Report 2016-104 Recommendation 2 Responses

Report 2016-104: California Public Utilities Commission: It Should Reform Its Rules to Increase Transparency and Accountability, and Its Contracting Practices Do Not Align With Requirements or Best Practices (Release Date: September 2016)

Recommendation #2 To: Public Utilities Commission

To ensure that the choice of a vendor is sufficiently justified and that the vendor represents the best value, the CPUC should explain in its final decision how the vendor was the most qualified in all cases when the CPUC does not competitively select the vendor it directs utilities to contract with.

Annual Follow-Up Agency Response From October 2022

To ensure a specific vendor is not named in a CPUC decision, the CPUC's Administrative Law Judge (ALJ) Division has implemented best practice language into their onboarding training program, known as Jumpstart, that all newly hired ALJs are required to complete.

Specifically, a slide in the JumpStart training module on Anatomy of a Decision now includes direct and clear language to not include a specific vendor in their decisions and all third-party contracting goes through the state's competitive bidding process.

These JumpStart modules are routinely updated (with training last provided in February 2022) and are stored on the ALJ Division's SharePoint site for new and experienced judges to reference the training materials. At a minimum, these trainings are conducted at least once per year but can be conducted multiple times a year depending on ALJ's hiring cycles.

California State Auditor's Assessment of Annual Follow-Up Status: Resolved

The CPUC provided evidence demonstrating the training it describes. To the extent that its decisions no longer order utilities to contract with named vendors, we consider this issue resolved.

Annual Follow-Up Agency Response From October 2021

CPUC continues to follow State procurement statutes, regulation and CPUC contracting policies, to inform and guide evaluation of proposals that are awarded by the CPUC. Also, CPUC recommends that the utilities comply with all state laws when procuring a contractor. The CPUC does not recommend that the utility select a contractor other than the most qualified contractors.

California State Auditor's Assessment of Annual Follow-Up Status: No Action Taken

The CPUC has not indicated a change to its practices or policies in response to our recommendation. Although the CPUC states that it only selects the most qualified contractors when recommending that a utility select a contractor, that statement alone does not address the recommendation to explain in specific decisions how it made the determination that the selected vendor was the most qualified if the vendor was selected through a process other than a competitive one.

Annual Follow-Up Agency Response From November 2020

CPUC procurement practices follow State procurement statutes, regulations, and its own internal contracting policies, for all CPUC owned goods and services. An exception to this is where an Investor Owed Utility (IOU) is directed by the CPUC to enter into a contract for a particular service, typically as a part of an administrative adjudication. In this situation, since the IOU is not a public entity, it is not required to follow State procurement statutes and regulations, or even CPUC contracting policies, unless required as a part of the order directing the contract. Where an IOU is running a competitive solicitation that is being evaluated by CPUC staff, CPUC staff use State procurement statutes, regulation and CPUC contracting policies, to inform and guide evaluation of proposals. "Best Value" or "Most Qualified" is not always the selection standard required in a particular solicitation. Typically, award is made to the most responsive and responsible bidder, as determined by either the "highest scoring" or "lowest cost" evaluated proposal, as measured against the RFP requirements. This process results in contracts that are in the best interest of ratepayers and the State of California.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Our audit found that the CPUC could have better justified its choice of a contractor that it required energy utilities to hire and, had it done so, it could have avoided the appearance of improper influence in its proceedings. Accordingly, we recommended that the CPUC explain how vendors it does not select through a competitive process are the most qualified. By declining to implement this recommendation, the CPUC is not taking all the steps it could to guard against the appearance of improper influence in contractor selection.

Annual Follow-Up Agency Response From October 2019

No change, as the Commissioners already considered this issue, as set forth in a prior follow-up response.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From October 2018

Will not Implement. The Policy and Governance Committee did discuss this issue at one of their meetings and decided that it was not necessary to establish a formal rules change to address the requirement of competitive bidding in vendor selection and directed Legal and ALJ Division staff to follow the applicable contracting requirements. Therefore, this issue has been addressed and resolved. Please let me know if you need anything further.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

We find it puzzling that the CPUC asserts that this issue has been addressed and resolved. Aside from referencing a discussion related to this issue and a directive to follow existing requirements, it is not clear that the CPUC has taken any action to address our recommendation. Our audit found that the CPUC could have better justified its choice of a contractor that it required energy utilities to hire and, had it done so, it could have avoided the appearance of improper influence in its proceedings. Accordingly, we recommended that the CPUC explain how vendors it does not select through a competitive process are the most qualified. By declining to implement this recommendation, the CPUC is not taking all the steps it could to guard against the appearance of improper influence in contractor selection.

Annual Follow-Up Agency Response From November 2017

The General Counsel and Chief Administrative Law Judge hope to prepare the issue for referral by the end of the year.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

The General Counsel and Chief Administrative Law Judge hope to prepare the issue for referral by the end of the year

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

The General Counsel and the Chief Administrative Law Judge will be referring this to the Policy and Governance Committee to adopt a formal policy.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The General Counsel and the Chief Administrative Law Judge will be referring this to the Policy and Governance Committee to adopt a formal policy.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2016-104

Agency responses received are posted verbatim.