Denver International Airport Airport Legal Services Section Performance Audit July 2014 Audit Services Division City and County of Denver Dennis J. Gallagher Auditor
The Auditor of the City and County of Denver is independently elected by the citizens of Denver. He is responsible for examining and evaluating the operations of City agencies for the purpose of ensuring the proper and efficient use of City resources and providing other audit services and information to City Council, the Mayor and the public to improve all aspects of Denver s government. He also chairs the City s Audit Committee. The Audit Committee is chaired by the Auditor and consists of seven members. The Audit Committee assists the Auditor in his oversight responsibilities of the integrity of the City s finances and operations, including the integrity of the City s financial statements. The Audit Committee is structured in a manner that ensures the independent oversight of City operations, thereby enhancing citizen confidence and avoiding any appearance of a conflict of interest. Audit Committee Dennis Gallagher, Chair Maurice Goodgaine Leslie Mitchell Rudolfo Payan Robert Bishop Jeffrey Hart Timothy O Brien, Vice-Chair Audit Staff John Carlson, Deputy Director, JD, MBA, CIA, CRMA, CGAP Sonia Montano, Internal Audit Supervisor, CGAP, CRMA Robyn Lamb, Lead Internal Auditor Tim Waddingham, Senior Internal Auditor, MS Kelsey Yamasaki, Senior Internal Auditor, MPP You can obtain copies of this report by contacting us at: 201 West Colfax Avenue, Department 705 Denver CO, 80202 (720) 913-5000 Fax (720) 913-5247 Or download and view an electronic copy by visiting our website at: www.denvergov.org/auditor
City and County of Denver 201 West Colfax Avenue, Department 705 Denver, Colorado 80202 720-913-5000 FAX 720-913-5247 www.denvergov.org/auditor Dennis J. Gallagher Auditor July 17, 2014 Mr. Scott Martinez, City Attorney Denver City Attorney s Office City and County of Denver Dear Mr. Martinez: Effectively navigating the ever-changing legal and regulatory needs surrounding the operation and expansion of the fifth-busiest airport in the United States is an important task. To assist in that effort, attached is our performance audit of the Denver International Airport (DIA) Airport Legal Services (ALS) Section. The purpose of the audit was to assess the effectiveness and efficiency of ALS and examine its staffing in order to determine whether ALS is adequately and properly meeting DIA s legal needs. In addition, the audit sought to determine whether proper processes are in place to adequately and timely respond to contracting needs and open records requests, as well as to assess whether the Administrative Hearings Process is cost effective and improves operations. Based on our review, ALS meets the legal needs of DIA. However, the audit team identified inefficiencies in the processes that ALS has in place for reviewing DIA-executed contracts and fulfilling open records requests. ALS attorneys are requiring more time to complete their portion of the contract review process, as well as taking more time to close most legal matters. Remedying the inefficiencies identified by our audit should reduce the amount of time ALS is spending on this important legal work. Just as important, however, will be analyzing whether the Section s current staffing approach is ideal for meeting the legal needs of DIA. Such a staffing analysis should not be performed, however, until the highlighted inefficiencies are sufficiently addressed. The operation of DIA is complex and we hope this report is helpful to further DIA s mission. If you have any questions, please call Kip Memmott, Director of Audit Services, at 720-913-5000. Sincerely, Dennis J. Gallagher Auditor DJG/sam cc: Honorable Michael Hancock, Mayor To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services that provide objective and useful information to improve decision making by management and the people. We will monitor and report on recommendations and progress towards their implementation.
Honorable Members of City Council Members of Audit Committee Ms. Cary Kennedy, Deputy Mayor, Chief Financial Officer Ms. Janice Sinden, Chief of Staff Mr. David P. Edinger, Chief Performance Officer Ms. Beth Machann, Controller Ms. Janna Young, City Council Executive Staff Director Mr. L. Michael Henry, Staff Director, Board of Ethics Mr. Xavier DuRán, Director of Airport Legal Services, City Attorney s Office Ms. Kim Day, Manager of Aviation Mr. Patrick Heck, Chief Financial Officer, Aviation To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services that provide objective and useful information to improve decision making by management and the people. We will monitor and report on recommendations and progress towards their implementation.
City and County of Denver Dennis J. Gallagher Auditor 201 West Colfax Avenue, Department 705 Denver, Colorado 80202 720-913-5000 FAX 720-913-5247 www.denvergov.org/auditor AUDITOR S REPORT We have completed our audit of the Denver International Airport (DIA) Airport Legal Services (ALS) Section. The purpose of the audit was to assess the effectiveness and efficiency of the governance and staffing of ALS as a means of determining whether ALS is adequately and properly meeting the legal needs of DIA. Additionally, we sought to determine whether ALS has appropriate processes in place to adequately and timely respond to DIA s contracting needs and open records compliance requirements. Finally, we assessed whether the Administrative Hearings Process is cost effective and improves DIA operations. This performance audit is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, General Powers and Duties of Auditor, and was conducted in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. While no substantive issues were identified with the legal services provided to DIA, ALS processes exhibit inefficiencies with regard to contracting and open records request fulfillment. These inefficiencies are the result of a contracting process that has grown more complex in recent years, limitations with two of the systems that ALS uses, and a lack of formal guidelines and procedures governing contract review and open records requests. Once these inefficiencies have been addressed, ALS should perform a detailed staffing analysis to determine whether the Section s staffing approach is sufficient for meeting the legal needs of DIA in the most efficient manner. We extend our appreciation to the Director of ALS and his team of professional staff, as well as to the personnel who assisted and cooperated with us during the audit. Audit Services Division Kip Memmott, MA, CGAP, CRMA Director of Audit Services To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services that provide objective and useful information to improve decision making by management and the people. We will monitor and report on recommendations and progress towards their implementation.
