State report finds many positives, some limitations to Presidio Parkway Project

In its December 9, 2010 letter on the Presidio Parkway public-private partnership (P3) project in San Francisco, the state Legislative Analyst’s Office (LAO) concludes that the project has many valuable features. Specifically the LAO finds that this P3 project, which will dramatically improve the southern approach to the Golden Gate Bridge:

1. Makes significant public safety improvements,

2. Provides environmental benefits,

3. Provides aesthetic benefits,

4. Saves the state millions of dollars in upfront costs, thereby freeing up transportation funds for other needed projects,

5. Shifts substantial liability from the state to a private entity (concessionaire), which is contractually responsible to promptly design and build the project. If the concessionaire fails to perform on-time or to specified standards, the concessionaire will suffer penalties,

6. Gives the concessionaire the flexibility to solve construction problems quickly. Here the LAO is rightly contrasting this P3 with Caltrans’ normal non-P3 system for delivering transportation projects, a system in which resolving construction problems can be a time consuming, bureaucratic process.

7. Gives the state more certainty over the project schedule,

8. Gives the state more certainty over the project’s cost, and

9. Assures maintenance of the project by the concessionaire for 30 years. This is important, because in the annual state budget fight the legislature regularly gives low priority to maintenance of our state highway system. In contrast, under the P3 agreement Presidio Parkway will be well maintained regardless of what happens in the annual state budget fights.

The LAO finds some limitations to the Presidio Parkway P3 project, but those limitations are because in the LAO’s view, the P3 arrangements do not go far enough. There are four areas where the LAO makes this type of comment:

First, the LAO notes that Presidio Parkway does not rely on toll revenue financing. Since the project already relies on toll revenue for part of its financing (i.e. that portion of the financing provided by the Golden Gate Transportation District), the LAO is really saying that the project should rely more on toll revenue. That’s OK to say, but the fact is that with other revenue already available for this project, there was simply no need to charge more tolls.

Second, the LAO notes that under the P3 arrangement the state retains some risk (that there may be unknown environmental, hazardous waste and archeological findings), but the concessionaire is assuming risk—as a practical matter a much higher risk—for any disagreements or conflicts in the interface between design and construction.

Third, the LAO recognizes that under the P3 the state gains more certainty over the project schedule but notes that it is not absolute certainty. There are still some events—events beyond the control of the concessionaire—which could extend the project schedule. That’s true, but it is also true that there is simply no such thing on the face of the earth as a contract, which eliminates every conceivable risk that could delay a project.

Fourth, the LAO recognizes that under the P3 the state gains more certainty over the project’s cost but notes that it is not an absolute cost guarantee. So although the LAO is correct that there are still some events that could increase costs, it is also true that with the P3 there are fewer potential events of that sort, than if there were no P3.

So in these four areas the LAO comments that the P3 should be greater than it is. However, there are good reasons why P3 agreements (which are now being used more and more throughout the world) only go as far as they do: In any contractual arrangement to deliver a complex, billion dollar project, there will always be an allocation of some contingencies to the state and an allocation of other contingencies to a concessionaire. The state still has and must have ownership and control of the state highway system (Presidio Parkway will be a part of that system), and the state should never relinquish its fundamental responsibility to oversee and control our basic infrastructure. Of necessity P3 agreements reflect those divisions of responsibilities and also those unknown contingencies in the world, which are impossible to completely eliminate in advance.

Right at the very end of its letter the LAO makes a brief comment on the alleged value of “a more traditional procurement approach.” However, that comment is of questionable value, because the LAO makes its comment without discussing at all the tremendous risks associated with Caltrans’ traditional ways of delivering projects: project delays, cost overruns, slow decision making, lack of accountability in the civil service system, lack of maintenance, more liability exposure, more overhead costs, no private entity to hold accountable and the long term cost of state staffing commitments.

So in summary, the LAO perceives many public benefits to using a P3 on the Presidio Parkway Project, in four areas comments that the P3 should be greater than it is and at the end makes a brief unfortunate comment about “a more traditional procurement approach” without discussing the many drawbacks associated with that approach.


By Paul Meyer
Executive Director of ACEC California
December 21, 2010

In California, a Road to Recovery Stirs Unrest--From the Wall Street Journal--Ianthe Jeanne Dugan

For construction workers in California, the new highway being built to the Golden Gate Bridge from San Francisco should have been great news—bringing thousands of jobs at a time when the state is furloughing workers to cope with a record deficit.
But the "Gateway to San Francisco" is being built in a partnership with foreign investors under a new law that allows private firms to build public roads in California. And state engineers, who are missing out on much of the design work, are suing to stop it.

