BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 425 HEARING: 5/1/13
AUTHOR: DeSaulnier FISCAL: Yes
VERSION: 4/18/13 TAX LEVY: No
CONSULTANT: Lui
PEER REVIEW FOR PUBLIC WORKS
Establishes the Public Works Project Peer Review Act of
2013.
Background and Existing Law
In 1974, California voters approved Proposition 9, known as
the Political Reform Act (PRA). The PRA requires persons
holding public offices to file disclosures of investments,
real property interests, and income -- including gifts --
within specified periods of assuming or leaving office, and
annually while holding office. Specified state and local
employees, candidates for office, and current holders of
elected or appointed state and local offices file their
statements of economic interests, known as a Form 700, with
the city clerk or county clerk, who makes and retains a
copy of each statement and then forwards the original to
the Fair Political Practices Commission (FPPC). The PRA
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 decisions in which the official
knows, or has reason to know, he or she has a financial
interest.
State law requires six CalEPA organizations -- Air
Resources Board, Department of Pesticide Regulation,
Department of Toxic Substances Control, Integrated Waste
Management Board, Office of Environmental Health Hazard
Assessment, and State Water Resources Control Board and
nine Regional Water Quality Boards -- to submit for
external scientific peer review all proposed rules that
have scientific basis or components (SB 1320, Sher, 1997).
Last year, the Toll Bridge Seismic Safety Peer Review Panel
reviewed CalTrans' seismic conditions on the foundation of
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the East Span of the San Francisco-Oakland Bay Bridge.
Investigative journalism found that the Panel's peer-review
experts had financial and professional conflicts of
interest -- three of its four members had financial ties to
CalTrans or its contractors, and three helped select the
Bay Bridge design, which may have compromised the Panel's
credibility. To address conflicts of interest issues by
peer-review experts, the author seeks to strengthen the
peer-review process.
Proposed Law
Senate Bill 425 creates the Public Works Project Peer
Review Act of 2013, which requires a public agency that is
principally tasked with administering the planning,
development, and operation of a project to establish a peer
review group, as defined, if:
A project's total development, construction, and
reasonable projected maintenance costs exceeds $1
billion;
The Governor, or head of the administering agency,
as defined, has determined that establishing a peer
review group is in the public's interest; or ,
The Legislature passes a statute or resolution
requiring the administering agency to establish a peer
review group.
The bill specifies:
I. The process of establishing a peer review group.
II. What a peer review group's evaluation must
include.
III. Requirements and expectations of a peer
reviewer.
IV. Public meeting requirements.
V. Exemptions.
VI. Definitions.
I. Establishing a peer review group . SB 425 defines a
peer review group as a group of persons qualified by
training and experience in scientific or technical fields,
or as authorities knowledgeable in the disciplines and
fields related to the public works project under review.
The bill requires an administering agency to develop a
transparent process for selecting members of the peer
review group before it establishes a peer review group.
The Bureau of State Audits must review the process for
SB 425 -- 4/18/13 -- Page 3
compliance. Unless otherwise provided in state law, an
administering agency is prohibited from establishing a peer
review group that does not meet the procedures set out in
this bill.
SB 425 prohibits a peer review group from meeting or taking
any action unless the administering agency writes a charter
and files it with the relevant standing committees of the
Legislature. The charter must be posted on the
administering agency's Internet website and contain all of
the following information:
The group's official name or designation.
The group's objective and the scope of its
activities.
A statement of the expertise and balance of
interests required of the group membership to perform
its charge.
The name of the administering agency and official
to whom the group reports.
A description of the duties for which the group is
responsible.
The estimated number and frequency of group
meetings.
The estimated annual operating costs for the group.
The bill requires the administering agency to enter into a
contract with each of the peer review group members that
requires each member to do all of the following:
File a Statement of Economic Interest, Form 700,
with the Fair Political Practices Commission.
Commit, upon penalty of perjury, to comply with the
bill's conflict of interest requirements.
