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An audit of the Portland Building rehabilitation project released Wednesday by city Auditor Mary Hull Caballero found a lack of transparency in the project’s budget amid a 10 percent cost increase. In addition, the audit faults the city for failing to distribute nearly $1 million in funding set aside for minority contractors and falling short of meeting certain goals and aspirations set for the project.

The massive renovation is forecast to be completed ahead of schedule, but costs have grown to an estimated $214 million, 10 percent more than the initial $195 million budget. The design/build/relocate team of Howard S. Wright and DLR Group began work on the three-year project in late 2017.

According to , the project team in late 2016 began eliminating elements from the scope of work in order to stay within the allotted $195 million budget. Those exclusions included tenant improvements on two and a half floors of office space and a first-floor child care center, as well as furnishings and technology equipment. Four months later, the project team began requesting funding to add back those exclusions as separate projects outside the given budget. While the project team was open about the individual funding requests, the audit finds, it was not transparent about the cumulative cost of the add-backs and the resulting escalation of the overall project cost.

The audit also found that the city has yet to disburse about $950,000 in project dollars set aside for equity grants aimed at addressing historical inequities in contracting and improving workforce diversity. In July 2016, City Council approved setting aside $1 million, about 1 percent of the project’s hard construction costs, to be dispersed periodically throughout the project in support of disadvantaged subcontractors and workers. Aside from a $50,000 contribution in late 2018 to a Metro workforce study, no other community benefits grants have been awarded.

A grant opportunity announced in April 2018, using funds from the Portland Building project and two other city projects, drew 39 applications, including 12 Portland Building-specific proposals. Despite available funds and interested applicants, the audit states, the city’s Office of Management and Finance did not award any funds as scheduled by October 2018, and as of the end of the calendar year had not communicated with applicants about the status of their applications or informed them as to why the grants were not awarded.

While the project is on track to meet minimum requirements – including elimination of moisture penetration, seismic upgrades and HVAC replacement – the audit found that discussions were not held with City Council or the project’s oversight committee about what has been done to reach beyond minimum requirements to achieve advanced goals and aspirations set forth in the project charter. Examples provided in the audit include aspirations and goals likely to not be met in the building’s accessibility, sustainability and historic preservation.

A response to the audit issued by Mayor Ted Wheeler and Tom Rinehart, the city’s Chief Administrative Officer, states that the project team has been open about items proposed outside of the budget, and that furnishings, technology equipment and child care center build-out were never part of the project scope. Also, the response states, the undisbursed equity funds will be released once the Community Opportunity and Enhancement Program is established through Prosper Portland, as directed by City Council.

The audit is a follow-up to a 2016 report issued under Caballero while the project was still in its planning stage. That report predicted that the project scope could narrow because of the city placing constraints on the project’s timeline and budget, leaving the scope the only project element open for flexibility.

The Auditor’s office will follow up in one year with recommendations made in the audit. Also, a separate audit of the construction contract is under way, with results due to be reported later this year.