The case is among the first brought by a union to stop a public project being handled by private investors, an area that is growing in the U.S. as cities and states struggle financially. Lawyers for the state who are fighting the lawsuit and others familiar with the case say it poses a threat to the $1 billion project, which is among the first public-private partnerships in California and a model nationwide for how municipalities can rebuild crumbling roads.
Daniel Near, a lawyer for the state's transportation department, says that the state's contract is legal. "They don't like the idea of losing control of state engineers designing and overseeing construction of projects," he says.

The union, which represents 9,000 public workers, brought the suit in State Superior Court in November claiming that state and county transportation agencies are "illegally proceeding with a public- private partnership." The suit is asking the court to force the state to put the project up for bid and stop work in the meantime. While the case awaits a hearing, construction is proceeding.

"They are holding the project hostage," says Paul Meyer, executive director of the American Council of Engineering Companies of California, a trade group representing private engineers. "If a judge temporarily stops this project, it will be a disaster." Michael Likosky, a professor at New York University who is a specialist in public finance, says that the case holds ramifications for similar projects around the country. "Municipalities are rejiggering the way they handle construction of roads, bridges and other infrastructure—and this project is a watershed," he says. "If it is derailed, it could make it harder to put together these deals around the country."

Private investors, seeking alternative ways to make a profit, are teeing up more money than ever to invest in roads and other infrastructure projects. They are buoyed by new state laws allowing these deals as well as federal programs that are financing them.

President Obama's economic stimulus program pumped $100 billion into infrastructure and energy partnerships and has attracted nearly three times as much in private money to fund a total of $380 billion in projects, according to federal figures.

With budget deficits growing—California's shortfall rose to $25.4 billion—Mr. Near says that such partnerships are the only ways for cash-strapped states to embark on new projects now.
The hard times inspired California to turn to a private firm when it decided to replace Doyle Drive, the 75-year-old, 1.6-mile road leading to the Golden Gate Bridge. The new six-lane road will be known as Presidio Parkway and wind through the Golden Gate National Recreation Area, connecting the city to the iconic bridge. The project was made possible last year when the state passed a law allowing private investment in public projects.

House Speaker Nancy Pelosi, the congresswoman from the district, was at the unveiling in 2009. "Together, we will build not only a new bridge," she said, "but a new opportunity for job creation and economic recovery here in San Francisco." The project is projected to create 13,000 jobs over the next 30 years—between construction, maintenance and administration. While construction and planning began last year, it was only in recent weeks that the state announced it was entering a partnership with Germany-based Hochtief Concessions and Luxembourg's Meridiam Infrastructure to design, construct, operate and maintain the road.

California is to give the group a lump sum when the project is completed, scheduled for 2014, and pay off the rest over 30 years, saving the cost of selling bonds for the already cash-strapped state.

Bruce Blanning, executive director of the state engineers' union, is worried about the fate of state workers as more jobs move into private hands. In California, state-employed construction workers—like all state workers—were recently mandated to start staying home three days a month without pay.

"My paycheck was cut by 15% this year," says Matt Hanson, an engineer who is president of the Professional Engineers in California Government, a labor union that brought the lawsuit. "It is frustrating because the state could have floated a bond and done this project for less money with state workers."

Mr. Blanning said the issues go beyond state versus private workers doing the project. "Much of the design work can be done overseas," he says. "This isn't about union versus nonunion jobs; this is about taking away American jobs."

Write to Ianthe Jeanne Dugan at ianthe.dugan@wsj.com

Caltrans’ Union Holds Hostage San Francisco’s Presidio Parkway

Once again a union of Caltrans employees is using the courts to hold up an important public safety project, gain leverage over the project and force its will on the people. This $1 billion project, called Presidio Parkway, would make major public safety improvements to and ease congestion on the southern, San Francisco approach to the Golden Gate Bridge.

The Caltrans union—Sacramento-based Professional Engineers in California Government (PECG)—has filed a lawsuit seeking an injunction that would delay the delivery and increase the costs of the project. Moreover, PECG’s project-threatening, job-threatening lawsuit comes at a time, when California’s economy is in terrible shape, and when elected leaders of all political persuasions are urgently calling for more job creation in California.

