Were going to hear updates from the Controllers Office, Public Integrity assessment process and from the City Attorneys investigations and reports. On monday, the office of the controller released their first Public Integrity review report, focused on contracting procedures that the department of public works, in that report and its findings are the focus of this hearing. There are a myriad, concurrent investigations connected to the scandal. Both locally and federally. Our focus today is not on criminal charge or the fbis work specifically. Our focus here is less on individual bad actors and more on the systems and structures that enabled and empowered them to commit bad acts. And failed to provide oversight, accountability and transparency. And today were looking at public works. How the behavior in the complaints and the structures that allowed them to allowed for them to demonstrate the need for structural reform to preempt and prevent the potential for criminal and unethical actions by Public Officials. This is one hearing on one report. We have much of substance to discuss today and there will be much more to discuss at further hearings and further reports in the near future. Well hear today first from controller Ben Rosenfield and acting director of audits mark delarosa, who will present the preliminary assessments of San Francisco public works contracting. We will then hear brief updates from deputy City Attorney anne pearson on the City Attorneys concurrent investigations. We have not invited departments or other parties to present today. The scope of the issues is broad and we thought it valuable to focus the first hearing to dig deep into the report and its findings. Before we move into the presentations, any initial remarks from my colleagues . Supervisor haney. Supervisor haney yes. Thank you, chair mar. I want to thank you for calling this hearing. And for your leadership on this. I also want to thank controller rosen field and your team for putting together a very detailed set of recommendations and analysis. In this report. And we are looking forward to working together to adopt these recommendations quickly. [ please stand by ] departments, in terms of its lack of oversight, and i think that is made absolutely clear in this report, but even beyond that, some of these loopholes, some of these issues around has allowed contracts to go out with no oversight whatever. When we have corruption government, it is the residents who suffer the most. It is the residents who get poor and ineffective City Services, and trust is eroded, money is wasted at a time when we need not just good outcomes, but we need trust, and we need resources probably more than ever, so i really do want to appreciate the work that has been done on this, and i think its critical that this committee assert our responsibility in oversight and moves forward many of these recommendations to restore oversight and to restore the public trust. Supervisor mar thank you, supervisor haney. Supervisor peskin . Supervisor peskin thank you, chair mar. Many years ago, when i was the chair of the board, and i created the Oversight Committee, while this entire chapter is scurrilous and shameful and an embarrassment to government and elected officials, this is exactly what the Oversight Committee was enacted to do. So lets get out it. Supervisor mar thank you, supervisor peskin. Id like to introduce the department controller, whos going to lead the presentation. Thank you very much for the opportunity and good afternoon to the committee. The first item here from the Controllers Office is our preliminary assessment on process, procedure, and pros specifically with regard to City Contracting with a focus on public works. Id like to first of all thank you in advance for any questions today as well as welcome those from the public. The important of the public tip line as well as the controllers information line provides important information. We have underway other work for friends of organizations and outside city accounts. We have reviews underway of Commission Contracting for approval processes at s. F. Go and other city commissions, including revenue contracts, the citys contracts, as well as awarding of permits at d. B. I. And any assessments that we determine is necessary in part of our ongoing coordination with the City Attorneys office. With that, id like to welcome Mark Dela Rosa whos director of the City Services program and tip line. Thank you so much, todd. Good afternoon, chair mar, members of the committee, supervisors peskin and haney. Mark de la rosa, acting director of the Controllers Office. Were just going to give you a very brief overview of the report we issued on monday, earlier this week. Let me begin by providing some context on this slide three. Just to provide the kind of the magnitude of the contracting activities at the San Francisco public works, we chose the scope of july 2017 through march 2020 as part of our assessment. This table before you is the summary of all of the contracts that were led within the department over that threeyear period. There were a total of 366 contracts that were in existence during this time period. The nottoexceed amount of all of these contracts were 1. 