· The Board of Supervisors appropriated $500,000 in additional General Fund monies in FY 2005-2006 to patch streets and repair potholes, increasing funding from $1 million annually to $1.5 million annually. The Board of Supervisors also appropriated $15 million in new General Fund monies in the spring of FY 2005-2006 to pay for street resurfacing projects.

· Despite these new resources, the Department of Public Works cannot show that it is providing street repair projects cost-effectively. The Department does not routinely track average project labor costs and productivity to ensure that projects are completed efficiently.

· Based on cost and productivity data provided by the Department, project labor costs for street resurfacing and patching projects vary widely from year to year and do not reflect increases in salaries, benefits, and overhead. For example, the Bureau of Street and Sewer Repair's labor cost per square foot to patch streets decreased by 25.6 percent in FY 2004-2005, from $1.76 per square foot in FY 2003-2004 to $1.31 per square foot in FY 2004-2005, and increased by 45.8 percent in FY 2005-2006, from $1.31 in FY 2004-2005 to $1.91 in FY 2005-2006. The 45.8 percent increase in labor costs in FY 2005-2006 far exceeds projected increases due to salary, benefits and overhead. The Bureau of Street and Sewer Repair needs to evaluate the labor hours, labor costs, and productivity of street resurfacing and patching projects, including the accuracy of cost and productivity data, to ensure that projects are delivered cost-effectively.

· The Bureau of Street and Sewer Repair has a high rate of nonproductive hours. More than 12 percent of the Bureau's scheduled hours are nonproductive paid and unpaid sick and disability leave. The Bureau lost the equivalent of 8.3 full time positions due to unpaid sick and disability leave in the 18 month period from January 2005 through June 2006, resulting in a productivity loss of approximately $725,000 in salaries and benefits.

· The Department incurs unexpected costs and delays from street improvement projects that incur design problems. For example, the Cesar Chavez Street Improvement Project incurred $579,000 in contract change order costs, or 25.2 percent of the total construction contract amount of $2.3 million, to pay for the redesign of a street bridge and compensate the contractor for overhead due to project delays. These costs could have been reduced or avoided if the Department had ensured adequate quality control over the project's design.

The Department of Public Works needs to closely manage street resurfacing, patching and pothole repair projects to ensure efficient spending of limited project monies. The Bureau of Engineering program manager manages street resurfacing project funding and implementation. The Department contracts for street resurfacing projects with costs exceeding $100,000, while the Bureau of Street and Sewer Repair performs projects with costs less than $100,000. The Bureau of Street and Sewer Repair also performs routine street maintenance projects such as patching and pothole repair.

The Department of Public Works' Management of Street Resurfacing Capital Projects

The Department of Public Works coordinates implementation of major street resurfacing projects with utilities and other underground work to minimize excavation of public streets. The Department maintains a five-year plan of utility and street projects, based on the utilities' schedules for underground work and the condition of streets needing repair or reconstruction. Once a street has been resurfaced or reconstructed, the City implements a five-year moratorium on street excavation.

The Department of Public Works combines street resurfacing projects with water, sewer, transit, or traffic projects managed by the Public Utilities Commission and the Municipal Transportation Authority. Street resurfacing is the final stage of the multi-agency projects.

The Department of Public Works' street resurfacing capital projects encounter the same project problems as the Department's other capital projects, discussed in Sections 6 and 8 of this report.

Anticipating Design Problems in Street Projects

The Department of Public Works has standard street project design and drafting procedures. Although street project site conditions are generally visible, and designing and implementing street projects is relatively straight-forward, the Department's procedures allow for contingencies. For example, the project designer can increase certain specifications for street projects requiring base repair by up to 20 percent to pay for the costs to repair damage to the street base that was not visible during the design process. Also, in accordance with the Department's procedures, street project construction contracts contain a 10 percent contingency to allow for changes in the construction contract and project. Although many street projects are completed on time and within budget, several street projects are notable for design errors or unanticipated site conditions.

The Octavia Boulevard Improvement Project, with original construction costs of $10.5 million, incurred $1.1 million in construction contract change orders or 10.5 percent of the total construction cost, due largely to design omissions and unforeseen site conditions. Examples of design omissions or unforeseen site conditions, some of which could reasonably been anticipated, include:

The City had to demolish old California Department of Transportation highway footings that had not been identified in the design.

The designer had not provided access to a parking lot adjacent to the street project.

The contractor had to relocate a storm water catch basin that had not been located correctly in the design.