It is a real travesty when Caltrans employees—the very public officials whose fundamental duty it is to provide the public with a safe and efficient transportation system—go to court to stop an important and badly needed transportation project.

This latest PECG lawsuit was filed against both the California Department of Transportation (Caltrans) and the San Francisco County Transportation Authority alleging that they made technical violations of SBX2 4 (Cogdill), California’s public-private partnership (P3) law enacted in 2009.

However, the allegations in PECG’s lawsuit are really just a smokescreen. The truth is that PECG opposed SBX2 4 in the legislature and in every subsequent public agency hearing on the issue. What PECG really wants from its lawsuit is to prevent competition and to maintain and expand its near monopoly on engineering work for major transportation projects.

The passage of SBX2 4 in 2009 was California’s modest step forward towards catching up with the rest of the nation and the world. For today public agencies everywhere, except in California, regularly use P3s to combine government oversight with private sector expertise and financing to speed up the delivery of needed infrastructure improvements. P3s are a particularly vital technique for delivering projects, when governments are strapped for cash—and that is certainly the case today in California. (http://www.acec-ca.org/news.asp?nid=268)

Sadly, as evidenced by its anti-Presidio Parkway lawsuit, PECG is far more interested in prohibiting competition with its monopoly than it is with helping to deliver needed projects. Once you get past the legalese, PECG’s anti-Presidio Parkway lawsuit is clearly a calculated move designed to divert attention from the union’s primary goal: to make sure that transportation work in California is awarded only to PECG’s members.

In addition to being patently unfair, a state-union monopoly scares away private investment. Private sector partners want open competitive bidding combined with public agency oversight—not a state employees union monopoly—in order to foster innovation, accountability and speedy project delivery.

PECG’s anti-Presidio Parkway lawsuit is a tool for eliminating private sector competition so that they can keep their bloated union staff intact, in spite of growing calls to cut state overhead.

This is not the first time that PECG has filed a lawsuit in order to get its way. In fact this run-to-the-courts strategy is becoming its standard operating procedure. Since the passage of Prop 35 in 2000—a measure which gives public agencies the choice to use public or private sector engineers as the public agencies see fit—PECG has filed multiple lawsuits attacking that measure. However, the courts, including the California Supreme Court in two separate lawsuits, have resoundingly and repeatedly rejected PECG’s legal claims.

Unfortunately, PECG’s past failures in court have not deterred PECG from continuing to run to court. In fact PECG’s anti-Presidio Parkway lawsuit includes yet another legal attack on Prop 35.

PECG is once again thumbing its nose at the Governor, the legislature and the people of California by holding hostage an important project for public safety and transportation efficiency. It is long past the time when PECG should be held to accountable to every California citizen for constantly placing its own self-interests above the interests of the public.

Paul Meyer
ACEC California Executive Director

We cannot, in good conscience, allow more infrastructure failures like those in New Orleans and San Bruno

The national leadership of the American Council of Engineering Companies announced earlier this month that they support the President’s new $50 billion transportation infrastructure initiative and urged the White House to also advocate other pending, longer term infrastructure proposals. In its letter to the President, our national organization commended him for using infrastructure investment as a mechanism for economic growth and urged him to work with Congress in breaking the logjam on multi-year aviation, water and surface transportation bills currently awaiting action in the House and Senate. Right now, details of the President’s $50 billion initiative are still being developed, but to be realistic the prospects for passage this year are remote--especially given our current contentious political environment.

It is unfortunate that the President chose not to launch this effort six months or a year earlier when professionals who can solve infrastructure problems advocated the idea as a key tool for an effective economic recovery agenda. If he had, perhaps Stimulus 1 would have been a more powerful, longer-term tool for job growth in the private as well as the public sector. But one thing is certain: President Obama’s proposal has, once again, injected infrastructure investment back into the arena of public discourse. Meanwhile, here in California the public has been made acutely aware of our infrastructure problems by the deadly failure of a 60 year old gas pipeline in San Bruno.

Whatever changes occur in Congress and the California Legislature after the November elections, both bodies should be pressed hard to commit to rebuild our state and national infrastructure now, not later. In fact one of the more lasting results of the battle for our hearts and minds that is happening right now in California and in Washington DC should be a new resolve to finally tackle the modernization of our crumbling infrastructure--with a new energetic offensive equal to that planned for the trip to Mars. These investments may be both public and private in nature, and they could even be used to enforce increased oversight initiatives over such entities as private utility companies.

