By Shaina Cole | Contributing Writer, Rocky Mountain Voice
A contractor digging up 16th Street hit a brick sewer the city hadn’t mapped. The cost of Denver’s signature downtown project jumped by $18 million, the finish line slid back nearly a year, and City Council found out after the deal was done.
That sequence sits at the heart of a new audit from Denver Auditor Timothy O’Brien, released Aug. 20. The report walks through how the 16th Street Improvement Project grew from a $149 million council approval in 2021 to a final cost of about $175.6 million, and how the single biggest change along the way never came to a council vote.
How $18 million skipped the council
The Department of Transportation & Infrastructure (DOTI) hired PCL Construction Services to rebuild the road.
In 2022, PCL uncovered a brick sewer beneath 16th Street, and work around the discovery stopped. The city hadn’t accounted for the sewer in its environmental assessment or its planning, and it had limited how far underground crews looked before work began.
What followed was a settlement.
The city and PCL signed a change order that added $18 million to the contract and pushed completion out 301 days, from Dec. 31, 2024, to Oct. 28, 2025.
A change order, not an amendment. That’s the whole story.
Under the city’s setup, a change order adjusts scope, time, or budget inside an existing contract. An amendment changes the contract itself, and amendments go to City Council for review and approval. Because the sewer deal was written as a change order, it never did.
The rule that allowed it is spelled out in the city’s Executive Order No. 8.
A change order needs City Council approval if it pushes a contract’s value past $500,000. But if the contract already tops $500,000, later change orders don’t. The 16th Street contract was approved at $149 million, so the $18 million change and its settlement never went before the council.
Auditors called that a gap in the city’s ability to oversee its own contracts. They found no mechanism to convert a change order into an amendment, even when the change is substantial enough that it should get a council vote.
The committee members who handle department oversight were concerned about what happened.
Shontel Lewis, who chairs the Transportation & Infrastructure Committee, told auditors the change order was significant and the department should have brought it to the committee. Not keeping the council informed, she said, kept members from making informed decisions about the city’s budget.
Vice-chair Chris Hinds said there is an expectation the department discuss cost overruns and delays with the committee. Members pointed to Denver International Airport, which they said routinely briefed the committee on the status of its Great Hall project.
O’Brien’s office described the risk.
“If there is no mechanism allowing change orders to become amendments, construction projects can continue circumventing City Council review for costly contract alterations,” O’Brien said in the audit’s release. “When strong oversight is absent, budget transparency is reduced and public trust in responsible city spending is lost.”
The department disagreed with the fix.
In its written response, DOTI said it followed current contract terms, city policy, and City Attorney’s Office guidance in treating the matter as a disputed change order and legal settlement.
That guidance, the department wrote, “recommends utilizing change orders for scope, time, and/or budget changes unless they constitute a cardinal change. Change Order 3 increased costs primarily due to delays and a contractor dispute, not a cardinal scope change.”
The auditor’s rebuttal, printed alongside the response, said the department missed the point. The finding was never that the change order broke the law. It was that the combined change order and settlement altered the contract enough to need a higher level of oversight, and the city’s rules give no way to require it.
Eleven change orders, $27.2 million
The sewer deal was the largest change, not the only one.
Auditors counted 11 change orders on the project, totaling $27.2 million. That added 18.2% to the original $149 million budget.
The report notes there is no fixed rule for when change orders become excessive, but that they are usually held within 5% of the budgeted cost. This project ran past three times that. After about $571,000 in cost reductions from cheaper substitutions, the final tab came to about $175.6 million, roughly 17.9% over plan.
Two change orders drove most of it. The $18 million sewer settlement was one. Change Order 2, covering storm sewer and Denver Water work, ran $5.3 million. Together the two made up about 85% of all change-order costs.
The bidding auditors couldn’t trace
The audit also faults how PCL got the job.
The department could not produce score sheets or aggregated bid scores showing why PCL was chosen, because it hadn’t kept them. Without that, auditors could not verify the award followed a competitive process. The report calls the result an unsupported $149 million award decision.
The field had already thinned. Three firms qualified to bid. One of them, Kiewit Corporation — ranked the third-highest design-build contractor in the country in 2020 — withdrew before proposals were due, citing utility risks. That left two. Auditors noted the department never took Kiewit up on an offer to discuss its concerns.
The damages the city let go
Contract terms weren’t always enforced. Of the project’s 14 blocks, only one finished on time. The contract let the city fine PCL for missed deadlines, penalties called liquidated damages, and auditors calculated those would have totaled about $1.03 million.
The department chose not to collect them.
Leaders said they waived the damages for missed deadlines to maintain the city’s relationship with PCL. The settlement then reshuffled the completion schedule without settling how liquidated damages would be handled going forward.
What the city accepted, and what it didn’t
The audit made 10 recommendations. DOTI agreed with seven and disagreed with three, including the central one: create a process to identify when a change order alters an agreement enough that it should become a council-reviewed amendment.
It agreed to formalize what it reports to City Council beyond the legal minimum, to keep full records of the bidding process on capital projects, and to build an approach for unexpected discoveries on future federally funded work with underground components.
On the disputes, O’Brien, in his letter to the department, wrote he was “disappointed Transportation & Infrastructure chose to disagree with three recommendations that would improve the city’s governance and management of future capital projects.”
The auditor’s overall read was not that the project was a fiasco.
City project management was “generally effective,” the report says, but can be strengthened.
The full audit and the department’s written responses are posted on the Auditor’s Office site.
The location of the sewer was a surprise.
Denver doesn’t have a complete map of its own brick sewer lines, and the audit acknowledges that investigating the ground more thoroughly before construction would have meant tearing up pavers and rerouting downtown shuttles.
Unforeseen conditions underground are a real hazard on projects like this.
The part the city can plan for is who signs off when the bill changes. On 16th Street, the answer was that the council didn’t have to. That answer is still in the books.