Chief auditor: change-order procedures lag practice; KPIs unmonitored

Paula Rivera, chief auditor for the California High‑Speed Rail Authority, told the authority’s Finance and Audit Committee that an audit of design‑build contract change orders found documented procedures and general compliance but also a lack of continuity between written procedures and current practice. "The change order process is missing continuity between procedures, policies, and practices," Rivera said during the committee meeting.

The audit examined the authority’s process from the identification of a change to submittal, negotiation and execution. Rivera said the authority requires change orders above $1,000,000 to go to the change control committee and those above $20,000,000 to go to the business oversight committee, and that the change control committee — reimplemented in 2021 — participates in a merit assessment, an independent cost analysis and negotiation for changes.

The audit team reported one formal issue and two observations. The issue was the lack of alignment between written procedures and evolving practices. The first observation was that key performance indicators (KPIs) established for the timeliness of change‑order reviews are not consistently tracked and there is no consequence for missing them. The second observation was that the authority’s change‑order process is “disjointed in comparison to best practices,” using Caltrans as a comparator, with time‑tracking and touch points left to individual construction packages rather than standardized across the program.

Rivera said testing of selected change orders showed contractors and oversight consultants generally complied with the authority’s documented process and that, across three construction packages reviewed, there was an "average reduction of approximately 23" between proposed and executed change‑order values (as stated to the committee). She also noted that a delegation change in October 2024 altered review practices and that more recent process changes are being pursued, including revisions to the change control committee charter and procedures.

Rivera also reviewed the audit office’s other work. She described a pre‑award cost review performed for a property management environmental services contract with Saphos Environmental and two subconsultants; the review flagged adjustments but nothing the office considered "egregious." She presented the fiscal 2025–26 audit plan, which includes civil work certification and incurred‑cost compliance audits, and said pre‑award reviews take priority because they run concurrently with contract negotiations.

Rivera said the audit office lacks current in‑house expertise on time‑related overhead (construction consultant entitlement for delay overhead) and plans targeted training and consultation — including discussions with Caltrans — before auditing that area. Rivera also reported on the internal quality assurance and improvement program: reviewers found two documentation gaps in assignments sampled from the past year (one concerning independence documentation on a long audit and another concerning documentation of whether the audited entity had ongoing legal proceedings). Rivera said both weaknesses have been addressed in updated work papers and review procedures.

Committee members asked whether the audit office had seen similar documentation issues previously and Rivera replied the incidents are not pervasive and have not affected audit results, but the office must improve end‑of‑audit documentation. The committee discussed when large negotiated changes would come to the board; staff said change orders above the dollar threshold requiring board approval are brought to the board before final agreement is executed.

The chief auditor concluded by recommending a review to align written procedures with current practice and to standardize KPI tracking and enforcement across construction packages. The committee took no formal action during the presentation.