If we do not, our lack of resolve will diminish our global competiveness. Worse, there is increased risk that we will experience more New Orleans catastrophes and San Bruno infrastructure failures. These failures will not just come from sleeping defects under our homes--but in the form of increased highway deaths caused by failing roadways, a loss of clean drinking water as aging water systems fail, and yes, the catastrophic failure of delivery systems for natural gas, gasoline, electricity and other life supporting materials. The loss of life and property that those catastrophes entail will surely be more painful than inconvenient. The fact that we as a society need loss of life to intensify our resolve weighs heavily, especially on those of us who know how to solve these problems, and who stand ready at a moment's notice to roll up our sleeves to get the job done.

Jerry Michael
ACEC California President

Isn’t PECG Just Sneaking Around To The Back Door?

In committee testimony on the recently amended AB 2620 (Eng), the American Council of Engineering Companies of California (ACEC CA) thanked the bill’s sponsor Professional Engineers in California Government (PECG) for finally acknowledging what we have known for many years: that the Legislative Analyst’s Office and the Department of Finance are correct in their assertion that the “loaded” costs of public engineers and private engineers are essentially the same - $224K to $230K.

PECG has finally, after years of assertions to the contrary and countless dollars spent on lobbying and PR, admitted they were wrong.

However, AB 2620 (see below for summary analysis and comments) which was approved by the Senate Transportation and Housing Committee yesterday, is a blatant attempt to artificially reduce PECG’s reimbursable rates to local agencies by inappropriately shifting overhead costs associated with state resources and not accounting for them when billing their services to those local agencies. The problem? Those costs don’t go away. As the analysis below points out, the State Highway Account (SHA), which is already underfunded and can’t keep up with state transportation needs, will ultimately bear these costs...to the tune of at least $66 million per year (and potentially higher).

Additionally, this is more evidence that PECG is seeking to take over local agency work. Why? PECG knows its members do not have enough work to do to keep busy. Just this spring the state's Legislative Analyst's Office reported that Caltrans is overstaffed by at least 1500 employees.

ACEC CA’s understanding is that several local transportation agencies originally were pleased that their costs for reimbursed work would be going down. Who wouldn’t be pleased? However, on closer scrutiny, they realized that the pressures on the SHA from shifting overhead costs are going to result in potentially a half-billion dollar loss over a five year transporation planning cycle and that short term cost gains will be more than offset by a lack of funding in the future. ACEC CA understands that several local agencies are now considering opposing such legislation because of the pressure this puts on the SHA.

Here’s just another example of the public sector and its allies in the Capitol adopting flagrantly protectionist legislation designed to protect state employee jobs, health plans and pensions while hurting private jobs, health plans and pensions and placing further burden on California taxpayers. If these actions were being taken by a private company they would almost certainly be viewed as anti-competitive pricing tactics and violations of the Sherman Act (anti-trust). It’s outrageous that some members of the Legislature and California’s public employee unions believe that there should be one law for the rest of us, and none for them.

The irony here is that the original bill, while still bad policy in our eyes, recognized a shortfall in SHA dollars and actually sought to increase funding. AB 2620 now creates additional pressure on the SHA by forcing overhead costs for state workers to be paid out of the account. The irony speaks for itself.


SUBJECT:

AB 2620 (Eng) Department of Transportation: capital outlay support services.

DESCRIPTION:

This bill changes the overhead rate that the Department of
Transportation (Caltrans), charges for reimbursed work it
performs for local agencies or private entities.

ANALYSIS:

Existing law authorizes Caltrans to recover its direct and
indirect costs for capital outlay support services it performs
for local agencies or private entities, except when Caltrans
performs work on the State Transportation Improvement Program
(STIP). Existing law exempts STIP projects from being charged
indirect costs.

This bill :

1) Defines "capital outlay support" to mean services
related to project development, including development of
specifications, preliminary engineering, prebid services,
preparation of project reports and the environmental
documents, design service, preparations of plans,
specifications and cost estimates, construction inspection
and management services, surveying and materials testing,
and related functions.

2) Defines "indirect overhead cost" to mean the pro rata
share of existing administrative salaries and benefits,
rent equipment cost, utilities, and materials

3) Requires a public agency or a private entity to
reimburse Caltrans for staff salaries and benefits for
staff needed to perform capital outlay support (COS)
services, as well as for the cost of administration
directly related to the function, such as space, equipment,
and required materials.

