Report 2016-132 Recommendation 5 Responses

Report 2016-132: Department of Water Resources: The Unexpected Complexity of the California WaterFix Project Has Resulted in Significant Cost Increases and Delays (Release Date: October 2017)

Recommendation #5 To: Water Resources, Department of

To ensure that only qualified subcontractors are added to contracts after the initial award is made, DWR should make sure that contractors select their own subcontractors and that DWR subsequently approves the selection after it verifies their qualifications.

Annual Follow-Up Agency Response From October 2019

DWR's position remains unchanged; DWR will not be implementing this recommendation. As shown in our response to Recommendation 4, above, DWR has developed procedures to ensure only the most qualified subcontractors are selected.

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

The procedures DWR developed for adding a new subcontractor require DWR to request potential new subcontractors from the prime contractor. We believe this addresses our recommendation by requiring the prime contractor, rather than DWR, to identify and propose the new subcontractors for DWR's approval upon verification of the proposed subcontractors' qualifications.

1-Year Agency Response

DWR's position remains unchanged. As shown in our response to Recommendation 4, above, DWR is developing procedures to ensure only the most qualified subcontractors are selected.

California State Auditor's Assessment of 1-Year Status: Will Not Implement

We continue to disagree with DWR's position. To reduce the risk of DWR directing contractors to select particular subcontractors, DWR should require its contractors to select the most highly qualified subcontractor, and DWR should then verify the subcontractor's qualifications before it approves the selection.

6-Month Agency Response

It continues to be DWR's position that the Department must have the ability, when necessary, to work with a contractor to ensure the most highly qualified subcontractor is chosen to accomplish the contract's specified tasks. As shown in our response to Recommendation 4, above, DWR has developed procedures to ensure only the most qualified subcontractors are selected. We feel it is in the State's best interest for the process to remain as shown in this updated procedure. Will not implement.

California State Auditor's Assessment of 6-Month Status: Will Not Implement

We disagree with DWR's position. To reduce the risk of DWR directing contractors to select particular subcontractors, DWR should require its contractors to select the most highly qualified subcontractor, and DWR should then verify the subcontractor's qualifications before it approves the selection.

60-Day Agency Response

It is essential that DWR work with a contractor to identify the specific tasks for which a subcontractor will be required. Additionally, it is important to convey to the contractor the expertise and qualifications necessary of the subcontractor in order to ensure the most highly qualified subcontractor is chosen to accomplish the specified tasks. The Report's Recommendation, above, isolates DWR from such consultation. Without these communications, time is unnecessarily expended while the contractor attempts to obtain a suitable sub-contractor without the benefit of input from DWR.

California State Auditor's Assessment of 60-Day Status: Will Not Implement

We disagree. Our recommendation is intended to reduce the risk that DWR will direct contractors to select specific subcontractors. We stand by our recommendation that the contractor should put forth the subcontractor it believes will best perform the work required by the contract and DWR should verify the qualifications of that subcontractor before approving the selection.

All Recommendations in 2016-132

Agency responses received are posted verbatim.