City and County of Denver Audit Services Division REPORT HIGHLIGHTS Denver International Airport Airport Legal Services Section July 2014 The audit assessed the effectiveness and efficiency of Airport Legal Services (ALS) governance and staffing to ensure that legal matters at Denver International Airport (DIA) are properly addressed. Background Like any robust business operation, DIA has many legal needs, which are served by the City Attorney s Office (CAO) through ALS. ALS is managed by a director and section supervisor, who oversee seven attorneys and six support staff. ALS performs contract review, fulfills open records requests, handles legal claims brought against DIA, and manages administrative hearings before the Manager of Aviation. Purpose We assessed whether ALS is efficiently and effectively governed to ensure that legal matters at DIA are properly addressed. We also sought to determine if appropriate processes are in place to adequately and timely respond to DIA s contracting needs and open records compliance requirements, and whether ALS has an appropriate organizational structure and amount and mix of personnel to meet the mission of the CAO and the legal needs of DIA. Finally, we sought to assess whether the Hearings before the Manager of Aviation Process (also known as the Administrative Hearings Process) is cost effective and improves operations. Highlights In assessing how well ALS is meeting the legal needs of DIA, we identified three main areas of inefficiency within ALS processes: The DIA Contracting Process The contracting process is taking longer, both for ALS and other divisions involved, despite the decline in the number of contracts opened each year. These inefficiencies extend overall contract processing time, which may result in a loss of revenue, delays in construction work, and untimely services provided to other DIA divisions. Case Management System A lack of quality review over data entered into Practice Manager, the ALS case management system, limits the reliability of legal matter data. Open Records Requests The number of open records requests that ALS must fulfill each year has been increasing. Requests should be fulfilled within seven days, but ALS does not have formal policies and procedures outlining the fulfillment process. Although the number of legal matters handled by ALS has declined since 2005, the average number of business days required by ALS to close most legal matter types has increased. We also determined that ALS would benefit from a formal staffing assessment; however, such an analysis should not be undertaken until inefficiencies are remedied. In order to conduct a thorough analysis, ALS will need to track, manage, and report on workload assignments and the range of legal work performed. The staffing analysis should take into account the ratios of attorneys to both legal secretaries and paralegals. For a complete copy of this report, visit www.denvergov.org/auditor or contact the Auditor s Office at 720.913.5000
TABLE OF CONTENTS INTRODUCTION & BACKGROUND 1 The City Attorney s Office Provides Legal Representation for Denver International Airport 1 Governance of Airport Legal Services 2 Airport Legal Services Role and Responsibilities 3 Airport Legal Services Contract and Case Management Systems 7 SCOPE 9 OBJECTIVE 9 METHODOLOGY 9 FINDING 11 Airport Legal Services Should Address Certain Process Inefficiencies Prior to Determining Whether Staffing Is Optimal to Serve Denver International Airport 11 RECOMMENDATIONS 30 APPENDICES 31 Appendix A Number of Contracts Opened by Airport Legal Services 31 Appendix B Benchmarking of Legal Organizations 32 AGENCY RESPONSE 33
INTRODUCTION & BACKGROUND The City Attorney s Office Provides Legal Representation for Denver International Airport Denver International Airport (DIA) is the fifth-busiest airport in the United States and contributes more than $26 billion annually to the Colorado economy. 1 The airport employs more than 30,000 people, of which more than 1,000 are employees of the City and County of Denver. Like any robust business operation, DIA has many legal needs, which are served by the City Attorney s Office (CAO). Attorneys within the CAO perform a wide array of legal services for City officials including the Mayor, the Auditor, the Clerk and Recorder, the City Council, and all City agencies, departments, boards, and commissions. With nearly 200 attorneys, paralegals, legal secretaries, and victim advocates on staff, the CAO is one of the largest law offices in the State of Colorado. The CAO is organized into six different sections, as shown in Figure 1. Figure 1. Denver City Attorney s Office Organizational Chart City Attorney Administration Section Human Services Section Litigation Section Prosecution Section Municipal Operations Section Airport Legal Services Section Source: Created by auditors from information obtained on the City Attorney s Office website as of May 2014. 1 Going from Great to Greater, Denver International Airport (DIA) Holds Sixth Annual State of DIA Luncheon, DIA press release, April 29, 2014, on the DIA website, http://flydenver.com/, accessed May 6, 2014. Page 1
Following are brief descriptions of the roles and responsibilities of each of the six CAO sections. 2 Administration The Administration Section comprises the City Attorney and the Deputy City Attorney. Both positions are appointed by the Mayor and are responsible for managing the other five CAO sections. Human Services The Human Services Section is responsible for providing legal services in all social services and welfare matters managed by the City s Department of Human Services. The Section provides a variety of services, including civil prosecution of child neglect and abuse; termination of parental rights and adoption; establishing and collecting child support obligations; establishing legal guardianship of incapacitated adults; and civil and criminal prosecution of welfare fraud. Litigation The Litigation Section is responsible for handling all personal injury claims, property damage cases, and civil rights claims brought against the City. The Section also manages the drafting of ordinances and Career Service Rules, workers compensation claims, and