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California State Auditor Report Number : 2015-117

California Department of General Services’ Real Estate Services Division
To Better Serve Its Client Agencies, It Needs to Track and Analyze Project Data and Improve Its Management Practices

March 15, 2016 2015-117

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814

Dear Governor and Legislative Leaders:

As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning the efficiency and effectiveness of the California Department of General Services’ Real Estate Services Division’s (division) planning and completion of construction projects that were active between January 1, 2011, and June 30, 2015.

This report concludes that for 25 projects we reviewed the division exceeded its initially estimated time frames and costs for the majority of the projects. We identified a variety of common factors that contributed to these delays and cost overages—such as client requested scope changes, design deficiencies, and planning inadequacies. Although some of these factors may not have been preventable, we noted that the division could have prevented others if it centrally tracked and analyzed data related to these projects. This lack of data hinders division management’s ability to do the following: assess how effectively it is delivering projects for its client agencies, identify undesirable patterns, and adjust its processes for project delivery accordingly. Further, although the division cannot demonstrate whether it has a backlog of construction projects, given the frequency with which the division exceeded its original time frames for the projects we reviewed, it is reasonable to conclude that other projects were not able to begin on time. Moreover, we identified a contracting method, known as job order contracting, that we believe could ultimately reduce project time frames and costs for certain types of projects.

We also noted that the budgets of construction projects managed by the division’s Project Management and Development Branch (project management branch) include costs related to planning, project management, design, review, inspection, and administrative services. Many of these costs are charged through an hourly rate to client agencies. The hourly rate it charges for its design, project management and construction management services is much higher than the rates of private sector firms conducting similar work for the State. Based on a rate analysis conducted by the project management branch, it concluded that administrative and overhead costs largely contribute to the difference between these rates. However, this analysis is inadequate and does not fully explain the differences between the rates, hindering the division’s ability to ensure that the project management branch’s rates remain competitive for its client agencies and that it is providing the State with the best value.

Finally, this audit found that the division has not developed adequate goals or meaningful metrics by which to measure its progress in delivering projects on time and within budget. Because it has not done so, the division is missing a key opportunity to obtain information critical to developing effective training for its staff. Thus, it is not surprising that we found the training the division’s two largest branches provide to staff is largely inadequate and infrequent. Further, the limited training it does offer is generally not focused on project delivery. Without a formal training program that incorporates mechanisms to evaluate the division’s project management processes, identifies room for improvement, and provides the needed training related to project delivery, we question how the division can claim that its staff are adequatelytrained.

Respectfully submitted,

State Auditor

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