4) Denies Caltrans reimbursement for indirect overhead
costs unless the cost can be attributed solely to the
capital outlay support functions and would not exist if
Caltrans did not perform that function.

5) Requires an agency or an entity to reimburse Caltrans
when Caltrans uses a contractor to provides capital outlay
support services for the cost of the contractor plus costs
directly associated with the contracted function, including
but not limited to, advertising and awarding the service
contract, inspection, supervision, and monitoring of the
contractor.

COMMENTS:

1) Purpose . According to the sponsors, the Professional
Engineers in California Government (PECG), Caltrans is
unnecessarily charging local and regional agencies overhead
and administrative costs that are not related to the
delivery of COS services associated with designing highway
improvements. PECG argues that for reimbursed work Caltrans
is currently charging local and regional authorities for
all Caltrans' administrative costs, including charges for
building depreciation, bond interest charges, audits, and
multiple other items unrelated to state highway project
delivery.

2) Overhead rates . Federal guidelines require that projects
funded with federal gas tax revenues are charged the
"functional" overhead rate and the rate for indirect costs.
The functional overhead costs are associated with a
specific function, such as COS. Annually, the Department
of Finance and the Federal Highway Administration approve
Caltrans' direct and indirect overhead rates. When
performing COS services on projects funded with local
funds, Caltrans charges local agencies both the functional
rate, as well as for the indirect costs associated with
operating Caltrans. By not charging the indirect cost for
reimbursed work, the state would be subsidizing local
agencies. Moreover, if Caltrans does not charge the rate
for indirect costs for reimbursed work, the federal
government will not reimburse the state for those costs.

3) Costs are real money . This bill exempts indirect costs
related to the overall management and operation of
Caltrans, including legal, personnel, civil rights, audits,
space charges, and other similar costs, from being charged
to public agencies or private entities if they contract
with Caltrans for COS services. It is a customary
accounting practice in any enterprise, public or private,
to allocate overhead costs across all functions of the
organization. By exempting public agencies or private
entities from paying the indirect costs, the bill offers an
incentive to those entities to retain Caltrans to provide
COS services and not to retain private engineering firms.
The exempted costs, however, do not go away. They are
charged to the other functions of Caltrans.

In end, this exemption reduces the amount of funds in the
State Highway Account that will be available to improve the
state's highway system. According to Caltrans, it received
nearly $66 million in reimbursements for indirect costs
associated with providing COS services in fiscal year
2008-2009. To exempt local agencies and a private entity
from reimbursing Caltrans for this cost means that the
State Highway Account will have to absorb the cost. State
highway funds are already at a premium. Caltrans indicates
that the minimum cost of performing rehabilitation work on
a state highway is approximately $240,000 per lane mile.
Failure to collect indirect overhead costs is equivalent to
approximately 275 line miles of highway not being
rehabilitated.

4) Federal accounting issues . The exemption from being
reimbursed for indirect costs may be contrary to federal
regulations governing cost allocation procedures for
agencies receiving federal highway revenues. If Caltrans is
out of conformity with federal accounting requirements,
remedial actions would have to be taken to bring the
department into conformity or the state not be reimbursed
for the costs.

ACEC California Welcomes CTC Approval of Presidio Parkway P3

SACRAMENTO – May 20, 2010 – ACEC California today applauded the California Transportation Commission (CTC) for its timely approval today of the proposed public-private partnership (P3) project called Presidio Parkway, which will dramatically improve the southern approach to the Golden Gate Bridge.

The CTC's voted on a project submittal sponsored by the San Francisco County Transportation Agency and Caltrans under SB XX4, legislation passed last year to allow the use of P3 to deliver some important transportation projects in California. SB XX4 was enacted in an effort to build appropriate transportation projects more efficiently and achieve faster delivery while transferring risk to the private sector and reducing overall project costs. Presidio Parkway is the first project to be brought before the CTC for P3 approval under the legislation and has been strongly endorsed by ACEC California and other parties.

“Presidio Parkway is a badly needed project to improve traffic mobility and public safety in the San Francisco approach to the Golden Gate Bridge and it can now move forward expeditiousl. The project is a high standard solution for meeting tomorrow’s traffic needs and safety standards,” said Paul Meyer, executive director of ACEC California.