collective bargaining with the Denver Police, Sheriff, and Fire Departments. Municipal Operations The Municipal Operations Section is responsible for providing general legal advice to all elected officials and City departments, agencies, offices, boards, and commissions. Prosecution and Code Enforcement The Prosecution and Code Enforcement Section is responsible for prosecuting individuals for traffic infractions, violations of municipal ordinances, and other matters including general sessions and general violations cases, and domestic violence cases. The Section also represents the City in nuisance abatement matters, excise and license matters, and other issues related to mental health and drug and alcohol commitments. Airport Legal Services The Airport Legal Services (ALS) Section provides legal services to DIA, including defending DIA against all litigation and claims, even those in bankruptcy court; drafting airline agreements and all other contracts; handling real estate transactions; and advising DIA management on regulatory compliance, bond transactions, and other financial matters including construction contracts, concession programs, operations, and environmental programs. Governance of Airport Legal Services Although ALS operates in office space located at DIA, the City Charter specifies that it is a function of the CAO. 3 Accordingly, ALS reports to and is governed by the CAO. Additionally, ALS is independent from DIA to effectively serve the airport as a client, much like a specialized practice group within a corporate law department. This unique 2 As of May 15, 2014, the City Attorney s Office website listed section descriptions, http://www.denvergov.org/city_attorney. 3 Denver City Charter, Article VI, City Attorney, 6.1.3, Functions of the Department of Law. City and County of Denver Page 2
governance structure requires cooperation among and mutual understanding of City Charter requirements by ALS, CAO, and DIA leadership. Airport Legal Services Role and Responsibilities ALS is managed by a director and section supervisor, who oversee seven attorneys and six support staff. Figure 2 provides a visual representation of how ALS is organized. Figure 2. Airport Legal Services Organizational Chart City Attorney Director of Airport Legal Services Section Supervisor Staff Assistant Assistant City Attorneys Paralegals Legal Secretaries Source: Created by auditors from organizational chart provided by ALS effective January 2014. Transactional Activities The legal services provided by ALS to DIA include advising DIA management on various issues, providing regulatory advice, representing DIA in lawsuits and claims, and conducting certain transactional activities. Of the transactional activities conducted by ALS, this audit focused on two specific activities: contract review and open records request fulfillment. Contract Review ALS works closely with DIA personnel to shepherd all contracts through an established contracting process to ensure compliance with all City rules and regulations. On average, ALS processes approximately 300 contracts per year and has several major related responsibilities. 4 These include: Providing legal advice to DIA personnel during all steps of the contracting process Providing draft contracts with language addressing Federal Aviation Administration and Transportation Security Administration safety requirements 4 The contract review process is based on auditors review of City rules and regulations and discussions with City personnel regarding the contracting process. Page 3
Ensuring that City prevailing wage requirements are attached to all Request for Proposal and Request for Qualification notices Assisting DIA project managers and personnel negotiate scopes of work and other contract language with vendors Conducting a peer review of all contracts before they are signed and executed by City personnel who have contract signature authority Assisting DIA contract compliance officers to ensure that vendors honor the terms of their contracts with DIA Open Records Requests ALS manages all open records requests submitted to DIA under the Colorado Open Records Act (CORA). 5 CORA requires that most records be available to the public and applies to all state, county, and municipal government entities. It specifies that government entities must respond to all CORA requests within three to seven business days unless the request is for voluminous records that cannot be reasonably collected in that timeframe. ALS does not process any open records requests made under the federal Freedom of Information Act because DIA is not a federal entity. Open records requests are further governed by the Rules and Regulations Governing Denver International Airport Part 220, which outlines how requests should be made to DIA, what to expect from DIA, and what fees DIA will charge for requests. 6 DIA charges $25 per hour if the request will take more than one hour to process. 7 In 2013, ALS received 121 requests. Litigation Activities ALS is also responsible for defending all litigation and claims brought against DIA. Claims DIA receives many complaints of personal injuries sustained on DIA property, most of which are handled by DIA s insurance carrier. However, ALS personnel do have responsibilities related to claims and act as the primary liaisons to the insurance carrier s legal counsel. Between 2009 and 2013, DIA received an average of seventy-five claims per year. Hearings before the Manager of Aviation ALS manages all Hearings before the Manager of Aviation, otherwise known as Administrative Hearings. According to ALS records, DIA received nineteen petitions for hearings between 2005 and 2013. The Denver Revised Municipal Code (D.R.M.C.) 5-17 authorizes a third party, whether it is a contractor or individual conducting business with DIA, who does not agree with a DIA determination to file a petition for an Administrative Hearing with the Manager of Aviation (Manager). 8 Administrative Hearings are further 5 Colorado Open Records Act, accessed May 6, 2014, https://www.sos.state.co.us/pubs/info_center/files/cora_act.pdf. 6 D.R.M.C. 5 16. Rules and Regulations enables the Manager of Aviation to adopt rules and regulations for the management, operation, and control of Denver Municipal Airport System, and for the use and occupancy, management, control, operation, care, repair, and maintenance of all structures and facilities thereon, and all land on which Denver Municipal Airport System is located and operated. 7 On May 2, 2014, the Governor of the State of Colorado signed House Bill 14 1193 into law. The bill caps the hourly rate that government entities can charge for processing an open records request at $30 per hour. The bill becomes effective July 1, 2014. 8 D.R.M.C. 5 17. Administrative review and court proceedings. City and County of Denver Page 4