4 million, and they are the chapter 6 public works type of contracts as well as the grants category of contracts that well also discuss a little later. So this slide basically provides a little bit more detail on those 366 contracts by the different contracting methods that were used by the department of public works to make those contracts effective. So the majority of them, as has shown here, were formally competitively bid or solicited. Those are ones of slightly higher value, and well talk about the different nuances and categories in this. There were those that fell into the informal solicitation categories. Those were a little bit more in the lower value in terms of the dollar thresholds, and those that were not solicited or no solicitation were required, that included sole source contracts, Emergency Authority contracts, and projects addressing homelessness, which were also going to cover. And the last category here is grants. So were going to cover the seven findings that we covered in our report. There were eight total recommendations that sprung from those seven findings, and the first we do want to emphasize is more overarching in nature, and this is about the construction of public works procurement. We do have a chapter within our admin code called chapter 6 that covers public works procurement, and there are six departments that are basically given the authority under that chapter 6 code to enter into public works contracts, and that included public works, the airport, port, rec and park, m. T. A. , and p. U. C. All of the chapter 6 department except for public works were overseen or are overseen by a board or commission which oversees the departments contracts in excess of a certain threshold amount. In 2011, thenmayor ed lee designated mr. Nuru as the director of public works to act on the mayors behalf in various aspects of the awarding contracts including Construction Contracts that were in excess of a certain threshold. Mr. Nuru then in turn designated three Deputy Directors to serve as contract aproofe approvers on his behalf. They had the ability to approve contracts without any external oversight of the department itself. Our recommendation then, is to, under chapter 6 of the admin code from the mayor to delegate final approval of Construction Projects to an individual outside of the mayor or director, and per chapter 6, to prohibit the Department Head from approving these contract activities. The second thing i would like to emphasize today is the ones regarding the projects addressing homelessness. In 2019, there were certain elements of the admin code for the city that were revised, and those were chapter 21b and section 6. 76 of the admin code, and these were basically added as part of the efforts to highlight the the efforts that are going on citywide for projects addressing homelessness. And the admin code basically defines this as projects designed to prevent homelessness through housingfuls, ahousing services and to provide shelter services. It allowed for the departments to bypass the standard competitive solicitation process. Therefore, the needed controls that are typically present under our formal solicitation were not always adhered to. Some of those are really the minimum solicitation requirements, the vendor qualifications, and the fair selection of the various bidders that were not uniformly applied when during procurement under these two admin code provisions. According to public works, they were awarded 15 contracts with a value of 24. 6 million for projects addressing homelessness under the 21b and the section 6. 76 authorities. And of those 15 contracts, 11 of these contracts are worth about 14 million, had no discernible Selection Process just based on our review of the information we gathered as part of this assessment. Back in february, the acting director of public works issued new policies and procedures to address these weaknesses, and our recommendation related to this finding is for public works to continue adhering to these new procurement procedures implemented by the acting director and for the city to adopt similar procedures for purchases citywide so theres the control that one would expect from regular solicitation. Supervisor peskin and can i just jump in with questions or should i write them down and do them at the end or should i do them as were going . Supervisor mar why dont we hold the questions to the end . I think that would be more efficient. Please continue, mr. De la rosa. Thank you. The third finding that i would like to highlight today relates to the prequalified contracting pools. As you may know, and as background, both chapter 21 and chapter 6 of the admin code both allow for a prequalified contracting pools, and basically, this is where departments can prequalify a group of vendors using a procurement process and then draw from the pool when the need arises. Once the pool is created, the city can select its preferred vendor instead of going through another solicitation for the specific scope of work that is needed by the department. What we found and this is not just within department of public works, but this is definitely a citywide occurrence is that the city does not have the standard procedure for selecting vendors once they are in the prequalified pool. There were instances in which the same vendors would be selected repeatedly from a prequalified pool at times by the departments former director, mr. Nuru. Although this is not prohibited, this certainly presents unethical procedures. The recommendation that follows from this finding is that the mayor, board, and the office of Contract Administration should establish clear guidelines for selecting a vendor or vendors from a prequalified pool. Possible methods that should be included in there should be considered a solicitation of quotes or a description of all vendors in the pool. The fourth finding relates to grants. For the period that we reviewed, which was 2017 through 2020, march, there were 19 grants that were valued at 23. 