“Thanks to SB XX4, California is now able to utilize –- albeit it on a limited basis -- what has become a valued and accepted project delivery system throughout the world. Not every project is appropriate for a P3 delivery but public agencies do now have a valuable tool for speeding up the delivery of needed projects without having to take on all the risk and that is a very positive development for California taxpayers,” Meyer added.

Public Engineers’ Union Misinformation Campaign Against Presidio Parkway Project is a Disservice to San Francisco Citizens

ACEC California today condemned the shoddy “public disservice” campaign of misinformation launched this week by the Professional Engineers in California Government (PECG) union, which aims at stopping an important and badly needed project to improve traffic mobility and public safety in the San Francisco approach to the Golden Gate Bridge. The project is called the Presidio Parkway.

Many transportation experts believe that the existing San Francisco approach to the Golden Gate Bridge is not nearly adequate for meeting today’s traffic needs and safety standards. The Presidio Parkway Project is sponsored by the San Francisco County Transportation Authority, which has worked hard for many years to build community support for the project and identify multiple funding sources.

The California Transportation Commission (CTC) is scheduled to consider the project at its May 19-20 meeting in Sacramento.

The project can be completed and delivered to the public much more quickly than traditional methods by using a new delivery technique authorized by SBXX 4, which was signed into law on February 20, 2009. SBXX 4 authorizes state and local transportation agencies to use public-private partnerships (P3s) in order to reduce project costs, expedite project completion or achieve improved design features.

After much study both the San Francisco County Transportation Authority and the California Department of Transportation (Caltrans) have determined that a P3 is the best structure to design and build the project on time, on budget while achieving high design, construction and ongoing maintenance standards.

Commented Paul Meyer, Executive Director of ACEC California, “It would be a real tragedy for San Francisco residents and visitors, if after all of this work, PECG’s misinformation campaign succeeds in slowing down or increasing the cost of such an important, urgently needed project.”

A recent, thorough analysis of the value of using a P3 to deliver the Presidio Parkway Project is now posted on the CTC website. To see the analysis go to www.catc.ca.gov .

Meyer also said that, “In recent years P3s have become a valued and accepted project delivery system throughout the world.” He cited the example of the Australian state of New South Wales. Just this week the former premier of that state, Bob Carr of the Australian Labor party, met with California legislators to discuss how New South Wales successfully used P3s to quickly deliver transportation projects in the run up to the Sydney Olympic games in 2000.

Carr was a P3 skeptic upon taking office in 1995 but soon realized their value and became a supporter of the technique. Since 1995 New South Wales opened six major freeway projects with a total capital value of A$5.4 billion (US$4.85 billion) around its capital, Sydney, at a net cost of only A$ 800 million (US$717 million) to the state government.

“SBXX 4 doesn’t require every project to be built as a P3,” said Meyer. “What it does offer is a valuable tool to public agencies for speeding up the delivery of needed projects. Unfortunately, PECG with its misinformation campaign does not have the public’s interests at heart, apparently only its own.”

ACEC California

California Project Captures ACEC’s Top Design Excellence Award

HDR, Inc.’s innovative “energy from onions” facility in Oxnard, Calif. cements California’s reputation as center for innovation and engineering excellence

On Tuesday evening, the American Council of Engineering Companies awarded Omaha, Neb.-based HDR Engineering, Inc. its coveted Grand Conceptor Award for the Gills Onions Advanced Energy Recovery System Project in Oxnard, Calif. This is the second year in a row that an engineering design project in California has received the council’s top award at the Engineering Excellence Awards, also known as the Academy Awards of the engineering industry. Last year’s award was bestowed on Cambridge, Mass.-based CDM for its Groundwater Replenishment System designed for the Orange County Water and Sanitation Districts.

The Gills Onions project was one of eight projects considered for ACEC’s top award. Other contestants included the new $1.3 billion Dallas Cowboys Stadium in Arlington, Texas and the Sea-to-Sky Highway project in British Columbia, Canada. The award was presented at ACEC’s Engineering Excellence Award (EEA) gala in Washington, D.C.

HDR was selected by Gills Onions, the largest fresh-cut onion processor in the nation, as the lead engineering firm on this breakthrough $9.5 million facility that converts onion waste to power. In the facility, juice is extracted from onion peels and treated in a high-rate anaerobic reactor to produce methane-rich biogas. The biogas is then treated and used to power two fuel cells that provide electricity for the processing plant. As a result of this project, the owner has achieved increased energy independence, elimination of a waste stream, reduced operational cost, and a smaller carbon footprint. The combination of the energy produced, cost savings generated, and grant funding achieved by the project will result in a full payback in less than six years.

