The Authority's inadequate enforcement of its contract management policies and procedures may encourage its reliance on contractors to perform important functions, further hindering its ability to control costs. As we noted in our 2012 audit report, the Authority's organizational structure places large portions of its program planning, construction, and oversight in the hands of the RDP consultants, who may not have the best interests of the State as their primary motivation. Further, as we discuss in the Introduction, the Authority's internal audits concluded that roles and responsibilities for contract managers and RDP consultants were not clearly defined. To address this issue, the Authority's contract management policies and procedures clearly assign contract managers the responsibility for tracking and monitoring all aspects of the contracts they manage. Nonetheless, we observed that the contract managers for theregional planning contracts-which are for preliminary engineering and environmental work in locations where the Authority plans to develop the high-speed rail system-still often rely on the RDP consultants to provide the oversight for which the contract managers are ultimately responsible. In fact, during our review, the Authority's contract managers for the regional planning contracts directed our contract management questions to the RDP consultants for answers and were generally unable to provide documentation related to contract management that did not originate from the RDP consultants. As a result, the RDP consultants have become the de facto contract management body, working closely with contractors with insufficient Authority oversight. | Even though RDP consultants may not have the best interests of the State as their primary motivation, the contract managers for the regional planning contracts still often rely on the RDP consultants to provide the oversight for which the contract managers are ultimately responsible. |
Further, the Authority has also placed the oversight responsibility for contract management with the RDP consultants, which creates a potential conflict of interest. Specifically, although an Authority employee heads CMSU, the RDP consultants fill its seven positions. When the Authority's contract managers inappropriately rely on the RDP consultants to perform their contract management responsibilities, it may not be reasonable to expect CMSU staff-who are also RDP consultants-to tell state contract managers to stop this practice. Consequentially, CMSU's current composition raises questions about the Authority's ability to use the unit as a tool to prevent the Authority's continued overreliance on the RDP consultants to perform contract management, which we believe should be among CMSU's priorities.
The Authority tasked contractors with duties that state employees could have performed in other instances as well. For example, the Authority's documentation for its $40 million contract for financial advisory services states that contracting for those services is justified because the tasks are of a highly technical nature and equivalent expertise is unavailable within state civil service. However, in December 2016, the Authority's former chief executive officer (CEO) sent the CFO an email in which he expressed concern over high spending rates for the contract, particularly in the areas of accounting support and budgets. In his email, the CEO stated that contract spending should focus on nontraditional areas of work, such as financing analyses and commercial and real estate strategies, and that employing state staff to perform basic budgeting and accounting work would be more appropriate and cost-effective.
The CFO responded to the CEO's concerns by stating that a core group of state staff provided services for budgeting and accounting, but that the financial advisory contractors were needed to help perform responsibilities that had no precedent in state service, including implementing information technology systems. The CFO reiterated this position to us during our audit. However, our review of the contract's work plans and invoice materials determined that, although some of the contractor's duties included information technology tasks, many of the tasks it reported performing were described as support for general budgeting and accounting activities. Given the fact that the contractor billed the Authority $3.5 million in fiscal year 2016-17 and $1.1 million in fiscal year 2017-18 for the budgeting and accounting portions of the contract, we believe the Authority should have taken steps to ensure and document that its use of contracted resources was necessary and prudent. | Given the fact that the contractor billed the Authority $3.5 million in fiscal year 2016-17 and $1.1 million in fiscal year 2017-18 for the budgeting and accounting portions of the contract, we believe the Authority should have taken steps to ensure and document that its use of contracted resources was necessary and prudent. |
The Authority also assigned work related to contract management to outside contractors that may have been more appropriately performed by state employees. For example, the Authority tasked its financial advisory contractor to perform analysis and support for its Contract Administration Branch from July 2016 through June 2018. As part of this work, the contractor developed the contract management policies we reviewed during this audit. The CFO explained that these policies and procedures took significant effort because no equivalent state criteria directly apply to the Authority. However, we do not believe that the Authority is so unique in its contract management needs that state resources could not develop similarly adequate tools. Further, the Authority also tasked the contractor with monitoring and reporting on the status of the RDP consultants' deliverables and with supporting CMSU in its compliance reviews of the Authority's contract managers. As we discuss above, these compliance reviews have been insufficient. We do not believe that any of these tasks are so highly technical or specialized that state employees could not have performed them. Nonetheless, the financial advisory contractor billed the Authority almost $4 million for these tasks over two years.
Finally, just as the Authority staffed CMSU with RDP consultants to oversee contract manager compliance, it also staffed its separate administrative unit for supporting contracts entirely with RDP consultants, who filled all 17 positions as of June 2018. We question why using RDP consultants in place of state employees to perform contract management oversight and support is necessary. The Authority agreed that it should place state employees in these positions in the future.