governed by Rules and Regulations Governing Denver International Airport, and are utilized as an alternative legal matter resolution method to filing a case in county, state, or federal court. 9 Although D.R.M.C. 5-17 requires the Manager to review the petition and render a determination on the matter, this authority may be delegated to a designated Hearing Officer. In accordance with the Rules and Regulations Governing Denver International Airport, the Manager may determine that no hearing is needed; however, this practice is not followed because all matters are forwarded to ALS. DIA uses contracted Hearing Officers to conduct Administrative Hearings. Between 2007 and 2013, DIA contracted with five legal entities to provide a Hearing Officer in place of the Manager, at an average cost of approximately $17,000 per year. ALS attorneys represent DIA s interests during the process. Some petitioners may represent themselves while others are required to engage an attorney for representation. A petition may not always result in the completion of an Administrative Hearing if negotiations between the parties are successful prior to the Hearing Officer issuing a final determination. Once the final determination is made, the petition matter is considered closed unless the parties involved pursue further action. Such actions include requesting that the Hearing Officer or Manager reconsider the final determination or appealing to the District Court. The complete Administrative Hearings Process is outlined in Figure 3. 9 Denver International Airport Rules and Regulations Governing Hearings before the Manager of Aviation, revised December 2012, accessed May 5, 2014, http://business.flydenver.com/info/research/rules/masters/hearing_rules.pdf. Page 5
Figure 3. Hearings before the Manager of Aviation Process File Petition A written petition must be filed with the Manager of Aviation within the time limitations stated in the Denver Revised Municipal Code 5 17 and include information such as the type of claim or legal theory of the claim against DIA, project information related to the claim or dispute against DIA, reasons the peititioner believes DIA's determination is incorrect, and the standing of the petitioner to make the claim against DIA. Early Ruling If the Manager of Aviation does not reject the petition, the Manager can determine that no hearing is needed and issue a written statement determining the issues stated in the petition and award or decline to award such relief as the Manager finds appropriate. If this does not occur, a formal hearing will be held before a Hearing Officer. Hearing If a hearing is held, the Hearing Officer, where appropriate, can dismiss a petition, issue summary judgment based on oral arguments, or hold a formal hearing. Post Hearing Once a hearing is held, and before the Hearing Officer issues a determination, reconsiderations can be made by the Hearing Officer or the Manager of Aviation. Final Orders and Appeals The Hearing Officer issues a written opinion, considered the final order of business. Appeals can be filed with the District Court. Source: Rules and Regulations Governing Denver International Airport s Hearings before the Manager of Aviation. Use of Outside Legal Counsel ALS uses outside legal counsel to assist with specialized aviation law such as matters related to Federal Aviation Administration (FAA) and Transportation Security Administration (TSA) regulations. ALS retained several law firms between 2006 and 2013. These firms specialized in FAA regulatory matters, with a specialty in litigation; bonds; environmental law; and employment law. The matters ALS outsources include, but are not limited to, oil and gas leases, litigation cases, and issues arising from changes in the number of concourse gates available at DIA and usage by airlines. City and County of Denver Page 6
Figure 4 shows ALS use of outside counsel. Figure 4. ALS Remittances to Outside Counsel by Year, 2006 through 2013 $400,000 $376,674 Amount Remitted $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $308,334 $230,303 $311,313 $245,205 $217,886 $223,268 $80,130 $50,000 $0 2006 2007 2008 2009 2010 2011 2012 2013 Calendar Year Source: PeopleSoft queries of outside legal counsel expenses, 2006 through 2013. Other airports use outside legal counsel in a similar manner. 10 The vast majority of airport legal departments we benchmarked send work to outside counsel and several use the same firms as ALS. Further, the type of aviation law that is outsourced is consistent across the airport legal departments benchmarked. It is common to outsource specialty and regulatory work because it is unique and intermittent in nature compared to other legal matters handled by airport staff and frequently changes. As a result, it is more economical for airports to use outside counsel as opposed to hiring additional staff. Airport Legal Services Contract and Case Management Systems ALS utilizes two systems to manage legal matters for DIA: Practice Manager and Alfresco. Practice Manager Practice Manager is a case management system utilized by the CAO. ALS primarily utilizes Practice Manager to track the four types of legal matters that DIA handles contracts, open record requests, claims, and litigation and as a repository of documentation produced for legal matters. Due to system limitations, Practice Manager is not used as a comprehensive legal matter management tool. Alfresco Alfresco is the City s system of record to manage the contracting process by ensuring that only City Charter-approved contract signers and delegated personnel are able to sign a City contract. At DIA, like all other City departments, all contracts are entered into Alfresco, which automates the process of requesting, drafting, reviewing, and approving contracts. As such, the 10 We conducted benchmarking of other airport legal departments to assess how other departments utilize outside legal counsel and are staffed using attorneys, paralegals, and legal secretaries. Page 7
