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.
Thursday, July 1, 2010
Thursday, May 20, 2010
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.
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.
Thursday, May 13, 2010
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
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
Thursday, April 29, 2010
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
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
Tuesday, April 13, 2010
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
Tom Blackburn
President, ACEC CA
Wednesday, March 10, 2010
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
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
Wednesday, March 3, 2010
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. ”
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. ”
Thursday, February 18, 2010
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.
Monday, February 1, 2010
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 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
Monday, January 25, 2010
Tuesday, December 29, 2009
Keeping Balance In Perspective
The California Chapter of the American Council of Engineering Companies (ACEC) and the National Society of Professional Engineers (NSPE) recently joined together to bestow a Qualifications-Based Selection (QBS) Award of Merit for 2009 on Ventura County, Calif. The award is meant to recognize the County’s dedication to the QBS process and represents a very high degree of achievement in the pursuit of Qualifications-Based Selection for design professional services.
QBS is a procurement process used by government agencies to aid selection of architectural and engineering services for public construction projects. The QBS Awards program is a joint initiative of ACEC and NSPE which recognizes public and private entities that effectively use and promote QBS methods to procure professional services of consulting engineers at the state and local levels.
The QBS procedure has been required by law in all federal projects since passage of the Brooks Act in 1972. Chapter 10 of the California Government Code, Sections 4526-4529 also mandates that local agencies in the state select applicable professional consultant services on the basis of demonstrated competence and professional qualifications through a QBS process.
In our opinion, the significance of Ventura County’s decision to use the QBS process to insure that their service needs are provided by both public and private entities went beyond just following the letter of the law. These local administrators have eschewed the admittedly easier rubber stamp approach in favor of going the extra mile for their taxpayers, by enhancing the spirit of competition required to deliver services on time and on budget. In these times of bureaucracy building, any effort made to recognize the expertise and employ private firms deserves recognition.
Tom Blackburn
ACEC California President
QBS is a procurement process used by government agencies to aid selection of architectural and engineering services for public construction projects. The QBS Awards program is a joint initiative of ACEC and NSPE which recognizes public and private entities that effectively use and promote QBS methods to procure professional services of consulting engineers at the state and local levels.
The QBS procedure has been required by law in all federal projects since passage of the Brooks Act in 1972. Chapter 10 of the California Government Code, Sections 4526-4529 also mandates that local agencies in the state select applicable professional consultant services on the basis of demonstrated competence and professional qualifications through a QBS process.
In our opinion, the significance of Ventura County’s decision to use the QBS process to insure that their service needs are provided by both public and private entities went beyond just following the letter of the law. These local administrators have eschewed the admittedly easier rubber stamp approach in favor of going the extra mile for their taxpayers, by enhancing the spirit of competition required to deliver services on time and on budget. In these times of bureaucracy building, any effort made to recognize the expertise and employ private firms deserves recognition.
Tom Blackburn
ACEC California President
Wednesday, November 18, 2009
We Are A Force of History
We are a force of history.
November 9th, 2009 was the official launch of UnplugthePoliticalMachine.org and the Citizen Power Campaign. Citizen Power vs. Union Power is what their campaign is all about. As this organization states, “The public employee unions run this state, and are running it right into the ground. Everyone in politics knows it, and increasingly everyone else is figuring it out. Conventional wisdom is that the unions are too powerful to take on. Remember when people said the same thing about the Soviet Union, another tyrannical power that fell 20 years ago when the Berlin wall came crashing down.”
I remember as well. The Soviet Union was just too powerful, or so it seemed. The day the wall began to fall, the East German military were still officially under orders to shoot anyone who came near the wall. But the world had completely changed, even though no one had yet made it official. But many people were oblivious to fear. All they knew was they wanted pieces of the wall – simple souvenirs. So by the thousands they brought sledgehammers and chisels to hack away at that wall. It worked, the DDR quickly backed down in the face of what even they realized was a force of history.
We have seen firsthand the oppression of tyranny here in California. In fact the citizens of this state of California are suffering a similar tyranny right now. But we also have more power than we realize. This time we are the force of history and it is time to chip away at our wall and take this state back.
Thirty years ago, then Governor Jerry Brown created public employee unions in California, now the most powerful special interest by far in California. How powerful? Ask any politician – nothing happens in Sacramento without their permission. They get their power because the government collects their political war chests right off the top of public employee salaries.
The government collects dues for the unions, and the unions give as much as 1/3 right back to the politicians who gave them that right in the first place. It’s a sweet deal for the politicians and the unions. Jerry Brown himself started all this in California. Ironically, he will most certainly receive tens of millions from the public employee unions next year in his run for governor.
