OIG No. 20-07: Investigation of Palm and Hibiscus Islands Neighborhood Infrastructure Improvement Project, Preliminary Report
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April 21, 2020
TO: Honorable Mayor and Members of the City Commission
FROM: Joseph Centorino, Inspector General
RE: Status of Investigation and Preliminary Observations, OIG No. 20-07
The city of Miami Beach has shown an impressive commitment in the last few years
to addressing these flooding vulnerabilities, including identifying the funding for
and beginning execution of a projected $600 million stormwater management
program, sourcing financing independently of federal and state funds…However,
Miami Beach is significantly at risk, so more infrastructural advancement and
investment are necessary.
Urban Land Institute Advisory Services Panel Report, April 2018
This report provides an interim response to a request by membe rs of the Commission
that the Office of Inspector General (OIG) review the Palm Island and Hibiscus Island
Infrastructure Project (Hereafter “Palm & Hibiscus project) and a project to repair a
segment of seawall on the east side of Indian Creek. (Hereafter: “Indian Creek project”).
The limited purpose of this report is to provide preliminary observations based on facts
gathered during an investigation of the Palm & Hibiscus project which is ongoing, and to
a lesser extent, on evidence gathered during a preliminary review of the Indian Creek
project. These preliminary observations are provided with the following caveats:
• The observations are not project specific and intended to be general in nature. Our
office is constrained from disclosing the findings of fact and recommendations
based on our investigation of the Palm & Hibiscus project until all persons and
entities referenced in a final report have an opportunity to respond. However, the
professional standards that apply to work of Inspector Generals in the State of
Florida allow for the reporting to decisionmakers of time-sensitive information and
preliminary observations that decisionmakers can use to carry out their oversight
responsibilities and prevent wasteful expenditures or mismanagement of a
program.
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• The observations were developed with the objective of providing information that
may assist the Mayor, members of the Commission and the City Manager in
making near-term decisions about projects that are similar to the Palm & Hibiscus
project in their size, scope, and complexity and designed to counter risks
associated with climate change and sea level rise. These observations are not
intended to apply to all projects or procurements of the City of Miami Beach.
Background of the Palm & Hibiscus investigation
In January, the first special agent joined our office. He was immediately assigned to
investigate the Palm & Hibiscus project and the Indian Creek project with the goal of
providing information that answered questions that were posed by Commissioners Mark
Samuelian and Michael Gongora and echoed by Mayor Dan Gelber during Oct. 30, 2019
meeting of the Commission. He leads an investigative team that consists of an auditor
from the Internal Audit staff and an independent professional eng ineer who was retained
by our office to assist in reviewing construction plans and other technical documents and
to participate in interviews with engineers and contractors.
During the balance of January and early February, the investigative team gathere d and
reviewed pertinent records associated with both projects and conducted interviews with
selected city officials and regulatory personnel with direct knowledge of both projects.
Evidence developed during this initial phase of fact -finding identified significant
differences between the Palm & Hibiscus project and the Indian Creek project in terms of
their scope and objectives; the root causes of schedule delays and increased costs; and
in the genesis of the permitting issues that prompted regulatory action.
Based on the foregoing, the Inspector General took made the following decisions. First,
he directed that the projects be investigated separately, and that priority be given to
completing the Palm & Hibiscus investigation. Second, he determined that a more
searching and rigorous investigation of the Palm & Hibiscus project was required to
address the questions posed the Mayor and members of the Commission. Third, he
decided to authorize several actions that were designed to expedite the investigation of
the Palm & Hibiscus project and ensure that our office gained timely access to all relevant
evidence. These actions included the following:
• Obtaining independent computer access to the files and folders of the Capital
Improvement Program office and the departments of Public Works, Procurement,
and Environment and Sustainability and independent access to archived emails
stored by the Information Technology Department sufficient to enable members of
the investigative team to search and retrieve city records and emails without the
knowledge or involvement of city personnel.
• Issuing subpoenas to contractors involved in the Palm & Hibiscus to produce
documents, emails and other records associated with the Palm & Hibiscus project
and purchasing the hardware and software required to efficiently and effectively
index, search, and retrieve all material emails, documents and other items that
were contained in several hundred gigabytes of eDiscovery material produced in
response to those subpoenas.
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• Requiring that all significant interviews with witnesses be conducted under oath in
order to elicit testimony that would assist in resolving discrepancies and clarify ing
inconsistences identified in published statements or official records or in statement
made in Commission hearings or during interviews by former city officials,
engineers, construction personnel, and regulatory staff associated with the Palm
& Hibiscus project. Preliminary observations:
Preliminary observations
The City’s commitment to completing an ambitious program of neighborhood
infrastructure projects and stormwater drainage improvements is dependent on several
critical support struts, among them having an in-house capability to manage major
construction projects that is typically found at major municipalities and in state and federal
agencies.
It is important to note that the Capital Improvement Projects office (CIP) has implemented
aspects of best practices for managing projects , including use of eBuilder construction
management software to to track changes in costs and schedule. The following
observations are intended to strengthen the City’s ability to manage future projects and
avoid the problems that drove up costs and caused delays in Palm & Hibiscus proj ect:
• Making significant changes to a project’s design criteria or construction plans after
work has begun poses a significant risk to the success of a neighborhood
infrastructure improvement project and should be avoided. The Commission could
consider requiring the project manager to certify that any proposed change is
essential to the success of the project and provide realistic estimates of the
estimated costs and impact on the project’s schedule.
• The City could mitigate the risk of regulatory issues related to permits issued by
the Miami-Dade Department of Environmental Resources Management (DERM) if
it held key personnel accountable for obtaining permits and permit modifications.
Notwithstanding contractual language that delegates this responsibility to the
general contractor, the City Manager could make the senior official who signs the
application for a DERM permit responsible for (a) ensuring that an permit
application is accurate and complete and (b) notifying DERM of significant changes
to a project’s design criteria or construction plans in requesting a permit
modification.
• The City could enhance its ability to provide oversight of CIP’s capital improvement
program by directing the City Manager to provide an annual Affordability Analysis
or its equivalent based on current cost estimates and schedules for all stormwater
drainage and neighborhood improvement projects. An Affordability Analysis would
help decisionmakers determine if there is adequate funding to complete CIP’s
portfolio of projects. A reliable Affordability Analysis would depend on CIP
providing current and credible cost estimates and schedule information.
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________________________________ 04/21/2020
Joseph M. Centorino, Inspector General Date
________________________________ 04/21/2020
F. James McGee, Special Agent Date
________________________________ 04/21/2020
Jessica Romero Losada, Internal Auditor Date
cc: Jimmy L. Morales, City Manager