LAO 2004-05 Budget Analysis: General Government

Analysis of the 2004-05 Budget Bill

Legislative Analyst's Office
February 2004

Department of Parks and Recreation (3790)

The budget proposes $22.7 million for capital outlay for the Department of Parks and Recreation (DPR). This amount includes $3.3 million from the California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Bond Act of 2002 (Proposition 40); $5.5 million from the Safe Neighborhood Parks, Clean Water, Clean Air and Coastal Protection Bond Act of 2000 (Proposition 12); $3.7 million from federal funds; $9.1 million from the Off-Highway Vehicle Trust Fund; and $1 million from the Habitat Conservation Fund.

The budget includes funding for the following previously funded projects:

The budget proposes funding of only one new proposal:

While we have no issues with these requests, we note that the 2003 California Five Year Infrastructure Plan (2003 Infrastructure Plan), prepared by the Department of Finance, indicated that significantly more DPR projects would be forthcoming in 2004-05 as discussed in detail below.

Infrastructure Plan

For the 2003 Infrastructure Plan, DPR identified $608.7 million of infrastructure needs for the five-year period of 2003-04 through 2007-08 (see Figure 1). This figure also shows the amount of capital outlay appropriated in the 2003-04 Budget Act and proposed in the 2004-05 Governor's Budget.

Figure 1

Department of Parks and Recreation
2003 Infrastructure Plan

(In Thousands)

 

2003-04

2004-05

2005-06

2006-07

2007-08

Total

DPR Identified Five-Year Infrastructure Needs

Critical infrastructure deficiencies

$29,962

$33,366

$22,969

$42,105

$21,065

$149,467

Environmental acquisitions and restorations

3,319

3,536

3,725

13,650

9,700

33,930

Facility/infrastructure modernization

9,701

8,066

8,897

9,244

19,556

55,554

Public access and recreation

73,359

89,203

72,894

63,250

63,088

361,794

Workload Space Deficiencies

-

-

-

1,858

6,089

7,947

    Totals

$116,341

$134,171

$108,575

$130,107

$119,498

$608,692

Projects Scheduled for Funding

Critical infrastructure deficiencies

$29,464

$24,974

$13,471

$20,218

$3,000

$91,127

Environmental acquisitions and restorations

2,719

3,536

2,600

3,150

2,500

14,505

Facility/infrastructure modernization

9,701

7,214

6,923

800

-

24,638

Public access and recreation

66,059

48,639

23,465

18,200

12,200

168,563

Workload space deficiencies

-

-

-

-

-

-

    Totals

$107,943

$84,363

$46,459

$42,368

$17,700

$298,833

Approved in 2003-04 and Proposed in 2004-05

Totals

$141,523

$22,676

 

 

 

 

As shown in Figure 1, the administration's budget-year proposal of $22.7 million is only about one-fourth of the total DPR infrastructure needs approved in the 2003 Infrastructure Plan for 2004-05. According to the 2004-05 Governor's Budget Summary, the administration is evaluating various alternatives to reorganize and streamline existing resource conservation efforts. As such, the Governor's budget is deferring the appropriation of bond funds in 2004-05 until the spring Finance Letter process. (Please see the "Crosscutting Issues" section of the "Resources" chapter of this Analysis for a discussion of various issues related to resources bonds.) In any case, the administration's spring Finance Letter proposal should ensure that bond funds are available to complete those projects previously approved by the Legislature. We note that roughly $37 million is needed for subsequent phases of 15 bond-funded projects that were initiated in the 2003-04 budget.

Retention of Project Management Authority  

We recommend the Legislature extend the Department of Parks and Recreation's project management authority over its capital outlay projects for three more years. This authority is scheduled to sunset on January 1, 2005, unless a later enacted statute extends or repeals the sunset date. Based on a review of current and projected capital outlay workload, we recommend a three-year extension of the sunset date.

What Is Project Management?

In the area of capital outlay, the term project management generally refers to the responsibility of overseeing the design, construction, schedule, and budget of a capital outlay project. Project management responsibilities begin with the initial design phase of a potential capital outlay project, and grow once a project has received an appropriation in the budget act. Figure 2 shows the various tasks or responsibilities that make up capital outlay project management.

