commissioner campos: good morning, everyone. welcome to the transportation authority plans and programs committee. happy new year to everyone. we are joined this morning by a

committee vice chair commissioner carmen chu, john avalos, david chiu and scott wiener on on routes -- are en route. please call item no. 2. >> approve the minutes of the december 6, 2011 meeting. this is an action item. commissioner campos: we have the minutes from the december 6 meeting. before we act on it, let me open up to public comment. is there anyone from the public that would like to comment on this item? seeing none, public comment is closed. motion by carmen chu, seconded by commissioner avalos. motion approved. please call item 3. >> citizens advisory committee

report. this is an information item. commissioner campos: we have the chair of the committee, mr. davis, who represents district 9. good morning, happy new year. welcome to the plans and programs committee. >> good morning, commissioners. i am here to provide the citizens advisory report. you have one item on your agenda today that we took action on at our october 26 meeting. that is item five, the allocation of roughly $40 million to the sfmta for their c3 program. to upgrade technology that is 40 years old. we passed the item in an ms. lee based on the fact that it will be upgrading technology and should improve services to their residence and folks writing muni.

with that, i can open it up to any questions. commissioner campos: thank you. we have been joined by commissioners david chiu and scott wiener. any questions for the citizens advisory committee? why don't we open this up to public comment? again, thank you to the members of the citizens advisory committee. any comments on this item? is there anyone from the public that would like to comment on this item? seeing none, public comment is closed. thank you, mr. davis. please call item for. >> >> item 4. report on limited scope performance audit of the san francisco municipal transportation agency, phase ii. this is an information item. commissioner campos: i would

ask for a brief presentation. before that begins, i also think mr. reiskin is an audience as well. i want to acknowledge his presence here and thank him and his staff for their collaboration in this effort. we will be hearing from him shortly. >> mr. chairman, commissioners, my name is jim ayers cgr management consultants. we were asked to give a short overview of the audit, just as they were pressured to the point

that we -- were fresher to the point that we made here -- refreshers to the points that we made here. we completed the draft of the report in march 2011. we had three rounds of the review. final presentation in november. we had a fairly lengthy review process that went on, by the agency, and by the board, because we did not want to give sfmta a report that had not been vetted through the commissioners.

these are the five areas of concern. with these, we had 19 recommendations, which we highlighted in the executive summary. these were reviewed by sfmta. they concurred with 17 of the 19, partially concurred with two others. let me just highlight some of those recommendations under these categories. with respect to project time, cost overruns, we had recommended an asset management team to improve accountability for project execution for assets foreign generating -- for

generating projects as part of the state of repair initiative. and then having within that asset team, the skills to execute those projects. another concern was accuracy of the estimates. we have looked at a sample of projects and found 12 out of 13 of those had four runs in both cost and schedule. the second item, board reporting an oversight. we are recommending that there be -- the tracking was done in quarterly reports, project by project, with no overview on program and portfolio law loss.

these are sort of an aggregate. -- portfolio levels. we provided that in the document that we delivered. one issue was the use of approved budgets, rather than baseline budget, to track whether a project was in trouble or not. we advocated, what was happening, when you track an approved project, everything shows up on the report. our recommendation was to track also against baselines. we put out a number of examples,

quoted figures about the capital program, planned expenditures, seemed inconsistent and confusing. we also recommended that other factors needed to be added to the report, like cash flow, the use of contingencies. there were two recommendations in that area of management process design and improvement. one called for additional information technology staff. another called for an organization within the agency to maintain process descriptions and to make continuous improvements. finally, we looked, in

conjunction with the central subway project, we looked in some detail at the systems project that was just beginning as we were conducting the audit. we noted some concerns of integration with other systems. any questions for us? commissioner campos: we wanted to give members of the committee as well as members of the public a brief summary of some of the key findings and recommendations, without belaboring the record that was done at the full transportation authority meeting. i think this captures that.

