Public Utilities Revenue Bond Oversight Committee
Contracting Working Group

MINUTES

Wednesday, March 22, 2006
1:30 p.m. – 3:00 p.m.
1155 Market Street (between 7 & 8th Streets) 4th Floor
San Francisco, CA  94103

1. Call To Order and Roll Call

   Chair Aimee Brown called the meeting to order at 1:35 p.m. and roll call was taken.  RBOC members present were Patrick Sweetland, Aimee Brown, and Brian Browne (arrived 1:45 p.m.). 

2. Presentation by Mr. Robert Kuo and Mr. Larry Doyle regarding status of audit of Water System Improvement Program (WSIP) expenditures, WSIP budget reports, and SFPUC budget control procedures.  

   Ms. Brown began by explaining the purpose of the meeting was to meet with financial consultants regarding the status of the report and to listen to observations they may have to date.   Mr. Kuo began by asking if there were questions from the background distributed previously through Ms. Ostberg. Mr. Sweetland stated that he’s happy with what’s been provided to date, and sees next steps needed as more of a qualitative commentary. Mr. Kuo expressed a fairly positive impression overall. He compared Water to the Airport and says the PUC is farther ahead in many respects, such as the Primavera system and project management, budget tracking, and expenditure. Mr. Kuo believes the effort to tie Primavera back to FAMIS is valuable.  Furthermore, in the November 2005 WSIP, the budget was laid out clearly in terms of how base year, escalation, and contingency. He recognizes that it’s still early in the program and there are bound to be scope changes that may affect schedule and costs. The $3.6 billion program appears to be fluid, and while a lot of contingency is built into each project it is difficult to know at this time if it is enough.

   Regarding the Quarterly Status Reports for the regional and local programs, Mr. Kuo believes SFPUC has done a good job, and project managers are being candid by flagging issues and getting additional appropriation authority from the Board of Supervisors before they run out of funding. However, Mr. Kuo feels the reports are too large and need better “high-level” summaries for senior PUC staff, the Commission, the Committee, and the Board of Supervisors. 

   Mr. Doyle then spoke on vouching and review of expenditures. His review got more into the day-to-day spending. He looked at all invoices above $100k for 20% of the contracts, which represented 40% of the dollars spent.  Other than a cumbersome signature process, he found no problems.  He said that Primavera and FAMIS do not reconcile; rather the PUC balances Primavera to FAMIS.  But the variances were not significant in his view.  The Pre-CIP money is included in Primavera and in two places in FAMIS.  He was able to segregate the bond funds from other funds

   Mr. Browne asked if any of the Pre-CIP funds were from 1997 A and B revenue bonds. Mr. Doyle said that at November 2002 there were no expenditures or appropriation from Proposition A.  Mr. Sweetland inquired whether the source of Pre-CIP funds was the sale property in Pleasanton.  Mr. Kuo stated that the only source of funds after November 2002 was commercial paper and that he was not aware that any bond money was used prior to that date.  (This statement has subsequently been clarified and corrected by staff and Mr. Kuo.)  Mr. Browne asked for information on all associated commercial paper charges that have been paid with Proposition A funds.  Mr. Sweetland believed this request constituted an increase in work scope for the consultants. Mr. Browne believed this information should have been included in the scope and report automatically.  Ms. Brown and Mr. Sweetland said this request is outside of the consultants’ scope but that a task order could be created.  The consultants agreed to prepare the analysis over the next several days. 
     
   Mr. Sweetland asked about costs that aren’t charged presently that might be charged to the WSIP in the future. Mr. Kuo said he had not seen evidence of this at either a project or staff level, but he is still looking into this.  There followed general discussion about how the RBOC could track inter- department charges to WSIP.

   Mr. Browne asked the City Attorney, Kenneth Roux – if Proposition E mandated a strategic plan. The City Attorney offered to answer that at the next meeting.
     
   Mr. Kuo stated that what he has seen so far is “pretty good.”  He said he is interested in the change control process for construction program; how to deal with project scope changes, how does that impact costs, who is going to be on the decision making chain, and how are those decisions reported back to the laundry list of people that are effected – so how best to strike a balance between accountability and responsibility and efficiency.

   In response to several related questions, Mr. Kuo stated that the reporting at the detail level is quite good, but that reporting at a high level for decision makers needs improvement – in particular how to convey information clearly to multiple constituencies.  Ms. Brown asked Mr. Kuo to make suggestions or recommendations regarding the RFP process so that it could be improved in the future since it is a very important part of process.  

   Ms. Brown stated that the concerns central to the committee are financial in nature. After this contract is complete, the committee, with input from the consultants, identify other tasks to complete, and lay out the next steps to take.

3. General Public Comment

   Emerick Kalman expressed concern about financial expenditures generally and asked that every dollar spent be certified by SFPUC’s General Manager and the Mayor. 

   Joan Girardot said it was unclear why we had a commercial paper program.  She also pointed out that the recycled water project was initially budgeted for $109 million and was now $201 million. She said that Proposition A was for seismic upgrades not new programs and asked for the paperwork supporting the change in the budget for the recycled water project.

   There was no more public comment.  

   The next subcommittee meeting was tentatively scheduled for April 18th or April 20th   and the agenda will include a discussion of the consultants’ draft report and future activities of the subcommittee.  

4. Adjournment was at 3:00 p.m.