Editor's note: Tay Yoshitani, chief executive officer of the Port of Seattle, last week wrote an open letter to the community about a recent performance audit that was critical of the port. Yoshitani succeeded Mic Dinsmore as port CEO in March 2007. The port operates Sea-Tac International Airport. Excerpts from his letter appear below.

This year the State Auditor's Office conducted a performance audit of the Port.

Based on recent headlines concerning the performance audit at the Port of Seattle, I'm sure many have asked themselves, "What's happening at the Port?"

Fair question - and as the Port's CEO, I want to share some of my thoughts about the audit, as well as the action plan to help right this ship.

First, I want to clarify one of the biggest concerns raised in this audit - wasted money. The Port did not waste $97.2 million in taxpayer money.

Here's where I'm coming from: $60 million of that number relates to the Port hiring a national contractor, instead of hiring more Port staff, to manage the redevelopment of Sea-Tac's terminals. This contractor has to date been paid $120 million over the past 10 years.

As you can imagine, airport facility development is a very specialized field that requires a wide variety of high-demand skills - and some of those skills are only needed on a short term, sporadic basis.

Construction on these projects must occur while serving crowds larger than a sold-out Seahawks game every day.

While the Port did hire its own staff when possible, the Port's use of consultants is consistent with best industry practices and supported by our airline partners, whose dollars pay a significant portion of Sea-Tac's redevelopment.

Major airports, including Atlanta, Baltimore, Washington Dulles, LAX, San Francisco and San Diego, utilize consultant staffing in similar ways.

The Port Commission originally approved this contracting approach and also re-approved it each year of this ten-year contract to date.

The performance auditor also took issue that the contract grew from $10 million to $120 million without competition.

In fact, the original bidding documents stated this would be an annual contract expected to extend over 10 years - and all bidders were aware of that expectation.

We structured the contract that way to save money. We let each year's performance be reviewed before approving the next year's work.

The auditor states that we wasted $32 million because the construction contract for a portion of the third runway exceeded our initial cost estimate by $32 million.

Bids often vary from estimates - particularly when the construction market is booming, as it was at the time. People involved in construction - whether public or private agencies or homeowners contemplating a remodel - understand that even thoroughly researched cost estimates can change as the project nears.

Ultimately, the market dictates the cost to build something. Because of the tight construction market, we received only one bid for this portion of the embankment project.

Constructing the embankment involved moving 539,000 dump-truck loads of dirt and shaping it into the base for the runway. We could have rejected that bid and started over, but doing so would have delayed the project by a year.

The Port staff has acknowledged that the Port Commission should have had more involvement before proceeding in this unusual situation, and that our contract process should have been better.

However, it's wrong to state that $32 million was wasted because it exceeded an original engineer's estimate.

We had an engineer's estimate-which was just that, an estimate. Actual bids often differ from bid estimates in both private and public construction projects.

When we awarded the contract, there was only one bid received - from a reputable, local company that has been a mainstay in Puget Sound construction projects.

We were in the middle of a region-wide, if not world-wide, construction boom and costs for materials had skyrocketed. We still see this today as oil, steel and concrete continue to hit record prices, in part with the rapid growth of China and India.

Ultimately, the market sets the price for the work, not our own engineer's estimate.

Let me be clear - we welcome and embrace most of the performance auditor's recommendations. I don't want our disagreement with the claim for wasted funds to diminish our commitment to developing better policies and procedures.

Core Values

The citizens of King County have entrusted the Port with a vital mission: creating economic growth. The Port is guided by core values that include keeping costs down, being accountable for our actions, and keeping the public informed on how things are going.

But clearly, we have work ahead of us in communicating how we incorporate these values into the Port's everyday operations.

The recent performance audit primarily focused on the major construction projects undertaken in recent years, especially at Sea-Tac.

You can see the results of this construction in the new Central Terminal and Arrivals Hall at the airport, the new cruise ship terminals along the waterfront ... and in the developments at the Port's container terminals.

Of course, the biggest of these projects is construction of the third runway. We plan to land the first plane on the new runway this fall-a huge accomplishment that will benefit the entire region.

Overall, these projects represent an investment of more than $4 billion in the past decade in Port facilities that support nearly 200,000 jobs and over $12 billion in annual revenue.

Much has been accomplished in the last ten years. However, the performance audit makes clear that we must change some of the ways we conduct business in our capital development program.

So, where do we go from here?

Continuous Improvement

.... We have an action plan to address the [audit's] recommendations. You can view that plan [at www.portseattle.org]. Two of the plan's key components:

I have established an internal team to recommend how we can best centralize our procurement activities.

The Port Commission is establishing a task force to recommend changes to the resolution that governs delegation of Commission authority to staff, general oversight and project authorization....

I intend to have these changes implemented by June 2008.

I agree with a majority of the remaining recommendations and we are in the midst of implementing them.

Zero Tolerance for Fraud

The Port has zero tolerance for fraud.... This audit, like previous ones, did not find actual instances of fraud. However, the performance auditor has indicated areas where the Port could be vulnerable to fraud.

As a result, I will hire an external firm to conduct an independent fraud audit which will specifically review these areas of vulnerability.

The performance audit report recommended establishing a fraud hot-line, and it is already up and running. Anyone with reason to suspect fraud is encouraged to call 877-571-5237....

Cooperation

The Port of Seattle has participated in 45 audits in the last ten years, including annual accountability and compliance audits conducted by the Washington State Auditor.... [O]nly those auditors involved in this performance audit have ever accused Port staff of being uncooperative....

Nevertheless, when the performance auditor first raised issues of staff being uncooperative, the Port's executive team reiterated to staff that full cooperation was expected of them....

As to the auditor's position that files were altered, I think two dynamics were at hand. First, our normal practice has been to assemble information for an auditor so it is easier for them to do their work.... We were unaware that this auditor did not want materials assembled - once that was made clear to us, we complied with that request.

Misunderstanding a request for information is a far cry from impeding access to it.

Second, certain staff members did catch up on backlogged filing and documentation, but they did not alter the information-only update and assemble it. The need for better record keeping is a central part of the audit's findings.... In the future, we will not let good intentions get in the way of good record keeping....

I will use this audit to improve the Port's operations, including how staff members perform their duties. Employee performance reviews and our employee discipline policy will be part of this process; depending on the severity of any violations, corrective action could range from verbal warnings to termination.

I will also continue my discussions with the State Auditor to examine cooperation during this performance audit and clarify our mutual best practices for cooperation during future audits.

Ultimately, though, this is about more than changing Port procedures and discipline; it is about changing our culture.

To make this place run more efficiently, we truly have to take some time to review these complicated contracting programs and how they relate to our larger Port operations.

Some changes are already underway, but others will take a bit more time if I'm to deliver the accountability this community wants and deserves.

My Commitment to You

I will always work to improve the Port's ability to keep down costs and spend wisely.... I will work to protect taxpayer and customer resources and go after any waste, no matter what the amount involved.

As I stated earlier, we welcome and embrace most of the performance auditor's recommendations.... This audit provides many important recommendations that can improve our operations and our culture. The new Port Commission and I are excited to embrace the opportunity this audit provides and seize this moment of change to improve the Port.

We have a great deal of work ahead of us in the coming months as we follow through on these commitments. We'll get it done, and we will be a better Port for it. I assure you that we won't let the citizens of King County down.