1. To improve its contract management, increase accountability, and justify the significant amount it pays for contracted services, the Authority should take the following steps by May 2019:
• Prioritize contract management efforts and reduce the frequency with which contract management responsibilities shift among Authority staff by establishing a formal process for hiring and assigning full-time, experienced contract managers. These contract managers should have duty statements reflecting their contract oversight responsibilities and they should report to supervisors who understand those responsibilities and have extensive knowledge about the contracts' deliverables. In addition, those supervisors' duty statements should clearly lay out their responsibility for addressing any contract manager noncompliance with the Authority's contract management policies and procedures, whether reported by Contract Management Support Unit (CMSU) or identified by another means.
Response:
The Authority concurs with the recommendation. The Authority will create a formal process for hiring and assigning full-time experienced contract managers to reduce the frequency with which contract management responsibilities shift among Authority staff. This will include emphasizing contract management experience/skills as well as desirable contract manager qualifications. In addition, all new advertised positions that require contract management will specify the skills required for a contract manager within the duty statement.
In addition, all existing duty statements will be reviewed and modified to reflect contract management/oversight responsibilities for all contract managers and their supervisors. Contract manager supervisors' duty statements will also address their responsibility to hold their contract management staff accountable for compliance with the Authority's contract management policies and procedures. While only contract managers are currently required to be trained in contract management, contract manager supervisors will also be required to attend contract management training to ensure that the contract managers they supervise are adhering to the Authority's policies and procedures. The Authority will also create a separate contract management training specifically for supervisors.
Planned completion date: 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.
| Response: The Authority concurs with the recommendation. A schedule to monitor contract managers' compliance has been created and assessments of contract manager performance are to begin no later than November 2018, to comply with the Authority's PROC-FIS-038, Contract Compliance Procedure. The assessments will be electronically tracked for resolution status and an executive report will be prepared no less than annually. | |
| In addition, the Authority concurs that CMSU should be composed of state staff. The Authority will prepare a Budget Change Proposal for the 2020/21 fiscal year to request staff augmentation to remove contracted Rail Delivery Partner (RDP) consultants and replace with state employees. | |
| Planned completion date: The contract manager assessment schedule has been developed and the Budget Change Proposal concept will be submitted to the Authority Executive Committee for consideration in May 2019. |
• Hold contract managers accountable for performing the duties that the Authority's policies assign to them. Specifically, CMSU and, to the extent necessary, contract managers' supervisors should require and review evidence from contract managers demonstrating their approval of deliverables, detection and resolution of contractor performance issues, and assessment of contract amendments for merit. The Authority should not accept observations and reports from its contractors or RDP consultants in place of this evidence.
| Response: The Authority concurs with the recommendation. The Authority's contract compliance policy POLI-FIS-038 established requirements for performing assessments and reports on contract manager compliance with the Authority's policies and procedures. The Authority will begin performing assessments of contract managers no later than November 2018. We will begin with the contracts identified in this audit and continue until all contracts have been fully assessed. These assessments will ensure that contract managers are following the Authority's policies and procedures, which are the foundation of a well-managed contract. The assessments will also provide documented evidence that contract managers, not RDP consultants, are properly approving deliverables/invoices, resolving contractor disputes or performance issues appropriately, and justifying contract amendments with verifiable documentation in all contracts. The assessments will not only provide supervisors/management with documentation demonstrating accountability (conformance/nonconformance), but also contain recommendations for best practices and opportunities for improvement. Once an assessment is issued, it will be tracked to closure/resolution. The process also maintains the tracking mechanism to verify the implementation of the corrective action. This plan provides a framework for review of the contract managers' performance by contract manager and by contract, providing a quantitative assessment of contract manager performance. | |
| Planned completion date: The Authority will begin performing assessments of contract managers no later than November 2018 and anticipates that all contract manager assessments will be completed by or before November 2020 and be ongoing thereafter. | |
2. To prevent the inappropriate use of contractors to perform state functions, the Authority should develop procedures by May 2019 for evaluating whether new or existing administrative duties should be assigned to contractors or to state employees.
Response:
The Authority concurs with this recommendation. The Authority's Administration Office will develop procedures for evaluating whether new or existing administrative duties should be assigned to contractors or to state employees.
Planned completion date: May 2019
3. To ensure the completeness of contract managers' invoice reviews and that invoiced costs are allowable under contract terms, the Authority should amend its applicable procedures by May 2019 to require contract managers to document their review of invoiced rates and expenses.
Response:
The Authority concurs with this recommendation. As part of a larger plan to revise, field test, and finalize the contract management procedures, the Authority will revise its invoice review procedures (FIS-PROC-033) to require contract managers to document their review of invoiced rates and expenses.
Planned completion date: May 2019
4. To ensure the consistency and effectiveness of its efforts to monitor the performance of the oversight firms with which it contracts, the Authority should develop a formal methodology by May 2019 for using the performance evaluation tool it has implemented. This methodology should include procedures for assessing the sufficiency of the oversight firms' review and approval for construction contracts.
| Response: | |
| The Authority concurs with this recommendation. The Authority has developed and implemented monthly performance-based evaluations for its construction oversight firms that are updated by each contract manager. A formal methodology will be developed for the performance evaluations. Contract Performance Monitoring and Reporting Policy POLI-FIS-034 and Procedure PROC-FIS-034 will be revised to document this formal methodology. | |
| The Authority's contract manager and quality team will evaluate the PCM's procedure for compliance with section 3.9 Contractor's Monthly Payments of the Project and Construction Management Manual (For Design-Build Contracts) on all construction packages; specifically, for the purpose of assessing construction progress to validate invoice submissions and earned value from the design-builder. The Authority will amend its Quality Manual to reflect this process and the frequency of the assessments. Any non-conformance will be formally documented. Planned completion date: May 2019 | |
5. To ensure oversights firms' spending is reasonable, the Authority should develop a formal process by May 2019, for tracking any out-of-scope work the oversight firms perform. To reduce the likelihood that its contracts with these oversight firms run out of funds prematurely as a result of this additional work, the Authority should also develop a formal process for amending these oversight firm's contracts contemporaneous to change orders that significantly extend timelines or increase the scope of work of the construction contracts that they oversee.
| Response: | |
| The Authority concurs with this recommendation. The June 2018 Program Baseline, approved by the Board of Directors, details the scope, schedule and budget for all work on the high-speed rail program, including PCM firms' contract budgets and schedule. Any PCM contract amendment requires approval from the Business Oversight Committee. As outlined in the response to Recommendation 1, the Business Oversight Committee requires a Business Case with subject matter expert signatures before considering any contract change. Additionally, the Authority will revise the PCM manual to reflect their responsibility to identify, manage and request amendments for out-of-scope work. The PCM contract managers will separately be responsible for tracking and identifying any potential out-of-scope work and the necessity to amend contracts at each PCM work plan revision and approval. | |
| The Program Delivery Committee is responsible for governance oversight of contracts and will consider the impact on PCM contracts by programmatic trends (such as schedule delays) or changes approved by the Business Oversight Committee (such as a change to a design-build contract). A key component of Program Delivery Committee meetings will focus on upcoming key milestones and decision-points, including when or if contracts need amending. Planned completion date: May 2019 |