Report 2016-125.1 All Recommendation Responses

Report 2016-125.1: The University of California Office of the President: It Has Not Adequately Ensured Compliance With Its Employee Displacement and Services Contract Policies (Release Date: August 2017)

Recommendation for Legislative Action

To ensure that the university maximizes the use of competition, the Legislature should revise the Public Contract Code to specify the conditions under which the university may amend contracts without competition.

Description of Legislative Action

SB 574 (Lara) would have prohibited an amendment, renewal, or extension of an existing contract unless specified conditions are met. This bill was vetoed by the Governor.

  • Legislative Action Current As-of: November 2017

California State Auditor's Assessment of 60-Day Status: Legislation Vetoed


Recommendation for Legislative Action

To ensure that the university maximizes the use of competition, the Legislature should revise the Public Contract Code to narrowly define the professional and personal services that the university may exempt from competitive bidding.

Description of Legislative Action

SB 574 (Lara) would have provided that to qualify as a lowest responsible bidder or best value awardee on any contract for specified positions a bidder must certify in writing to the university that the bid includes, for all employees who work for more than 10 days at the university in any 12-month period under the contract, a total employee compensation package that is valued on a per-employee basis at a level sufficient that it does not undercut by more than 5 percent the average per-employee value of total compensation for employees of the University of California who perform comparable work at the relevant campus, medical center, or laboratory at which the bidder proposes to perform the work. This bill was vetoed by the Governor.

  • Legislative Action Current As-of: November 2017

California State Auditor's Assessment of 60-Day Status: Legislation Vetoed


Recommendation #3 To: University of California

To ensure that university locations adequately justify the necessity of contracts that will displace university employees, the Office of the President should actively enforce compliance with the displacement guidelines by monitoring university locations for compliance, providing regular training on the displacement guidelines to university locations, and amending the displacement guidelines to state that the Office of the President's human resources department has the authority to approve or reject displacement decisions.

60-Day Agency Response

Systemwide HR is revising the existing displacement guidelines and creating a template to ensure consistency. It will also be implementing a more thorough HR review which will include a preliminary financial review before the approval process is completed. The revised guidelines and template will be distributed to the campus locations. Systemwide HR will also advise the campus locations to incorporate an overview of the revised displacement guidelines into existing trainings.

  • Estimated Completion Date: December 2017
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Partially Implemented


Recommendation #4 To: University of California

To ensure that university locations adequately justify the necessity of contracts that will displace university employees, the Office of the President should revise contracting policies to address situations in which university locations are contemplating entering into services contracts instead of hiring university employees to perform an activity. In these situations, the Office of the President should require university locations to perform an analysis that is similar to the one it requires when current university employees are displaced.

60-Day Agency Response

To achieve the objective of this recommendation UC Procurement will:

-Review contracting policy (BUS-43) and update as appropriate

-Provide training and/or job aids to ensure campus and local procurement leaders are aware of the displacement guidelines and practices so that they can confirm compliance with these guidelines and practices as part of the contracting process.

  • Estimated Completion Date: December 2017
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Pending


Recommendation #5 To: University of California

To ensure that university locations adequately justify the necessity of contracts that will displace university employees, the Office of the President should ensure that staff with the necessary business and financial skills at the Office of the President review and approve the cost analyses that university locations submit.

60-Day Agency Response

Systemwide HR is revising the existing displacement guidelines and creating a template which includes review by the appropriate office to ensure that staff with the necessary business and financial skills review the cost analyses that university locations submit.

  • Estimated Completion Date: December 2017
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Pending


Recommendation #6 To: University of California

To ensure that university locations adequately justify the necessity of contracts that will displace university employees, the Office of the President should revise the cost analysis requirements in the displacement guidelines to mitigate the risk of university locations incorrectly estimating savings by requiring a threshold level of savings as part of their business and financial necessity analyses and requiring that university locations periodically reevaluate the savings after the services contracts take effect to inform future contracting decisions.

60-Day Agency Response

In assessing whether to contract out for services or to perform the work with UC employees, locations take into account a number of considerations on an ongoing basis, including whether the work is within the scope and capabilities of current staff; whether contracting out for services would improve the methods or practices of service delivery or facilitate the development of internal expertise; and the immediacy of the need for the services as well as the expected duration of such need. UC manages its head count on an ongoing and periodic basis to accomplish existing or anticipated work. Systemwide HR will send a written communication to campus locations regarding the need to more carefully determine whether it is more economical and efficient to perform the work with UC employees or with service contracts, and will continue to work to strengthen and standardize procedures to facilitate these efforts.

