Report 2016-132 Recommendation 2 Responses

Report 2016-132: Department of Water Resources: The Unexpected Complexity of the California WaterFix Project Has Resulted in Significant Cost Increases and Delays (Release Date: October 2017)

Recommendation #2 To: Water Resources, Department of

To better manage large infrastructure projects, DWR should develop and implement a project-reporting policy requiring its management staff to document and justify decisions to proceed with such projects if they are expected to exceed their established budgets by 10 percent or schedules by 12 months. DWR should make these documented decisions and justifications publicly available and submit them to the Resources Agency for review and approval.

1-Year Agency Response

The Governor's recent approval of AB 2543 essentially codifies this recommendation of the Auditor at Government Code section 11093.7. The new statute requires state departments undertaking an infrastructure project costing $100,000,000 or more to publicly post on its Internet Web site any change in the cost or schedule of the project that would result in the project exceeding its established budget by 10 percent or more or in delaying its completion by 12 months or longer. The posted information shall describe how much the project is expected to exceed its established budget or delay its construction schedule.

California State Auditor's Assessment of 1-Year Status: Resolved

We agree that DWR correctly characterized the requirements of AB 2543. While the new law does not address the Resources Agency review/approval and documentation portions of our recommendation, we believe it appropriately captures the spirit of our recommendation, which was intended to increase transparency and ensure agency is aware of major overruns. Accordingly, we've marked this recommendation as "resolved" instead of "fully implemented.

6-Month Agency Response

DWR continuously strives to improve its transparency, project management, monitoring, and usable metrics related to large infrastructure projects. To this end, DWR will evaluate its existing policies and procedures related to increases in project cost and delays in project schedules. DWR will then develop or amend policies and procedures if needed to include a mechanism for reporting material cost and time increases to the public. DWR will update its progress on this issue at the next periodic report to the State Auditor.

California State Auditor's Assessment of 6-Month Status: No Action Taken

60-Day Agency Response

This recommendation does not make a distinction between the planning phase of a project and the design and construction phase. DWR believes this is an important distinction, as evidenced in the Report's findings for the planning phase of the WaterFix. The recommendation presupposes that an extension of time during a project planning phase is something that has a negative consequence. This recommendation has limited applicability here, since decisions regarding this project were made in response to stakeholder input and public comments to increase the range and scope to better meet the needs of the state. The planning process for large infrastructure projects is complex and subject to changing requirements and scope from a variety of sources including regulating agencies, project proponents, stakeholders, and the public at large. As seen with WaterFix, this results in increases in scope and schedules that are beyond the control of DWR. Limiting the Department's ability to be responsive to stakeholder input during complex "planning" efforts would be counterproductive.

California State Auditor's Assessment of 60-Day Status: Will Not Implement

Our recommendation does not presuppose that time delays have a negative consequence, rather that they should be thoroughly justified and vetted. The recommendation does not limit DWR's ability to be responsive to stakeholder input, but would require DWR to consciously and transparently consider that input before making decisions that affect project cost and schedule, whether during planning or other phases of the project.

All Recommendations in 2016-132

Agency responses received are posted verbatim.