King County, Wash., is BIG. With a population of 2 million, it’s the 14th largest county in the U.S. More than $1 billion of its $4.5 billion annual budget goes toward capital projects.
Even so, the county executive and nine-member council face the same challenges as any county leaders. High-budget, high-profile projects have gone substantially over cost and schedule estimates, leading to troubling headlines. Unforeseen price increases in 2005, ’06, and ’07, for example, pushed subcontractor bids on a levy-funded hospital so high that construction had to be put on hold.
“Legislators were surprised when the contract didn’t protect them from market risk,” says King County Capital Projects Oversight Manager Tina Rogers, P.E. “The project was put on hold, and the county initiated a public/private partnership.”
In the end, the hospital was a positive story for elected officials; the county was able to transfer some risk to the developer and a larger project was delivered. Still, it left legislators wanting more time to consider policy options and more opportunity for proactive management … and that feeling led to an opportunity.
“Like all large counties, there’s such a huge diversity of projects that it’s difficult for the legislative branch to identify the projects which present the greatest challenges,” says Rogers. “It’s not their job to manage projects; it’s their job to fund projects. Still, staying on top of the issues is important, and having a grasp of big initiatives, plus hundreds of smaller projects, is difficult for legislators who may or may not have experience in construction. We needed a system that would help them be better informed, especially about the highest-risk projects.”
And here is where King County is unusual.
In 2006, the County Council asked the auditor’s office to develop such a program, and funded the initiative with about $350,000. Initially funded from four large capital projects, the work and the funding now spans all of the county’s capital programs. Rogers, a licensed civil engineer, was hired in 2008 to create and manage the program with a colleague who has an architectural background. Together, they have 60 years of program management experience.
“We couldn’t find any models, at least not from a legislative perspective,” Rogers says. “We did have some guidance from risk assessment consultants who’d worked with county executives from an internal management perspective, but we had to adapt that to a system that would work for our council.”
Launched in 2010, the resulting Capital Project Risk Scoring Instrument has substantively changed how the county delivers major infrastructure projects.
“If deemed high risk, a project won’t get funding all at once, only in phases; and more information will have to be submitted to obtain individual phase funding,” Rogers says. “For example, a formal assessment must be completed, an up-to-date risk register maintained; and during construction, a quarterly report submitted to the council.”
Jane Hague, the vice chair of the county council, says the process is working: “With these efforts, especially the improved communication, we’ve encountered fewer surprises. This builds transparency and public trust.”
In short, King County’s experience provides helpful insight for any public works agency striving to manage financial risk in an era of challenging budgets.
Next page: Setting the stage for countywide collaboration