BILL ANALYSIS Ó
Bill No: SB
425
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
SB 425 Author: DeSaulnier
As Introduced: February 21, 2013
Hearing Date: April 9, 2013
Consultant: Paul Donahue
SUBJECT
Public Works Peer Review Act of 2013
DESCRIPTION
This bill establishes a process for selection and
functioning of peer review groups that would conduct
evaluations of the scientific and technical aspects of
public works projects that exceed $1 billion. Specifically,
this bill :
1)Requires the administering agency of a project to
establish a peer review group under any of the following
circumstances:
a) The project is a megaproject, defined as having
total development, construction, and reasonable
projected maintenance costs exceeding $1 billion.
b) The Governor, or the head of the administering
agency involved, has determined that the establishment
of a peer review group is in the public interest in
connection with the development and construction of a
project.
c) A statute or concurrent resolution is passed by the
Legislature requiring the administering agency to
SB 425 (DeSaulnier) continued
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establish a peer review group.<1>
2)Defines a "peer review group" to mean a group of persons
qualified by training and experience in particular
scientific or technical fields, or as authorities
knowledgeable in the various disciplines and fields
related to the public works project under review, who
give expert advice on the scientific and technical
aspects of the megaprojects.
3)Requires an administering agency, before establishing a
peer review group, to develop a transparent process for
selecting its members, and provides that the Bureau of
State Audits shall review the process to ensure it was
followed.
4)Prohibits a peer review group from meeting or taking any
action until a charter is filed with the head of the
administering agency and the relevant standing committees
of the Legislature, and is posted on the administering
agency's website, stating among other things the group's
objective, the scope of its activities, and a description
of the duties for which the group is responsible.
5)Specifies that peer review group meetings shall be held
in accordance with the following: (a) an agenda and
relevant documents must be posted on the agency website a
week in advance; (b) meetings shall be held in publicly
accessible forum, and provide for public participation;
and (c) most relevant documents at issue shall be made
available to the public, except those which place the
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<1> The bill also specifies that, unless otherwise provided
in statute, an administering agency is barred from
establishing a peer review group except as provided for
herein.
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agency at a negotiating disadvantage.<2> The bill
authorizes agency employees to provide administrative
support to the peer review group.
6) Requires a member of a peer review group, within 30 days
of joining the group, to file forms with the Fair
Political Practices Commission (FPPC) stating his or her
economic interests, and declaring himself or herself to
be independent of all parties involved in the project,
including project sponsors or contractors, and to have no
conflicts of interest.
7)Defines "conflict of interest" for a reviewer, or his or
her relative or professional associate, if the person
has:
a) A financial or other interest, either in the
project or with a project sponsor, that is known to
the reviewer and is likely to bias the reviewer's
evaluation of the project.
b) Received or could receive a direct financial
benefit of any amount deriving from a project sponsor
or any contractor connected to a project under review.
c) Received, or could receive, an indirect financial
benefit from a project sponsor or contractor that in
the aggregate exceeds $10,000 per year, including
honoraria, fees, stock or other financial benefit, and
the current value of the reviewer's already existing
stock holdings.
d) The appearance of a conflict of interest that would
cause a reasonable person to question the reviewer's
impartiality if he or she were to participate in the
review.
e) Any other interest in the project, project sponsor,
or any connected contractor that, in the view of a
reasonable person, is likely to bias the reviewer's
evaluation of that project.
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<2> The bill additionally provides that, in order to
evaluate matters that relate to personnel, design
standards, contract amounts, or other issues that may put
the administering agency at a negotiating disadvantage, a
meeting of a peer review group may be exempt in part from
the Bagley-Keene Open Meeting Act, at the discretion of the
head of the administering agency to whom the peer review
group reports, unless that meeting includes participation
by one or more full-time, or permanent part-time, officers
or employees of the administering agency. The bill also
makes legislative findings concerning the foregoing.
