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L A C
L A C
S O U T H C A R O L I N A G E N E R A L A S S E M B L Y
November 2006
A M
ANAGEMENT
R
EVIEW
OF THE
S
OUTH
C
AROLINA
D
EPARTMENT OF
T
RANSPORTATION
LAC.SC.GOV
LAC/05-3 L
EGISLATIVE
A
UDIT
C
OUNCIL
1331 Elmwood Ave., Suite 315
Columbia, SC 29201
(803) 253-7612 VOICE
(803) 253-7639 FAX
Public Members
Dill B. Blackwell, Chairman
Philip F. Laughridge, CPA, Vice Chairman
Susan B. Hoag
S. Jahue (Jake) Moore, Esq.
Henry M. Swink
Members Who Serve Ex Officio
Kevin L. Bryant
Senate Judiciary Committee
Michael L. Fair
Senate Finance Committee
Rex F. Rice
House Ways & Means Committee
James H. Harrison
House Judiciary Committee
Director
George L. Schroeder
Authorized by §2-15-10 et seq. of the South Carolina Code of Laws, the
Legislative Audit Council, created in 1975, reviews the operations of state
agencies, investigates fiscal matters as required, and provides information to
assist the General Assembly. Some audits are conducted at the request of
groups of legislators who have questions about potential problems in state
agencies or programs; other audits are performed as a result of statutory
mandate.
The Legislative Audit Council is composed of five public members, one of
whom must be a practicing certified or licensed public accountant and one of
whom must be an attorney. In addition, four members of the General
Assembly serve ex officio.
Audits by the Legislative Audit Council are conducted in accordance with
generally accepted government auditing standards as set forth by the
Comptroller General of the United States.
Copies of all LAC audits are available at no charge. We encourage you to
visit our website to view and print copies of LAC reports.
LAC.SC.GOV
LAC.SC.GOV
LAC/05-3
A Management Review of the South Carolina Department of Transportation
was conducted by the following audit team.
Deputy Director
Auditors
Jane I. Thesing
Benjamin J. Bryan
Jantzen N. Blackmon
Senior Auditors
Lynn U. Ballentine, CPA
Marcia Ashford Lindsay
Andrea Derrick Truitt
Typography
Legal Counsel
Candice H. Pou
Andrea Derrick Truitt
Maribeth R. Werts S O U T H C A R O L I N A G E N E R A L A S S E M B L Y
A M
ANAGEMENT
R
EVIEW
OF THE
S
OUTH
C
AROLINA
D
EPARTMENT OF
T
RANSPORTATION
LAC.SC.GOV
LAC/05-3 Page ii
LAC/05-3 South Carolina Department of Transportation Contents
Synopsis
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Chapter 1
Introduction and
SCDOTs Funding
Audit Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Audit Scope and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

SCDOTs Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 23 SCDOTs Contracts With an Engineering Consulting Firm . . . . . . . . . . . 27

Construction Contracts
Audits of Preconstruction Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 36 Contract With CPA Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 2
Contract
Management
Contracts for Construction and Resource Management (CRM) . . . . . . . . . . 9

Preconstruction Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Chapter 3
Federal Billings Held . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Environmental Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Program
SCDOT Planning
Management
Performance Meas
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47

49 Fleet Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 65 55 61 66

67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Temporary Employees
Chapter 4
Administrative
Management
Building Renovations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Conferences and Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concerns About Favoritism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Internal Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative Cost Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page iii
LAC/05-3 South Carolina Department of Transportation Contents
Appendix
Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Page iv
LAC/05-3 South Carolina Department of Transportation Synopsis
Members of the General Assembly asked the Legislative Audit Council to
conduct an audit of the South Carolina Department of Transportation
(SCDOT). Our audit focused on how SCDOT has managed its resources.
Because the department has limited resources to construct and maintain the
states roads and bridges, it is important for SCDOT management to carefully
control agency expenditures to minimize waste and maximize
cost-effectiveness.
We found that SCDOT did not always control expenditures in the areas we
reviewed, particularly consultant contracts. Also, management did not always
maximize available resources. However, SCDOT has taken appropriate
action to control costs in construction contracts and some administrative
areas. Our findings are summarized below.
Contract
Management
We reviewed two ongoing SCDOT contracts with private firms for
construction and resource management (CRM). As of April 2006, SCDOT
had spent approximately $253 million for these contracts to manage
construction projects. We found that the CRM contracts did not adequately
protect the states interest and resulted in wasted funds.
The contracts provided for fixed payments prior to work being
completed. Having fixed fees for program and financial management
resulted in the contractors being paid approximately $8.7 million for
projects that were eliminated from the contracts.
The contracts program and financial management fees were set too high.
If the contracts had provided for program/financial management fees of
2%, as proposed by one of the contractors, instead of 4.5%, SCDOT and
the state would have saved approximately $32 million that could have
been used for other projects.
Although the CRM contractors were to manage their assigned projects,
SCDOT incurred substantial internal charges in overseeing the
contractors work. This increased the cost of 39 of the 84 projects they
were responsible for managing by approximately $15 million.
The CRM performance in managing construction contracts was no better
than that of SCDOT managers. The projects managed by the CRM
contractors were 7% more over budget than those managed by SCDOT.
Page v
LAC/05-3 South Carolina Department of Transportation Synopsis
SCDOT frequently contracts with consultants for preconstruction activities,
including road and bridge design, environmental assessments, and obtaining
right-of-way. We identified several problems with cost controls over the
preconstruction process.
SCDOTs procurements of preconstruction contracts do not always
ensure the most qualified contractor receives the job. In half of the
selections we reviewed, SCDOT selected firms that did not receive the
highest scores based on the written criteria.
SCDOT has not implemented adequate controls to ensure that
preconstruction contracts are obtained at a reasonable price. Once a
qualified firm has been selected, SCDOT is required by federal
regulations to negotiate the price. We found no evidence documenting
how SCDOT negotiated the price of the contract in 25% of the consultant
contracts we reviewed.
Federal regulations require agencies to prepare an independent cost
estimate to evaluate the price proposed by the consultant. For half of the
contracts we reviewed, there was no evidence of an independent estimate
prepared by SCD