the volume of capital projects, at any one point in time, to justify having more staff that we can specialize into an asset approach. but we are organizing and have been organizing our capital plan along the lines of men as a category. we are largely agreed with the recommendation. just when it comes down to staffing, we cannot do a purer asset model. with cost estimation, something that we were putting into place at dpw as well. both cost and schedule estimations speak to the largest part of what the apparent overruns in money and time, and fully agree that we need to do that. in terms of reporting and oversight, we also agree with the recommendations. i just made reference to this also.

we need to track not just individual projects, but the rollout of programs and portfolios. part of the point was, it is hard for policymakers, various boards, to get a big picture of where we are on the rail projects, but projects, facilities projects, because we were tracking at a project by project level. we have 16 programs now in our capital plan that our asset- based categories. all of our tracking and management will be done at the project will and program and portfolio level. commissioner campos: one of the things that stood out for me -- and i understand the difficulty of serving on the city commission where people have full-time jobs, other responsibilities.

one of the things that really stood out was the question of why the mta board of directors was not more aware of some of these issues, it if you will. quite frankly, one question that was raised to me was, these types of performance audits are helpful, but why is it that the board of directors is not the one doing this? that is a larger question. in terms of what it means, going forward, what change, specifically, will this entail, in terms of what percentage of the board, -- is there going to be a change in the level of engagement of oversight? what does that mean in terms of

what the board will do, going forward? >> this slide speaks to the improved project reporting, which goes to the mta quarterly. the consultants rightly pointed out some shortcomings of the reporting format, structure. that is being improved. the next slide speaks to financial information that they rightly pointed out. not being consistent in how we were defining the different terms associated with scope, schedule, budget, in terms of what is the baseline, what needs changing and at what level? we are clarifying a lot of that. we have established the

transportation capital committee, an internal structure that will be vetting and approving, denying changes and everything that goes into the capital plan. the 20-year capital plan, five- year, and two-year capital budget will go to the board and we will be reporting on the quarterly period between the reporting and the approval process cheese, we will have a much tighter package, much more visibility to the mta board, information presented in a way that will be much easier for them to evaluate from their part-time status. i do not think we were delivering information to them in a way that would allow them to identify where the problems are, the changes we are going to be making, and the reporting is meant to get us there.

commissioner campos: one thing i hope happens, this kind of audit, that the board will take it and have their own discussions about other changes that may be needed. on one hand, i understand the importance of staff giving that information, but independent of that, you want the board to be asking those questions. that is the role they are supposed to play, really. the hope is there will be more engagement. >> absolutely, and i think there is willingness from the chairman and other members of the board to engage. they need us to give them the basic information they need to be able to ask the right questions. in terms of management process seees, the main thing had to do with risk analysis, a formalized process that the agency does for

large projects, but have not been done, in the systematic way that auditors recommended. we will be doing that, going forward. the agency does some very large projects but also some very small projects in the sustainable streets around, traffic calming project that are very small but you can eat up the entire budget, the undertaking a comprehensive risk assessment. it is really not warranted. we are working on other means for smaller projects, such as checklists, checks and balances through the approval processes to make sure the risks associated with process are addressed up front, which is what i believe the recommendation meant. in terms of continuing on with management processes, a lot of it focuses on business process improvement.

a lot of this, we fully agree with. fortunately, a lot of this work was under way with a process that started in the spring of 2010. this is what i was referring to. i take no credit for this, but it is good work that is underway, and we are now implementing the whole capital planning process, from the start point of the long-range plan, to the approvals, a much tighter process than existed before. we are just throwing that out. its first year. it is already bearing fruit. the decisions that we make are transparent, justified in writing. i think we will cover the threshold to which certain approvals need to be made. they said we need more i.t. staff.

most would agree with the recommendation. i know there are some that believe there might be too much i.t. staff in the city in some rollins, but i think they were speaking specifically to some of the informations systems we have to manage this large and complex capital projects we are developing. chricommissioner chiu: could you talk about the specialized needs said mta has around i.t.? obviously, there is a city-wide policy to centralize i.t.. i want to get a sense of what you think about that balance? >> i have not completed a full assessment of the mta's i.t.. i am very familiar, from having participated for four years, the direction the city is going. i have been working to make sure the mta is in that direction,

from staying on board with city- wide e-mail, to looking at something here, asset management systems. when i was at dpw, we were for the real-estate to get approval for enterprise asset management systems that the mta may be able to take advantage of now. the more we can get all the city in agencies on thie same system, it will be one place to report. the control system, the large capital project management system that the mta is developing, it will be designed and tailor towards the sfmta, but is a similar structure to what the puc uses. it is my hope there will be

opportunities to leverage what the puc has done, to someone integrate those systems. in an ideal world, we would have a single system to integrate the whole city. this will be a good thing for the mta. it will have some similarities, possibly integration with the puc. it will not be a city-wide enterprise solution, though it has the potential to be so in the future. because we are implementing these systems and on the to integrate with the other city agencies, that was the impetus behind the suggestion that we need more staffing and in areas of i.t. project management. that is one area where we have pretty much zero staffing. much of the city-wide conversation about consolidation of functions has been around that. we do not need our own e-mail

