DENVER – As work moves forward on the National Western Center construction project, the city needs to improve how it tracks subcontractors’ financial reports and whether contractors pay their subcontractors on time, according to a report out this month from Denver Auditor Timothy M. O’Brien, CPA. The city also needs to improve transparency of contractors through strengthened conflict-of-interest disclosure requirements.
“The National Western Center project is moving along quickly, and I hope our observations and recommendations will help management keep everything in good financial order,” Auditor O’Brien said.
Auditor O’Brien commissioned the third-party audit firm BKD to assess the city’s construction contract with Hensel Phelps at the National Western Center. Hensel Phelps has a $275 million contract for construction work on the project.
The examination found no concerns related to the procurement process, change orders, insurance and bond coverage, or the closeout process. However, the city could strengthen some review steps and requirements to ensure a transparent and financially responsible program.
First, the examination team recommends implementing a review process of the financial reports subcontractors submit, so the city can avoid overbilling or other errors. Currently, the contractor reviews subcontractor invoices, but the National Western Center team does not also review the statements from a financial perspective. Relying solely on the contractor may increase the risk of the city being charged inappropriate costs.
Second, the team found evidence of at least one subcontractor receiving a late payment after the city paid the contractor. City ordinance requires prompt payment to subcontractors, and these subcontractors — often small businesses — rely on payments from the contractor to pay their employees.
Finally, the team recommends an improvement to the conflict-of-interest clause in all future construction contracts to hold contractors more accountable and ensure transparency in city projects. Currently, the conflict-of-interest clause applies to city employees — not to contractors. The intent of disclosing conflicts is not to automatically exclude any contractor but to ensure transparency and informed decision-making.
The National Western Center management agreed to all the recommendations, and they plan to implement them all by the end of the year.
“The National Western Center construction is a big project important to the future of nearby neighborhoods and our city as a whole,” Auditor O’Brien said. “I’m glad these recommendations can help the team out there continue to function responsibly and ethically.”