San Francisco gave contracts a $300M boost, some without review 

click to enlarge The San Francisco Public Utilities Commission placed change orders for the rebuild of the Hetch Hetchy water system. (AP file photo) - THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION PLACED CHANGE ORDERS FOR THE REBUILD OF THE HETCH HETCHY WATER SYSTEM. (AP FILE PHOTO)
  • The San Francisco Public Utilities Commission placed change orders for the rebuild of the Hetch Hetchy water system. (AP file photo)
  • The San Francisco Public Utilities Commission placed change orders for the rebuild of the Hetch Hetchy water system. (AP file photo)

During the past five years, more than 100 of The City’s largest contracts grew in cost by nearly $300 million — sometimes without the knowledge of San Francisco’s most powerful decision-makers.

That’s according to a new Budget Analyst’s Office report requested by Board of Supervisors President David Chiu, who said he’s fed up with the difficulty of tracking how San Francisco spends its money.

Contracts must be approved by city boards and commissions, but revisions for unforeseen costs frequently don’t require additional authorization. A change of less than $500,000, for example, doesn’t need approval from the Board of Supervisors.

The report recommends that The City’s $500,000 threshold for supervisor scrutiny of such changes should be lowered, and that San Francisco should adopt a process similar to the one Santa Clara County uses to approve a bulk list of contract changes. But Chiu said more information needs to be analyzed before he drafts legislation to address the problem.

“At the very least, we need to have more transparency,” Chiu said, adding that The City also should adopt a uniform tracking method for departments to monitor contracts.

The report examined 218 construction and professional services contracts worth $5 million or more — a stack of agreements totaling $6.4 billion — from July 2006 to September 2011. It found that the original amounts of 107 of those contracts were later increased with so-called “change orders” that added $295.2 million to The City’s tab.

Chiu didn’t have specific figures, but said many of the change orders reviewed by the budget analyst didn’t go to the board for approval.

The report addressed the contracts of 10 departments, with the San Francisco Public Utilities Commission accounting for most of the total cost increase from changes. According to the report, 56 out of 86 SFPUC contracts reviewed over a five-year period had change orders, which added $166.6 million in costs.

Tyrone Jue, a spokesman for the SFPUC, cautioned against using change orders to gauge the efficacy of a department or project. Jue said the SFPUC’s change orders over the past five years were all for the massive $4.6 billion rebuild of the Hetch Hetchy water system, but the project as a whole is $160 million under budget.

“Change orders don’t always tell the whole story,” Jue said.

dschreiber@sfexaminer.com

Where the changes were concentrated

Four agencies accounted for the lion’s share of the cost differences.

San Francisco Public Utilities Commission

  • 86 Contracts
  • 56 Contracts with changes
  • $2,540,177,433 Original contract amount
  • $166,610,235 Additional cost in changes
  • $2,706,787,668 Final contract amount


San Francisco Department of Human Services

  • 27 Contracts
  • 12 Contracts with changes
  • $944,564,106 Original contract amount
  • $53,994,400 Additional cost in changes
  • $998,558,506 Final contract amount

 

San Francisco International Airport

  • 48 Contracts
  • 19 Contracts with changes
  • $907,629,009 Original contract amount
  • $17,122,074 Additional cost in changes
  • $924,751,083 Final contract amount


San Francisco Department of Technology


  • 4 Contracts
  • 3 Contracts with changes
  • $44,193,905 Original contract amount
  • $31,759,286 Additional cost in changes
  • $75,953,191 Final contract amount



Cost creep

Contracts greater than $5 million between July 2006 and September 2011:

  • 218 contracts — totaling $6.4 billion
  • 107 increased in cost — totaling $295.2 million
  • 9.5 percent average increase
  • $2.8 million average cost increase

 

Source: Budget Analyst’s Office

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Dan Schreiber

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Tuesday, Dec 6, 2016

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