contracting process is no longer a manual process, but rather an automated web-based workflow process. At DIA, contracts cannot move through the webbased workflow process unless they are reviewed and peer-reviewed by ALS attorneys. City and County of Denver Page 8
SCOPE The scope of the audit was to assess the effectiveness and efficiency of Airport Legal Services (ALS) governance and staffing in order to determine if ALS is adequately and properly meeting the legal needs of Denver International Airport (DIA), as well as comparing ALS to legal departments of comparably sized airports and private firms. We also sought to determine if appropriate processes are in place to adequately and timely respond to DIA s contracting needs and open records compliance requirements, and if the Hearings before the Manager of Aviation Process is cost effective and of value for DIA operations. OBJECTIVE The objective of the audit was to assess whether ALS is efficiently and effectively governed through adequate oversight set forth by the City Attorney, the Manager of Aviation, and ALS leadership to ensure legal matters at DIA are properly addressed. We also sought to assess whether ALS has an appropriate organizational structure and amount and mix of personnel to meet the mission of the CAO and the legal needs of DIA in the most efficient way. Finally, we sought to assess whether ALS has appropriate processes in place to respond to the development and review of contracts, open records requests, and the Hearings before the Manager of Aviation Process, also known as the Administrative Hearings Process. METHODOLOGY We utilized several methodologies to achieve the audit objective. These evidence gathering techniques included, but were not limited to: Reviewing City rules and regulations and ALS, CAO, and DIA policies and procedures Interviewing ALS, CAO, and DIA leadership about the governance structure and their role in oversight of ALS operations Benchmarking other airport legal departments about their staffing mix, use of outside legal counsel, and governance structure Benchmarking private law firms and companies about their firm or law department staffing mix and use of support staff Surveying and interviewing DIA personnel about their interactions with ALS Evaluating ALS workload and staffing mix over time Analyzing Practice Manager and Alfresco data Analyzing the ALS budget and ledger, including usage of outside legal counsel Page 9
Reviewing the role of ALS in the contracting process at DIA, the process used by ALS for responding to open records requests, and the role of ALS in the Hearings before the Manager of Aviation Process City and County of Denver Page 10
FINDING Airport Legal Services Should Address Certain Process Inefficiencies Prior to Determining Whether Staffing Is Optimal to Serve Denver International Airport The Airport Legal Services (ALS) Section provides Denver International Airport (DIA) with a variety of transactional and litigation support, as well as general legal advice, contract review, and fulfillment of open records requests. In assessing how well ALS is meeting the legal needs of DIA, we identified a number of process inefficiencies, specifically in the areas of contracting, the use of the Section s case management system, and in fulfilling open records requests. These inefficiencies are the result of an increasingly complex contracting process, limitations with the case management system, and a lack of formal procedures. Although we also determined that ALS would benefit from a formal staffing assessment, such an analysis should not be undertaken until the identified inefficiencies are addressed. The staffing analysis should take into account the ratios of attorneys to both legal secretaries and paralegals. Inefficiencies in ALS Business Processes Exist We identified three main areas where inefficiencies exist with ALS processes: the role of ALS in the DIA contracting process; the ALS case management system, Practice Manager; and fulfillment of open records requests. Contracting Process Inefficiencies The DIA contracting process is time consuming and cumbersome, and on average, ALS processes approximately 300 contracts annually. ALS attorneys have several key responsibilities to fulfill in the contracting process at DIA. 11 These responsibilities include: Providing legal advice to DIA divisions at all steps of the contracting process Providing draft contracts for all Request for Proposal and Request for Qualification notices to ensure that they clearly outline items such as Federal Aviation Administration (FAA) and Transportation Security Administration (TSA) security administration requirements and City requirements Assisting DIA project managers and personnel in negotiating the scope of work and other contract language with a selected vendor Conducting a peer-review of all contracts before they are signed and executed by City personnel with contract signature authority Assisting DIA contract compliance officers to ensure contractors honor the terms of DIA contracts 11 The contract review process is based on auditors review of City rules and regulations and discussions with City personnel regarding the contracting process. Page 11
