Category: Construction Audit & Advisory Services

Construction Audit & Advisory: Upcoming Chances to Learn and Connect

Posted on May 5, 2025

HPM’s Audit & Advisory team is hitting the road for May conferences. AAIA’s 35th Annual Conference in Denver and COAA Connect Spring 2025 in Pittsburgh will feature sessions with valuable insights from seasoned experts from our team. 

AAIA 35th Annual Conference 

May 4–7, 2025
Denver, CO
Event Details 

The Annual Association of Airport Internal Auditors (AAIA) Conference invites airport internal auditors from around the world to learn and network each year.  

  • Audit Director Valerie Rogers Smith and Principal Jake Ortego will lead a session on allowances and contingencies. 

Session Highlight:  

Title: Auditing Allowances and Contingency on Construction Projects
Allowances and Contingencies are tools used within construction contracts to address items that are either not defined or cannot be defined at this time; however, will be required to deliver the project’s intended scope. While many contracts provide clear rules for the use of allowance and/or contingency funds and how they will be tracked, it is also not uncommon to have ambiguous contract terms. Additional complexities are possible given that each party can have contract allowances or contingencies including the owner, contractor, subcontractors, and design firms. This presentation will provide an understanding of construction allowances and contingencies as well as an approach to auditing them. The session will include exploring some of the nuances of these contract tools as well as common areas of disagreement on the approval, usage, reconciliation, and tracking of funds.

COAA Connect Spring 2025 

May 7–9, 2025
Pittsburgh, PA
Event Details 

The Construction Owners Association of America (COAA) supports Owners’ success in the design and construction of buildings and facilities through education, information, and collaboration.  

  • Jake Ortego and Andrew Reilly from Carnegie Mellon will lead a session discussing current considerations related to tariffs and rising costs. 

Session Highlight:

Title: Tariffs and Other Escalation Costs … Let’s Discuss
The last few years have seen increased escalation claims due to volatility caused by world events. Most recently, the still TBD impacts of federal tariffs are causing uncertainty and even panic. Entitlement to any portion of these increases is often not clearly defined or understood by all parties. Adding to the confusion, there are many variables to consider … including market trends, procurement schedules, contractual requirements, and delays outside the control of contractors and suppliers. Diligent analysis is the key to making fair and equitable determinations for escalation requests. The session will provide tangible examples and encourage discussion and questions. 

Our team is looking forward to sharing experience and insights this month. Learn more about HPM’s Audit & Advisory team before the conference.  

Meet Laura Tatem: Bringing a Wealth of Audit & Aviation Expertise to HPM

Posted on April 29, 2025

HPM’s Audit & Advisory team recently added Laura Tatem, Senior Associate Auditor to their team. With a deep background in both external and internal auditing – especially within the aviation industry – we sat down with Tatem to learn more about her career journey, standout projects, and what she’s looking forward to in this new chapter. 

Can you tell us about your career and previous experience working with airports and audits? 

“I started my career in public accounting, focusing on external audits for construction companies, government entities, and non-profits in Virginia and Florida. Eventually, I transitioned into Internal Audit and spent 11 years leading the audit department at Tampa International Airport (TPA). 

During my time at TPA, I became very involved in the aviation industry, attending and contributing to conferences and meetings with organizations such as the American Association of Airport Executives, Airports Council International, the Florida Airports Council, and the Association of Airport Internal Auditors. It was an incredible experience that really shaped my professional path.” 

What are some projects you’ve worked on that you’re most proud of? 

“My favorite projects—whether in external or internal auditing—have always been those centered around construction. I loved visiting job sites, seeing how funds were being used, and observing the construction methods firsthand. At TPA, I was fortunate to walk through many impressive sites and collaborate with contractors across various initiatives. 

Some of the standout projects for me include the construction of the Rental Car Facility, the automated train connecting it to the main terminal, and the new airport office building. These projects were not only complex and rewarding but also a lot of fun to be part of.” 

What are you most looking forward to in your new role with HPM? 

“I’m really excited about focusing solely on construction in my role at HPM. I see this as a great opportunity to continue learning, deepen my expertise, and work alongside a talented team. I’m energized by the projects ahead and the people I’ll be working with.”  