  • Estimated Completion Date: December 2017
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Pending

Although the Office of the President has outlined a plan for addressing this recommendation, at this time it is not clear whether its plan will implement the recommendation as intended. The State Auditor's recommendation fills the gap in the university's policy that currently exists because the Office of the President does not require campuses to assess whether a displacement decision achieves the financial benefits intended. By requiring a threshold level of savings as justification for displacement and requiring the campuses to revisit those analysis, the Office of the President has better assurance that campuses' displacement decisions resulted in the expected economic benefits.


Recommendation #7 To: University of California

To ensure that the university achieves its goals of obtaining services at the lowest cost or best value and of providing vendors with fair access to contracting opportunities, the Office of the President should direct university locations, including its own local procurement office, to implement controls to ensure staff better comply with the university's contract manual's requirements for using standard terms and conditions, obtaining the proper contract approvals, and awarding of sole-source contracts.

60-Day Agency Response

The Office of the President will update the university's contracting policy (BUS-43) as required and reinforce compliance through:

-A letter from the UC Chief Procurement Officer to all Campus and the Office of the President procurement leaders to remind them that they are expected to follow BUS-43 requirements regarding the use of templates available on the Office of the President's website.

-A webinar/training event for all procurement leaders and staff to introduce refreshed materials and reinforce compliance with contracting policies

-Updated templates, job aids and FAQs on the Office of the President's website.

  • Estimated Completion Date: December 2017
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Pending


Recommendation #8 To: University of California

To ensure that the university achieves its goals of obtaining services at the lowest cost or best value and of providing vendors with fair access to contracting opportunities, the Office of the President should revise the university's contract manual to incorporate the best practices found in the State Contracting Manual for limiting the use of amendments to repeatedly extend existing contracts.

60-Day Agency Response

To achieve the objective of this recommendation UC Procurement will:

-Revise all template agreements to ensure that contract terms, including extensions, do not exceed 10 years.

-Address these items in a webinar/training event for all procurement leaders and staff

-Update job aids and FAQs on the Office of the President's website

-Evaluate how UC can leverage the procurement technology currently being implemented to provide visibility to current contract terms

  • Estimated Completion Date: December 2017
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Pending


Recommendation #9 To: University of California

To ensure that the university achieves its goals of obtaining services at the lowest cost or best value and of providing vendors with fair access to contracting opportunities, the Office of the President should revise the university's contract manual to narrow the exemption from competition to only selected professional services, similar to the State Contracting Manual.

60-Day Agency Response

To achieve the objective of this recommendation UC Procurement will:

-Revise its contracting policy (BUS-43) to:

-Amend the definitions of Professional Services and Personal Services

-Reinforce UC's commitment to encourage competitive bidding even when a potential exemption exists

-Address these items in a webinar/training event for all procurement leaders and staff

-Update templates, job aids and FAQs on the Office of the President's website

  • Estimated Completion Date: December 2017
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Pending


Recommendation #10 To: University of California

To ensure that the university achieves its goals of obtaining services at the lowest cost or best value and of providing vendors with fair access to contracting opportunities, the Office of the President should direct all university locations to implement controls in their online procurement systems to prevent staff from avoiding the requirement to competitively bid a contract when individual purchases of the same good or service accumulate to $100,000 or more within a fiscal year.

60-Day Agency Response

The Office of the President is planning a set of actions to address this recommendation. Because UC Procurement is in the midst of installing new technology the actions will include:

-A formal notification from the UC Chief Procurement Officer to all Campus and Office of the President procurement leaders to institute a quarterly review process by which each campus senior procurement officer shall ensure that a quarterly review of purchase transactions is conducted in order to identify opportunities to aggregate for competitive bidding (repetitive purchases of the same goods or services). Such review shall be documented, with one copy maintained at the campus and a second copy forwarded to the Director of Strategic Sourcing, UC Procurement Services at the Office of the President.

-Address these items in a webinar/training event for all procurement leaders and staff

-Update templates, job aids and FAQs on the Office of the President's website

-Address, in the new contracts database configuration, the functionality needed to support this solution.

  • Estimated Completion Date: December 2017
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Pending


Recommendation #11 To: University of California

To help ensure that the university will implement its central contract database for tracking and monitoring all university contracts in a timely manner, the Office of the President should develop a detailed project implementation plan by October 2017 that outlines a schedule of the specific activities that will need to occur to complete this effort.