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8)Requires the FPPC to create a form that identifies
potential institutional conflicts for members of peer
review groups, and that requires the peer review group
member to declare under penalty of perjury that he or she
is independent of all parties involved in the project and
has no conflicts of interest.
EXISTING LAW
1)Defines a "public work" as construction, alteration,
demolition, installation, or repair work done under
contract and paid for in whole or in part out of public
funds, work done for irrigation, utility, reclamation,
and improvement districts, and other districts of this
type, street, sewer, or other improvement work done under
the direction and supervision or by the authority of any
officer or public body of the state, or of any of its
political subdivisions, and specified public
transportation demonstration projects.
2)Requires the High Speed Rail Authority (HSRA) to
establish an independent peer review group for the
purpose of reviewing the planning, engineering,
financing, and other elements of the its plans, and
issuing an analysis of appropriateness and accuracy of
the HSRA's assumptions, and an analysis of the viability
of the authority's financing plan, including the funding
plan for each corridor.
3)Prohibits public officials and officers, acting in their
official capacities, from making any contracts in which
they are financially interested, unless the interest is
remote, as defined.
4)The Political Reform Act prohibits a public official at
any level of state or local government from making,
participating in making, or in any way attempting to use
his or her official position to influence a governmental
decision in which the official knows, or has reason to
know, he or she has a financial interest. A violation of
the act is a crime.
BACKGROUND
1)Purpose of the bill : According to the author, this bill
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seeks to defend the term "peer review" and ensure that it
is only used in the public works project arena in the way
that we all understand it to mean: an objective review by
independent peers without conflicts of interest.
The author states that "large public works projects can
take on monumental importance and even proceed against
better judgment if logical concerns are ignored for the
potential 'greater good' the project may promise. In the
project selection process, policymakers must rely on
experts to evaluate a project's costs and benefits; these
experts can make varying assumptions in order to reach a
variety of conclusions. Legitimate peer review is a
cornerstone of the scientific method and a key tool for
policymakers to use to validate conclusions presented by
these experts.
"Further, when a project sponsor claims that a project
has been "peer reviewed," policymakers and the public
often grant more credibility to offered justifications
for constructing a project. Because of this, it is
important that the term "peer review" mean what the
public generally believe it to mean. This includes
ensuring the project sponsor followed a transparent
process for development of the peer review, and that no
conflicts of interest reside with the peer review
panelists?This is especially important today with the
potential large-scale projects proposed in California's
near future."
2)High Speed Rail Authority's peer reviewed forecasts
called into question : In 2009, the HSRA developed
forecasts of demand and ridership for a "high-speed"
train running from San Francisco to LA, based on a model
system developed for HSRA by Cambridge Systematics, a
leading transportation consulting firm, to forecast
high-speed rail ridership under a variety of scenarios,
including different configurations of routing, pricing,
frequency of service and travel time. The ridership
forecasts were included in California's successful
application for federal stimulus dollars,<3> but the
ridership study was roundly criticized.
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<3> In January 2010, the state received $2.25 billion in
federal stimulus funds for high speed rail.
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In 2010, the Senate Transportation and Housing Committee
commissioned a review of the HSRA ridership forecasts. In
June, 2010, researchers at the Institute of
Transportation Studies at the University of California,
Berkeley highlighted numerous problems identified in the
ridership study, including its use of:
a) A sample of long-distance travelers that was not
sufficiently representative, and of a statistical
method to adjust for that difference that has been
proven unreliable.
b) Statistical adjustments that were valid for
intra-regional ridership models, but not for
inter-regional ones, thereby exaggerating the
importance of having frequent service.
c) A structure that predetermines which high-speed
rail station travelers will choose rather than
allowing travelers to make the choice themselves.
d) Restrictions that were based on professional
judgment, not on observed data.
In 2011, the HSRA's own peer review panel among other
things found that projections prepared by consultants in
the ridership study suffered from "important technical
deficiencies."