Laura’s extensive credentials include Certified Public Accountant (CPA), Certified Internal Auditor (CIA), Certified Government Auditing Professional (CGAP), Certification in Risk Management Assurance (CRMA) and AAAE Certified Member (CM). 

In addition, she is a graduate of both Tampa Connection and Leadership Tampa and was named one of the Tampa Bay Business Journal’s 40 Under 40 Award recipients. 

Outside of her work with audit and aviation, Laura is a passionate animal advocate and currently serves on the board of the Humane Society of Tampa Bay. At home, she has three dogs and a 24-year-old turtle.  

HPM is thrilled to welcome Laura to the team. Reach out to our Audit & Advisory group to learn more about our services and how our expertise can serve your next project.  

How Construction Audits Help K-12 School Districts: Ensuring Fair Contracts & Accurate Billing

Posted on April 1, 2025

Negotiating fair, enforceable contract terms that help ensure accurate project billings for large-scale construction programs can be frustrating and complex. Many assume audits should only take place at the end of a project; however, having construction audit and advisory services throughout every stage of a construction project provides significant value for districts. These services not only save money and time, but also ensure decisions are backed by expert advice, resulting in strong contracts that protect districts and their investments. 

The Importance of Construction Audit Services 

Construction programs for K-12 districts often involve multiple projects, several stakeholders, significant budgets, and intricate contracts often with differing terms and multiple contracted parties. With so much at stake, a robust audit process is essential. Here are some key ways audit and advisory services help districts navigate construction contracts and cost controls: 

Expert Construction Contract Auditing & Management

Construction auditors provide a thorough review of contracts to ensure they are fair, legally enforceable, and aligned with the district’s best interests. By identifying potential risks and ambiguities early districts can avoid costly disputes and delays. 

Fair & Transparent Contract Negotiations

Transparency in contract negotiations is critical for K-12 school districts. Auditors help in negotiating terms that are clear, equitable, and beneficial for all parties involved. This ensures that districts and their students receive the best value for their investments. 

Comprehensive Post-Contract Auditing

After construction is completed, an in-depth audit ensures that districts only pay for services and materials that were physically provided. This post-contract review helps identify overcharges, billing errors, or compliance issues. 

Cost Segregation Services for Tax Savings

Cost segregation analysis helps school districts maximize tax savings by properly classifying construction expenses. This financial strategy allows districts to allocate funds more effectively and enhance their overall budget efficiency. 

Trusted Partners in Construction Cost Controls

A strong audit process establishes trust between school districts and contractors. By continuously monitoring expenses and project timelines, auditors help districts maintain financial oversight and accountability. 

Construction Cost Claim Expertise

Disputes over construction costs can arise, but having experts who specialize in cost claims ensures that districts are well-prepared to handle any challenges. These professionals help in resolving disputes efficiently and fairly. 

Partner with HPM for Trusted Construction Audit Services 

With HPM, K-12 leaders gain a trusted partner with extensive experience in navigating construction financials efficiently, transparently, and profitably. Our expert audit services protect district investments, prevent financial pitfalls, and strengthen relationships with contractors. Reach out today to learn more.  

7 Crucial Conversations for Airports Hiring a Program Manager

Posted on May 30, 2024

How do airports benefit from hiring an owner’s representative? Site selection, project team procurement, construction auditing – your needs during a capital expenditure program can be as varied as the projects are complex. When you have major investments, a need for speed-to-market, and a reputation at stake, minimizing risk and maximizing return are table stakes. That’s where an owner’s representative or a program manager thrives. A program manager offers many benefits to airports, including clear timelines, streamlined communication, and, perhaps best of all, peace of mind. With the right program manager in place, you can focus on and achieve overall project success and maintain a strategic approach for your investment without having to dig into the details. 

But how do you choose the right owner’s rep/program manager for your project? To help you navigate through the noise, we’ve compiled our list of the top seven questions to ask when hiring a firm to represent you during the planning, design, and construction process in the U.S. so you can find that right fit. 

1. Do you understand U.S. and local building codes and regulations for permitting? 

Why it’s important: national and local codes and regulations are complex. While they are designed to specify minimum requirements related to health, safety, and the welfare of building occupants, they can be challenging to comprehend fully. An experienced program manager will help you navigate these requirements through careful planning, ultimately allowing you to avoid common pitfalls.

