State auditor faults handling of delta tunnels planning contracts

A state audit found that the Department of Water Resources didn’t follow proper procedures in awarding planning contracts for California WaterFix, a proposed tunnel project in the Sacramento-San Joaquin Delta. (Katie Falkenberg / Los Angeles Times)

By Bettina Boxall

California water managers awarded a multimillion-dollar contract to a Sacramento consulting firm without going through the required competitive bidding process, according to the state auditor.

In a report released Thursday, state auditor Elaine Howle criticized the California Department of Water Resources for the way it handled a planning contract for California WaterFix, a $17-billion project to re-plumb the Sacramento-San Joaquin Delta.

“DWR did not follow state law when it replaced the program manager” for WaterFix with an executive of the Hallmark Group, who “did not have the necessary qualifications” to fill the post, Howle wrote.

According to the audit, the Metropolitan Water District of Southern California and other contractors involved in WaterFix wanted Hallmark to replace a manager who was not working full time on the project.

But, Howle found, the Hallmark executive who assumed the position had an undergraduate degree in economics and did not have an engineering background or experience in managing large water infrastructure projects.

The water resources agency first awarded Hallmark a subcontract and then a separate contract that was extended several times, for a total of $13.8 million.

In the department’s response, attached to the audit, director Grant Davis disputed the findings.

Hallmark provided excellent services, Davis wrote, arguing that the firm’s role did not require engineering expertise. “Hallmark’s job was to scrutinize costs, monitor schedules and ensure that tasks were completed on time,” he said.

The department also contended that it was not required to go through a competitive bidding process to award a subcontract to Hallmark.

The state audit is the second review that has found fault with some aspect of WaterFix planning finances.

As the project has been revised and undergone lengthy environmental reviews, planning costs have climbed to $280 million. The expenses are supposed to be paid by customers of the state and federal water projects that would benefit from WaterFix.

The state audit concluded that — appropriately — water resources had not used any general fund money to cover planning costs.

In contrast, a recent review by the Interior Department’s inspector general found that the U.S. Bureau of Reclamation had improperly left federal taxpayers on the hook for $50 million in WaterFix costs that should have been picked up by districts served by the federal Central Valley Project.