The Department of Public Works had to survey existing Municipal Transportation Authority track on Market Street that had not been surveyed to determine alignment and grade.

The Cesar Chavez Street Improvement Project, with original construction costs of $2.3 million, incurred $579,00 in contract change orders or 25.2 percent of the total construction cost, due to design problems and unforeseen site conditions. The largest change order totaled $605,000 (offset by other reductions in costs) to pay for the redesign of a street bridge and to compensate the contractor for overhead and other costs associated with the time delay.

The Kearny Street improvement project encountered problems when the design for the street's base repair differed from the actual conditions. The sidewalk height and location of the utility box differed from the design plans. In this case, the lengthy planning and design process contributed to the change order, since the street conditions changed during the time that the designer was planning the project.

The Department of Public Works needs to assess and revise as appropriate its street design project quality controls to ensure that street project designs meet the project needs and site requirements.

The Bureau of Engineering needs to revise or enhance its existing street project design and drafting procedures to ensure that the design and planning process is timely, including site visits late in the design process, to ensure that project plans and specifications correspond to actual site conditions.

Managing Street Project Timelines

Because delays in completing street construction projects can disrupt traffic and activities along the corridor, the Department of Public Works needs to ensure that street projects are completed on time. The Department's street construction projects complete almost three months after the original completion date based on the median number of days that construction projects are extended.

Table 1.1
Number of Days that the Actual Street Construction Project Completion Date Exceeds the Original Construction Contract Completion Date for
12 Construction Contracts Completed in 2004 and 2005

Source: Bureau of Construction Management

Construction completion can be delayed for a number of reasons, such as inclement weather, additions to the project scope especially in as-needed contracts, or unforeseen site conditions. If the street project is combined with water line, sewer, or other underground work, projects can be delayed to relocate or work around unanticipated utilities. Although the affected utility company pays the costs of relocating utilities and contractor delays, the City incurs costs for its own staff affected by the delays.

Contract delays due to street design or condition issues included:

An extension of the Cesar Chavez Street Improvement Project by more than one year to allow for design changes to address unforeseen site conditions or design omissions. Other project delays contributed to total delays of nearly two years.

More than one and one-half year in delays to complete the Geary Boulevard Pavement Renovation Project, which was a joint project with the Public Utilities Commission and the Municipal Transportation Agency. Although project delays resulted from client requests or other issues with the other City departments, delays also resulted from changes initiated by the Department of Public Works, including redesigning curb ramp approaches.

More than six months delay in the Octavia Boulevard Improvement Project to address several unforeseen site condition or design omissions, including locating and demolishing California Department of Transportation footings, removing trees, curb modifications, relocating irrigation lines, and other activities.

Delays caused by the redesign and installation of curb ramps, reconstruction of street curbs, and additional slurry sealing of streets in other projects.

The Department of Public Works needs to identify major causes of street project delays and develop procedures to reduce common causes. Quality control procedures to reduce delays caused by design problems or site conditions that could have been anticipated will help to reduce some time delays. The Department should also look at project scheduling to reduce the impact of rain and wet weather and holiday moratoriums on street construction projects.

The Bureau of Street and Sewer Repair's Management of Street Projects

The Bureau of Street and Sewer Repair is responsible for annual maintenance and repair of the City's streets, including repairing potholes and patching streets, sealing street surfaces, and maintaining street structures. Total FY 2006-2007 funding to the Bureau of Street and Sewer Repair for street resurfacing, patching, sealing and pothole repair projects was approximately $10.6 million.

The Bureau of Street and Sewer Repair receives approximately $4.2 million annually in State vehicle fuel excise tax (allocated in the Department's Road Fund) to pay for slurry sealing and patch paving of the streets, pothole repairs, and other street repairs.

The Bureau of Street and Sewer Repair also performs street resurfacing projects that are managed by the Bureau of Engineering and funded by the San Francisco County Transportation Authority from the ½ cent sales tax. The San Francisco County Transportation Authority allocates approximately $3 million per year to the Department of Public Works for annual street resurfacing.

In the spring of FY 2005-2006, the Board of Supervisors appropriated $15 million in General Fund monies for street resurfacing and renovation projects which carried forward into FY 2006-2007. The Department of Public Works allocated $3.4 million of these funds to the Bureau of Street and Sewer Repair.

