Denver’s prequalification process for contractors working on projects valued at $1M or more is too opaque and lacks a consistent process to prevent city agencies responsible for selecting contractors from receiving inaccurate or misleading information, according to a new report from city auditor Tim O’Brien.

The audit was released as Denver undertakes several large construction projects ranging from upgrading the National Western Center to adding new gates and concourses at Denver International Airport.

“We need a balance between transparency for contractors, accountability, and a workable process that encourages the best companies to work with the city,” O’Brien said in a news release. “We’re limiting our options with a process that’s complex and not transparent.”

Denver’s charter gives all contractor prequalification authority to two entities, the Department of Transportation and Infrastructure and the Denver International Airport. Representatives from both entities co-manage a body known as the Prequalification Board, tasked with reviewing a particular contractor’s staffing capabilities, safety record, financial capabilities and past performance on city projects.

At the end of the process, contractors are assigned a financial score that dictates what kind of projects they are allowed to work on. However, the audit found that contractors who go through this process are rarely, if ever, notified why they were assigned certain scores. The process also doesn't have a way for contractors to appeal the decisions of the Prequalification Board, according to the audit.

The audit also found there are unnamed “optional” factors that the Prequalification Board can use to determine financial scores for contractors, which could allow the board to make subjective decisions regarding contractor qualifications. It could also allow for a board member to manipulate the outcome of a contractor prequalification process, although the audit said it found no evidence that such impropriety has occurred.

“While we found no evidence of improper decision-making, such as a board member potentially manipulating the outcome of a recommendation, we can have no certainty that this has not occurred because the Prequalification Board does not transparently document how it arrives at its recommendations,” the audit says.

There were also instances documented where contractors submitted false or misleading information to the Prequalification Board. The audit found that Denver’s contractor application process doesn't ask contractors to divulge information about their past performance on city projects or whether they have ever missed a payment while being under contract with the city. The audit found that prequalification staff often don't verify contractors' self-reported information regarding their financial health or ability to meet a contract's scope of work.

O’Brien recommended that DOTI and DIA update their prequalification process to include more transparency and give contractors a way to appeal their financial scores. The audit also recommends that the Prequalification Board start documenting how it makes decisions and require staff to verify the information submitted by contractors.

“This is an important process,” O’Brien said. “Making the process more competitive benefits the taxpayers and makes the process fairer.”