How much money is involved? Let’s look at round numbers for just one union – the California Teachers Association. There are 340,000 teachers, who pay approximately $1000 per year in union dues. $300 per year, per teacher, goes toward politics. That’s $100 million per year, right off the top of teachers’ salaries, collected by the government, given to the CTA and its affiliates, and then funneled right back into the political campaigns of the politicians who do their bidding -- which usually means voting for more spending and higher taxes on you and me.
In short – our taxes, being used to make us pay more taxes. As the organizers of Citizen Power put it: It’s a rigged game that is destroying California, and it is well past time we take down that wall to progress and prosperity for all of us, unions and non-unions alike.
I believe the chiseling and hacking has begun. If thousands of us join in, the Citizen Power Initiative can put an end to this travesty in November, 2010.
Tom Blackburn
Blackburn Consulting
ACEC California President
November 9th, 2009 was the official launch of UnplugthePoliticalMachine.org and the Citizen Power Campaign. Citizen Power vs. Union Power is what their campaign is all about. As this organization states, “The public employee unions run this state, and are running it right into the ground. Everyone in politics knows it, and increasingly everyone else is figuring it out. Conventional wisdom is that the unions are too powerful to take on. Remember when people said the same thing about the Soviet Union, another tyrannical power that fell 20 years ago when the Berlin wall came crashing down.”
I remember as well. The Soviet Union was just too powerful, or so it seemed. The day the wall began to fall, the East German military were still officially under orders to shoot anyone who came near the wall. But the world had completely changed, even though no one had yet made it official. But many people were oblivious to fear. All they knew was they wanted pieces of the wall – simple souvenirs. So by the thousands they brought sledgehammers and chisels to hack away at that wall. It worked, the DDR quickly backed down in the face of what even they realized was a force of history.
We have seen firsthand the oppression of tyranny here in California. In fact the citizens of this state of California are suffering a similar tyranny right now. But we also have more power than we realize. This time we are the force of history and it is time to chip away at our wall and take this state back.
Thirty years ago, then Governor Jerry Brown created public employee unions in California, now the most powerful special interest by far in California. How powerful? Ask any politician – nothing happens in Sacramento without their permission. They get their power because the government collects their political war chests right off the top of public employee salaries.
The government collects dues for the unions, and the unions give as much as 1/3 right back to the politicians who gave them that right in the first place. It’s a sweet deal for the politicians and the unions. Jerry Brown himself started all this in California. Ironically, he will most certainly receive tens of millions from the public employee unions next year in his run for governor.
How much money is involved? Let’s look at round numbers for just one union – the California Teachers Association. There are 340,000 teachers, who pay approximately $1000 per year in union dues. $300 per year, per teacher, goes toward politics. That’s $100 million per year, right off the top of teachers’ salaries, collected by the government, given to the CTA and its affiliates, and then funneled right back into the political campaigns of the politicians who do their bidding -- which usually means voting for more spending and higher taxes on you and me.
In short – our taxes, being used to make us pay more taxes. As the organizers of Citizen Power put it: It’s a rigged game that is destroying California, and it is well past time we take down that wall to progress and prosperity for all of us, unions and non-unions alike.
I believe the chiseling and hacking has begun. If thousands of us join in, the Citizen Power Initiative can put an end to this travesty in November, 2010.
Tom Blackburn
Blackburn Consulting
ACEC California President
Wednesday, October 21, 2009
Finally, a Realist in the Public Sector
I don’t know if you’ve noticed, but an interesting and healthy debate is taking place in the pages of the Yuba City Appeal Democrat these days. It’s a debate that many more Californians should be having.
The fracas began with an editorial from the Appeal Democrat which took public employee unions and Democratic legislators to task for attempting to prevent California cities from declaring bankruptcy. (Doing so would put public employees pensions and benefits in jeopardy but, as the editorial pointed out, these generous benefits are one of the main reasons cities find themselves in fiscal trouble.)
It didn’t take long following the publication of the editorial for Professionals Engineers in California Government (PECG) to weigh in with their tired campaign slogan suggesting public employees don’t get paid enough for years of service or when they retire. (We beg to differ, but their sizable campaign contributions evidently speak louder than our facts.)
Just when you’d expect a riposte from the private sector, Chuck Miller, a retired public employee and past president of PECG, sharpened his pencil and filed his own op-ed taking PECG and current president Mark Sheahan to task.
To quote Mr. Miller: “The Sept. 23 A-D editorial Sheahan rebutted was correct in criticizing public employee unions and elected officials for their lack of concern and prudent management of the taxpayers' money.”
