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 go 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 have to do that in a partial wage because we do not have the staff and projects are much more integrated than an asset- specific approach would lend to. commissioner campos: in terms of not having staff, is there an argument that you should have staff, is there need to make an investment so -- i do not know if you have any thoughts on that. >> it is not a matter of having an adequate staff to deliver the program. as the other city departments do with their capital projects, the increase and decrease their staff as the capital funding

flows required. my point is, to deliver a number of capital projects at any given time, we do not necessarily have an engineer that we can dedicate just to rail projects. we have somebody working 75% on rail projects, 25% on overhead projects. it is just that we do not have 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