Report 2016-132 Recommendation 4 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 #4 To: Water Resources, Department of

To fully comply with state contracting law, DWR should ensure that it competitively selects architectural and engineering consultants based on demonstrated competence and professional qualifications. In addition, DWR should document in the contract file its evaluation of the competence and professional qualifications of all contractors and any subcontractors that are added to the contract subsequent to the competitive selection process.

Annual Follow-Up Agency Response From October 2019

On February 1, 2019, DWR fully implemented two new procedures to address subcontractor and personnel changes to A&E contracts. These new procedures include: Adding a New Subcontractor, and Personnel Changes by Letter. Prior to the implementation of the procedures, DWR provided extensive training to contract managers via nine training sessions held during January 2019. The new procedures were also distributed via email and posted on DWR's intranet.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We reviewed the new procedures and found that, if implemented as documented, they would fully implement our recommendation.

1-Year Agency Response

DWR is in the process of implementing a new procedure to add subsequent subcontractors to an A&E contract pursuant to the audit recommendation and in line with DWR's continuous improvement process. As a result of the significant increase in workload due to the 2017 storm events, completion of the draft procedure took longer than anticipated. The proposed procedure will make significant changes to the process when DWR adds subcontractors or approves contract personnel changes. The draft procedure is pending review for approval.

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

Although DWR never documented its evaluation of Hallmark's competence or qualifications to provide program management services, services which must be performed by a licensed engineer or general contractor, its contract with Hallmark expired in July 2018.

6-Month Agency Response

Although the Department disagrees with the Auditor's view, DWR has complied with the Auditor's recommendations. Enhanced procedures for documenting DWR's evaluation of Architectural and Engineering contractors and subsequent subcontractors have been developed and will be implemented in April, 2018. For prime contracts, DWR will retain evaluation scores from the competitive selection process and other contract documents in the contract file. DWR has also identified a procedure to document the competence and qualifications of subcontractors added to the contract after the selection process, and will also maintain the subcontractor evaluation scores in the contract file.

Will Implement.

California State Auditor's Assessment of 6-Month Status: Pending

We disagree that DWR has complied with our recommendation. DWR has developed procedures for documenting its evaluation of architectural and engineering contractors and for documenting the competence and qualifications of subcontractors. However, DWR has not documented its evaluation of Hallmark's competence or qualifications to provide program management services, services which must be performed by a licensed engineer or general contractor. Nevertheless, DWR has continued to extend the duration of its program management contract with Hallmark.

60-Day Agency Response

The Department will continue to comply with state contracting law including the processes outlined above. Enhanced procedures for documenting DWR's evaluation of Architectural and Engineering contractors and subcontractors have been developed and are in the process of final internal approval.

California State Auditor's Assessment of 60-Day Status: Pending

As we stated in our report, we do not believe DWR followed state law when it replaced the program manager for the conservation and conveyance program.

All Recommendations in 2016-132

Agency responses received are posted verbatim.