Bravo, Mr. Miller! Finally, a representative of the public employee sector who is willing to stand up and tell it like it is. The fact is that California’s public employees get some of the richest pension benefits in the world AND they get even more generous health benefits, making those pension dollars stretch even further in retirement.
In his editorial, Chuck Miller admits that he is doing quite alright, thank you, with his Caltrans pension. However, he also realizes that the system has run amok and the strains on that system threaten his future retirement benefits.
There are many fine people that work at PECG and other public unions, but I don’t think it serves them or the public to run the system into the ground. Like Mr. Miller, they should realize that the pension system is in desperate need of reform.
Tom Blackburn
Blackburn Consulting
President, ACEC Califronia
The fracas began with an editorial from the Appeal Democrat which took public employee unions and Democratic legislators to task for attempting to prevent California cities from declaring bankruptcy. (Doing so would put public employees pensions and benefits in jeopardy but, as the editorial pointed out, these generous benefits are one of the main reasons cities find themselves in fiscal trouble.)
It didn’t take long following the publication of the editorial for Professionals Engineers in California Government (PECG) to weigh in with their tired campaign slogan suggesting public employees don’t get paid enough for years of service or when they retire. (We beg to differ, but their sizable campaign contributions evidently speak louder than our facts.)
Just when you’d expect a riposte from the private sector, Chuck Miller, a retired public employee and past president of PECG, sharpened his pencil and filed his own op-ed taking PECG and current president Mark Sheahan to task.
To quote Mr. Miller: “The Sept. 23 A-D editorial Sheahan rebutted was correct in criticizing public employee unions and elected officials for their lack of concern and prudent management of the taxpayers' money.”
Bravo, Mr. Miller! Finally, a representative of the public employee sector who is willing to stand up and tell it like it is. The fact is that California’s public employees get some of the richest pension benefits in the world AND they get even more generous health benefits, making those pension dollars stretch even further in retirement.
In his editorial, Chuck Miller admits that he is doing quite alright, thank you, with his Caltrans pension. However, he also realizes that the system has run amok and the strains on that system threaten his future retirement benefits.
There are many fine people that work at PECG and other public unions, but I don’t think it serves them or the public to run the system into the ground. Like Mr. Miller, they should realize that the pension system is in desperate need of reform.
Tom Blackburn
Blackburn Consulting
President, ACEC Califronia
Monday, September 21, 2009
Firms feel the pinch when state puts major projects on hold
Treasurer’s office shifting toward more direct bond funds rather than pooling funds for hundreds of projects
Sacramento Business Journal - by Michael Shaw Staff writer
Tom Blackburn sounds remarkably patient for someone who’s been waiting for more than a year for payment from one of his largest clients.
Blackburn Consulting, a relatively small firm of 40 people with offices in Auburn and West Sacramento, performs soil engineering services mainly on public projects, such as levee work for the state of California. The state’s budget crisis has had a major impact on Blackburn’s company and those like it.
“We have some projects funded by the state that have gone over a year without being paid,” he said. “Typically, we’re paid within 60 to 90 days. This stuff really impacts our firm and I’m sure many others.”
The lack of payments is a direct result of the California’s weakened financial condition, brought on by falling tax revenue, a series of budget crises and unfavorable grades from credit-rating agencies. It has led to the state Treasurer’s Office looking for new ways to fund projects, and to some fighting among union and non-union engineering firms over scarce jobs.
“It’s a big deal for us,” said Blackburn, the newly installed president of the American Council of Engineering Companies’ California chapter, of the impact on engineering firms. “We don’t have furloughs. We have layoffs and real jobs that are gone.”
When the state Legislature adopted a budget in July that closed a $26 billion gap, it didn’t resolve the state’s financial crisis. Many capital projects that were put on hold back in December — when the state’s Pooled Money Investment Account was unable to fund all its obligations for things such as school construction — are still on hold.
That has caused problems for architecture and engineering firms in Sacramento and beyond.
“We have a big project that’s on hold,” said Chuck Hack, business development director at Lionakis, Sacramento’s largest architecture firm. “We get updates, but nothing specific, so we’re in a wait-and-see mode.” The $45 million project is supposed to replace the Department of Forestry camp in Growlersburg with 72,000 square feet of new administration and other buildings and ultimately improve firefighting efforts there. The preliminary plans were 65 percent complete when the project was put on hold, deemed “nonessential” by the state.
But the economy has led to significant savings for projects that have been allowed to move forward. Lionakis is the architect on one such project that will remove asbestos, add seismic support and put a new exterior on the six-story Department of Motor Vehicles building at Broadway and 24th Street. Competition among contractors for this kind of work has significantly reduced costs. The budget for the DMV project was $67 million and the winning bid came in at $44 million.