2. Do you have a thorough understanding of the factors that will drive the budget, such as labor and materials?

Why it’s important: As the market booms, U.S. labor forces remain stretched, forcing the cost of labor to increase. The same is true with materials pricing, as across the board we are seeing a rise in the cost of materials (e.g., steel). An established program manager should know the market trends and local workforce, thereby helping you mitigate the impacts on your budget and realize success. 

Why it’s important: As we see material and labor costs rising, innovative solutions like AI/machine learning or virtual reality/augmentation are being used to offset the strain on the workforce and budget. The best program managers will know that keeping up with emerging trends and tools is important to maximizing your ROI. 

4. Do you have an advocate that can be your boots-on-the-ground resource?v

Why it’s important: There is great value in engaging an experienced partner with trained eyes and ears who understands the local design and construction community as well as the industry. A program manager who already has established relationships can more easily act as a facilitator throughout the project, providing you with the confidence you need to ensure you are safeguarding your investment. By hiring the right program manager, you can maximize your attention to other endeavors and responsibilities and remove any barriers that may come between you and success. 

5. Do you understand the various delivery models?

Why it’s important: An effective program manager will help you consider your options (Progressive Design-Build, CM-at-Risk, Design-Build, Integrated Project Delivery, etc.). Choosing the option that is best suited for how you do business is paramount to managing risk and creating a cohesive team approach. Plus, understanding the terms and conditions of your contracts helps ensure the project is delivered without an interruption in expectations. In particular, the Progressive Design-Build delivery model has become increasingly attractive to airports as it allows the owner to have more input into the overall design of the facility, manage costs in a proactive manner, and achieve substantial schedule benefits. An airport can significantly benefit by hiring a program manager that has experience not only in managing a Progressive Design-Build project but managing the construction of airport terminals utilizing the Progressive Design-Build delivery model.  

6. Do you have the capacity for this project?

Why it’s important: You need to know if the PM team has time to take on a capital project and manage the day-to-day details. This direct question gives firms an opportunity to recognize their potential distractions and request help in adopting a speed-to-market mentality. Through clear communication from the beginning, you can find a program manager who will study the way you work, help you manage decision-making through the chain of command, and put pressure at given points so you can meet your goals and mitigate your risk in the process. 

7. Do you understand what construction activities are eligible for your funding/grants, and do you know when you will need to have the funding available/on hand?

Why it’s important: To ensure that your project is maximizing the funding opportunities available, it is imperative to know what types of activities are eligible for specific funding sources/grants in order to prevent ineligible expenditures from being paid directly from the airport funds. Further, it is critical to understand the anticipated cash flow for the project in order to proactively ensure that money is on hand as invoices are received.

As a leading program management firm with a history stretching back to the 1940s, we know how to act as true advocates for our clients, helping airport owners complete their projects faster and for a better price. From coast to coast, HPM has managed more than $12 billion and audited over $30 billion in construction value during our 25-year history of program management work.

Interested in learning more? Contact Us today!

HPM Hosts Second Annual Georgia Education Executives Summit

Posted on May 1, 2024

April 24-26, executive leaders in Georgia education gathered for HPM‘s Second Annual Summit. School districts from across the state were represented at the event held in Adairsville. The Summit is a premier event designed to connect leaders in the K-12 industry to create unique strategies for navigating common challenges. Speakers included national experts in financing, staffing, planning and international business. Presenters shared insights on optimizing learning environments for students while maximizing facility lifespans.

About the Program

Featured keynote speakers included Cheryl Logan, Executive Director at the University of Pennsylvania and Casey Morris, Senior Director of Capital Planning at Ameresco. HPM’s Chris Allee, Megan Whitten Cordingly, Greg Ellis, Jake Ortego and Tracy Richter also shared best practices for navigating successful capital improvement programs. Each session was designed to foster a conversational, interactive environment to build connectivity among participants.

In a particularly insightful session highlighting program controls, attendees took an in-depth look at cutting-edge technology designed to empower leaders to make more informed decisions and better communicate with internal and external stakeholders. Embracing the digital world is paramount to achieving a successful program. Guests were also offered an approach to facility condition assessments that breaks the cyclical nature of facility planning. When implemented, this strategy enables K-12 leaders to create actionable, defensible and sustainable capital plans resulting in predictable outcomes.

