprehensive project management policies and procedures to  guide the planning and execution of the construction process,  ensure development and use of timely data to oversee construction  projects and measure results, and  ensure that the needs for human capital expertise are met.
section_title: Kennedy Center Comments
paragraphs: We provided a draft copy of this report to the Chairman of the Kennedy  Center Board of Trustees and the President of the Kennedy Center. On June  20, 2003, the Kennedy Center President provided us with written comments  on behalf of the trustees and staff (see app. II). Kennedy Center officials  generally agreed with our findings and recommendations. They said that  they found the recommendations helpful, and that they have initiated  efforts to address them. Further, these officials provided additional  comments to clarify information regarding the project estimates, project  management data, and human capital resources, which we have  incorporated throughout the report as appropriate.
section_title: Objectives, Scope, and Methodology
paragraphs: To meet our first objective of comparing the garage expansion and site  improvement project’s most recent estimates on costs, time frames for  completion, and scope with estimates previously provided to Congress in  1997 and 1998, we analyzed Kennedy Center construction project  documents, such as contracts, estimates, and plans. To gain a better  understanding of the construction project, we accompanied a Kennedy  Center official on a tour of the construction site during which the official  pointed out the major components and features of the project. In addition,  we interviewed officials with the Kennedy Center, the construction  management contractor, the architectural firm involved with the project,  and the U.S. Army Corps of Engineers. To meet our second objective of  determining what challenges, if any, the Kennedy Center faces in managing  large construction projects, we examined the Kennedy Center construction  process, including existing policies and procedures, organization structure,  and construction data systems.  For background information, we reviewed  applicable statutes relating to the Kennedy Center and considered previous  GAO work and industry construction management practices.
We did our work between January and July 2003 in accordance with  generally accepted government auditing standards.
As agreed with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after its  issue date. At that time, we will send copies of this report to the  appropriate congressional committees, the Chairman of the Kennedy  Center Board of Trustees, and the President of the Kennedy Center. We will  make copies available to others on request. In addition, this report will be  available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions, please contact me on (202) 512-2834  or at goldsteinm@gao.gov. Major contributors to this report were Casey L.  Brown, Terrell Dorn, and Thomas G. Keightley.
section_title: Kennedy Center’s Projected Revenue from Parking Spaces Constructed in the Garage Expansion
paragraphs: Debt service  (principal plus  interest)
section_title: Agency Comments from the John F. Kennedy Center for the Performing Arts
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