1987 Correspondence - Laserfiche WebLink

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~ANN~t9 T~ yp v " OF TRPay March 6, 1987 Minnesota Department of Transportation Transportation Building, St. Paul, MN 55155 Mr. David R. Hartley Ramsey City Administrator 15153 Nowthen Boulevard Northwest Ramsey, Minnesota 55303 Dear Mr. Hartley: RE: Gateway North Industrial Airport Engineering Services Agreement - Preaward Audit Phone 296-2788 R~'~~~ r~~,,^~ Qns d. We have recently received a preaward audit report from the Minnesota Department of Transportation's External Audit Section. This report was prepared for costs associated with the Hakanson Anderson Associates (HAA)-City of Ramsey Engineering Services Agreement. Two suggestions were made in the report that should be implemented to properly administer the agreement. The first relates to the HAA overhead rate of 124.00% which could not be substantiated using the company's current accounting system. Based upon the figures provided, an overhead rate of 118.30% was computed. HAA is now revising their accounting system to accumulate direct labor dollars. This action may change the overhead rate, but we recommend that a provisional rate of 118.30% be used for making partial payments under the agreement. If a higher rate can be substantiated after work under the agreement has been performed, a retroactive adjustment can be made at the time of final payment subject to audit confirmation. Because of this, we recommend that the following statements be added to the agreement, perhaps by amendment or addendum: A provisional overhead rate of 118.30% of the direct labor costs will be used for the purpose of making partial payments to the consultant. Final payment due to the consultant and the subconsultant will be based on actual acceptable costs as determined by a Mn/DOT audit. The audit will be conducted in accordance with the cost principles and procedures set forth in the Code of Federal Regulations, Title 48, Chapter 1, Federal Acquisition Regulations, Part 31, which are made a part hereof by reference with the same force and effect as though fully set forth herein. The second suggestion relates to billings by the two subconsultants. These companies generally bill a set hourly rate which includes all expenses and profits. The billing of expenses via hourly rates increases the profit factor with each additional hour of work, thus diminishing the incentive for expeditious completion. An £quaf Opporlunily Employer