Bond Watch #3, October, 2009

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Branch Library Improvement Program

In September the Citizen’s General Obligation Bond Oversight Committee’s (CGOBOC) meeting was dominated by a report issued about the West Portal Branch Library renovation project by the City Services Auditor, an internal auditing group in the Controller’s Office. We usually figure out exactly what went wrong in a project after it is completed so this audit is important since the library renovation projects are ongoing and any lessons learned from the auditor’s report can improve active projects all over the city.

Unfortunately, the scope of the audit was very narrow – to analyze if the contract terms were met and make sure significant administrative requirements were in place (insurance, bonding etc.). The auditor found that the contract terms were not met and the recommendation was to write a better, more applicable contract. It seems that the city has a standard contract to use on construction projects that should have been rewritten for this small project. In addition, there were some concerns about the contractor’s insurance, license and other business requirements which were not monitored at the level required by the city.

But, I was hoping for an audit that would help explain the major problems in all bond projects…Why do schedules seem to slip consistently? Why do projects cost more than budgeted? and most of all How do we fix it?

In the end, $100 million dollar bond projects seem just like a bathroom renovation in my home - materials always cost more than I anticipated, the contractor has complete control over the schedule and I’m sure of exactly what I want only after the project is complete. So I understand why these projects are so hard but I do believe that the city should be better at it than I am.  

SF General Hospital Rebuild

At the September meeting we also discussed the General Hospital rebuild project which was just approved by the voters in 2008 for a whopping $887 million dollars. From a project management perspective this is supposed to be the project that runs perfectly. The city spent a considerable amount of money before the bond was even on the ballot to scope the project and cost it and make sure they were asking for enough money to complete the project (novel idea, huh?). In addition, the schedule was conservative and agreed to by all parties and plans were sent to the state hospital regulatory agency OSHPD, who can hold up projects for months for various reasons.

So, when the Department of Public Works representative for the hospital called the schedule aggressive (read: slipping), I was surprised. He did note that they are below budget but as we saw with the Laguna Honda Hospital project, slipping schedules always equals more costs. Those costs may be in the future but they are real and certain. We’re less than a year into a 6 year project and I’m concerned that we are heading down a familiar road. The CGOBOC made our concerns clear and hopefully when we meet with the hospital again in 2010, we’ll hear a different report. Stay tuned!