
State Auditor Elaine Howle on October 5 released an audit on Governor Jerry Brown’s Delta Tunnels project revealing extensive mismanagement by the Department of Water Resources, including the violation of state contracting laws, spending millions of dollars over anticipated costs, and failure to complete either an economic or financial analysis.
The 97-page report said the Department of Water Resources broke state contracting laws when they replaced the program manager for the California WaterFix, formerly called the Bay Delta Conservation Plan. The WaterFix project aims to build two massive 35-mile long tunnels under the Delta to export Sacramento River water to corporate agribusiness interests in the San Joaquin Valley and Southern California water agencies.
The audit summary pointed out that although DWR used a robust selection process to select its first program manager, the URS Corporation, it later used other methods to select a replacement program manager, the Hallmark Group.
Chuck Gardner is the CEO and President of the Hallmark Group. As of July 2017, DWR had given Gardner $13.8 million to work on the tunnels project.
The report said DWR directed its contractor to replace their program manager with the Hallmark Group without demonstrating that this new program manager was qualified to provide such services or had the required professional license.
Hallmark lacked a licensed engineer required by law for construction project managers and had no demonstrable experience planning large water resources infrastructure projects, according to the audit.
DWR later awarded this new program manager its own contract without a competitive process, and the program manager has had to subcontract many of the program management functions for which DWR is generally paying a markup of 5 percent, the audit determined.
In a contorted procedure, DWR hired the new contractor under the existing contract with URS by making Hallmark a subcontractor. But instead of making Hallmark responsible to URS, they instead made them accountable to DWR, in spite of Hallmark not having the qualifications to manage such a project.
The report reveals how DWR audit and internal audit staff complained about Hallmark’s qualifications to do the job, but the upper management and DWR legal counsel ignored their advice.