The Summit’s closing session provided information on the role of educational facility standards in the development of an effective long-range facilities plan. These standards play a critical role in shaping the curriculum. Furthermore, they can be utilized to inform new construction, renovation and modernization, ultimately serving as a tool to generate improved educational performance.

“I was extremely satisfied with the quality of the content provided at The Summit,” said an attendee. “The Setting the Standard session brought everything together and was tremendously applicable. I am very likely to attend the event again and recommend that my peers in Georgia education do the same.”

Why HPM?

HPM partners with K-12 school districts to create and implement data-driven long-range planning initiatives. This team of seasoned planning professionals is comprised of former educators turned facilities conditions and assessment experts. They frequently teach the essential practice of integrated planning into capital improvement programs. HPM’s continuous planning practices consistently yield efficiencies and savings to K-12 clients. In turn, every dollar within a bond program is utilized to its full potential. Learn more about HPM’s extensive resume managing large-scale programs on behalf of K12 school districts.

AAR Breaks Ground on MRO Expansion at Miami International Airport

Posted on April 3, 2024

AAR CORP., a leading provider of aviation services, MROs and OEMs based out of Wood Dale, Ill., hosted a groundbreaking ceremony in Miami, Fla. on March 27th. The new MRO facility will be located next to AAR’s current hangar at Miami International Airport. With 114,000 square feet of additional space, AAR’s maintenance capacity is slated to increase by 33%. The three-bay facility will create more than 200 new jobs in the Miami area.

More than 400 guests attended the celebration commemorating the start of construction. Attendees included AAR’s Chairman, President and CEO, John M. Holmes, United Airlines‘ Vice President of Tech Ops- Heavy Maintenance, James Crane, Miami International Airport Director and CEO, Ralph Cutié and Miami-Dade County Mayor, Danielle Levine Cava.

“The construction of this facility is an important step in AAR’s growth strategy that enables us to best serve our valued customers.”, said Holmes. “We are enthusiastic that our expansion in Miami will create career opportunities and continue to strengthen the aviation industry in South Florida.”

HPM is providing planning services for the project, along with lease negotiation services and coordination with the Miami-Dade Aviation Department. HPM’s support enables AAR to focus on the maintenance of the 40-ton aircraft coming through its bays. With an extensive portfolio of aviation industry experience, HPM is uniquely qualified to position AAR for success in this growth endeavor, expected to be fully operational by October 2025.

AAR independently provides services to commercial and government customers worldwide. Operating worldwide for almost 70 years, AAR has established itself as a trusted global leader. The company is best known for strategic warehousing, parts supply and repair & engineering.

Are Claimed Weather Delays Correct?

Posted on January 30, 2024

Weather Delays

As owners’ representatives, HPM is often asked to evaluate the validity of claims for additional days due to weather delays. Typically, the owner’s entire team is able to play a significant role in the review process. Together, we can understand the requirements for an extension.

There are typically three main requirements for the construction manager to make an extension claim citing weather delays.

  1. They must notify the owner in a timely manner.
  2. The weather must be abnormal and, therefore, not predictable.
  3. The impacted work must be relevant to the critical path.

 

While each contract may vary, the requirements of the AIA 201 contract serves as a good base example.

Notification

AIA 201, section 15.1.3.1 determines the time frame as to when the request must be given to the owner. Claims by either party under Section 15.1.3.1 shall be initiated within 21 days after the occurrence of the event in question, or within 21 days after the claimant first recognizes the condition in question– whichever is later. Per the contract, the owner is responsible only for claims submitted within 21 days of the conditions. Please note, this paragraph states that the Construction Manager must notify the owner of a claim, not simply a notice of a weather event.

Abnormal Weather 

The stipulation is not if the weather impacted the work, but, if the weather was abnormal. AIA 201 Section 15.1.6.2 states, “If adverse weather conditions are the basis for a claim for additional time, such claim shall be documented by data substantiating that weather conditions were abnormal for the period of time, could not have been reasonably anticipated…”. In this sentence, you may rightfully focus on how to determine if the weather conditions were abnormal. It is also important to focus on the question of the correct “period of time”.

Related to the “period of time”, it is most logical to assume a weather event that disrupted a concrete pour would be the total scheduled time related to pouring concrete. This may be one and a half months, or it could be four months, but it is not specific to a calendar month (like just the weather impact in July). Related to any review of abnormal weather, one must have a basis for “normal”. The National Oceanic and Atmospheric Administration (NOAA) is the most common guide for this review.