Based on surveys and interviews with DIA personnel, although the entire contracting process is cumbersome, ALS portion of the process is considered a bottleneck. Because ALS does not require its staff to track specific hours worked by legal matter type, to determine if there is substance to this perception, we analyzed contract data available in both Practice Manager and Alfresco. While neither system tracks specific hours worked, Practice Manager data was used to measure the number of days it takes a contract to be processed from the time an attorney begins actively consulting on a contract to the date closed in the system. 12 We also examined Alfresco data, which captures the specific timeframes a contract is in an attorney s queue, to assess ALS involvement in developing, drafting, approving, and providing advice throughout the entire process. Analysis of Practice Manager Data According to our analysis of Practice Manager data for the years 2005 through 2012, the contracting process is taking longer while the number of contracts opened each year is declining. As shown in Figure 5, the average number of days ALS is involved in the contracting process has increased by seven business days during this timeframe. While the 2012 average number of business days to close a contract is eight days fewer than in 2011, 17 percent of the contracts opened in 2012 were still being processed as of March 13, 2014. The average number of business days will increase when these forty-six open contracts close. Figure 5. Average Number of Business Days for ALS to Close Contracts, 2005 through 2012 Business Days 140 130 120 110 100 90 80 115 88 111 104 99 125 130 122 70 60 2005 2006 2007 2008 2009 2010 2011 2012 Calendar Year Source: Auditors analysis of Practice Manager data. Note: We excluded 2013 from our analysis because more than 50 percent of the contracts opened during 2013 were still being processed as of March 13, 2014. Since 2005, the number of DIA contracts has trended downward. Figure 6 illustrates the number of contracts opened each year from 2005 through 2013. 12 Practice Manager includes a field titled Close Date, which should indicate that a contract has been finalized and the work specified in the contract is ready to be performed. City and County of Denver Page 12
Figure 6: Number of Contracts Opened at ALS, 2005 through 2013 450 Contracts Opened 400 350 300 250 341 407 339 296 279 333 256 276 257 200 2005 2006 2007 2008 2009 2010 2011 2012 2013 Calendar Year Source: Auditors analysis of Practice Manager data. We also looked at the percentage of contracts that were closed within a certain time frame as a way to analyze whether it is taking longer for DIA contracts to be processed. Specifically, we looked at what percentages of contracts were completed in 180 days, 240 days, 300 days, and 360 days. ALS completed approximately 75 percent of contracts within 180 calendar days between 2005 and 2009. Between 2009 and 2012, the approval of 75 percent of contracts doubled from 180 calendar days to approximately 360 calendar days. Although ALS processing time increased dramatically, DIA implemented the use of a 90-day forecast in the Request For Proposal (RFP) process, which may have had an impact on this increase. 13 Table 1 illustrates the percentage of contracts that were completed from 2005 through 2012. 13 DIA implemented the 90 day forecast so that prospective businesses and contractors would have time to adequately prepare proposals in advance of the business opportunities becoming available. As Airport Legal Services (ALS) consults on contracts throughout the procurement process, this has increased the time ALS spends on contracts that are included on the 90 day forecast. Page 13
Table 1: Percentage of Contracts Completed by ALS by Calendar Days, 2005 through 2012 Calendar Year 0 to 180 Days 0 to 240 Days 0 to 300 Days 0 to 360 Days 2005 74% 81% 85% 88% 2006 79% 86% 91% 94% 2007 76% 81% 86% 88% 2008 75% 83% 89% 92% 2009 73% 82% 88% 92% 2010 62% 78% 87% 92% 2011 64% 78% 82% 85% 2012 53% 60% 70% 75% Source: Auditors analysis of Practice Manager data. Note: The percentage of contracts completed per column of days is an accumulation throughout the year. We excluded 2013 from our analysis because more than 50 percent of the contracts opened during 2013 were still being processed as of March 13, 2014. The bolded percentages are for graphical presentation only. The most significant change occurred from 2011 to 2012, where it took an additional 120 days or 50 percent longer for ALS to approve approximately 75 percent of contracts. 14 In addition to looking at the total number of contracts opened by ALS each year and the percentage of contracts completed, we used Practice Manager data to look at the number of contracts opened each month from 2005 to 2013. This review indicated that there is substantial fluctuation in the number of contracts received month-to-month within any given year. ALS cannot predict when they will receive contracts throughout the year or the number of contracts they will receive in any given month. 15 While the sporadic nature of contract volume is outside of ALS control, these fluctuations may have an impact on processing times. Analysis of Alfresco Data We used 2012 and 2013 data extracted from Alfresco, the City s contract database, to analyze the average number of days that DIA-executed contracts were in ALS attorneys queues. In 2012, DIA executed 216 contracts and in 2013, DIA executed 240 contracts. 16 Contracts that require City Council approval take longer to get through the entire process due to the extra step of approval. In 2012, 117 of the contracts (54 percent) required City Council approval, and in 2013, 142 (59 percent) required City Council approval. Based on our analysis of the Alfresco data, DIA-executed contracts were in ALS attorneys queues more in 2013 than in 2012, but the overall contracting process took 14 The additional number of days were calculated by subtracting the 240 days it took to achieve approximately 75 percent in 2011 from the 360 days it took in 2012 to achieve 75 percent. 15 See Appendix A for the number of contracts opened by month from 2005 through 2013. 16 The Alfresco dataset included all executed and cancelled contract types by all City agencies. The focus of this analysis was relegated to DIA executed contract types only. DIA contract types executed in 2012 and 2013 included revenue, expenditure, and general agreement. These contract types are further defined by work type. The 2012 and 2013 DIA work types included capital improvement projects, concessions and revenue, grant, non financial agreement, operations and maintenance, professional services, Request for Proposal, Request for Qualification, standard expenditure, and task order. The two task orders executed in 2012 did not require attorney time. Therefore, these two contracts are not included in total 2012 executed contracts. City and County of Denver Page 14