In Sacramento, budget problems have delayed millions of dollars of work on office building renovati ons. Funding for new school construction this year is also on hold. So unless school districts can raise their own money through voter-approved bond sales, most projects are going onto an “approved but unfunded” list. Local districts with projects on that waiting list include Placer Union High, Davis Joint Unified and Folsom-Cordova Unified.
However, California’s financial officials have been able to find money for some projects that were significantly under way when the crisis struck, such as the Central Plant at Q and 7th streets, which will heat and cool about 20 state buildings downtown. Construction is largely complete.
Officials at state agencies that oversee capital projects, such as the Department of General Services and the Division of State Architects, say their hands are tied until the state’s financial officials can supply the money to move forward.
“Our projects were all the result of PMIB action,” said Eric Lamoureux, spokesman for General Services, speaking of the Pooled Money Investment Board that oversees the fund that supplies hundreds of state projects.
How long will the cash crunch last? The state plans to test investors’ appetite for California bonds by late fall.
“We’re not exactly in a position cash flow-wise where we can resume making hundreds of millions of dollars in loans from the account,” said Tom Dresslar, spokesman for state Treasurer Bill Lockyer. Dresslar expects the state to get back to the business of selling bonds around Thanksgiving. That would give projects much-needed cash. The state also is changing how it goes about funding, shifting away from the idea of pooling funds for hundreds of projects toward more direct bond sales. If the plan works, proceeds would go straight to projects.
“We’d rather not be in the same position again,” Dresslar said.
In the meantime, firms are waiting to see if the plan will work.
Engineer Blackburn notes that some firms that relied on work from private developers and the sweeping master plans that proliferated during the real estate boom are worse off than those who largely do work on public projects.
“I know a firm that went from $16 million in revenue down to $3 million,” he said. “Most of the firms I’m talking to would put it in these terms — it’s a struggle to survive.”
A few large companies are still reeling in government contracts for big projects such as high-speed rail, he said. But those are exceptions.
Blackburn claims that the state’s financial crisis has disproportionately hit private firms represented through the American Council of Engineering Companies. That’s because much of the engineering work on Caltrans projects goes to union engineers represented by the Professional Engineers in California Government.
The state’s financial crisis has exacerbated the disagreements between the two organizations. When times were good, there were more projects to go around. But the economic climate has led to quarrels between the groups over whether private or union engineers are more costly to the state.
Blackburn sees lawmakers’ attitudes about their role as part of the problem.
“The government — their position is that they’re here to provide jobs,” he said. “In my view, we need to figure out how to have a more nimble government than that.”
mshaw@bizjournals.com | 916-558-7861
Sacramento Business Journal - by Michael Shaw Staff writer
Tom Blackburn sounds remarkably patient for someone who’s been waiting for more than a year for payment from one of his largest clients.
Blackburn Consulting, a relatively small firm of 40 people with offices in Auburn and West Sacramento, performs soil engineering services mainly on public projects, such as levee work for the state of California. The state’s budget crisis has had a major impact on Blackburn’s company and those like it.
“We have some projects funded by the state that have gone over a year without being paid,” he said. “Typically, we’re paid within 60 to 90 days. This stuff really impacts our firm and I’m sure many others.”
The lack of payments is a direct result of the California’s weakened financial condition, brought on by falling tax revenue, a series of budget crises and unfavorable grades from credit-rating agencies. It has led to the state Treasurer’s Office looking for new ways to fund projects, and to some fighting among union and non-union engineering firms over scarce jobs.
“It’s a big deal for us,” said Blackburn, the newly installed president of the American Council of Engineering Companies’ California chapter, of the impact on engineering firms. “We don’t have furloughs. We have layoffs and real jobs that are gone.”
When the state Legislature adopted a budget in July that closed a $26 billion gap, it didn’t resolve the state’s financial crisis. Many capital projects that were put on hold back in December — when the state’s Pooled Money Investment Account was unable to fund all its obligations for things such as school construction — are still on hold.
That has caused problems for architecture and engineering firms in Sacramento and beyond.
“We have a big project that’s on hold,” said Chuck Hack, business development director at Lionakis, Sacramento’s largest architecture firm. “We get updates, but nothing specific, so we’re in a wait-and-see mode.” The $45 million project is supposed to replace the Department of Forestry camp in Growlersburg with 72,000 square feet of new administration and other buildings and ultimately improve firefighting efforts there. The preliminary plans were 65 percent complete when the project was put on hold, deemed “nonessential” by the state.
But the economy has led to significant savings for projects that have been allowed to move forward. Lionakis is the architect on one such project that will remove asbestos, add seismic support and put a new exterior on the six-story Department of Motor Vehicles building at Broadway and 24th Street. Competition among contractors for this kind of work has significantly reduced costs. The budget for the DMV project was $67 million and the winning bid came in at $44 million.
