An audit released today by the Controller’s office reveals that the PUC’s Community Benefits Program is both deeply problematic and deeply mismanaged. In multiple contracts reviewed during the audit, the PUC allowed contractors to fail to completely deliver their promised — and binding —commitments to donate funds to the communities affected by PUC projects.
This is doubly disturbing, as the strength of a bidder’s pledged commitment to the community is a major factor in deciding who wins a lucrative contract from the PUC. Today’s audit revealed at least one situation in which the strength of a contractor’s commitment to fund the community allowed it to beat out a competitor that submitted a less generous offer — but the winning contractor subsequently reneged on the commitment that earned it the job.
“By awarding contracts based, in part, on Social Impact Partnership commitments and allowing contractors to default on those commitments, SFPUC increases the risk that it will award contracts to contractors that ultimately will not deliver the greatest value to the City or its residents,” sums up the audit.
The purpose of the Community Benefits Program aka Social Impact Partnerships is simple — on paper. It’s supposed to ensure that the winners of big PUC contracts invest time, resources and money in programs aiding the communities most affected by PUC projects; living next-door to the sewage treatment plant, after all, isn’t always all it’s cracked up to be.
Yet today’s audit found unsettling problems with every facet of the Community Benefits Program from nose to tail: with the manner of how proposals are formulated; with inconsistent scoring methodology; with bid-winning contractors changing the terms post-facto; with contractors inflating the value of their gifts and/or making mathematical errors; with critical documents being lost; and, finally, with contractors being allowed to not live up to their end of the bargain and fully fund their commitments.
It is not addressed in today’s audit, but one is led to question why the 10-year-old Community Benefits Program exists at all. The city could, potentially, simply award contracts to the best and most qualified bidder, and then mandate a community benefit in much the same way that major construction projects must set aside a percentage of costs to fund public art.
It does not make inherent sense that the most qualified expert in, say, sewage line replacement would lose out on the job to a less qualified competitor due to an unrelated commitment — especially when the PUC subsequently allows that commitment to be ignored.
Also not addressed in today’s audit are the bombshell allegations that the Community Benefits Program is a de facto slush fund, with money going toward PUC staffers’ favored nonprofits, and bidders lavishing millions for “advice” on how to structure their community benefits proposals on a consultant who is also being paid by the PUC.
But what was addressed — deeply lax oversight and an arguable loss of institutional control — certainly explained why such allegations remain plausible.
As of Dec. 30, 2020, the PUC had executed 84 contracts with commitments to its community benefits program. They pledged nearly $22 million in financial support; nearly $1 million of in in-kind commitments, and some 82,000 volunteer hours. Nearly two-thirds of those commitments haven’t yet come due, and have not yet been provided. Considering the PUC’s poor record of ensuring the commitments are fulfilled, the ramifications of failing to fix this program are considerable.
Regarding the situations in which contractors failed to honor their commitments, “none of these contracts could SFPUC provide substantive evidence that it notified the contractor that it was falling behind on its delivery or did not meet its pledged commitment by the end of its contract term,” reads today’s audit.
“Although the contractors failed to meet these contractual obligations, SFPUC took limited or no action to enforce the contract provisions until after the Controller initiated this audit.”
In the seven contracts cited by the controller, the PUC failed to ensure $685,000 was paid toward community benefits.
Recommendations include the (rather straightforward) suggestion that the PUC should be “proactively reaching out” to delinquent contractors; it should also increase transparency by creating a publicly accessible dashboard that’s “accurate, reliable and updated in a timely manner.”
Today’s audit was first requested by the San Francisco Labor Council all the way back in February, 2019.
“We can say, ‘shame on the contractor’ for paying to play. But the public agency has created a scheme whereby if they want the work, they need to pay,” former Labor Council president Rudy Gonzalez said today. “What remains to be known is, who instructed them to pay? Will we have to, again, wait for federal intervention to find this out?”
The audit’s findings were acknowledged by both the City Attorney and PUC, with promises to fix this mess moving forward.
“The lack of clear policies and oversight in the Social Impact Partnership Program has left the program susceptible to favoritism and abuse,” said City Attorney David Chiu. “If this program is to continue and live up to its goals, it must be reformed and authorized by the appropriate policy bodies, including the Board of Supervisors.”
Newly installed PUC general manager Dennis Herrera, Chiu’s predecessor as City Attorney, also pledged a change: “Moving forward, we are committed to updating this program to provide transparency, accountability, and results. No one at the SFPUC will tell contractors which organizations to make commitments to or how much to give them. This program will be a model of integrity with effective oversight.”
The controller’s office will be revisiting this program every six months to check on its progress.