Report 2018-108 Recommendation 7 Responses

Report 2018-108: 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 (Release Date: November 2018)

Recommendation #7 To: High-Speed Rail Authority, California

To improve its contract management, increase accountability, and justify the significant amount it pays for contracted services, the Authority should, by May 2019, require CMSU to establish a schedule to monitor individual contract manager compliance and report annually the results of this monitoring to Authority executive leadership. To help ensure the integrity of its oversight role, CMSU should be composed of state staff in place of RDP consultants.

1-Year Agency Response

The Authority requested and received 35 positions - seventeen related to performing contract assessments and administration and 18 positions related to accounting and budget areas. Based on the recruitment plan to replace 35 consultant positions with state staff, the Authority believes that any actual or perceived conflict of interest will be eliminated.

Four of the seventeen contract assessment and administration positions have been filled. Interviews for the two remaining CAB positions were held in October and are anticipated to be filled by late November. Job bulletins for the remaining eleven contract administration positions have been released and it is anticipated that interviews will be conducted in November/December and the positions filled in the first part of the year.

Of the 18 positions related to accounting and budgets, 10 of the 18 positions have been filled. Interviews for three positions were held in September and October and are in the final steps of the hiring process. The remaining five have either posted job bulletins or will be posted soon with interviews anticipated in early December.

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

In December 2019, the Authority provided an updated organizational chart showing that five of the seven positions in the CAB/CMSU are filled by state staff, including the director position. If the Authority uses these individuals in the roles previously performed by RDP consultants, it will help ensure the integrity of the unit's oversight functions.

6-Month Agency Response

The Authority has continued to augment staff to perform contract assessments. Three existing staff within the Authority have been temporarily reassigned to the Contract Administration Branch (CAB), formally known as CMSU. These staff support the assessment process, update policies and procedures and assist in the contract management training. Additionally, in order to reduce the reliance on consultant staff in the short-term, the Authority identified vacant positions that could either be reclassified or moved temporarily to CAB. These positions have been advertised to fill the vacancies.

The Authority has also submitted a Finance Letter for inclusion in the May Revise of the Governor's 2019-2020 Budget requesting 35 positions. Seventeen positions are related to consultants performing contract assessments and contract administration and 18 positions are related to positions in the Accounting and Budget branches.

In addition, the CEO has directed an enterprise-wide review to determine if consultants are temporary, of a particularly urgent nature, or of such a highly-skilled or technical nature not available in civil service.

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

The Authority provided a calendar indicating that CMSU (now referred to as the Contracts Administration Branch, or CAB) conducted contract manager assessments between November 30, 2018 and February 27, 2018. However, the organizational chart the Authority provided as part of its response indicates that despite the temporary reassignment of three state staff to CAB, the unit is still composed primarily of RDP contractors. Additionally, although the Authority provided evidence that it has advertised positions that will replace the RDP contractors with all state staff, it has not yet filled these positions. Further, the Authority's records show that RDP consultants performed more than three-quarters of the contract manager assessments that the Authority reports having conducted in response to our audit recommendations, an approach the Authority indicated to us that it took in order to expedite the assessments. Nonetheless, these include assessments of managers responsible for specific contracts that we concluded in our report could represent conflicts of interest if the staff performing the assessment were RDP consultants. As such, despite its claim of full implementation, the Authority has not yet demonstrated that it is able to effectively staff and operate its contract management oversight group with state staff, which we believe is necessary and prudent.

60-Day Agency Response

The Authority has developed a schedule to perform assessments of contract managers' compliance with all contracts which will be completed by November 2019. The first 23 such assessments were completed through December 2018. An executive report will be prepared no less than annually. The assessments are performed by RDP staff with state staff oversight, as well as review and approval of the completed assessment.

The Authority concurs that CMSU should be composed primarily of state staff. The Authority has temporarily transferred internal state personnel to augment the CMSU and drafted an interim staff augmentation request to sister departments. The draft request is being circulated for coordination and review. In the interim, any assessments performed by contracted RDP staff will be reviewed and approved by state staff.

A Budget Change Proposal Concept for the 2020/21 fiscal year to request staff augmentation in order to remove contracted RDP consultants and replace with state staff is currently being prepared.

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

The Authority provided a schedule indicating that it planned completion of the contract manager assessment process by December 2019. It did not provide results of the assessments its response indicates the Authority has already completed, but indicates that it will report on those results to its executives annually. The Authority also did not provide details about its staff augmentation request or Budget Change Proposal. As we emphasized on page 85 of our audit report, we believe the Authority should move to secure professional state staff for contract management oversight positions sooner than fiscal year 2020-21.

All Recommendations in 2018-108

Agency responses received are posted verbatim.