In Sacramento, budget problems have delayed millions of dollars of work on office building renovati ons. Funding for new school construction this year is also on hold. So unless school districts can raise their own money through voter-approved bond sales, most projects are going onto an “approved but unfunded” list. Local districts with projects on that waiting list include Placer Union High, Davis Joint Unified and Folsom-Cordova Unified.
However, California’s financial officials have been able to find money for some projects that were significantly under way when the crisis struck, such as the Central Plant at Q and 7th streets, which will heat and cool about 20 state buildings downtown. Construction is largely complete.
Officials at state agencies that oversee capital projects, such as the Department of General Services and the Division of State Architects, say their hands are tied until the state’s financial officials can supply the money to move forward.
“Our projects were all the result of PMIB action,” said Eric Lamoureux, spokesman for General Services, speaking of the Pooled Money Investment Board that oversees the fund that supplies hundreds of state projects.
How long will the cash crunch last? The state plans to test investors’ appetite for California bonds by late fall.
“We’re not exactly in a position cash flow-wise where we can resume making hundreds of millions of dollars in loans from the account,” said Tom Dresslar, spokesman for state Treasurer Bill Lockyer. Dresslar expects the state to get back to the business of selling bonds around Thanksgiving. That would give projects much-needed cash. The state also is changing how it goes about funding, shifting away from the idea of pooling funds for hundreds of projects toward more direct bond sales. If the plan works, proceeds would go straight to projects.
“We’d rather not be in the same position again,” Dresslar said.
In the meantime, firms are waiting to see if the plan will work.
Engineer Blackburn notes that some firms that relied on work from private developers and the sweeping master plans that proliferated during the real estate boom are worse off than those who largely do work on public projects.
“I know a firm that went from $16 million in revenue down to $3 million,” he said. “Most of the firms I’m talking to would put it in these terms — it’s a struggle to survive.”
A few large companies are still reeling in government contracts for big projects such as high-speed rail, he said. But those are exceptions.
Blackburn claims that the state’s financial crisis has disproportionately hit private firms represented through the American Council of Engineering Companies. That’s because much of the engineering work on Caltrans projects goes to union engineers represented by the Professional Engineers in California Government.
The state’s financial crisis has exacerbated the disagreements between the two organizations. When times were good, there were more projects to go around. But the economic climate has led to quarrels between the groups over whether private or union engineers are more costly to the state.
Blackburn sees lawmakers’ attitudes about their role as part of the problem.
“The government — their position is that they’re here to provide jobs,” he said. “In my view, we need to figure out how to have a more nimble government than that.”
mshaw@bizjournals.com | 916-558-7861
Wednesday, September 16, 2009
Use of ACEC California Firms
Paul Meyer and Tom Blackburn:
Ed Henderson has told me about your continuing efforts to promote the benefits of belonging to ACEC. I have enjoyed many benefits during my 15 year membership, one of which is the opportunity to work with other ACEC member firms. I find that firms that belong to ACEC provide a higher quality of service than those firms that don’t. Firms that we have used as subconsultants have always done an excellent job for us and our clients. We have used member firms throughout the state and have never been disappointed.
I want to let you know of a current project where we reached out to another ACEC firm for help.
We recently were selected for a large project in Southern California, a place that is out of our normal service area. The project engineer for the client is a former TLA employee and he knew we would/will do a great job for him. The project is basically a hydrology and hydraulic study; however the client wants an extensive amount of mapping, which we don’t do. To meet that need, we used our ACEC directory and found a firm in the area. We are teaming with Hillwig-Goodrow, Inc. (Alan Hillwig, PLS). The subcontract portion of the work to Hillwig is $107,000; that will help Alan pay his ACEC dues for a long time.
Without an ACEC firm in the area, I don’t think I would have taken a chance using a firm I don’t know.
Terry Lowell, P.E.
President
TLA Engineering & Planning, Inc.
1528 Eureka Road, Suite 100
Roseville, CA 95661
Ed Henderson has told me about your continuing efforts to promote the benefits of belonging to ACEC. I have enjoyed many benefits during my 15 year membership, one of which is the opportunity to work with other ACEC member firms. I find that firms that belong to ACEC provide a higher quality of service than those firms that don’t. Firms that we have used as subconsultants have always done an excellent job for us and our clients. We have used member firms throughout the state and have never been disappointed.
I want to let you know of a current project where we reached out to another ACEC firm for help.