network, administrator. the nuts and bolts should be centralized. the agency-specific projects need leadership in project management to make sure they do now overrun cost and schedule, as i t projects tend to do. that is an area where i know our i.t. staff is short. commissioner campos: another point made in the audit was that with some of the problems, delays, overruns of some projects, because of the way i.t. is structured, the systems you have in place, by the time you know something is a problem, you are talking about that being a few weeks late. is that something that will be addressed? >> part of having a good project control system is to have real- time information on what is happening in-project, project

managers can see the progress. they can see where the project is, budget-wise. right now, that information is in different places, is not in real time, is on paper. to have this available real- time is absolutely the tools we need to give our project managers to be able to manage. the next slide continues with this large control system. the auditors felt there was a risk, being a large i.t. product itself. we concur. we will be looking at that closely, making sure we are staffed with the right kind of i.t. staff.

to give you an idea of what some of the process improvements are under way, strengthened by the audit, this re-engineering of the process that the mta started to undertake nearly two years ago. i referenced what a lot of these were. the last bullet speaks to the question you raised, in terms of getting good and accurate information to the mta board so they can be properly engaged. i have also referenced our revamped capital process which aligned better with the city, but is a much more sophisticated way to look at all the assets of the system, identifying their condition, having a system to evaluate and prioritize what those are, to develop to a five- year capital improvement plan, and from that, to distill to a

two-year capital budget. much more sophisticated than the way the mta was doing before. as well, at this point, as any other city agency is doing. i think that has been a big improvement. being much clearer in terms of definitions. this seems basic, but these were things that were not necessarily in place, and the audit datgave us feedback on th. i mentioned putting in approval of requirements that govern changes to projects. and then i just wanted to end to clarify something that was printed in the media about capital funds, operating funds, the idea that these overruns created all this money and the

agency has an operating deficit. while there is no question investing in capital can reduce capital cost -- sometimes it increases -- to the extent we ever save money on capital projects, we use those funds to reinvest in the capital assets of the agency to invest in the state of good repair, not to take a onetime money, which capital money is, to plug operational gaps. that is a big public finance no- no, something that we would not do, but no dispute with the idea that we want to make sure every dollar we get, whether from the federal government, state government, mtc, wherever it is, that we spend it well. this last slide outline some of the steps being taken. some were in place before the audit.

just last week, we did bring our 20-year capital plan to the mta board of directors. we also brought our 60-year to teach it planned. one of those objectives explicitly speaks to capital project delivery. to achieve that objective as part of our agency strategic plan, we will have a complete action plan, much of which is executing the foregoing, tracking it, reported to the mta board, and public as well. commissioner campos: i wanted to ask whether or not the audit influenced what the 20-year capital plan looks like, in terms of the approach, other things that were included as a result? >> along the lines of the asset

approach, we have now created 16 categories that are largely asset-oriented. that was certainly informed by the audit. the plan speaks not only to the substance of the need, but the process by which that 20-year plan gets brought. how we get from that down to a five-year plan, which is a fiscally-constrained plan, and from there, the two-year plan, and the entire capital planning process was informed by this audit. very grateful for the opportunity. it is of great playbook, going forward. i think the mta delivery of capital projects is making very significant improvements now, that will serve it well, going forward. commissioner campos: thank you, mr. reiskin. colleagues, any questions? president chiu?

commissioner chiu: we have all set for presentations responding to audits, how organizations are handling their bureaucracy. at the end of the day, in one year, if you were to come back and say we succeeded on this, are there a couple of metrics that you can point to where you would measure your progress of all of these process these, the impact of that, going forward? put differently, with all of these recommendations, but will be the successor outcome? -- success outcome? >> the key performance indicator, for me, is the on time and on budget delivery of capital projects. that is what we have put as the key performance indicator for this. there will be many other measures, such as estimation, accuracy, change orders due to

errors and omissions, scope changes over time, lots of different things to look at. but the ultimate outcome is whether we are delivering projects on time and on budget. commissioner chiu: what would those numbers be right now, if you have to say -- your budget performance rating? >> i do not know if i have a good baseline right now. this strategic plan is meant to be effective july 1. what we're doing now is establishing baseline for all the measures in the plan where we do not have them, where they are not how they need to be. i do not know off the top of my head what that would be. based on the way we were doing things before, setting baseline's early in the process with almost back of the envelope calculations, i would estimate we are very low with regard to budget and probably to schedule.

measured from the approved project, which is taking that baseline through the planning process, getting to a design estimate, from the approved project to the actuals, would be much better. no doubt, there is room for improvement. commissioner commissioner chiu: i would love to see what those numerical baselines look like. we do not want to set them to forfeit those targets, but i have seen a lack of good performance measures that we can really measure progress against, and i know this is something you are focused on, but i would love your thoughts on this in coming months. >> absolutely. we have identified a key performance indicators for each of those 15 objectives, and beyond that, we will have a more comprehensive suite of performance measures, and we intend to report not only to our board, but publicly.

