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Report Number: 2016-125.1

The University of California Office of the President
It Has Not Adequately Ensured Compliance With Its Employee Displacement and Services Contract Policies

August 22, 2017 2016-125.1

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 University of California (university) Office of the President’s oversight of university locations’ use of services contracts.

This report concludes that the Office of the President has not ensured that university locations follow its policy for justifying their decisions to displace university employees and it needs to ensure that university locations comply with its policy when contracting for services. Two of the 31 services contracts we reviewed displaced university employees. However, the two university locations administering these contracts did not fully adhere to the University Guidelines on Contracting for Services (displacement guidelines), in part because they did not submit required information to the Office of the President for review. Moreover, the Office of the President has not adequately enforced university locations’ compliance with the displacement guidelines. Further, the displacement guidelines do not address situations in which university locations could hire new employees rather than contracting for the services. Nine of the 31 service contacts were for services that university employees might have been able to perform. We also observed that services contract workers generally received less compensation in wages and benefits than university employees who performed similar work.

Our review of 30 services contracts found that five university locations and the Office of the President generally adhered to the Office of the President’s contracting policy. The remaining services contract we reviewed was solely to address the issue of displacement as described above. We found that university locations could make certain improvements, such as by ensuring they include the university’s standard terms and conditions in their services contracts. We also found that some university locations avoided competitive bidding by repeatedly amending their services contracts. Moreover, the university’s broad definition of professional services and misuse of sole‑source exemptions may have contributed to some university locations avoiding competitive bidding requirements.

Finally, the Office of the President could do more to create cost efficiencies in its systemwide procurement program by implementing a central contract database and guiding the university locations on how to redirect procurement benefits to the university’s core missions of teaching, research, and public service.

Respectfully submitted,

State Auditor

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