The EEA Gala applauds the accomplishments of private engineering firms in an elegant celebration attended by industry leaders, members of Congress, federal agency officials and the media. This year's EEA competition featured 163 projects from throughout the world all vying for honors of excellence — culminating in the Grand Conceptor Award for best overall engineering achievement.

ACEC California

No Water, No Development

The report released today (click on the title of this post to read report) by Ernst & Young and the Urban Land Institute calls water profligacy an “American way of life” and sees real limits to where people can go to live in the US because of water supply issues. 

Nowhere is this more evident than in California where, after the best rainfall totals in years, the state has announced that water allocations will still be far below normal. In fact, they call for much needed “long-term solutions to improve water supply reliability.” As engineers we applaud this kind of investigation and implore you to write about this issue with a sense of purpose.



Tom Blackburn
President, 
ACEC CA

ACEC California's Executive Director Response to the LAO Report on Caltrans Overstaffing

The LAO Report clearly spells out what we have been saying for years: Caltrans is overstaffed and inefficient. It needs to be downsized in the same way that private engineering firms have been forced to downsize due to a lack of work—including lack of a fair share of state work. We fear that the legislature will, once again, adopt a ‘business as usual’ approach, cave-in to powerful public unions, and in effect force the problem onto the business community and the California taxpayers.

For years the Legislature has only allowed private engineering companies to perform less than 10 percent of the state transportation engineering—a level far below the 50 to 60 per cent level in the other 49 states. Instead, as the LAO report demonstrates Caltrans has over-relied on full-time employees. Then when funding for projects dries up, as it is now, Caltrans and the taxpayers are stuck with too many, costly full-time employees.

If the past is any guide, no one should be surprised, if in response to the LAO report the Legislature does the following: Instead of reducing Caltrans huge bureaucracy, the Legislature slashes Caltrans’ current meager use of consultants. If so, the Legislature will face a bit of a problem: At present Caltrans total use of engineers from engineering companies does not even come close to the 1,500 job cuts called for by the LAO.

This is not and should not be about private engineers versus public engineers. The plain fact is that Caltrans—like any state department of transportation—needs both. What this is really about is the plain fact that for years Caltrans has been allowed to grow without limits. We are now at the point where, if anyone had any doubts, the LAO has amply demonstrated that bigger is not necessarily better. In fact, if you take a look at almost any other DOT in this country, the trend has been toward smaller, more efficient operations. California stands alone as the only state in which more than 90 percent of work performed is handled in-house.

Paul Meyer
ACEC California Executive Director

Legislative Analysts Office Releases its report on the 2010-2011 Transportation Budget

Yesterday, the non-partisan Legislative Analysts Office released its report on the 2010-2011 Transportation Budget (attached). Key recommendations made in the report included a reduction in Caltrans’ workforce by 1,500 in order to better meet actual workload and capture savings of $200 million in the $2B Capital Outlay Support (COS)budget. Tom Blackburn, president, and Paul Meyer, Executive Director of the private sector American Council of Engineering Companies of California have read the report and made the following comments:

Tom Blackburn, President, American Council of Engineering Companies-California, says:

“Finally, the LAO has addressed the elephant in the room. The public unions’ stranglehold on California’s transportation infrastructure has brought California taxpayers a huge cost to bear in the present and the future in unfunded pensions and medical benefits. The LAO concluded that, “the program’s budget lacks sufficient workload justification.” That’s because too much money goes into benefits rather than box culverts, pensions rather than projects and salaries rather than streets. And, once the public union employee is hired, it’s virtually impossible to terminate them. While $200M is a great start it’s not enough to get us back on track and we need fundamental change at the state level to get our finances in order, the economy back on track and jobs where they will be less of a drain on state coffers now and in the future: in the private sector.”