II. Evaluation . The bill defines "megaproject" as a
project with total development, construction, and
reasonable project maintenance costs exceeding $1 billion.
SB 425 requires a peer review group to evaluate the
following components of megaprojects:
Project demand studies,
Design and engineering models and estimates, and ,
Construction, testing, and inspection practices.
III. The reviewer . SB 425 requires that a member of a
peer review group must:
File, within 30 days of joining the group,
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disclosure statements required under the Political
Reform Act, under penalty of perjury, stating his or
her economic interest, and declaring himself or
herself to be independent of all parties involved in
the project, and to have no conflicts of interest;
Be reimbursed only for actual expenses, like
transportation and room and board costs, plus $100 per
day he or she performs work in the review;
Have some expertise, but need not be an expert,
involving the work to be reviewed; and ,
Recuse himself or herself, if a member feels unable
to provide objective advice, from the peer review
group.
IV. Meeting requirements . SB 425 requires that peer
review group meetings must:
Be held in a publicly accessible forum; and ,
Contain a public participation component, including
presentations identifying specific issues to be
discussed or reviewed and any other relevant
presentation from the administering agency.
SB 425 requires an agenda and relevant documents be posted
on the administering agency's Internet website at least one
week before the meeting.
The bill requires that, to the extent possible, without
putting the administering agency at a negotiating
disadvantage, all documentation related to the issues to be
reviewed at a peer review group meeting must be made
available to the public upon request.
The bill allows a full-time, or permanent part time,
officer or employee of the administering agency from
supplying administrative support to a peer review group.
The bill prohibits support staff from divulging contents of
a closed-door meeting.
V. Exemptions . SB 425 exempts the High-Speed Rail
Authority (HSRA) peer review group from the bill's
requirements.
SB 425 exempts the California Water Commission, California
Department of Water Resources, or any state, regional, or
local public entity or district engaged in storing,
supplying, transporting, distributing, or delivering water.
SB 425 -- 4/18/13 -- Page 5
SB 425 provides that, in order to evaluate matters related
to personnel, design standards, contract amounts, or other
issues that may put the administering agency at a
negotiating disadvantage, a peer review group's meeting may
be exempt in part from the Bagley-Keene Open Meeting Act's
requirements, 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.
VI. Definitions . The bill defines the following terms:
"Auditor" is the Bureau of State Audits.
"Conflict of interest" means a reviewer or a
relative or professional associate of the reviewer has
a financial or other interest in a project or with a
project sponsor that is known to the review and is
likely to bias the reviewer's evaluation of that
project. A reviewer has a conflict of interest if any
of the following apply to the reviewer, to a close
relative, or the reviewer's professional associate:
o He or she has received or could receive a
direct financial benefit from a project sponsor
or of any contractor connected to the project
under review.
o He or she, apart from any direct
financial benefit from a project sponsor of or
contractor connected to the project under review,
has received or could receive an indirect
financial benefit from a project sponsor or
contractor that exceeds in the aggregate $10,000
per year, including honoraria, fees, stock, or
other financial benefit, and the current value of
the reviewer's existing stock holdings.
o He or she has 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.
o He or she has any other interest in the
project, project sponsor, or any connected
contract that, in the view of a reasonable
person, is likely to bias the reviewer's
evaluation of that project.
SB 425 -- 4/18/13 -- Page 6
"Exempt agency" means the California Water
Commission, California Department of Water Resources,
or any state, regional, or local public entity or
district engaged in storing, supplying, transporting,
distributing, or delivery water.
"Megaproject" means a project with a total
development, construction, and reasonable projected
maintenance costs exceeding $1 billion.
"Project" means a public works project, as defined
in state law, which will be owned by a public agency,
excluding an exempt agency.