We recently were selected for a large project in Southern California, a place that is out of our normal service area. The project engineer for the client is a former TLA employee and he knew we would/will do a great job for him. The project is basically a hydrology and hydraulic study; however the client wants an extensive amount of mapping, which we don’t do. To meet that need, we used our ACEC directory and found a firm in the area. We are teaming with Hillwig-Goodrow, Inc. (Alan Hillwig, PLS). The subcontract portion of the work to Hillwig is $107,000; that will help Alan pay his ACEC dues for a long time.
Without an ACEC firm in the area, I don’t think I would have taken a chance using a firm I don’t know.
Terry Lowell, P.E.
President
TLA Engineering & Planning, Inc.
1528 Eureka Road, Suite 100
Roseville, CA 95661
Friday, August 28, 2009
PECG Ad Campaign is Misleading, Deceptive and Irresponsible
This is a time when all Californians should work diligently to help put the state back on an even keel by practicing fiscal responsibility. Instead, PECG has chosen to use expensive means to create yet another misinformation campaign and sway public opinion into believing that state employed engineers are cheaper than private companies and that restricting contracted out services will save the state money.
The fact is that a 2007 report by the former head of the non-partisan Legislative Analyst’s Office, showed the comparable cost of in house (state-employed) engineers ranged from $173,434 to $209,212 while the average cost of an outside (privately-employed) engineer was $193,000.
Moreover, PECG’s misleading ad campaign states that pension benefits are only $2000 per state worker per month. In fact, a PECG member employed by Caltrans with a term of employment of 22.7 years - which is the average term of employment for state workers -- would have to earn less than $60,000 in the final year of employment to receive a pension of $2,000 a month.
Resources such as the state worker database
And there’s the rub. It’s not just that in house engineers have comparable salaries to contract engineers, it’s that when you consider the extra liability per state worker in pension and health care benefits – sometimes more than a million dollars over a lifetime -- short-term contracts are a much cheaper option for the state and can actually help reduce costs because the state is not on the hook for contract workers’ long term healthcare or pension benefits.
Unfortunately, less than 10 percent of transportation engineering and design work conducted by the state is contracted out to private engineering companies. Ninety percent is handled by state employees. In light of this dramatically one-sided statistic, it is disingenuous of the union representing state workers to suggest that cost savings of any kind can be made by further restricting outside contracts. If anything, the opposite is true.
The taxpayers, state leaders and ultimately the many fine state employees do not benefit from this misleading campaign as we try to identify the appropriate fiscal adjustments.
Tom Blackburn
President, ACEC California
Blackburn Consulting
The fact is that a 2007 report
Moreover, PECG’s misleading ad campaign states that pension benefits are only $2000 per state worker per month. In fact, a PECG member employed by Caltrans with a term of employment of 22.7 years - which is the average term of employment for state workers -- would have to earn less than $60,000 in the final year of employment to receive a pension of $2,000 a month.
Resources such as the state worker database
And there’s the rub. It’s not just that in house engineers have comparable salaries to contract engineers, it’s that when you consider the extra liability per state worker in pension and health care benefits – sometimes more than a million dollars over a lifetime -- short-term contracts are a much cheaper option for the state and can actually help reduce costs because the state is not on the hook for contract workers’ long term healthcare or pension benefits.
Unfortunately, less than 10 percent of transportation engineering and design work conducted by the state is contracted out to private engineering companies. Ninety percent is handled by state employees. In light of this dramatically one-sided statistic, it is disingenuous of the union representing state workers to suggest that cost savings of any kind can be made by further restricting outside contracts. If anything, the opposite is true.
The taxpayers, state leaders and ultimately the many fine state employees do not benefit from this misleading campaign as we try to identify the appropriate fiscal adjustments.
Tom Blackburn
President, ACEC California
Blackburn Consulting
Monday, July 6, 2009
US House Bill H.R. 2104 is smokescreen to bypass California voters
H.R. 2104, a bill currently before the U.S. House of Representatives would mandate that only public employees carry out construction inspection functions on all federally funded transportation projects. The bill proposes that such a mandate would identify alleged "conflicts of interest and potential failures to protect public safety and welfare" that might occur if privately employed engineers are given that work.
California’s private engineers vehemently disagree. The whole idea that somehow, all of a sudden, the private engineering firms that can and do perform this work now have ‘conflicts of interest’ or would fall short of ‘providing for public safety’ is ludicrous. Not only is this bill a smoke screen for protecting public union jobs in California and the nation, its premise is based on misinformation which is carefully woven in to the bill.
In fact the entire concept of the bill runs counter to common practices in the industry and is an affront to the high professional standards which California engineers have maintained for decades.
