Report 2018-108 Recommendation 3 Responses

Report 2018-108: California High‑Speed Rail Authority: Its Flawed Decision Making and Poor Contract Management Have Contributed to Billions in Cost Overruns and Delays in the System's Construction (Release Date: November 2018)

Recommendation #3 To: High-Speed Rail Authority, California

To better position itself to complete the three Central Valley projects by the December 2022 federal grant deadline, the Authority should improve its monitoring and evaluation of the oversight firms' risk assessment processes and should take steps to ensure that these processes are consistent across the three projects by May 2019.

Annual Follow-Up Agency Response From November 2020

The Authority has improved its monitoring and evaluation of the oversight firms' risk assessment processes and has taken steps to ensure that these processes are consistent across the three projects.

Risk update meetings and workshops for each of the Central Valley construction packages have been held and continue, resulting in updated project risk registers. The Authority has also hired a new program risk manager who is using the risk registers as a tool to mitigate major program and project risks.

The workshops, coupled with risk guidance provided by the program risk manager, have resulted in risk management consistency across all three projects. As documentation that the workshop process has been completed and that risk management consistency across all three projects has been achieved, the summaries of the quantitative schedule risk analysis performed for each project have been provided. Similarly, a quantitative cost risk analysis has also been performed for each project.

Regarding improving its risk management program overall, the Authority has reviewed and refreshed the entire risk exposure to the program during the previous six months and has developed a revised Estimate to Complete (ETC) for the 2020 Business Plan. The ETC is supported by detailed risk assessments, both qualitative and quantitative.

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

In our one-year assessment of this recommendation's status, we noted that the Authority had not provided documentation of the Central Valley risk workshops. In its most recent response, the Authority provided documentation that workshops had taken place. The Authority also provided updated risk assessments for each of the three construction projects. It will be important for the Authority to continue to monitor the consistency and quality of the risk assessments for each of the three distinct projects as it continues to try and complete those projects before the December 2022 deadline.

1-Year Agency Response

Risk update meetings and workshops have continued, resulting in updated project risk registers. Updating the risk registers is a continuous process as project development and schedules are advanced. The Authority has also hired a new program risk manager who will focus on using the risk registers as a tool to mitigate the major program and project risks.

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

The Authority has still not provided documentation that it completed the specific Centrally Valley risk workshops that it informed us were delayed at the time of its six-month response. Although we acknowledge risk assessment for each individual construction project is an ongoing process, our recommendation focused on ensuring consistency across all three projects, which the Authority's response does not fully address. Once the Authority provides documentation that the workshop process is complete and we are able to review evidence of the actions it produces for ensuring consistency across the projects, we will evaluate whether the recommendation has been fully implemented.

6-Month Agency Response

The Authority has hired an additional risk management resource to head program risk management. The Authority has updated its PCM Manual to provide more explicit guidance on risk management.

Also, the Authority has developed and updated risk management-related governing and guiding documents to ensure consistency of risk management processes across construction projects. The documents include the updated Risk Management Plan that defines roles and responsibilities within program and project teams for development of risk registers and mitigation plans, and a Risk Management Manual that further delineates the responsibilities for the PCM team in ensuring that risk management processes are implemented as well as for the Authority to ensure consistency of risk assessments across all projects. The entire risk team, including both resources at the program level and from the Central Valley construction projects, has collaboratively worked on the risk management-related documents. The Risk Management Manual also includes more guidance on Monte Carlo analysis.

The entire risk team is having risk update meetings and risk workshops to provide consistency for all program elements to update the project risk registers including cost-risk evaluation of the three construction projects. Upon updating the project risk registers, the major focus moving forward will be mitigation of risk events. Each risk workshop will have a narrative report and the accepted mitigation steps that will be tracked very closely in the Risk Management System.

Furthermore, the Program Controls Manual was updated to include a process for preparation of the estimate-to-complete in the Cost Forecasting Procedure.

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

The Authority provided documentation demonstrating the changes it describes in its response, which it made effective on May 15, 2019. If adhered to, these new practices should help the Authority ensure that its oversight firms are providing it with the best and most up-to-date information about risk to the Central Valley construction projects, as well as the associated costs. After following up with the Authority, it informed us that the important risk workshop work for the three Central Valley construction projects is still ongoing. Once that process is complete and we are able to review evidence of the actions it produces for ensuring consistency across the projects, we will be able to evaluate whether the recommendation has been fully implemented.

60-Day Agency Response

The Authority has hired additional risk management personnel to oversee the Central Valley design-build construction projects. Also, the Authority is advancing its Cost-Risk Evaluation of these projects ensuring risk management and mitigation, and estimate-to-completion consistency, across the three construction projects.

The Authority is enforcing all policies and procedures related to PCM oversight. The PCM Manual is being revised to be more explicit on risk management. The revised draft PCM Manual is currently circulating for review and comment.

The Program Controls Manual is being updated to include a risk management section and will be circulated for review and comment.

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

Because oversight firms already played a significant role in the risk management process at the time of our audit, this recommendation focuses on the need to improve the Authority's monitoring and evaluation to ensure the quality of the oversight firms' performance in this area. The Authority provided draft procedures for conducting oversight firm evaluations, as well as an example evaluation form. We reviewed completed versions of these evaluation forms during our audit and determined that the Authority should take steps to ensure their consistency across the three oversight firm contracts, which it has not yet demonstrated. We will be looking for further evidence that the Authority has taken these steps, as well as the other improvements the Authority mentions in its response, when the Authority reports full implementation of this recommendation.

All Recommendations in 2018-108

Agency responses received are posted verbatim.