8 million within San Francisco public works. These were for a variety of services, including workforce development, job training, and according to public works, they do follow the competitively bid routes whenever they award these grants. So the finding we had on this was just that there were no clear law or rules that provided requirements or guidance of how these types of procurements should be handled. We identified a couple of findings according to the 1984 City Attorney opinion, and there was a 2017 opinion refined based on this guidance. The recommendation that we put forth under this finding was that for the board, the mayor, and the office of Contract Administration should establish minimum qualifications or requirements to ensure the competitive solicitation of grants are in place as well as the award of contracts and solicited processes as per code and policy. The next finding relates to centralized oversight and monitoring. As you know, chapter 21 purchases are handled by the office of Contract Administration, which is under the city administrator. The chapter 6 contracting or procurement fall within each of the six departments that i named as Public Works Authority is granted. Because of the the spread of the various authority that that the different departments and different entities in the city have, there really is no centralized process or an oversight of the procurements citywide, so lack of central monitoring and central procedures are definite. Commissioner lee definitely not in place, given that theyre spread through the various authorities that i mentioned. The two recommendations that we we provided on these are for the city to closed gaps in centralized in centralized monitoring of all procurement activities by strengthening and reviewing the procedures of City Administration or strengthening and monitoring all procurement throughout the city. We also recommend to promote data driven decisions by the agency to utilize data procurement systems and to enter the needed information so that we capture the information on all the contracts, not just from the time of awarding but also from the very, very beginning of outreach and solicitation. We wanted to call out the topic of tone at the top, which is definitely a topic that is very, very important, if not the root cause of a lot of the internal control weaknesses that weve identified. In this case, we identify tone at the top by the organizations leadership. And based on the information that we gathered, interviews that we conducted at public works, the tone at the top that mr. Nuru had was one that prioritized low cost, expediency, and lack of organizational transparency among staff. This is certainly one that were going to be highlighting as part of the various assessments that we will be issuing, so more to come in terms of a recommendation on this one. The very last set of findings or recommendations relate to gaps in gift restrictions and enforcements, and this is basically what we found was that despite certain requirements that are in place, including a form 700 statement, which is a statement of economic interest that is required of all city officers and employees to disclose reportable financial interests, there were some gaps that existed, and loopholes, and im certain that the City Attorneys office will be covering a certain portion of this. But we basically found that the loopholes should be addressed and that the recommendations that followed on this are that for the Ethics Commission to follow these to ensure that city laws do not create any sprung unethical behavior as well as follow the requirements of form 700 filed electronically and following the reviews of such. As todd mentioned in the beginning, we do this is just the first of many of a number of assessments that we will be issuing that relates to the various internal control weaknesses that we identified related to the nuru investigations. Some of those are the ethical standards at the airport, Department Contractor process, as well as policies and procedures at the department of building inspection. I just wanted to say before i move forward, i thank our group, our team within the Controllers Office who worked on these audits, with the leadership of amanda and kay. We also want to thank the staff and leadership at public works who really provided us with full cooperation and collaboration, and the data that we requested to make sure that we do issue a report that is substantive and that is value led. As far as we want to thank the City Attorney office of Contract Administration and the Ethics Commission for providing us their input. With that, were happy to answer any questions you may have. Supervisor mar thank you so much, mr. De la rosa and mr. Wrightstrom for your presentation and the work, and also, controller rosenfeld for this really important review. I just had a few questions that i wanted to ask and also, i know my colleagues do, as well. First of all, i guess i just want to make this clear. It wasnt clear in your presentation, but it is in the review report. For nine years, mr. Nuru had uni lateral authority to grant contracts of over 600,000 with no oversight. Not only did he have that unilateral authority, but he granted that power to three others. So when did this practice end . From our understanding, the process is still in place via the designation of the of the Department Head as the primary approver is still in existence, with the delegated authority to the deputies. If i could just add to that, as well, in addition to that, id like to call out the work and interim controls that were put in place on february 3, also outlining, effective immediately, that d. P. W. Staff had to put into place additional controls which included procuring quotes from at least three qualified contracts, and so that memo was dated contractors, and so that memo was dated february 3, requiring five on requirements for approval on contracts, shelter and housing, and public contracts emergencies. Supervisor mar thank you. So the acting director did at least put some controls into place on february 23. Got it. Well,