Figure 2

Capital Outlay Project Management Responsibilities

 

   Development and review of preschematic documents

   Development and review of environmental documents

   Development, review, and administration of architectural and engineering service contracts

   Project cost estimating

   Development and review of preliminary plans (design documents)

   Development and review of working drawings (construction documents)

   Development, review, and administration of construction contracts

   Coordination of designers, special consultants, contractors, and inspectors

   Change order analysis and estimating

   Manage project schedules, costs, and scope

   Oversee on-site construction operations

   Preparation of project progress reports

   Analysis and settlement of construction claims and disputes

   Preparation of project completion reports

DPR's History With Project Management

Previous Project Management Authority. During the 1994-95 through 1999-00 fiscal years, the DPR was a participant in the state's pilot program on performance based budgeting. The purpose of performance based budgeting was to provide departments greater operational flexibility in order to improve the efficiency and effectiveness of service delivery. During the six-year period that DPR participated in this program, it entered into an annual Memorandum of Understanding (MOU) with the Legislature that specified the scope of operational flexibility and authority granted to it. With regard to capital outlay needs at state parks, DPR was allowed to exercise the same authority granted to the Division of the State Architect and the Real Estate Services Division of the Department of General Services (DGS). In other words, DPR was authorized to plan, design, construct, and administer contracts and professional services relative to the development and completion of its capital outlay projects.

Project Management Reverts to DGS. Beginning with the 2000-01 fiscal year, DPR opted to not participate in the performance based budgeting program. As a result, the MOU with the Legislature expired, along with DPR's authority to manage its capital outlay projects. Consequently, project management authority for DPR capital outlay projects reverted to DGS, the state entity generally responsible for managing state capital outlay projects. With the exception of the higher education segments, the Department of Transportation (highway construction), the Department of Water Resources (flood control and water supply), and the Department of Corrections (new prison construction), all other state agencies use DGS capital outlay project managers to oversee the completion of their capital outlay projects.

However, following the passage of Proposition 12, which provided $525 million in general obligation bond funds to DPR for various capital improvements at state parks, DPR requested statutory authority to once again manage the development and construction of its capital outlay projects. The DPR reasoned that restoration of its project management authority was reasonable because it had successfully managed its capital outlay projects under the performance based budgeting program and it already had the necessary personnel on its staff to manage capital outlay projects.

Current DPR Project Management Authority. Chapter 993, Statutes of 2000 (AB 553, Cardenas), authorized the Department of Finance (DOF) to delegate to DPR the same authority granted to DGS to plan, design, construct, and administer contracts and professional services for legislatively approved DPR capital outlay projects. As a result of Chapter 993, DPR submitted a project management proposal to DOF, and in July 2001 DOF and DPR entered into an MOU that set forth the terms and conditions under which DPR would manage and oversee its capital outlay projects. Basically, DPR must comply with the same laws, regulations, and administrative requirements as DGS project management.

The department's project management authority under Chapter 993, however, will sunset on January 1, 2005 unless a later enacted statute deletes or extends that date. The DPR believes that it should retain its project management authority in order to complete the capital outlay projects it currently has in progress, as well as future projects that it will undertake with the remaining general obligation bond funds. Based on the foregoing, we understand that DPR is sponsoring legislation in 2004 to remove the sunset date, allowing DOF to continue to delegate project management authority to DPR.

Evaluation of DPR's Project Management Program

As stated earlier, under the provisions of the project management MOU, DPR must comply with the same laws, regulations, and administrative requirements as DGS project management. In order to assist the Legislature in deciding whether to extend DPR's project management authority, we have evaluated the various project management tools and processes used by DPR to assess its ability to properly manage its capital outlay projects. Furthermore, in order to measure the competence of DPR's project management program, we have used the DGS project management program as a comparison. 

Project Management Tools and Processes

The DPR employs the project management tools and processes shown in Figure 3. These tools and processes are generally the same ones used by DGS project managers. There are, however, some differences, which we highlight below.

Figure 3

DPR Capital Outlay Project Management
Tools and Processes

 

Capital outlay project managers

Consultant and construction contracts with enhanced provisions regarding roles and commitments of consultants and contractors

Formal written project agreements for each project to coordinate roles and responsibilities of multidisciplinary project teams

Integrated project-tracking database for:

   Project status

   Project schedule

   Project budget

   Contract monitoring

   Geographical information system for site location and topography

Electronic project estimating system to develop:

   Conceptual estimates for initial budget development

       Intermediate estimates to monitor project costs through design and development phases

       Confirming estimates for a final check of project costs before requesting construction bids

Parks Project Revolving Fund

Quarterly progress reports on all capital outlay projects

Capital Outlay Project Managers. Both DPR and DGS employ project managers to oversee the development and completion of capital outlay projects, and to ensure that each project adheres to legislatively approved project scope, cost, and schedule. The ratio of project managers to active capital outlay projects is roughly the same for the two departments. The DPR has 24 project managers overseeing approximately 75 projects, which amounts to 3.1 projects per project manager. The DGS has 65 project directors overseeing approximately 210 active capital outlay projects, which amounts to 3.2 projects per project director. Thus, the workload of project directors/managers in the two departments appears to be comparable.

Consultant and Construction Contracts. Both DGS and DPR contract for architectural and engineering consultant services, and construction services. The DPR adds the following provisions to the standard contract language used by DGS to better define contractor/consultant commitments and project control mechanisms:

Contracts issued by DGS do not require a schedule of values, nor do they specify a time limit on when contractor claims can be submitted. We believe the two DPR contract provisions described above provide DPR with enhanced oversight of project costs, schedule, and potential contractor change orders.