60-Day Agency Response

The implementation plan for the contracts database is completed. This plan will stand up the database, ready campus and system-wide users to start authoring new contracts using this system, and will address the conversion of existing system-wide contracts from the current platform into the new database. We have provided a copy of the implementation plan with this submission. Subsequent implementation waves scheduled for 2018 will migrate campus contracts to the system as well as, potentially, medical centers and labs.

  • Completion Date: October 2017
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Fully Implemented


Recommendation #12 To: University of California

To maximize benefits from the systemwide procurement initiative and to ensure that the university uses those benefits for its teaching, research, and public service missions, the Office of the President should direct all university locations to provide better documentation to substantiate actual benefits they claim related to their procurement decisions.

60-Day Agency Response

UC Procurement will update Benefits Bank instructions to make it clearer that source documents and other documentation, while not available in Benefits Bank, are available. The Office of the President will provide Benefits Bank refresher training to ensure all users understand the process of recording and documenting benefits and are using it correctly.

  • Estimated Completion Date: March 2018
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Pending


Recommendation #13 To: University of California

To maximize benefits from the systemwide procurement initiative and to ensure that the university uses those benefits for its teaching, research, and public service missions, the Office of the President should revise its guidance to ensure the benefits that university locations claim result from only procurement-related activities.

60-Day Agency Response

UC Procurement will review its guidance to ensure it appropriately reflects the contribution of Procurement. UC Procurement will provide Benefits Bank refresher training to ensure all users understand the process of recording and documenting benefits and are using it correctly.

  • Estimated Completion Date: March 2018
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Pending


Recommendation #14 To: University of California

To maximize benefits from the systemwide procurement initiative and to ensure that the university uses those benefits for its teaching, research, and public service missions, the Office of the President should implement a process to centrally direct these benefits to ensure that university locations use them to support the university's core missions.

60-Day Agency Response

The benefits created through UC Procurement's involvement are used by campuses to support the core mission of teaching, research and public service. As stated in the University's initial response, implementing a process as described in this recommendation would not only place a significant administrative burden on campus units to track savings and document expenditures from those savings, but also create a dynamic that would limit the incentive for units to generate savings in the face of UC either prescribing the use of those funds or ultimately shifting them to another unit or campus altogether. In addition to the disincentives, it is not in the best interests of a campus to have the Office of the President direct how it spends these savings, as that determination is properly and best left to the campus.

  • Estimated Completion Date:
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: Will Not Implement

The State Auditor's recommendation would achieve a measure of accountability that the Office of the President currently lacks in its systemwide procurement initiative. Specifically, our recommendation would ensure that university locations are using the benefits from the systemwide procurement initiative to further the university's core missions. Absent measures of accountability over the university locations' use of these benefits and its unwillingness to adopt our recommendation, the Office of the President's assertion that university locations have redirected these benefits to the university's core missions lacks credibility.


Recommendation #15 To: University of California

To maximize benefits from the systemwide procurement initiative and to ensure that the university uses those benefits for its teaching, research, and public service missions, the Office of the President should study ways to measure actual procurement benefits—possibly focusing this effort on benefits from larger dollar amounts—and if such measurement is not possible, it should clearly disclose to the regents and the public that the amounts it reports are based on estimates.

60-Day Agency Response

The Office of the President will review its reporting process to more clearly identify the reported benefits emanating from definite quantity contracts (contacts governing set quantity purchases) and those benefits emanating from requirement contracts (contracts governing large numbers of future transactions with benefit attainment dependent on forecasted purchases, volumes and contract adoption).

  • Estimated Completion Date: March 2018
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: No Action Taken

Although the Office of the President indicates it will implement our recommendation, it has yet to take any actions to do so.


Recommendation #16 To: University of California

To maximize benefits from the systemwide procurement initiative and to ensure that the university uses those benefits for its teaching, research, and public service missions, the Office of the President should, if actual benefits are measurable, implement a process to monitor and report annually to the regents the estimated and actual benefits.

60-Day Agency Response

The Office of the President will review its reporting process to more clearly identify the reported benefits emanating from definite quantity contracts (contacts governing set quantity purchases) and those benefits emanating from requirement contracts(contracts governing large numbers of future transactions with benefit attainment dependent on forecasted purchases, volumes and contract adoption).

  • Estimated Completion Date: March 2018
  • Response Date: October 2017

California State Auditor's Assessment of 60-Day Status: No Action Taken

Although the Office of the President indicates it will implement our recommendation, it has yet to take any actions to do so.


All Recommendations in 2016-125.1

Agency responses received are posted verbatim.