Paul Meyer, Executive Director, American Council of Engineering Companies-California, says:

“The report from the non-partisan state LAO confirms exactly what many transportation experts have witnessed for years: The public employee unions’ control over a key state agency, Caltrans, has resulted in a huge and inefficient bureaucracy—one which is sapping away the state’s limited financial resources. What the public wants are real transportation improvements—not a bloated bureaucracy. The LAO is exactly correct in calling for a dramatic reduction in the Caltrans bureaucracy and modern management systems for controlling costs and holding state employees accountable. ”

California Senate Recognizes Work of Engineering Sector as Part of National Engineers Week

SACRAMENTO, February 17, 2010 – The California Senate today recognized the contributions made by engineers to the state’s infrastructure and economy with SR 33, presented by Sen. Alex Padilla (D-Pacoima). The resolution celebrates National Engineers Week, which is celebrated each year during the week of George Washington’s birthday, and this year runs from February 14 through February 20. National Engineers Week is designed to attract more young people to careers in the engineering sector. Washington, the first President of the United States and widely considered to be the father of the nation, was trained as a land surveyor and spent some of his time in the US Army as a military engineer. SR 33 spotlights the wide range of contributions that engineers and surveyors make in all aspects of modern life. ACEC California President Tom Blackburn was on the Senate floor for the presentation of the resolutions.

Speeding up Transportation Projects Benefits Everyone

This month the Legislature and Governor Schwarzenegger will once again begin to fashion a state budget, and while the specific provisions of that effort are still unknown, the fact that that budget will have a big impact on the future of our state is anything but. The latest projections are that, unless the state changes its basic budget provisions, over the next 18 months the state will be in the red by about $20 billion…and counting.

How did we get here? Well, one clear reason is the state bureaucracy is growing bigger and more expensive and is becoming an ever larger drain on our state coffers. A case in point: Over the past decade Caltrans’ (i.e. our State Department of Transportation or DOT) in-house staff for delivering projects has more than doubled in size (mostly before Governor Schwarzenegger took office).

The primary reason for this dramatic expansion is that powerful state employee unions use their clout in the state budget process to create union jobs and severely restrict the state’s use of engineering companies. As a result, Caltrans uses private engineering companies for only a small portion of its work (about 10 per cent). The other 90 per cent of Caltrans’ project work is handled by full-time long term state employees on the state payroll -- making California’s DOT more financially committed to the use of permanent state employees than any other state in the nation.
Indeed the national average among the other 49 DOTs is to use private engineering firms for over 50 per cent of their workload. Other DOTs do so, because then they can quickly access special expertise when they need it and just as quickly terminate those services when they no longer need it.
Amazingly, state employee unions claim that using private engineering companies for bridge and road design is too expensive and results in substandard services.

First, let’s talk about costs. When state employee unions talk about it, they compare apples and oranges. For the cost of a state employee, public unions only count salary, benefits and a few direct costs. But for the cost of a private sector engineer, the public unions count all of the overhead and support assistance that an engineer needs in order to do his or her job.
Even more significantly, public employee unions ignore the fact that state employee engineers stay on the state’s payroll long after a project is complete. In contrast, once a private engineer finishes a state project, the engineer moves on to work on another project for another client, and the state no longer owes that engineering firm anything. One only has to consider the state’s huge unfunded liability for state employee pensions and medical care, to understand that the difference between hiring a permanent state employee and the cost of procuring a particular service for a limited time is a huge cost difference.

We currently suffer from the worst of two trends: Caltrans is way overstaffed and must still pay those staffing costs, while at the same time there is now little new money available for new projects. It is no surprise then—though largely unknown to motorists—that the state gas tax is now substantially used to pay for state employees, not new projects.
Second, what about the quality of services provided by engineering companies? In a service business such as engineering, the ability to win and retain business is inevitably in direct proportion to the quality of the services provided. Private companies do not stay in business–-and their employees do not stay employed--if they provide poor service. The same cannot be said, unfortunately, of a state bureaucracy where, as everyone knows, it is far more difficult to reward high performance and weed out poor performers.

Frankly, the state’s current practice of severely restricting the use of private engineering companies is not sustainable and ignores opposite trends across the country. The status quo is a recipe for even greater fiscal disaster in California. The alternative to simply using private services when needed--adding more jobs at the state level--will further exacerbate the unfunded pension liability bombshells facing the taxpayers in coming years.
Meanwhile, California’s need for high quality, cost effective engineering services has never been greater. A recent national report found that California’s all too often congested, deficient roads cost motorists an estimated $40 billion per year due to higher operating costs, crashes and delays (www.tripnet.org ).

California’s future will hold even more financial peril--unless the state makes basic changes in the way it conducts business and provides services. By opening the door to smarter use of the private sector to deliver needed transportation projects, California can create sustainable jobs, speed up project delivery, help grow our economy and expand our tax base.

Tom Blackburn
President, ACEC California

How Public Servants Became Our Masters