"Project sponsor" means any public agency that
funds a project, including a federal, state, local, or
other entity, or the administering agency.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . State law utilizes the term "peer
review" in specified instances, like health care and some
design-build projects. However, the peer review process is
minimally regulated by state law. A public agency may
proceed with a large scale public works project because a
peer-reviewed analysis on the project assuages concerns and
lends the project more credibility. By defining strict
peer review standards, prescribing open-meeting
requirements, and outlining conflicts of interest
provisions, SB 425 strengthens the peer review process for
public works projects and ensures that peer review
panelists don't have conflicts of interest. SB 425
protects taxpayer funds and ensures that public agencies
have independent, expert, and verified information to make
informed planning decisions.
2. Intent . Conversations with the author's office
indicate that the author's intent is to fortify the peer
review process to ensure that peer reviewers provide
unbiased, expert, third-party input to high-cost public
works projects. It remains unclear whether SB 425's
approach achieves its intended purpose, due to a
problematic approach that relies on an administering agency
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defining a peer review group's objective and the scope of
activities -- the same agency whose project the bill seeks
to review.
3. Implementation . The bill also suffers from several
implementation issues:
Types of projects . What does a megaproject look
like? A November 2011 Senate Transportation and
Housing Committee's informational hearing background
report provided examples, like a truck lane on the
Long Beach freeway or a highway tunnel linking I-710
and I-210. However, SB 425 exempts two of the largest
infrastructure megaprojects discussed for California's
future -- High-Speed Rail and any future water project
that stores, supplies, transports, distributes, or
delivers water, including twin water transfer tunnels.
The Committee may wish to consider amending the bill
to include these types of projects in the bill's
definition of megaprojects.
Definition . The bill defines "megaproject" as a
project with total development, construction, and
reasonable projected maintenance costs exceeding $1
billion. It is unclear how the $1 billion is
calculated. What's the time frame for "projected
maintenance" costs? Is the projected maintenance
figure capped at the expected life-term of the
project, or a specified time period? Who calculates
the $1 billion figure -- the peer review group or the
administering agency? The Committee may wish to
consider refining the definition of a megaproject to
mean $1 billion in an initial contractual obligation,
and specify the timeframe of projected maintenance
costs to parallel the time an administering agency has
to repay any debt incurred during the project.
Duplication . If a peer review group convenes a
meeting, it must post an agenda and any documents on
the public agency's website, be held in a publicly
accessible forum, and contain a public participation
component. These meeting requirements are similar to
what is already included in Ralph M. Brown Act or
Bagley-Keene Act, and that may already apply to
peer-review group meetings. The bill also vests broad
discretion in the head of the administering agency to
exempt peer review groups' meetings from Bagley-Keene
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regulations, when matters related to personnel, design
standards, contract amounts, or other issues that put
the agency at a "negotiating disadvantage." It is
unclear what would constitute a "negotiating
disadvantage." To avoid duplication of existing law,
and because peer-review meetings would already be
subject to open-meeting requirements, the Committee
may wish to eliminate the bill's specified meeting
provisions and declare that a peer review group is
subject to either Ralph M. Brown or Bagley-Keene, as
applicable.
Political Reform Act . SB 425 requires, as part of
a contract with the administering agency, that a
member of a peer review group must file Form 700 and
specified statements with the FPPC. If a
peer-reviewer fails to file with the FPPC, it is
unclear whether a violation of these requirements
would be an FPPC violation or a contractual violation.
Because the bill does not make parallel requirements
in the Political Reform Act, would a peer-review group
be subject to FPPC enforcement or review? The
Committee may wish to clarify the bill's intent in
including this FPPC requirement
4. Unintended consequences . Since 1997, Cal/EPA has
operated its External Scientific Peer Review Program, for
which its Program Manager developed a Conflict of Interest
Disclosure form, based on a National Academy of Sciences
Model, and procedures for a Cal/EPA organization to obtain
external scientific peer reviews. In Cal/EPA's process, a
Cal/EPA organization first writes to the Program Manager to
request for reviewers. The Program Manager forwards the
request to the University of California, who then solicits
reviewer candidates. Candidates complete the Conflict of
Interest Disclosure form, mail it to the Program Manager,
and the Manager writes each reviewer separately to initiate
the review and provides instructions. Finally, the
reviewer sends the completed review to the Cal/EPA
organization which requested it. In prohibiting any
administering agency from establishing a peer review group
in another manner than what the bill sets forth, SB 425
could undermine Cal/EPA's longstanding process. The
Committee may wish to consider amendments that exempt
existing peer review processes.
