1. To ensure that the change orders it approves are necessary and that their costs are appropriate, the Authority should adhere to the guidance and estimates the oversight firms provide to it. If the Authority chooses to deviate from the oversight firms' recommendations, it should clearly document why it made those deviations.
Response:
The Authority concurs with this recommendation. In 2017, the Authority initiated a governance process to assess the construction, financial, legal and other program perspectives for all changes. The Board of Directors adopted the 2018 Business Plan that included the new governance (see page 63 of the Plan) and adopted the program Baseline in June 2018. The Authority then updated and formalized this process in the Program Management Plan (PMP).
The current process includes: a Program Delivery Committee, which is a management committee that holds the functional groups accountable for program delivery and evaluates all pending and potential change orders; and a Business Oversight Committee, which acts as a change control committee and must approve all change orders before they go to the Executive Committee and, when needed, the Board of Directors (Board) for approval to execute.
Each governance committee has an approved charter that outlines its purpose and decision-making authority. In accordance with the CSA recommendation, the Authority will revise the charters to require documentation when a governance committee overrules a Project Construction Management (PCM) firm's recommendation.
This will be accomplished through a Business Case, which is the document for requesting a proposed change order or a change to the Baseline. The Business Case is required to provide a summary and justification of the recommended actions/changes and includes signatures from the relevant functional, legal, construction and program teams. For construction change orders, the accompanying Business Case will document the PCM recommendation and cost estimate with an explanation of any differences.
Planned completion date: June 2019
2. Before executing its next construction contract, the Authority should establish formal prerequisites for beginning construction to prevent avoidable cost overruns and project delays. At a minimum, these prerequisites should identify specific benchmarks related to land acquisition, utility agreements and relocations, and agreements with external stakeholders, including impacted local governments and other railroad operators.
| Response: The Authority concurs with this recommendation and has placed significant focus on this issue. The 2018 Business Plan identifies this as a critical lesson learned and it continues to be a point of emphasis (see Chapter 4, Lessons Learned and Managing Risk, page 53 of the Plan). Key among the lessons learned was that the Authority's decision to award design-build contracts before acquiring right of way and completing agreements with utilities, local governments and railroads meant there were many unknowns that created risks of delays and higher costs. The same chapter also describes the governance and management procedures initiated in 2017 to strengthen decision making through a highly structured process, which our response to Recommendation 1 outlines briefly. | ||
| More specifically, the Business Oversight Committee considers benchmarks prior to progressing to procurement or to the next phase of project delivery. For example, the Business Oversight Committee would consider the progress of pre-construction activities, including right-of-way acquisition, prior to approving procurement activities to select a construction contractor. | ||
| Further, delivering projects in accordance with the Program Baseline, which was adopted by the Board of Directors in June 2018, also ensures that certain predecessor tasks (or prerequisites) are sufficiently advanced prior to beginning construction, as the Baseline incorporates the lessons learned outlined in the 2018 Business Plan. The Authority continues to develop Baseline project work plans composed of discretely defined tasks. These tasks are linked together based on project delivery sequencing, which establishes what tasks must be completed prior to beginning other tasks (i.e., predecessor tasks and successor tasks). Planned completion dates: | ||
| Project Work Plans (with benchmarks) - Draft: | January 2019 | |
| Project Work Plans (with benchmarks) - Final: | February 2019 | |
3. To better position itself to complete the three Central Valley projects by the December 2022 federal grant deadline, the Authority should improve its monitoring and evaluation of the oversight firms' risk assessment processes and should take steps to ensure that these processes are consistent across the three projects by May 2019.
Response:
The Authority concurs with this recommendation. The Authority recognizes the risks associated with complying with the deadline established by the American Recovery and Reinvestment Act of 2009 and is in the process of reorganizing its risk team overseeing the Central Valley projects. It is hiring additional risk management personnel and will prioritize both risk management and mitigation in a way that is consistent across the three construction projects. Further, to verify that the risk assessment processes are consistent across the three projects, the Authority will continue to enforce all policies and procedures related to PCM oversight, revise the PCM manual to be more explicit on risk management, and will publish a program estimate-to-complete and risk management manual.
Planned completion date: April 2019
4. To enable policymakers and the public to track the Authority's progress toward meeting the federal grant deadline of December 2022, the Authority should, by January 2019, begin providing quarterly updates to the Legislature detailing the progress of the three Central Valley construction projects using an earned value model that compares construction progress to the projected total completion cost and date. The Authority should base these updates on the most current cost estimates available.
Response:
The Authority concurs with this recommendation. The Authority recently developed a Program Delivery Status Report (PDSR) that it produces on a monthly basis. The PDSR includes comprehensive status information within the Authority's three main areas of project delivery: 1) right-of-way procurement, third party agreements, and environmental clearance; 2) engineering/design and construction; and 3) rail infrastructure. This PDSR and associated procedures will be codified within the Program Controls Manual to be published.
The PDSR provides detailed information on the progress of the three Central Valley construction projects within the Infrastructure Delivery section, including cost variance and schedule performance index (SPI).
Moving forward, the Authority will use the most current cost information and an earned value model to refine the cost variance and SPI for each of the three Central Valley construction projects. On a monthly basis, the cost variance and SPI information will be used to estimate the projected total completion cost and date for each of the Central Valley construction projects. This information will be included in the PDSR.
By January 2019, the Authority will use information from the PDSR - including earned value, cost variance and SPI - to develop and provide quarterly updates to the Legislature. The updates will include detailed information on the progress of the three Central Valley construction projects. This information will be used to actively manage the construction projects to ensure that the 2022 federal grant deadline is met.
Planned completion dates:
PDSR Quarterly Update - Draft: December 2018
PDSR Quarterly Update - Final: January 2019
PDSR Manual - May 2019
5. To ensure that it is adequately prepared if it is unable to meet the federal grant deadline of December 2022, the Authority should, by May 2019, develop a contingency plan for responding to such a scenario.
Response:
The Authority concurs with this recommendation. The Authority intends to meet the federal grant deadline and, to achieve that, we continuously monitor and assess the program through the Program Delivery Committee and the Business Oversight Committee. As part of this monitoring process we routinely update the individual project risk registers in coordination with the Federal Railroad Administration (FRA) on a quarterly basis. The Program Delivery Committee and the Business Oversight Committee use the Project Update Report, Business Plan and Baseline in their monitoring activities. We will continue to assess different contingency plans/options through each of these activities and will prepare a contingency plan in accordance with the CSA recommendation, which will be updated on an annual basis.
Planned completion date: May 2019