Formal Written Project Agreements. A written project agreement (DPR), or management plan (DGS), is a departmental document that sets forth the roles and responsibilities for each member of a project team, including what product each person is responsible for delivering, and the schedule for the delivery of that product. Both DPR and DGS use project agreements/management plans as a way to coordinate the activities and responsibilities of multidisciplinary project teams. 

Integrated Database. Both DGS and DPR use project databases to track the current costs, scope, and schedule of capital outlay projects. However, the DPR database has enhancements that do not exist in the DGS database system:

Electronic Project Estimating System. The DPR uses an automated project cost estimating system to provide it with a conceptual cost estimate for a new project based on current labor and material costs. In addition, this system allows continuous updating of project costs as the project scope is refined. Moreover, it allows DPR to track the incremental changes to the cost of a project. The DGS has similar capabilities in the area of project cost estimating.

Park Project Revolving Fund. Capital outlay revolving funds are used by both DPR and DGS in order to expend project funds over several years. The DPR established the Park Project Revolving Fund (PPRF), into which it deposits all money received or appropriated for expenditure on capital outlay projects. Moneys deposited in the PPRF are available for all legislatively approved capital outlay purposes without regard to fiscal years. The PPRF is needed because the completion of capital outlay projects usually spans several fiscal years following an appropriation. Without a revolving fund, DPR would be unable to pay for its own staff costs after the first year of an appropriation and would therefore have to expend the total budget act appropriation within the fiscal year the appropriation was made. The PPRF is equivalent to DGS's Architectural Revolving Fund. However, the PPRF will sunset on January 1, 2005. 

Quarterly Progress Reports. The requirement to submit quarterly reports is set forth in the State Administrative Manual. These reports, which are due on April 15, July 15, October 15, and January 15, provide information regarding project appropriations, status of the current phase, summary of any scope changes, original and revised project schedule dates, and information of construction change orders. Both DPR and DGS submit quarterly reports to DOF on all active capital outlay projects under their management.

Conclusion. The DPR project management tools and processes appear to be the equivalent to the tools and processes used by DGS. However, as noted earlier, DPR has developed and implemented several improvements that enhance its overall project management ability.

How Has DPR Managed Its Capital Outlay Projects?

The State Public Works Board (SPWB) is responsible for the review and approval process for all capital outlay projects to ensure they adhere to legislatively approved scope and budget. This responsibility includes reviewing and approving project cost augmentations and changes to project scope. Frequently, the need to augment project costs or to change project scope can be indicative of inadequate project planning, cost estimation, and/or construction management.

In order to assess how DPR has performed its project management function, we reviewed the minutes from SPWB meetings and notification letters to the Joint Legislative Budget Committee for DPR requests to approve project cost increases and/or changes to project scope. In addition, we also examined executive orders issued by DOF for project augmentations. For the period July 2001 through November 2003, we found ten project cost increases—all for minor amounts—and three requested changes to project scope. The department is managing approximately 75 major capital outlay projects, along with a significant number of smaller projects (minor capital outlay). The percentage of DPR project augmentations and scope changes appears to be comparable to DGS-managed projects. Thus, our review of DPR's project management outcomes—in terms of complying with legislatively approved project scope and cost—indicates no concerns when compared to DGS' performance.

Should the Sunset Date Be Repealed or Extended?

Although DPR is currently managing approximately 75 major capital outlay projects, by the end of 2004 it will have completed 33 of the projects. Figure 4 shows the year in which the remaining DPR projects are scheduled for completion. These projects will still be in progress after DPR's project management authority has sunset pursuant to Chapter 993. 

Figure 4

Completion Schedule for
DPR Projectsa

Scheduled Year of Completion

Number of Projects

2005

27

2006

13

2007

2

 

a  Those projects scheduled to be completed after January 1, 2005, the sunset date for DPR's project management authority.

Given DPR's familiarity with the planning, design, and scope of the projects currently underway, it would make operational sense to have DPR complete its project management oversight on these projects. If DPR's project management authority were to sunset, the remaining 42 projects would be transferred to DGS for completion. We believe that such a transfer would likely result in delayed completion of the projects and increased costs because: (1) the projects would stop while DGS familiarized itself with them and (2) DGS would likely need to augment its staff to accommodate the increased workload.

Given the benefits of DPR completing the numerous projects already underway and DPR's project management record to date, we recommend the Legislature extend DPR's project management authority (and related revolving fund) to January 1, 2008. Such a three-year extension would provide DPR with sufficient time to complete the construction phase of its current capital outlay projects and to prepare and submit final project financial statements to DOF upon construction completion.

Depending on such factors as whether DPR receives additional capital outlay funding through a new general obligation bond, the Legislature can make a future determination on whether to continue DPR's project management authority beyond January 1, 2008


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