An audit released today by the Comptroller’s Office reveals that PUC’s community benefits program is both deeply problematic and deeply mismanaged. In several contracts examined during the audit, the PUC allowed contractors to not fully meet their promised – and binding – commitments to donate funds to communities affected by PUC projects.
This is doubly worrisome, as the strength of a bidder’s commitment to the community is a major factor in deciding who wins a lucrative PUC contract. Today’s audit found at least one situation where the strength of an entrepreneur’s commitment to funding the community allowed them to beat a competitor who submitted a less generous bid – but the winning entrepreneur later reneged on the engagement that won him the job.
“By awarding contracts based, in part, on social impact partnership commitments and allowing entrepreneurs to default on those commitments, SFPUC increases the risk that it awards contracts to entrepreneurs who ultimately , will not provide the greatest value to the City or its residents. summarizes the audit.
The goal of the Community Benefits Program, or Social Impact Partnerships, is simple – on paper. It is supposed to ensure that the winners of large PUC contracts invest time, resources and money in programs to assist the communities most affected by PUC projects; living next to the sewage treatment plant, after all, isn’t always what you say you are.
Yet today’s audit found troubling issues with every facet of the community benefits program from nose to tail: with the way proposals are worded; with inconsistent scoring methodology; with winning entrepreneurs who modify the conditions a posteriori; with entrepreneurs who inflate the value of their gifts and / or make mathematical mistakes; with the loss of critical documents; and, finally, entrepreneurs being allowed not to meet their end of the bargain and to fully finance their commitments.
It is not covered in today’s audit, but one wonders why the Community Benefits Program, which has been in existence for 10 years, exists. The city could, potentially, simply award contracts to the best and most qualified bidder, and then mandate a community benefit in the same way that large construction projects must set aside a percentage of costs to fund public art.
It does not make sense for the more qualified expert, for example, in sewer replacement, to lose their job to a less qualified competitor due to independent engagement, especially when the PUC allows by subsequently that this commitment is ignored.
Today’s audit also fails to address explosive claims that the benefits program is a de facto slush fund, with the money going to nonprofits preferred by staff members of the PUC, and bidders providing millions of “tips” on how to structure their community benefit proposals on a consultant who is also paid by the PUC.
But what has been tackled – deeply lax oversight and questionable loss of institutional control – certainly explained why such claims remain plausible.
As of December 30, 2020, the PUC had executed 84 contracts with commitments to its community benefits program. They pledged nearly $ 22 million in financial support; nearly $ 1 million in in-kind commitments and some 82,000 hours of volunteer work. Almost two-thirds of these commitments have not yet expired and have not yet been provided. Given the PUC’s poor record in meeting commitments, the ramifications of failing to correct this program are considerable.
Regarding the situations in which the contractors did not honor their commitments, “none of these contracts was able to provide substantial proof that it notified the contractor that it was late in its delivery or that it had not honored his commitment promised at the end of the term of his contract, ”we read in today’s audit.
“Although the subcontractors did not meet these contractual obligations, the SFPUC took little or no action to enforce the terms of the contract until the controller initiated this audit.”
In the seven contracts cited by the Controller, the PUC did not ensure that $ 685,000 was paid out to benefit the community.
Recommendations include the (rather straightforward) suggestion that the PUC should “proactively link” with delinquent contractors; it should also increase transparency by creating a publicly accessible dashboard that is “accurate, reliable and updated in a timely manner”.
Today’s audit was first requested by the San Francisco Labor Council in February 2019.
“We can say ‘shame on the entrepreneur’ for paying to play. But the state agency has created a program that if they want the job, they have to pay, ”former Labor Council chairman Rudy Gonzalez said today. “What remains to be seen is who asked them to pay?” Will we once again have to wait for federal intervention to find out?
The findings of the audit were acknowledged by the city attorney and the PUC, with promises to fix this mess in the future.
“The lack of clear policies and oversight in the Social Impact Partnering program has made the program vulnerable to favoritism and abuse,” City Attorney David Chiu said. “If this program is to continue and live up to its objectives, it must be reformed and authorized by the appropriate political bodies, including the supervisory board. ”
Newly installed PUC general manager Dennis Herrera, Chiu’s predecessor as city attorney, also pledged a change: “Going forward, we are committed to updating this program to ensure transparency, accountability and accountability. results. No one at SFPUC will tell entrepreneurs which organizations to commit to or how much to give them. This program will be a model of integrity with effective oversight.
The Comptroller’s Office will review this program every six months to verify its progress.