i would be happy to come to plans and programs at some point in the future and report not just on that but on all the measures. commissioner chiu: was sort of tools do you have internally for management -- what sort of tools do you have internally for management to make sure you are hitting those? >> we are pulling information from different places to see how we are doing on budget compared to how we're doing on schedule for independent projects. right now, there is regular reporting from the capital division, much of which is kind of done by hand. i personally meet with the project managers of each of the major projects once a month. we sit down and cycle eventually through all of the projects to ensure that we are keeping things on track and delivering. once we have this new control system in place, it will be much easier in real time at any time for any of the agency's

management as well as project managers to know at any given point in time to know how we're doing on a project and be able to flag much more quickly where we need to be able to focus resources. commissioner campos: i look at this in a very simple way, very basic way. i think that when an agency tells the public, "we are going to spend x amount of money," whether it is in the context of a capital project or overtime, which we have talked about before -- but whatever your budget is if for some reason you are not able to meet that budget, i think that raises a number of questions. it could truly impact the level of trust that the public has in that agency, which is why i think it is important that a lot of work be done in advance before a number is put out there, so that it is not a back of the envelope process.

there is a great deal of thought that goes into that, and much consideration of different factors, including what is happening internally at the agency, making sure that all the components of the agency are communicating with one another. making sure community input is taking -- taken into consideration, with the recognition that things change. there will be circumstances, as commissioner wiener indicated, where you would want to change numbers, but i think that is an overarching concern people have with the mta. whether it is over time, whether it is capital projects, that there has been a commitment to spend x amount of money that turns out to be a lot more money -- whether it is overtime, whether it is capital projects. i think that is a concern. even though we are talking about capital projects, it does

impact operations in two ways -- it may have a direct impact to the extent that a cost overrun or a delay may require the expenditure of additional operational money, even though a lot of that capital project money will not be able to be used for operational purposes. it may impact it that way. the second impact is when you have a shortfall in terms of your operational budget, it is hard to make a good case that people should give you more money to cover the shortfall if you have not managed a capital project well. that is, i think, perhaps where the real impact is. even if we are talking about money that cannot be used for operational purposes, when you are going back to -- whether it is the board of supervisors or going back to the ridership

asking for more money, it is hard to make the case if you have not managed the money you do have well. >> i completely agree. commissioner campos: before we open up to public comment, i would like to ask the executive director of the county transportation authority to come up. one of the things we look forward to doing at the county transportation authority is to go through the same analysis, through the same performance audit for the county transportation authority so that we make sure that this is happening across the board. i am sure that if it happened with other agencies, there would be other issues identified as well. with that, good morning to you. >> good morning, mr. chairman and commissioners. happy new year to all of you. just a couple of commons -- first of all, i am delighted to

have mr. reiskin here talking about his perspective on the audit. i am delighted to be collaborating with him on a number of things. i predict that we will be a resourced to him in addressing a lot of these issues -- that we will be a resourced -- that we will be a resource to him in addressing a lot of these issues. we hope to be. i think this discussion is a sign of maturation of the mta that happened over the last decade. it is sort of inevitable that we would be at a point like this at some moment, and i am glad that moment has come. i think it is very constructive. i want to draw the connection funding because that is what i do. to a man who has a hammer, every problem is a nail, right? let me talk about funding for a moment. first of all, the issue of

defining project scope as an integrated process inside the agency is the key to not having surprises like the ones that commissioner wiener talked about because the public will come up with good ideas, but a good planning process will incorporate all of the multi modal -- multimodal, planning stuff. hopefully, it will not affect the viability of the project or even the overall cost of it. the other thing is that we are not just talking about scope changes that result in cost increases. obviously, that is part of the problem, but to draw from an analogy i think you will really understand -- if you are remodeling your bathroom, and half with through the process, you decide you want to add an extra shower stall, it is not just the cost of the shower

stall, but you will have to move things around in the bathroom. the original cost components will also -- because of the components already in there will also result in cost increases, so it would be a much larger number than it would be if you had planned it from the beginning. the kinds of communication in- house are very important. i draw your attention to the fact that prop k, already per the voter mandate, has the requirement for the programs. the reason for that is we want to be able to track those trends into the future and make sure that the money is available to deal with projects as those needs, up -- as this needs come -- as those needs come up. \ if you cannot stay with the five-year program, you cannot

realize the leveraging of prop k funding that they are supposed to realize, and that can be quite significant. there is an item on the agenda right after this where we are leveraging two federal -- to one federal money -- two to one federal money for the communications system. i think focusing on a comprehensive project management to avoid those overruns is really fundamental to the relationship between the authority's funding process and the mta's program. for me, it is something to keep in mind as we move forward, and we look forward to that collaboration. commissioner campos: thank you. if there is any member of the public who would like to speak on this item, please come forward. >>