Audit: San Diego often OKs infrastructure projects without proper vetting, increasing costs and delays
With the city facing a $5 billion shortfall in funding for needed projects, its auditor says better efficiency is crucial.
A new audit says San Diego frequently approves city infrastructure projects prematurely and without proper vetting, which can make the projects more expensive and significantly delay their completion.
The 54-page audit, released June 1 by City Auditor Andy Hanau, says the problem is particularly concerning as San Diego faces a $5 billion shortfall in funding for crucial infrastructure projects over the next five years.
“It is important to have strong controls in place for vetting proposed projects so the city can focus its limited resources on projects with a greater likelihood of being completed on budget and on schedule,” the audit states.
The audit concluded that preliminary vetting is inadequate for nearly half of city infrastructure projects, which include building fire stations and libraries along with smaller projects like adding a new roof or restroom to an existing building.
Of the projects without adequate vetting, more than two-thirds experienced some sort of funding shortfall. The audit said that was likely because funding needs were poorly estimated to begin with.
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The audit found that 44 percent of projects had inadequate vetting, while 56 percent were adequately vetted. Compared with the sufficiently vetted projects, the insufficiently vetted ones typically cost nearly three times as much and took an average of four years longer to complete.
Whether a project was adequately vetted was based on the difference between initial cost estimates and revised cost estimates once city engineers and other officials had fully analyzed it. If the cost estimate after full analysis was more than 50 percent higher than the initial estimate, a project was deemed inadequately vetted.
“It is important to have strong controls in place for vetting proposed projects so the city can focus its limited resources on projects with a greater likelihood of being completed on budget and on schedule.”
— San Diego city audit report
The audit says inadequately planned projects often have adverse effects on other, unrelated projects.
“If costs increase once a project is more fully scoped, that requires the city to divert funding from other capital improvement projects — likely resulting in delays and eventual cost overruns for those projects as well,” the report states.
The audit recommends that projects get formally added to the city’s capital improvement plan only once they have a well-defined scope, reasonably accurate total cost estimates and a realistic funding plan.
It also recommends that city officials comb through all projects in the capital improvement plan to make sure they are still financially feasible and fit with the city’s goals and priorities.
A third recommendation says the city should create standard construction timeline estimates for projects that have been properly vetted and that the schedules for individual projects be reassessed and updated regularly.
The audit comes just as the city is making major changes to how it spends infrastructure money, with much greater emphasis on projects in previously neglected neighborhoods, located mostly south of State Route 94.
New report calls for a five-year plan spelling out how the city intends to spend the $511 million in developer impact fees currently in neighborhood-specific accounts.
The two officials who oversee creation of the city’s capital improvement plan said they agree with the recommendations in the audit and plan to implement them.
But the officials, Finance Director Rolando Charvel and Engineering & Capital Projects Director Rania Amen, said they wouldn’t be able to complete the changes until a year from now.
The audit analyzed 173 infrastructure projects that were on the city’s capital improvement plan between July 2014 and October 2022. The analysis was limited to the general fund, so no water or sewer projects were included.
Part of the problem, according to the audit, is a City Council policy that has “vague language that does not require realistic and defined project estimates when the council approves partially funded new capital improvement projects.”
The audit praises the Engineering & Capital Projects Department for a new policy that aims to ensure project readiness with more preliminary vetting, but the audit says that more proactive approach should be formalized as a new council policy.
That would help set realistic expectations, the audit says, so neighborhoods don’t expect a project to be completed much earlier than possible.
The audit emphasizes that inadequate vetting is not the only cause of cost overruns and delays. Other causes include lack of staffing, unexpectedly higher rates of inflation, unanticipated site conditions and revised construction regulations.
It also notes that even projects that are adequately vetted often cost more than expected and take a bit longer. But the audit says the typical cost increase over initial estimates is only about 3 percent for projects that were adequately vetted.
The audit says more efficient use of infrastructure money is crucial with the city facing such a large infrastructure funding gap.
An analysis released in January said the gap between projected infrastructure needs over the next five years has climbed to $5.17 billion — $4.58 billion in funding for $9.75 billion in needed projects.