3)Conflict of Interest : This measure contains extensive
conflict of interest provisions to which peer review
group members would be subject. Current law prohibits
public officials and officers, acting in their official
capacities, from making any contracts in which they are
financially interested, unless the interest is remote, as
defined.<4> The courts have held that the purpose of
this prohibition is to not only strike at actual
impropriety, but also to strike at the appearance of
impropriety, by removing or limiting "the possibility of
any personal influence, either directly or indirectly
which might bear on an official's decision, as well as to
void contracts which are actually obtained through fraud
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<4> Govt. Code § 1090
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or dishonest conduct."<5>
In light of the far-reaching aspects of existing
statutes, the author may wish to consider harmonizing, to
the extent practicable, the bill's conflict of interest
provisions with existing statutes.
The author intends to delete SEC. 2 from the bill if it
moves to the Senate Committee on Governance and Finance,
to which it is double-referred. That provision directs
the FPPC to create a form that identifies potential
institutional conflicts for members of peer review
groups, and that requires the peer review group member to
declare under penalty of perjury that he or she is
independent of all parties involved in the project and
has no conflicts of interest.
4)Opponents : The organizations opposing the bill have
grave concerns that, by imposing yet another legal
requirement on major projects, it will undoubtedly
encourage more legal challenges by opponents whenever a
potential conflict, no matter how small, was reported -
or not reported - by one of the selected peers.
Opponents also believe that once peer review is mandated,
with all the limitations and disclosures required under
this bill, peer review will lose its effectiveness as a
sounding board for project participants and will become
simply another legal hurdle standing in the way of
project development.
Other opponents note that the bill would apply to the Bay
Delta Conservation Plan, which has been through years of,
"rigorous environmental and scientific review." They see
no benefit to adding an additional layer of review, and
state they are unaware of any problems that necessitate
the introduction of this measure
PRIOR/RELATED LEGISLATION
AB 41 (Hill) Chapter 626, Statutes of 2012. Added members
of the High-Speed Rail Authority to those specified
officers who must publicly identify a financial interest
giving rise to a conflict of interest or potential conflict
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<5> See, e.g., Stigall v. City of Taft (1962) 58 Cal.2d
565; City of Imperial Beach v. Bailey (1980) 103 Cal.App.3d
191
SB 425 (DeSaulnier) continued
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of interest, and recuse themselves accordingly, pursuant to
the Political Reform Act.
AB 58 (Galgiani) 2011-2012 Session. Would have required
initial designations to the High-Speed Rail Authority
independent peer review group be made by January 1, 2012,
and would have required the peer review group to designate
a member of its staff to serve as a liaison to the peer
review group. (Hearing cancelled by author)
AB 527 (Hernandez) 2011-2012 Session. Would have prohibited
public officials or employees from authorizing the approval
of public funds if any member of the governing body or
board has a financial interest in the person or entity that
receives the expended funds. (Failed passage in Senate
Governmental Organization Committee).
AB 2801 (Carter) Chapter 181, Statutes of 2008. Added a
"remote interest" exception to conflict of interest law to
allow resolution of litigation involving a public body and
a member of the public body and sets forth the
circumstances under which that exception applies.
AB 1754 (Committee on Housing and Community Development)
Chapter 348, Statutes of 2005. Established that no conflict
of interest exists for a California Housing Finance Agency
employee or board member who participates in the planning,
discussion, development, or approval of loan products or
programs so long as the loan product or program may be
originated by any of the lenders approved by agency and
that the loan product or program is made available to all
qualified borrowers.
SUPPORT:
None on file
OPPOSE:
Association of California Water Agencies
Castaic Lake Water Agency
Coachella Valley Water District
Desert Water Agency
Eastern Municipal Water Agency
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Kern County Water Agency
Metropolitan Water District of Southern California
Mojave Water Agency
Three Valleys Municipal Water District
Valley Ag Water Coalition
Westlands Water District
Western Growers Association
Western Municipal Water District
DUAL REFERRAL: Senate Governance and Finance Committee
FISCAL COMMITTEE: Senate Appropriations Committee
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