My fellow ACEC California member and engineer Rob Salaber agrees. Rob asks: “Why all of a sudden is the well established system of partnering between the public and private engineering community in question? Simple. At this time of fiscal crisis when everyone is suffering financially, the public unions want all of the work for their members, and U.S. Congressman Bob Filner (D. San Diego) is trying to deliver it to them on a silver platter.”
H.R. 2014 would also directly conflict with Proposition 35, legislation passed by California voters which has withstood two State Supreme Court challenges by California’s public unions since its passage in 2000. At that time, California voters overwhelmingly approved amendment to the California state constitution to give state and local public agencies the choice and authority to use private engineering services, when needed.
Proposition 35 expressly applies to construction services such as inspections as well. It is now regularly used by both state and local agencies to excellent effect to speed up the delivery of badly needed infrastructure projects, including transportation projects. It doesn't cut corners and it has ensured the continued safety of our citizens.
Numerous surveys of practices in states all around the country demonstrate that the traditional system of using private engineering services is crucial to delivering innovative, on-time and on-budget projects to the public. Allowing only state employees to conduct construction inspection work would slow up the delivery of projects at a time when we desperately need efficiencies, both to keep costs low and deliver projects on time and on budget for minimal disruption to the general public.
America’s private engineers are involved in every phase of every type of transportation
project including planning solutions to reduce congestion, assessing environmental impacts, evaluating and improving the safety and sustainability of roads, bridges and tunnels, designing both simple and complex infrastructure to exceedingly high standards, and, yes, monitoring construction to ensure it complies with approved designs and materials.
This proposed legislation sponsored by U.S. Congressman Bob Filner (D. San Diego) is ill considered, and will result in even greater costs for California taxpayers without any discernible additional value to the state.
Tom Blackburn, Blackburn Consulting
ACEC California President
California’s private engineers vehemently disagree. The whole idea that somehow, all of a sudden, the private engineering firms that can and do perform this work now have ‘conflicts of interest’ or would fall short of ‘providing for public safety’ is ludicrous. Not only is this bill a smoke screen for protecting public union jobs in California and the nation, its premise is based on misinformation which is carefully woven in to the bill.
In fact the entire concept of the bill runs counter to common practices in the industry and is an affront to the high professional standards which California engineers have maintained for decades.
My fellow ACEC California member and engineer Rob Salaber agrees. Rob asks: “Why all of a sudden is the well established system of partnering between the public and private engineering community in question? Simple. At this time of fiscal crisis when everyone is suffering financially, the public unions want all of the work for their members, and U.S. Congressman Bob Filner (D. San Diego) is trying to deliver it to them on a silver platter.”
H.R. 2014 would also directly conflict with Proposition 35, legislation passed by California voters which has withstood two State Supreme Court challenges by California’s public unions since its passage in 2000. At that time, California voters overwhelmingly approved amendment to the California state constitution to give state and local public agencies the choice and authority to use private engineering services, when needed.
Proposition 35 expressly applies to construction services such as inspections as well. It is now regularly used by both state and local agencies to excellent effect to speed up the delivery of badly needed infrastructure projects, including transportation projects. It doesn't cut corners and it has ensured the continued safety of our citizens.
Numerous surveys of practices in states all around the country demonstrate that the traditional system of using private engineering services is crucial to delivering innovative, on-time and on-budget projects to the public. Allowing only state employees to conduct construction inspection work would slow up the delivery of projects at a time when we desperately need efficiencies, both to keep costs low and deliver projects on time and on budget for minimal disruption to the general public.
America’s private engineers are involved in every phase of every type of transportation
project including planning solutions to reduce congestion, assessing environmental impacts, evaluating and improving the safety and sustainability of roads, bridges and tunnels, designing both simple and complex infrastructure to exceedingly high standards, and, yes, monitoring construction to ensure it complies with approved designs and materials.
This proposed legislation sponsored by U.S. Congressman Bob Filner (D. San Diego) is ill considered, and will result in even greater costs for California taxpayers without any discernible additional value to the state.
Tom Blackburn, Blackburn Consulting
ACEC California President
Tuesday, June 23, 2009
The real cost of hiring public employees is in their pension funds.
A recent article in the Sacramento Bee outlined where the City’s money will have to be allocated during the next fiscal year in order to keep current employees employed. Bottom line, 85 cents out of every dollar spent in the $386 million California general fund would go to pay for the salaries, health care and retirement benefits of more than 3,000 city employees.
The “cuts” of course will then have to come from a corresponding reduction in Sacramento city services and supplies --which drop from an average of about 22 percent during the last six years to about 5.5 percent of the annual fund. Good news for people who need to keep their jobs; bad news for taxpayers.
But an equally important point made in the article might just be overlooked if one were to miss focusing on all of the ramifications of budget parsing. The overwhelming cost of pension obligations incurred by the city in hiring more full time employees is almost mindboggling for those demanding more efficiency and accountability.