Critical Path

AIA 201 15.1.6.2 states, “if adverse weather conditions are the basis for a claim for additional time, such claim shall be documented by data substantiating that weather conditions were abnormal for the period of time…and had an adverse effect on the scheduled construction.” You often hear the analysis of a delay as an analysis of the critical path. The critical path is the required sequence of work necessary to complete the project in the shortest possible time. While the analysis of the possible adverse effect of weather on the scheduled construction is a requirement, it may not be necessary to perform such an analysis if the other hurdles have not been met, namely, timely notice and proving the weather was abnormal.

Lump Sum General Contractors… Yes or No?

Posted on January 29, 2024

When contracting for construction utilizing the CMAR approach most owners ask themselves if agreeing to a lump sum for general conditions type cost is the best contracting method. While there is not one answer to all questions, there should be a discussion of the pros and cons associated with payment plans for general conditions type costs.

Where to Start…

A great place to start is analyzing the reasons for selecting a fixed amount for GCs in the first place. Are these types of costs difficult to review, in that there are many small expenses? Are some of these costs difficult to understand, such as payroll burden and insurance? Might some of these costs, such as supervision and management, be subjective? Are we trying to eliminate the need to evaluate subjectivity?

Secondly, if we are going to specify a fixed amount for GCs, we must define General Conditions. Defining anything labeled as “General” takes work and specificity in order to ensure understanding.

Because there is no one “correct” approach, the question should not be binary (yes or no). There is a third option, Not to Exceed (NTE). NTE can be a good option in that the sum cannot be higher than, but could be less than, and can also be reviewed or audited if needed.

Factors to Consider

Without writing a dissertation on each of these points, it is important to consider problems that might arise from the lump sum GC’s method, along with other relevant factors.

Sure, invoices take time to review, and GC’s costs come with a lot of invoices. However, in some cases, not all invoices must be reviewed. Having the ability to review, but not the requirement, may be helpful.

Getting the lowest GC’s bid is occasionally a good thing, but having the best CM supervision is almost always a good thing. How many projects have gone awry because of excessive supervision or overly qualified personnel? A low bid for GCs (at least 50% complete supervision and management) positively correlates to less supervision and less experienced personnel. Incentivizing less supervision and experience is not our goal, but it may be the result.

There can be a case for certain types of GC’s costs being subjective. Mostly, off-site vs. on-site persons as reimbursable. This can be mitigated by making the dividing line clear in your contract and including that contract in your RFP.

In addition to the possible misaligned goals of the owner and CM with low bid GCs, another result of an LS GC’s approach could be a CM shifting GC’s type costs to the Cost of Work, either in a subcontract or in self-performed work.

Transparency is Key

Lastly, what starts as fixed, doesn’t always remain fixed. Having full transparency to actual costs when a claim for additional GCs arises might be helpful.

When we have these discussions (which are quite frequent), we agree with the CM that the Lump Sum is not adjustable. This, however, does not mean that it is not auditable. Also, just because the CM (at the moment) might think that certain costs are not reimbursable doesn’t mean that they are not project-related records that are auditable by the Owner’s accountants.

Why Does this Matter?

You may ask, “Why do we care, as long as we are not being charged any more than we agreed to and if they aren’t going to bill us that cost?” There are many reasons, including:

Credits related to the reimbursable Cost of Work may be miscoded to the LS or not reimbursable job cost (accidentally, of course), thereby inflating the Cost of Work.

Costs that are to be apportioned to the lump sum and to the reimbursable cost may only be charged to the reimbursable cost (again, an oversight). Having access to all the cost records would make such errors easy to spot (Dumpsters for demo work vs. dumpsters for new construction trash, where demo work is being self-performed on a lump sum basis).

Costs that are charged to non-reimbursable may point to other errors, like consultants being billed as employees (at fixed labor rates), or rental equipment from third parties being charged as if it were owned by the CM.

Illegal expenditures may be hidden in LS or non-reimbursable job costs.

As you are contemplating the above, also contemplate that well over 50% of the time, a review of the project records designated by the CM to be LS or not reimbursable indicates that credits are owed to reimbursable Cost of Work that would have not been discovered otherwise.