unless there are specific comments or questions, let's turn it over to the mta. let me ask director ed reiskin to come up. thank you for being here. the one point i would make about this, mr. reiskin, as we noted, this performance audit looks at a period of time that well proceeds your tenure. to the extent there are concerns that predate your arrival, i want to thank you for the open this for which you have approached in these reviews. i know that your tenure at dpw,

your administration is always focused on best practices. i know these are things you are worried about. i am thankful you are trying to see how we can learn from this and address these issues. i appreciate that because i know it is not an easy thing to do necessarily for an agency. usually, people become defensive. instead of doing that, you have indicated you want to tackle these issues on. >> thank you and good morning. you kind of stole my opening. that is absolutely right. i want to thank you for your leadership in bringing this audit to bear, to the committee, and to the full ta commission. there is no question, being

handed a best of things that i can do that would improve how the mta is doing business, whether on the capital side or operating side, is very much welcome. i am grateful for the opportunity to talk through where we are with this. i will say, wow discovered a period of time that predated my tenure, likewise, many of the corrective actions predated my tenure. i will be talking about a lot of good things that i cannot take credit for, that were already under way, but based on my experience in delivering capital projects, managing capital programs, it will certainly be a main focus of mine, moving forward. i have a brief presentation that i will walk through, and then i welcome the opportunity to answer questions.

one point i want to make, in addition to the fact that this covered in a limited period of time in the past, it also covered a limited scope, in terms of the capital projects and programs the agency delivers. it covered certain projects within our capital division. we also deliver projects elsewhere in the agency, such as sustainable streets. it is just a caution about extrapolation through the entire capital delivery process of the agency. however, all of the corrective actions i will be speaking to our agency what improvements. i am just going to walk through the audit concerns and then talk about some of the things that are underway to address them. you heard from the team what

the main areas of concern were. i will start with what i think is the most important, most concern to you all, to me, and to the public, including the way it has been portrayed. they did look at baseline budget and schedules for a selected number of projects and found, relative to the baseline that were established, many cases where the final budget exceeded the baseline budget, and the final schedule exceeded the base line schedule. this is something that i focused on their much when i was at dpw. we made it a key part of what we were measuring for each project, tracking where each one was relative to budget and schedule. this is the bread and butter of good project management, the able to deliver what you say, on

time, and on budget. i will first acknowledge, there is no question in my mind, from my limited time at the mta, there is room for improvement in how we are managing the delivery of capital projects. you will hear about some of the things are already in place to address that. i do want to caution against taking some of these numbers without understanding some of the underlying reasons behind things having apparent cost and schedule overruns. i think a lot of it has to do with estimation and process. i do not think as much has to do with some level of rampant mismanagement or misuse of public funds. again, no question there are ways to improve so we can use our dollars more effectively and

deliver projects on time and on budget, but here are a couple of examples of what i'm talking about, and why what appeared in the audit as a cost overrun, schedule over run, was not an example of wasted money or time. one example i made reference to last time was the church and dubose rail replacement project. that is a very busy intersection with bikes, pedestrians, the 22 crosses in the north-south direction. this started as a real replacement project. the rail is at the end of its useful life. the baseline budget was established as a rail replacement project. when we first brought that out to the community to do the standard public notification that the mta does for any

capital project that will be disruptive in the neighborhood, the community stepped up and started to provide feedback in terms of other transportation- related improvements they felt needed to happen at that area, going all the way up to the n judah stop, down to church and market. the mta sat down with the community groups, dpw, puc, and started looking at the project, not just as a rail replacement project, but a complete streets replacement project. in the process of doing so, they significantly increased the scope to make a number of other streetscape improvements, pedestrian, bicycle safety improvements, including other amenities, to make it a more

complete project. what that did, of course, was increase the cost. a much better project, but a much more expensive project. the auditors looked at this and said, your base line was here and your project cost was here. that is a cost overrun. i do not disagree with the conclusion, but a suggestion that the amount of that over run are dollars that are being wasted, could be used elsewhere, that is a conclusion that i suggest we do not drop. one conclusion that we could draw, the approach to the complete streets project should have been from the start and we should not have been looking at such a critical transportation node at our system with such a narrow view, as a real replacement project. that is where the lesson is, for

me. commissioner campos: if i may, one of the things i wanted to say, when i think about capital project management, it is not just the issue of overruns, but how an agency looks at the project from the beginning, what kind of ground work is done, so the moment you start out describing the project as something, you recognize the importance of staying as close to that as possible. even if you change it because of public input, at least for the regular muni rider, they will look at something that was a specific amount that group. making sure that the community out -- is done before we start saying this is what we're going to do -- outreach is done before