longer as well. As evidenced in Table 2, the average number of days DIA-executed contracts were in an ALS attorney s queue increased by twenty days between 2012 and 2013, from thirty-nine to fifty-nine days. Similarly, the overall number of days to execute DIA contracts increased between these two years by almost sixty days, from an average of 114 to 172 days. 17 We sought to determine whether the ALS step in the contracting process is what caused the overall process to take longer in 2013, especially since we heard through numerous interviews that ALS was the source of a bottleneck. To determine whether ALS attorneys are causing the contracting process to take longer, we calculated the average percent of time a contract is in an ALS attorney s queue based on the total average number of days it takes to execute a DIA contract. In both 2012 and 2013, we found that contracts were in an ALS attorney s queue approximately 35 percent of the total processing time. While ALS attorney days increased between the two years, the overall percentage of time in an ALS attorney s queue in the contracting process remained relatively the same. This indicates that other DIA divisions are also taking longer to complete their portions of the contracting process. We also analyzed contracts to determine whether the type of contract reviewed affected the percent of time the contract was in an ALS attorney s queue. We found that contracts requiring City Council approval required more time in an ALS attorney s queue. Specifically, as shown in Table 2, 2012 and 2013 contracts that required City Council approval were in an attorney s queue for approximately 40 percent of the total time it took to execute contracts. In comparison, those 2012 and 2013 contracts that did not require City Council approval were only in an attorney s queue for approximately 25 percent of the total time. DIA contracts requiring City Council approval include all contracts except construction contracts that are at least $500,000. DIA construction contracts require City Council approval at $5 million or above. This analysis shows us that, on average, contracts with higher dollar amounts require more day in an ALS attorney s queue. Table 2. ALS Contract Review Time by City Council Review Requirement, 2012 through 2013 Number of DIA Contracts Average Days in an Attorney s Queue Average Days to Execute Percent of Time in an Attorney s Queue 2012 2013 2012 2013 2012 2013 2012 2013 DIA-Executed Contracts 216 240 40 59 114 172 35% 34% City Council Approval 117 142 49 74 119 185 41% 40% Non-City Council Approval 99 98 28 36 114 152 25% 24% Source: Auditors analysis of Alfresco data. Note: Alfresco data includes two DIA task orders executed in 2012 that are not reflected in the total of all DIA contracts since no days were reported in an ALS attorney s queue for these contract work types. Percent of time in an attorney s queue was calculated by dividing the average days in an attorney s queue by the average days to execute a contract. 17 The overall time to execute a DIA contract includes days contracts are processed by DIA personnel, processed by ALS personnel, waiting for signature validation, and waiting for City Council approval, if necessary. Page 15
Table 3 further describes the number of DIA-executed contracts in an ALS attorney s queue by contract work type. This table includes the average days in an attorney s queue, average days to execute the contract, and percent of time contracts were in an attorney s queue. This table shows that in both 2012 and 2013, the three most common contract work types executed were Concessions & Revenue, Standard Expenditure, and Professional Services contracts. These contracts also required among the highest average days in an attorney s queue and percent of time in an attorney s queue in the entire contracting process. Concessions & Revenue contracts required an average of 48 and 67 days in an attorney s queue in 2012 and 2013, respectively. Standard Expenditure contracts required an average of 38 and 56 days in an attorney s queue in 2012 and 2013, respectively. Professional Services contracts required an average of 48 and 58 days in an attorney s queue in 2012 and 2013, respectively. Table 3. DIA-Executed Contract Analysis by Contract Work Type, 2012 and 2013 Number of DIA Contracts Average Days in an Attorney s Queue Average Days to Execute Percent of Time in an Attorney s Queue Contract Work Type 2012 2013 2012 2013 2012 2013 2012 2013 Concessions & Revenue 65 110 48 67 109 183 43% 37% Standard Expenditure 48 65 38 56 95 149 40% 37% Professional Services 43 38 48 58 137 163 35% 36% Capital Improvement Project 14 12 14 40 146 238 9% 17% Request for Proposal 26 4 21 4 142 194 15% 2% Grant 11 7 55 36 115 43 47% 83% Request for Qualification 4 1 1 84 36 759 1% 11% Operations and Maintenance 2 3 6 12 190 167 3% 7% Non-Financial Agreement 2 0 53 N/A 78 N/A 68% N/A Intergovernmental Agreement 1 0 99 N/A 196 N/A 51% N/A Source: Auditors calculations from Alfresco data. Note: Percent of time in an attorney s queue was calculated by dividing the average days in an attorney s queue by the average days to execute a contract. Practice Manager Inefficiencies ALS uses a software program called Practice Manager to track and document work performed on all DIA-related legal matters, including contracts, open records requests, claims, and lawsuits, including Administrative Hearings. Practice Manager is also used by other sections of the City Attorney s Office (CAO). Practice Manager was designed to serve as a comprehensive case management solution for legal offices. However, we found in a previous audit that the CAO does not use Practice Manager as a comprehensive case management tool due in part to the City and County of Denver Page 16
