Board of Regents discusses UIHC audit, comments on Modern Piping allegations

UI President Bruce Harreld and regents speak out on the UI’s legal dispute with Modern Piping regarding the Stead Children’s Hospital.


Joseph Cress

Iowa fans wave to kids in the Stead Family Children’s Hospital during an NCAA football game between Iowa and Wyoming in Kinnick Stadium on Saturday, Sept. 2, 2017.

Katie Ann McCarver, News Reporter

The state Board of Regents and University of Iowa President Bruce Harreld said on Wednesday the UI has taken the proper course of action amid an ongoing legal dispute with Modern Piping over the UI Stead Family Children’s Hospital construction project.

“The university is acting within its rights on these matters and will pursue its rights of appeal,” Harreld said. “We’ve learned something from this process, and we have a right to be heard.”

Over the last three years, Navigant Consulting Inc. has conducted an investigation into the efficiency of policies, procedures, and internal controls at the Children’s Hospital and its remaining construction costs.

The Navigant review of the facility comes as the UI defends itself against allegations by Modern Piping, which claims that the UI did not pay what was owed during the construction of the Children’s Hospital. Harreld responded to the case at the state regents’ Audit and Compliance Committee meeting in the IMU on Wednesday.

Modern Piping is one of the 24 local contractors hired in the construction of the hospital, a nine-year project with a budget of more than $300 million funded by bonds, patient revenue, and private donors, according to the hospital’s website.

The UI reported it paid Modern Piping $57 million; another $17 million is in dispute. The latter and the order to arbitrate are on appeal to the Iowa Supreme Court.

“Auditors noted a lack of accurate progress reporting and monthly updates,” Chief Audit Executive Patrice Sayre said. “There were insufficient contingency funds and limitations in software, including no efforts to integrate with university systems.”

Further points included misalignment of scope and budget, insufficient scheduling, slow turnaround times for change orders, and more.

“At the conclusion, management has altered many processes according to the suggestions made by Navigant,” Sayre said. “They’re changing turnaround times and providing the appropriate documentation for variation of amounts.”

Overall, the Children’s Hospital has made changes to its development and management of schedules, standardization of guidelines, and enhanced use of technology, Sayre said.

“We welcome audits on campus,” Harreld said. “We knew we had issues, and knew we needed to change some things. So we did.”

Harreld said the regents are eager to resolve these issues now, in order to avoid such complications in future projects of the same size.

“This is by far the largest and most complex project we as a university have ever seen,” Harreld said. “We took this large contracting package and broke it into smaller ones, but we needed more financial management oversight and better schedule monitoring.”

Regents have followed the court case as it has developed, having played a crucial role in the establishment of the Children’s Hospital and its design.

“UI is doing exactly the right thing,” Regent Larry McKibben said. “There’s no question in my mind that this deserves to be at the Supreme Court in the state of Iowa to make that final decision.”

According to the UI, Modern Piping has not provided the “as-built” plans and more that was specified in its contract. Attempted negotiations failed because of UI’s refusal to accept deals that threaten state assets and citizens of Iowa, Harreld said.

“While the university has attempted to negotiate in good faith multiple times, it has found an unwilling partner,” he said. “The university refuses to accept a deal that does not protect the patients, students, taxpayers and families of Iowa.”