we start saying this is what ever going to do. that is an important point. commissioner avalos? commissioner avalos: you had a process with the community that led to a broadening of the scope of the project, but what were the internal decisions within the sfmta that led to a rail replacement project to a complete street project? was there a decision made by the board of directors? approval of the project outside of project management that led to the broadening of that scope? >> the project was approved by the mta board, but you are touching on something that is another fundamental opportunity at this audit helps to point out. part of what made this a complete streets project was not just the outreach to the

community, but the prophecies of the mta, transit folks, talking to the streets folks. this is why the mta was put together. creating a comprehensive picture of the transportation system. at the start, there were only four rail replacements. by engaging internally and having the engineers from sustainable streets as part of the equation, they were able to develop a much better project that subsequently went through the various approval paths. it is that process, as well as the community process, that we are now pushing towards the front of the project. we will not do any work in the right away that has not been vetted by transportation engineers, other folks, and that is something that has not been happening despite the fact that

it was more than 10 years ago that the mta was put together. that is the biggest improvement we can make, other than some of the nuts and bolts identified in the audit. commissioner campos: commissioner wiener. commissioner wiener: i want to follow up on that, and being familiar with that project, being in my district, it is an incredible project. i want to thank the mta for working with the community to make that happen. this really did come from the neighborhood. we have a very strong neighborhood association there. i agree, we can always do it better and involve the community early on to make sure the project is fully defined at the beginning. i am glad to hear changes are

being made to do that, but by the same token, you can never predict all of the ideas that will come out of the woodwork. what i do not want to do is create a situation where the mta proposes a project, and then an unanticipated idea comes from the neighborhood that will be really good and save money in the long run. because of a fear that they will be criticized for cost overruns, mta says no, we do not want to be criticized, so we have to put off to another day. i think it is balanced between agency is encouraging people to think up front, but understanding you can never anticipate every idea. as we know, people may not focus until something is happening.

i just wanted to make that point. >> that is a great point and speaks a little bit too commissioner avalos' question. we have tightened up the internal approval process so that there is a well prescribed process for how we approved scope changes. through having that process and transparency, we will be able to defend and support any scope changes that were not foreseen, that would be for the good of the city and will not shy away from that. it does also raise the point -- and this is something i dealt with at dpw. there is a trade up between how much time you invest up front in the exploratory phase. the same problem would possible scope addition occurs with unforeseen conditions.

what you do upfront can save money down the road, but often, you do not have funding up front, compared to how much you leave to the balance of the process. with right away processes, it could the how many holes you dig in the ground to figure out where the utilities are. they are not usually where they were marked, and that can lead to delays. it would be great to have the full picture up front, but that comes at a cost. we do have trade-offs to consider. just a couple other examples. we did a traction power replacement in richmond. this is part of what energizes the overhead lines. when it mta first bid the project in 2008, the bids came in $3 million over budget because it was at a time when copper was at a peak.

there was a lot of acquiring it involved. mta later delayed the process. -- wiring iinvolved. that is another example where the targets were missed. however, in that case, the change actually saved the city money. there are other things that -- other examples of that. many of the projects have example that explain what our cost overruns, money being well spent for the system. i do not want folks to leave with the idea that there is a lot of money or time being wasted in these projects. most of the schedule or cost overruns have explanations, and there are good explanations. not all of them do, and that is

where the work is to be done. i definitely appreciate the work of the audit, but i want to recognize a lot of what the audit found has explanation. to the extent it does not, there are many good recommendations here that will whiwe will be implementing. on cost and on schedule, one of the recommendations we only partially agree with, using an asset-management approach. if we were a much larger agency with larger pools of assets, we might have the luxury of being able to organize our engineers and product managers, construction managers, planners, into asset-specific groups. the benefit of that is the work better as a team, and they better know their subject matter expertise. that is a recommendation for how

to organize. an organizational design that i shifted to ed dpw at a high level, separating the buildings from the streets. we are limited because we have a relatively small capital division. we need people to be able to work across different asset types. we are also doing many more projects where we are upgrading or improving assets for many different categories. rail assets, over had assets, bicycle infrastructure, other right of way. as we go to a more integrated complete streets approach, it makes it more difficult to have that asset-specific focus. our funding generally goes in line with the assets, but we ve