system s limitations. Our 2013 City Attorney s Office: Litigation and Claims Management Performance Audit found that Practice Manager provides limited functionality, which creates inefficiencies for CAO personnel. 18 In response to the audit, the CAO agreed to assess whether an upgrade of Practice Manager or a new system will best benefit the work of the CAO s Civil Litigation Section. Although the scope of this audit did not include assessing how ALS uses Practice Manager, we noted similar limitations and process inefficiencies in the use of Practice Manager during the course of performing a workload analysis and reviewing various ALS processes and procedures. In attempting to determine the complete number of contracts, open records requests, claims, and litigation matters ALS managed from 2005 through 2013, ALS personnel were unable to perform Practice Manager queries that provided accurate and reliable counts of all legal matters. Subsequently, ALS personnel had to spend valuable time reviewing and reconciling the totals generated by Practice Manager for accuracy. For example, the original query total provided for contracts entered into Practice Manager opened in 2012 was 327. In addition, ALS provided a list of all matters opened in Practice Manager since the inception of the program in 2005. This list indicated that there were only 276 total matters. ALS personnel verified that 276 was the correct number of contract matters opened in 2012. Further, ALS personnel were unable to create reports in Practice Manager and export that data in an easily analyzable format for auditor review. We also observed numerous data inaccuracies in the Practice Manager system. We found inaccuracies in the following matters, which included litigation cases, contracts, and open records requests: Nine matters did not have close dates, or the close dates were inaccurate. Four matters were miscoded with the wrong matter type. One matter was not entered into the system. Numerous matters exhibited non-sequential file numbering. For example, some matter file numbers were skipped while others were duplicated. Specifically, three 2006 contract file numbers were each listed twice in the system. In addition, file numbers were not always in order by the date the matter was opened. Audit work also found a matter that was opened in December 2010, but the next two sequential contract file numbers were opened on earlier dates, February 2010 and June 2010, respectively. Open Records Requests Inefficiencies ALS responds to all DIA-related Colorado Open Records Act (CORA) requests, the process for which is governed by the Rules and Regulations Governing Denver International Airport Part 220 (Part 220). Part 220 clearly states that DIA must respond to all CORA requests as required by law, but specifies that requests shall not take priority over mission-critical work activities or activities required in response to emergencies. 18 City Attorney s Office: Litigation and Claims Management Performance Audit, June 2013, http://www.denvergov.org/auditor. Page 17
From 2005 through 2013, ALS processed nearly 850 open records requests but the number processed per year has been increasing. Since 2010, ALS has been processing approximately 120 open records requests per year, which is nearly double the amount that were being processed between 2005 and 2007. Compared to other City departments, the number of open records requests that ALS must process is very high. The only other comparable City department that processes more open records requests than ALS is the Department of Environmental Health. 19 Figure 7 provides a breakdown of the number of open records requests that ALS received annually from 2005 through 2013. Figure 7. Number of Open Records Requests Received by DIA by Year, 2005 through 2013 Open Records Requests Received 140 120 100 80 60 40 20 0 121 118 119 121 86 87 68 64 64 2005 2006 2007 2008 2009 2010 2011 2012 2013 Calendar Year Source: Auditors analysis of Practice Manager data. Although CORA specifies that open records requests must be processed within seven business days, at times it takes ALS longer to complete requests based on the complexity of the requests or the accessibility of the information requested. Figure 8 shows that the average number of business days it took ALS to close open records requests has increased from approximately three days in 2005 to more than twenty days in 2013. 19 Although the Department of Safety (Safety) receives many requests for information, the vast majority of records requested are governed by the Colorado Criminal Justice Records Act (CCJRA). Safety processes more than one thousand requests for records every year under the provisions of the CCJRA. City and County of Denver Page 18
Figure 8. Average Number of Business Days for ALS to Close Open Records Requests Matters, 2005 through 2013 25 21 Average Business Days 20 15 10 5 3 3 13 4 12 14 15 12 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Calendar Year Source: Auditors analysis of Practice Manager data. In addition, we found that by averaging all open records requests completed from 2005 through 2013, ALS completed open records requests in twelve days. Of the nearly 850 requests completed, 77 percent were processed in one to seven days; 9 percent were processed in eight to fourteen days; and 14 percent were processed in fifteen or more days. Our analysis indicates that the more open records requests ALS receives, the longer it will take to process them. ALS staff explained to us the process for handling open records requests. Specifically, when a request is received, ALS personnel log it into Practice Manager and the person assigned to the request confirms receipt and outlines estimated completion dates and costs. If the request is vague or broadly worded, ALS personnel will contact the requestor for additional information. Once ALS has received payment and all information necessary from the requestor, ALS personnel work with DIA personnel to organize the records and redact any information that should remain confidential. We determined that this process is sufficient to ensure that requests are fulfilled in compliance with rules and regulations. However, ALS does not have formal policies and procedures outlining this process. Currently, the Mayor s Office is leading an initiative to ensure that all City departments follow the same practices in processing open records requests to ensure consistency throughout the City. This initiative includes a standardized cost for all open records requests. Page 19