Report 2018-108 Recommendation 5 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 #5 To: High-Speed Rail Authority, California

To ensure that it is adequately prepared if it is unable to meet the federal grant deadline of December 2022, the Authority should, by May 2019, develop a contingency plan for responding to such a scenario.

Annual Follow-Up Agency Response From September 2023

As noted in our response to Recommendation 4, Amendment 7 of our federal grant generally conforms to Amendment 4 to Agreement Number FR-HSR-0118-12, which implemented the contingency plan and addressed the risk of being unable to meet the prior deadline.

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

The Authority has now amended two federal grant agreements for its Central Valley projects that extend those agreements' deadlines to December 2026 and December 2028, respectively.

Annual Follow-Up Agency Response From November 2022

As noted in our response to Recommendation 4, Amendment 7 of our federal grant generally conforms to Amendment 4 to Agreement Number FR-HSR-0118-12, which implemented the contingency plan and addressed the risk of being unable to meet the prior deadline.

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

We will assess the status of this recommendation when the authority and has finalized the amendment it refers to in its response.

Annual Follow-Up Agency Response From October 2021

As noted in our response to Recommendation 4, our amended federal grant extended the deadline to December 2026, which implemented the contingency plan and addressed the risk of being unable to meet the prior deadline.

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

After submitting its response, the Authority clarified that it has amended one of its two relevant federal grant agreements and is working with the federal government to amend the other. Therefore, we have evaluated the status as partially implemented.

Annual Follow-Up Agency Response From November 2020

The Authority is undertaking an enhanced risk assessment of the assumptions in the Business Plan, to be issued December 15, 2020. We are looking closely at how we are doing against the ARRA deadline. As we have expressed in the past, the Authority will require the cooperation of the FRA to achieve the federal December 2022 construction deadline and/or to explore alternatives to that deadline.

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

As we have stated previously, although we remain concerned about the Authority's ability to meet its December 2022 construction deadline, we acknowledge that the Authority will require the cooperation of the FRA in order to explore alternatives to that deadline. Given the possible financial implications for the State if the Authority does not meet the deadline, the Authority should continue attempts to reengage the FRA in order to develop contingencies for such a scenario.

1-Year Agency Response

We have addressed the risks associated with the FRA's disengagement and the effect of the delay in the FRA's action on NEPA Assignment (which had been pending since July 2018) in the Authority's May 2019 Project Update Report to the Legislature. On July 24, 2019, the Authority announced that the State of California had received approval from the FRA to assume its federal environmental review responsibilities under NEPA through a program known as NEPA Assignment. The Authority and FRA have held ongoing constructive dialog related to NEPA Assignment.

The Authority will require the cooperation of the FRA to achieve the federal December 2022 construction deadline and/or to explore alternatives to that deadline.

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

We discuss the Authority's May 2019 Legislative report in our six-month assessment to this recommendation. As we stated then, although we remain concerned about the Authority's ability to meet its December 2022 construction deadline, we acknowledge that the Authority will require the cooperation of the FRA in order to explore alternatives to that deadline. The Authority confirmed for us that, notwithstanding the NEPA issue it reports in its response, its attempts to engage the FRA about contingency planning around the December 2022 deadline have remained unsuccessful. Given the possible financial implications for the State if the Authority does not meet the deadline, the Authority should continue its efforts to reengage the FRA in order to develop contingencies for such a scenario.

6-Month Agency Response

Following receipt of the FRA's February 19, 2019 letter notifying the Authority of its intent to terminate Cooperative Agreement No. FR-HSR-0118-12-01-01 effective March 5, 2019, the FRA disengaged from all communication with the Authority. Therefore, the Authority is presently unable to perform the necessary consultation with the FRA and evaluate collaboratively the alternatives for contingency planning should the Authority fail to achieve the required scope of work by the current December 2022 grant performance period. The Authority continues full implementation of its "Get to Work plans" in order to accelerate construction performance and achieve the current federal grant performance period deadline. The Authority is eager to resume our long-standing partnership with the FRA.

California State Auditor's Assessment of 6-Month Status: No Action Taken

The Authority addressed the FRA's disengagement in its May 2019 project update report to the Legislature, and provided us documents indicating that the FRA has cancelled regular standing meetings with Authority personnel. Although we remain concerned about the Authority's ability to meet its December 2022 construction deadline, we acknowledge that the Authority will require the cooperation of the FRA in order to explore alternatives to that deadline. Given the possible financial implications for the State if the Authority does not meet the deadline, the Authority should continue its efforts to reengage the FRA in order to develop contingencies for such a scenario.

60-Day Agency Response

The Authority continues to routinely update the individual project risk registers in coordination with the FRA on a quarterly basis. In doing so, the Authority has established project controls allowing construction performance monitoring to achieve the federal grant deadline. If, by July 2019, progress in the Central Valley is not tracking to the "Get to Work plans", the Authority will consult with FRA to evaluate options and the possibility of seeking an amendment to the federal grant deadline. Monitoring Central Valley construction from present to July 2019 will allow 2019 construction to fully initiate to evaluate progress against planned project schedule milestones.

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

The Authority's response states that it continues to take steps to improve the likelihood that it will meet the federal grant deadline of December 2022. However, as we discuss on pages 32-33 of our audit report, meeting the federal deadline will require significant increases in the rate of construction progress in the Central Valley. As such, to ensure it is prepared if it is unable to meet the federal grant deadline, the Authority should as soon as possible, and by May 2019, develop a contingency plan.

All Recommendations in 2018-108

Agency responses received are posted verbatim.