What’s more, according to the proposed budget released last month, the stock market's fall has battered the value of the Sacramento City Employees' Retirement System, and the hit will need to be offset next year to the tune of an $8 million contribution by the city. Then, in the 2011-2012 fiscal year, the city is preparing for a $12 million hike in its annual contribution to the California Public Employees' Retirement System to make up for investment losses in city funds held by CalPERS.
"We're concerned and we would hope that the city, as all cities, will look very seriously at ratcheting down their pension contributions," said Jon Coupal, president of the Howard Jarvis Taxpayers Association told the Bee. “Still, the numbers – especially the amount of the budget being spent on salaries – aren't surprising,” Coupal said. "California is the land of milk and honey as far as public employees go," he said. Adding to the mix, said Coupal, is that Sacramento is a government town where local politics are dominated by the labor-friendly Democratic Party.
As you might expect, Bob Blymyer, the executive director of the Sacramento County Taxpayers League, sees it differently. He told the Bee: "The public won't stand for" inequity between public and private sector compensation. It was never the taxpayers' intention to upgrade public workers' salaries and benefits to where they are better than private enterprise.”
All of which points out the following reality: Every time the state hires a new public engineer (who makes more money than if he or she worked in a private engineering firm, and then joins the public engineers employees union to fight for his or her “rights”) the state (you and I) are also signing on for a pension obligation that can run into the $1 to $2 million range, depending on salary levels.
So, rather than just saving jobs, perhaps we taxpayers should be focusing our attention away from just salary to consider another real cost of hiring more public engineers – especially when we let their union lobbyists garner favors from state legislators to, for example, prevent the state from outsourcing the work when and where they can.
By the way, the truth is that in recent years thousands of engineers working in the private sector have already lost their jobs. Much of that failure can be attributed to their comparatively poor and
underfunded private unions who failed miserably in “achieving” the same kind attention and support from the California legislature. Perhaps that kind of inequity should be added to the growing list of reasons to make some official changes in the next election?
Tom Blackburn
President-Elect ACEC California
Blackburn Consulting
The “cuts” of course will then have to come from a corresponding reduction in Sacramento city services and supplies --which drop from an average of about 22 percent during the last six years to about 5.5 percent of the annual fund. Good news for people who need to keep their jobs; bad news for taxpayers.
But an equally important point made in the article might just be overlooked if one were to miss focusing on all of the ramifications of budget parsing. The overwhelming cost of pension obligations incurred by the city in hiring more full time employees is almost mindboggling for those demanding more efficiency and accountability.
What’s more, according to the proposed budget released last month, the stock market's fall has battered the value of the Sacramento City Employees' Retirement System, and the hit will need to be offset next year to the tune of an $8 million contribution by the city. Then, in the 2011-2012 fiscal year, the city is preparing for a $12 million hike in its annual contribution to the California Public Employees' Retirement System to make up for investment losses in city funds held by CalPERS.
"We're concerned and we would hope that the city, as all cities, will look very seriously at ratcheting down their pension contributions," said Jon Coupal, president of the Howard Jarvis Taxpayers Association told the Bee. “Still, the numbers – especially the amount of the budget being spent on salaries – aren't surprising,” Coupal said. "California is the land of milk and honey as far as public employees go," he said. Adding to the mix, said Coupal, is that Sacramento is a government town where local politics are dominated by the labor-friendly Democratic Party.
As you might expect, Bob Blymyer, the executive director of the Sacramento County Taxpayers League, sees it differently. He told the Bee: "The public won't stand for" inequity between public and private sector compensation. It was never the taxpayers' intention to upgrade public workers' salaries and benefits to where they are better than private enterprise.”
All of which points out the following reality: Every time the state hires a new public engineer (who makes more money than if he or she worked in a private engineering firm, and then joins the public engineers employees union to fight for his or her “rights”) the state (you and I) are also signing on for a pension obligation that can run into the $1 to $2 million range, depending on salary levels.
So, rather than just saving jobs, perhaps we taxpayers should be focusing our attention away from just salary to consider another real cost of hiring more public engineers – especially when we let their union lobbyists garner favors from state legislators to, for example, prevent the state from outsourcing the work when and where they can.
By the way, the truth is that in recent years thousands of engineers working in the private sector have already lost their jobs. Much of that failure can be attributed to their comparatively poor and
underfunded private unions who failed miserably in “achieving” the same kind attention and support from the California legislature. Perhaps that kind of inequity should be added to the growing list of reasons to make some official changes in the next election?
Tom Blackburn
President-Elect ACEC California
Blackburn Consulting
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