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5. Uncertainty . Almost no one disputes the wisdom of
knowing about a project's environmental effects before
local officials make a decision. That's why CEQA requires
public officials to prepare EIRs on projects that may have
significant, adverse environmental effects. But many
builders and developers say that opponents who can't
convince public officials to deny projects turn around and
file lawsuits over CEQA and EIR procedural problems. Could
information gathered during the peer review process be used
to bring new causes of action that delay proposed
development?
6. Charter . SB 425 requires an administering agency to
establish a charter for each peer review group. The
charter outlines a peer review group's objectives and scope
of activities, a description of its duties, and frequency
of meetings. By having the administering agency determine
a peer review group's objectives and range of activities, a
peer-reviewer's ability to ask questions or raise concerns
outside its charter's scope may be constricted. To protect
the peer review group's independence, the Committee may
wish to consider amending SB 425 to include, in the
charter, a statement that authorizes a peer reviewer to
conduct his or her duties, without limit or restriction,
fully and impartially.
7. Show me the money . Rule 37.4 of the Joint Rules of the
Senate and Assembly prescribes that any bill requiring
action by the Bureau of State Audits must contain an
appropriation for the cost of any audit. The Committee may
wish to consider amending SB 425 to provide the
appropriation.
8. Legislative findings and declarations . The California
Constitution specifies the public's right of access to the
meetings of public bodies or writings of public officials
and agencies. SB 425 makes legislative findings and
declarations to support its purpose in limiting the
public's right of access because publicly disclosing the
peer review group's internal deliberations could impair the
soundness of the group's evaluation and disadvantage the
administering agency in contract negotiations.
To amend a voter-approved initiative, the Legislature must
approve the amendment by a 2/3-vote. SB 425 makes
legislative findings and declaration to support its purpose
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amending the Political Reform Act of 1974.
9. Technical amendments . The Committee may wish to
consider amending the bill to remove nonexistent code
references:
On page 6, line 5, strike out "87202.1"
On page 7, line 6, strike out "11228"
10. Mandate . SB 425 requires that a member of a peer
review group file disclosure statements under penalty of
perjury. By creating a new crime, SB 425 also creates a
new state-mandated program. But the bill disclaims the
state's responsibility for reimbursing local governments
for enforcing these new crimes. That's consistent with the
California Constitution, which says that the state does not
have to reimburse local governments for the costs of new
crimes (Article XIIIB, 6[a][2]).
11. Double-referral . Because some of SB 425's provisions
fall within the jurisdictions of the Senate Governmental
Organization Committee and the Senate Governance and
Finance Committee, the Senate Rules Committee ordered a
double-referral. The Senate Governmental Organization
Committee passed the bill at its April 9 hearing by an 8-2
vote.
12. Previous legislation . SB 425 is not the first bill
seeking to address conflicts of interest and audits.
SB 486 (DeSaulnier, 2013) would create the Office
of Legal Compliance and Ethics within the state
Transportation Agency. It would require the Office to
conduct internal audits. The bill is set to be heard
on April 30 in the Senate Transportation and Housing
Committee.
AB 58 (Galgiani, 2012) would have required initial
designations to the HSRA to the independent peer
review group. This bill was not heard, and
subsequently died, in the Assembly Transportation
Committee.
AB 527 (R. Hernández, 2011) would have prohibited
public official or employees from authorizing the
approval of public funds, if any member of the
governing board or body had a financial interest in
the person or entity that received expe4nded funds.
The bill failed passage in the Senate Governmental
Organization Committee.
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Support and Opposition (4/25/13)
Support : Unknown.
Opposition : American Society of Civil Engineers;
Association of California Water Agencies; Construction
Employers' Association.