Supervisors approve PUC engineering contract increases amid criticism over local-hire results

The Board of Supervisors adopted a resolution authorizing the general manager of the Public Utilities Commission to execute amendments to increase four professional engineering service agreements for projects funded by the Water System Improvement Program. The measure passed after sharp questioning from supervisors over local hiring outcomes and project scoping.

Supervisor David Campos, speaking from the Budget and Finance Committee, raised concerns about whether splitting larger contracts into smaller ones achieved the stated goal of increasing Local Business Enterprise (LBE) prime-contracting opportunities. Campos noted that the four contracts, taken together, totaled roughly $36 million but had been split into separate agreements below the $10 million reporting threshold. "If you do that and yet only have 10% of the total amount go to local companies, that's a problem," Campos said.

Harlan Kelly, assistant general manager for infrastructure at the PUC, told the board the department had split contracts to provide opportunities for LBEs to prime and to encourage local participation. Kelly said outreach succeeded for some contracts but that not every contract could be awarded to an LBE prime. "You provide the opportunities, you do the outreach and those are the rules of engagement and you have to live with the results," Kelly said. He added that in one joint venture an LBE partner performed a significant portion of the work, but acknowledged results were mixed.

Supervisor Ross Mirkarimi (Mercarimi in the transcript) and others also pressed the PUC on whether the original requests for qualifications (RFQs) had adequately captured project scope and complexity. Supervisors argued that large later increases — briefly described in the PUC presentation as design changes after more field investigation revealed seismic faults at proposed reservoir sites — raised questions about the adequacy of project scoping.

The board voted 8–2 to adopt the resolution. The vote followed a committee process in which some supervisors had withheld recommendation pending clearer information about local hiring outcomes and how contract increases were justified.

Why it matters: The vote authorizes the PUC to increase professional agreement amounts to respond to design changes identified in the Water System Improvement Program. Supervisors expressed that when contract-splitting is used as a tool to generate local participation, the city must see measurable local-hire results.

What’s next: The PUC will proceed with the contract amendments. Supervisors asked for better empirical reporting on local-hire outcomes and asked PUC staff to explain the causes of significant cost increases and the design changes that created them.