K12 School District Leaders Attend HPM’s Executives Summit

Posted on November 16, 2023

HPM recently hosted the inaugural HPM Texas Education Executives Summit, a premiere event connecting executive leaders in K12 school districts to create unique strategies for navigating common challenges. The Summit, held November 1-3, 2023 at The JL Bar Ranch, provided the perfect backdrop for an elevated networking and educational experience. Leaders representing seven districts across the state were in attendance, along with national experts in finance, facilities planning, contract management/auditing and other fields impacting the K12 industry.

About the Event

Attendees gleaned valuable insight on approaches for successful bond planning and execution. Topics included strategies for maximizing bond dollars through comprehensive Planning, best practices for navigating bond elections, tips for developing and maintaining a master schedule. As a highlight, HPM President, Ryan Austin and Senior Vice President of Program Development, Greg Ellis led a discussion on capital program success, offering strategies for managing multiple contractors, efficient program controls strategies, managing delays such as materials availability, change orders and contract disputes. Most importantly, sessions were robust, reality based and designed to foster conversation.

The Summit concluded with a round table discussion of open-ended topics benefiting all attendees with a focus on methods for overcoming operational challenges. Outcomes of the discussion provided thought provoking ideas for participants to take back to their districts, as well as a framework for future Summit topics.

Why HPM?

HPM partners with K12 school districts to create and implement data-driven long range planning initiatives. This team of seasoned planning professionals is comprised of former educators turned facilities conditions and assessment experts. They frequently teach the essential practice of integrated planning into capital improvement programs. HPM’s continuous planning practices consistently yield efficiencies and savings to K-12 clients. In turn, every dollar within a bond program is utilized to its full potential. Learn more about HPM’s extensive resume managing large scale programs on behalf of K12 school districts.

Cost Segregation: Increase Cash Flow and Maximize Investment Potential

Posted on May 30, 2023

Engineers Specializing in the Niche Service Offering of Cost Segregation

At the center of HPM lies a clear and simple mission: acting in the best interest of the owners we represent at all times, so that they might maximize the productivity and profitability of their entity. Underneath this broad umbrella lie numerous service offerings providing owners with practical steps to accomplish their goals. The Audit & Contract Services group within HPM are experts not only in construction but also in the world of finance and accounting. These professionals are able to save millions of dollars on behalf of their clients by applying this unique combination of skills and industry knowledge. Within the Audit & Contract Services group are engineers specializing in the crucial service offering of Cost Segregation.

Maximizing Cash Flow

Cost segregation is a powerful tool in reducing taxes and producing additional cash flow in the early years of property ownership, enabling assets that depreciate more quickly to be separated from the standard depreciation schedule for the property. Within today’s volatile market, many property owners are wishing they had known about cost segregation sooner. For those who have acquired, remodeled, or built a piece of property this year, a cost segregation study is the best way to reduce taxable income and increase your cash flow sooner by identifying components of a project that are eligible for faster tax depreciation.

Cost Segregation

Bonus Depreciation

Cost Segregation becomes all the more powerful when taking into account bonus depreciation, which is being phased out slowly over the next four years. According to the IRS, some properties qualify for bonus depreciation, which is an additional five-year depreciation and allows these property owners to deduct a specified percentage (usually 30%, 50% or 100%) in the same year the property is placed in service. Customers should take advantage of this extra benefit on top of Cost Segregation while it is still around, as it will start to see a 20% reduction beginning this year.

Choose Your Team Wisely

Due to the many complexities and nuances that accompany Cost Segregation, it is imperative that you choose a partner with an engineering background. Cost Segregation is more of an engineering function than an accounting function, and this is proving to be true as the pool of companies offering Cost Segregation services has become more saturated. The IRS is starting to weigh the validity of firms that utilize an engineering approach over those that take an accounting approach, as it takes a true engineering knowledge of building components to segregate the asset correctly. A firm may claim to abide by IRS guidelines, but it takes specialized experience to accurately understand this. Any study done without this substantial background knowledge could potentially be thrown out or leave money on the table.

Bottom line — if you are thinking about utilizing a Cost Segregation study, consider partnering with HPM and benefitting from our team’s significant experience carrying out these practices. The rewards may be even greater than you think.

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