The Bureau of Street and Sewer Repair's Labor Costs to Resurface and Patch Streets and Repair Potholes

The Bureau of Street and Sewer Repair does not routinely track the average labor costs of street resurfacing, patching and pothole repair projects. In FY 2005-2006, the Board of Supervisors appropriated an additional $500,000 in General Fund monies for patching and pothole repair projects, from $1.0 million per year to $1.5 million per year. However, the Bureau can not consistently show that these projects are delivered cost-effectively.

The Bureau's average labor costs to resurface and patch streets, based on cost and productivity data provided by the Bureau, have been inconsistent over the past three years. Although the average labor costs would be expected to increase at the same rate as salary, benefit, and overhead increases, average labor costs for street patching and resurfacing projects based on the Bureau's data decreased between FY 2003-2004 and FY 2004-2005 and then increased significantly in FY 2005-2006.

Labor Costs to Patch and Resurface Streets

The Bureau of Street and Sewer Repair's average labor costs to patch streets decreased by 25.6 percent between FY 2003-2004 and FY 2004-2005 and increased by 45.8 percent between FY 2004-2005 and FY 2005-2006, as shown in Table 1.2.

Table 1.2
The Bureau of Street and Sewer Repair's Labor Costs to Patch Streets
FY 2003-2004 through FY 2005-2006

Source: Department of Public Works and SF Stat

Average labor costs to resurface streets decreased by 33.8 percent between FY 2003-2004 and FY 2004-2005 and increased by 18.1 percent between FY 2004-2005 and FY 2005-2006.

Table 1.3
The Bureau of Street and Sewer Repair's Costs to Resurface Streets
FY 2003-2004 through FY 2005-2006

Source: Bureau of Engineering

While labor cost increases should reflect increases in salary, fringe benefit costs, and overhead rates, the Bureau's labor costs do not correspond with these cost increases. The large increase in average labor costs for street patching projects in FY 2005-2006 exceeds expected increases in salary, benefit, and overhead costs. The Bureau of Street and Sewer Repair needs to evaluate the labor hours, labor costs, and productivity of street resurfacing and patching projects, including the accuracy of cost and productivity data, to ensure that these projects are delivered cost-effectively.

The Costs of Repairing Potholes

The Bureau's Response Time to Pothole Complaints

The Bureau of Street and Sewer Repair reports the response time to pothole complaints to SF Stat, the City's performance measurement system. The SF Stat data shows that the Bureau of Street and Sewer Repair's response to pothole complaints improved slightly between FY 2004-2005 and FY 2005-2006. As a result of receiving additional funds to repair potholes, the Department of Public Works hired one additional crew to repair potholes in FY 2005-2006. The addition of one crew allowed the Bureau to increase its response to pothole complaints. In FY 2005-2006, the Bureau reported responding to 30 percent of pothole complaints within 24 hours compared to 27 percent in FY 2004-2005. The Bureau repaired 1,493 potholes in response to complaints in FY 2005-2006 compared to 1,371 potholes in FY 2004-2005, a 9 percent increase.

The Bureau of Street and Sewer Repair's Costs to Repair Potholes

In addition to reducing the response time to pothole complaints, the Bureau of Street and Sewer Repair repaired more potholes in FY 2005-2006 compared to FY 2004-2005 due to the additional funds allocated to pothole repair. The Bureau's average labor costs to repair potholes have increased by approximately 14.8 percent per year, which is consistent with expected increases in salary, benefit, and overhead costs.

Table 1.4
The Bureau of Street and Sewer Repair's Labor Costs to Repair Potholes
FY 2003-2004 through FY 2005-2006

Source: Department of Public Works and SF Stat

The Asphalt Plant's Costs

Currently, much of the Department of Public Works asphalt for street projects is manufactured by the Department's asphalt plant, managed by the Bureau of Street and Sewer Repair. The asphalt plant is funded by the General Fund, although the sale of asphalt, either to outside contractors working on City projects or charged to City projects funded by the local sales tax, State gas tax, or other funds, was intended to recover costs. However, the asphalt plant has operated at a loss for the last several years because the plant's operating costs exceed the price of asphalt. In FY 2002-2003 the Board of Supervisors approved an ordinance (File 03-0416) appropriating $2.2 million to construct asphalt storage silos. At that time, the Department projected that the plant would produce approximately 85,000 tons of asphalt by FY 2005-2006, reducing the per ton production costs. In fact, in FY 2005-2006 the asphalt plant has produced 35,772 tons of asphalt, which is 49,228 less tons, representing a percentage deficit of 57.9 percent. In FY 2005-2006, the Department's cost to manufacture asphalt was $78 per ton, compared to the market price of $65 per ton, representing a $13 per ton loss.

