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California High‑Speed Rail Authority
Its Flawed Decision Making and Poor Contract Management Have Contributed to Billions in Cost Overruns and Delays in the System's Construction

Report Number: 2018-108


Scope and Methodology

The Joint Legislative Audit Committee (Audit Committee) directed the California State Auditor to perform an audit related to the Authority's costs and contracting processes, as well as several other audit objectives. Table A below outlines the Audit Committee's objectives and our methods for addressing them.

Table A
Audit Objectives and the Methods Used to Address Them
1 Review and evaluate the laws, rules, and regulations significant to the audit objectives. Reviewed relevant laws, regulations, policies, and procedures.
2 Review and assess the Authority's policies, procedures, and processes for managing contracts and containing costs for the project, including its processes for tracking, reviewing, and paying contractor invoices.
  • Reviewed prior audit findings from our office and the Authority's internal audits office related to contract management policies, procedures, and practices.
  • Reviewed the Authority's 2017 revised contract management policies and procedures.
  • Identified areas of the 2017 policies and procedures most closely related to controlling costs and ensuring value. We compared those areas to the Authority's previous policies and to the State Contracting Manual.
  • Selected nine active environmental, engineering, or professional services contracts with a total value of $1.3 billion and reviewed the contract managers' compliance with the Authority's policies and procedures. We also reviewed the Authority's management of its three active construction contracts, with a total value of $3.1 billion.
  • When necessary, reviewed contract materials provided by persons other than contract managers, such as other Authority staff, outside consultants, or the contractors themselves.
3 Evaluate the Authority's process for reviewing and approving design-build contract change orders.
  • Reviewed Authority construction data and documentation to determine the number and value of the change orders it has executed to date and of those it expects to execute before the completion of the Central Valley construction.
  • Judgmentally selected 16 change orders, including three rejected changes. We reviewed supporting documentation to determine if the Authority followed the processes outlined in its policy for processing change orders.
  • Analyzed the Authority's future cost estimates to determine the major risk areas contributing to executed and expected change orders. We interviewed Authority staff and reviewed documentation to assess how the Authority's decisions contributed to changes.
  • Analyzed the Authority's baseline schedules and other planning documents to determine the current and expected effects of change orders on the system's cost and schedule.
4 To the extent possible, review and evaluate the Authority's efforts to determine the economic impact the project has had on communities in those areas where construction is underway.
  • Reviewed the Authority's reporting on the economic impact of its expenditures from July 2006 through June 2017.
  • Reviewed documentation to determine the extent to which the Authority supported its reported expenditures.
5 Determine the extent to which the Authority contracts with small and disadvantaged businesses.
  • Reviewed state laws and other state and federal criteria related to utilizing small, disadvantaged, and disabled veteran owned businesses.
  • Selected 10 contracts included on the Authority's utilization reports and reviewed supporting documentation.
  • Identified the number, type, and value of contracts for which the Authority does not report its utilization of small, disadvantaged, and disabled veteran owned businesses.
6 Review the Authority's sustainability policy and assess its compliance with the policy. Assess the Authority's efforts to evaluate the economic and environmental outcomes of its policy.
  • Reviewed the Authority's sustainability policy and implementation plan.
  • Reviewed nine entries from the Authority's sustainability database to assess the extent to which the data are valid and supported by required documentation.
  • Engaged a sustainability consulting firm to evaluate the Authority's sustainability policy, implementation plan, reporting, and progress toward goals in comparison to industry best practices and other, similar projects.
7 Determine whether there are opportunities for the Authority to expedite the project and reduce costs through cooperation with other transportation entities, such as other transit or rail lines, or through capturing additional value through construction of project facilities.
  • Reviewed the Authority's business plans to determine how the system plans have evolved over time to increasingly include blending with existing infrastructure.
  • Interviewed Authority staff and reviewed Federal Railroad Administration regulations to determine how blending is likely to affect rail service operations.
  • Reviewed the Authority's environmental and engineering planning documents to determine when the Authority made key decisions about blended infrastructure.
  • Compared the Authority's system cost estimates over the past six years to assess how blending has led to reduced costs.
  • Interviewed staff and reviewed documentation to determine whether additional options exist to blend elsewhere in the system.
  • Reviewed academic and industry materials on opportunities to capture additional value through construction of project facilities and determined that the Authority has worked with cities to evaluate their feasibility, but is still in the early stages of this planning.
8 Review and assess any other issues that are significant to the audit. We did not identify any additional issues that are significant to the audit.

Sources: Audit Committee's audit request number 2018‑108, planning documents, and information and documentation identified in the table column titled Method.

Assessment of Data Reliability

In performing this audit, we relied on electronic data files we obtained from the Authority's oversight firms related to the dollar amount and nature of changes to the Authority's construction contracts. The GAO, whose standards we are statutorily required to follow, requires us to assess the sufficiency and appropriateness of any computer‑processed information we use to support our findings, conclusions, or recommendations. To perform this assessment, we evaluated the oversight firms' data against sources of corroborating documentation from both the Authority and its construction contractors. We determined that the data was sufficiently reliable for the purposes of summarizing change orders in this report.

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