State auditor critical of DWR’s handling of governor’s tunnels project

October 5, 2017 9:37am

•  More than a quarter of a billion dollars already poured into just planning

•  Report says DWR did not follow the law in at least one aspect, cites cost increases and delays

Because of the complexity of the governor’s Delta water tunnels scheme, the planning phase has experienced significant cost increases and schedule delays, says a report Thursday from state Auditor Elaine Howle.

The cost and timeline increased because of the scale and unanticipated complexity of the project, the report says. In addition, costs of the conservation and tunnels program’s efforts to evaluate and plan for the potential implementation of the Bay Delta Conservation Plan and its alternatives, which eventually morphed into what is now marketed as the “WaterFix” project also significantly increased, the report says.

As of the end of June, planning phase costs had reached approximately $280 million, Ms. Howle notes.

Her report says the governor’s Department of Water Resources did not select appropriately its current program manager for the program.

“DWR did not follow state law when it replaced the program manager for the conservation and conveyance program. Additionally, DWR did not accurately value its initial contract with the new program manager — the Hallmark Group — or ensure that it received fair and reasonable pricing for one of Hallmark’s subcontractors,” Ms. Howle says.

If the mammoth tunnels ever find enough money to begin construction, DWR needs to take certain steps to better prepare for the transition of “WaterFix” to the design and construction phase, Ms. Howle’s audit says.

She also notes, as have numerous critics of the project, that “DWR has not completed either an economic or a financial analysis to demonstrate the financial viability of ‘WaterFix.’”

Other criticisms include:

• DWR has not fully implemented a governance structure for the design and construction phase of “WaterFix.”

• DWR has not maintained important program management documents for “WaterFix.”

Her suggestions for improvement include:

• To improve management of large and complex infrastructure projects, the Legislature should enact legislation requiring agencies to publicly report significant changes in the cost or schedule of such projects if they are expected to exceed their established budgets by 10 percent or schedules by 12 months.

• To better manage large infrastructure projects, DWR should develop and implement a project‑reporting policy requiring its management staff to document and justify decisions to proceed with such projects if they are expected to exceed their established budgets by 10 percent or schedules by 12 months. DWR should make these documented decisions and justifications publicly available and submit them to the California Natural Resources Agency for review and approval.

• 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.

• 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.

• DWR should ensure that it retains adequate documentation in its contract files to support that contract prices are fair and reasonable.

• To ensure that DWR manages “WaterFix” in an effective manner, DWR should complete both the economic analysis and financial analysis for “WaterFix” and make them publicly available as soon as possible.

Her report goes on to say that to prepare for the potential approval and to ensure that the project is managed properly during the design and construction phase, DWR should do the following:

• Develop an appropriate governance structure so that it is prepared to oversee the design and construction of “WaterFix” in the event it is ultimately approved.

• Develop and update when necessary the associated program management plan for the design and construction phase of the project.

“DWR generally agrees with our findings and recommendations, although it disagrees with our conclusion that DWR did not follow state law in selecting the program manager,” Ms. Howle says “DWR also did not agree with our recommendation that it develop and implement a project reporting policy.”

If built, the twin tunnels would be an underground version of Gov. Edmund Gerald Brown Jr.'s voters-rejected peripheral canal. The tunnels would suck water out of the Sacramento River before it could flow into the California Delta and divert it to the State Water Project and federal Central Valley Project irrigation systems. Urban business and residents along with farmers would be on the hook to pay for the tunnels through higher water rates.

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