During the FY 2006-2007 budget review, the Budget Analyst recommended and the Board of Supervisors approved reserving six months of the asphalt plant operating budget, pending a report to the Board of Supervisors by the Director of Public Works, no later than October 1, 2006, on the options for obtaining asphalt for City projects, including (a) continuing to operate the asphalt plant to fully recover costs, (b) contracting out the operations of the asphalt plant, and (c) purchasing asphalt from private suppliers.

The Department of Public Works has submitted a report to the Board of Supervisors, finding that insufficient street resurfacing funding and corresponding demand for asphalt has contributed to the asphalt plant's revenue shortfall. The Department's report identified five options and the benefits and risks of each option. The Budget Analyst will prepare a written evaluation of the Department's findings to present to the Board of Supervisors during the Finance and Budget Committee's hearing to release the reserved funds in January 2007.

The Bureau of Street and Sewer Repair's Staff Productivity

The Bureau of Street and Sewer Repair loses more than 9 percent of productive work time due to unpaid sick leave, paid and unpaid disability leave, and other types of unpaid leave. More than 12 percent of productive work time is lost due to paid and unpaid sick leave, disability leave, and other unpaid time off. Bureau employees only work 76.8 percent of all hours scheduled.

Table 1.5
Bureau of Street and Sewer Repair Hours Worked and Not Worked
January 2005 through June 2006

Source: SF Stat

This large percentage of non-productive time impairs the Bureau of Street and Sewer Repair's ability to perform its functions and increases costs relative to productive output. The Bureau needs to work with the Human Resources and the Health and Safety Division to identify causes of paid and unpaid sick and disability leave and actions that the Bureau can take to reduce the incidence of unpaid leave and increase the number of productive hours.

Conclusion

The City has a large back log in street projects and needs to manage its street projects cost-efficiently to ensure that limited funds are well used. To address this backlog, the Board of Supervisors appropriated an additional $500,000 in General Fund monies to patch streets and repair potholes in the FY 2005-2006 budget, and $15 million in General Fund monies in the spring of FY 2005-2006 to resurface streets. These additional monies have allowed the Department to increase its street resurfacing, patching and pothole repair projects. However, the Department of Public Works has not ensured that street projects are completed timely and cost-effectively.

The Department of Public Works' street renovation and improvement projects have experienced delays and cost overruns due to design errors and omissions or site conditions that could have reasonably been anticipated. The Bureau of Street and Sewer Repair does not track and manage street project costs to ensure that projects are performed cost-effectively. Consequently, the costs of projects vary widely from year to year and project costs cannot be anticipated based upon increases in salaries, benefits and overhead costs.

The Bureau of Street and Sewer Repair also loses productive time to paid and unpaid sick and disability leave. The Bureau lost the equivalent of 8.3 full time positions due to unpaid sick and disability leave in the 18 month period from January 2005 through June 2006, resulting in a productivity loss of approximately $725,000 in salaries and benefits.

Recommendations

The Bureau of Engineering Manager should:

1.1 Assess and revise as appropriate the Bureau of Engineering's street design project quality controls to ensure that street project designs meet the project needs and site requirements.

1.2 Revise or enhance the Bureau of Engineering's existing street project design and drafting procedures, to ensure that project plans and specifications correspond to actual site conditions.

1.3 Identify major causes of street project delays and develop procedures to reduce common causes, including quality control and project scheduling procedures.

The Bureau of Sewer and Street Repair Manager should:

1.4 Develop systems to better capture and report patching and pothole activities and the cost-effectiveness of performing the work.

1.5 Evaluate the labor hours, labor costs, and productivity of street resurfacing projects to ensure that these projects are delivered cost-effectively.

1.6 Present cost data and analysis of pothole, patching, and street resurfacing costs to the Board of Supervisors as part of the FY 2007-2008 budget review.

1.7 Work with the Human Resources and the Health and Safety Division to identify causes of paid and unpaid sick and disability leave and actions that the Bureau can take to reduce the incidence of unpaid leave and increase the number of productive hours.

1.8 Continue to report hours worked and not worked as part of the Department of Public Works' SF Stat measures.

Costs and Benefits

The Department of Public Works would achieve approximately $180,000 in efficiency gains by increasing productive time and reducing the hours lost to paid and unpaid sick and disability leave. If the hours attributed to paid and unpaid sick and disability leave were reduced by 10 percent, the Bureau of Street and Sewer Repair would have productivity increases equal to two positions, with estimated salary and fringe benefit costs of $180,000.