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Councilmen seek overhaul of bid-to-goal bonuses

SAN DIEGO – Two City Council members are calling on the mayor and fellow council members to overhaul the bid-to-goal bonus program in the Utilities Department after a city audit report found costly flaws and weaknesses in the system.

Councilman Kevin Faulconer, who chairs the Audit Committee, is seeking a special audit meeting on Feb. 22 to review and discuss the report.
Faulconer and Councilman Carl DeMaio requested the audit report in May.

The bid-to-goal program conducts a simulated bid competition between the Utilities Department and a mock outside bid, with some of the cost savings achieved used to pay performance bonuses for city employees.

The bonus program cost city taxpayers more than $28 million since fiscal 2006 _ with the funds coming directly from water and sewer bills. Water and sewer bills have increased by over 35 percent during the same period of time. This year, more than 1,400 bonuses were awarded, ranging from $1,200 to $6,200.

The audit report found the following irregularities:

_ $10.7 million in supposed cost savings from the incentive program were overstated.

_ Goals set for bonuses were not adequately documented, payouts were not externally audited and 40 percent of goals were incorrectly reported.

_ While some efficiencies are documented, the report notes many are “attributable to other factors” and “efficiencies would have occurred to some extent through other efforts.”

“I called for this audit because I had some serious reservations about this program and how it operates. This audit validates a lot of my concerns,” Faulconer said. “It raises a series of serious issues that require corrective action, which could include eliminating the bid-to-goal program. Frankly, I need to be convinced that we need this program.

“I want to stress that this is exactly the type of work I want to see from our independent City Auditor, and I applaud him and his staff for the time and effort they’ve invested on this. I also want to point out that city staff has made some of the changes – strengthening goals, for example – the audit recommends, but much more obviously needs to be done.”

DeMaio also expressed his concerns about the program.

“This audit report confirms the concerns I have over the way in which these bonuses for city employees are being administered. We should implement the recommendations of the audit report as soon as possible to protect taxpayers from this questionable bonus program,” DeMaio said.

“Instead of conducting a simulated mock bid, we should conduct a real bid through the Managed Competition reform voters have already approved,” he said.

DeMaio said he is committed to working with the mayor and City Council to eliminate the bonus program through labor negotiations and replace it with a program that utilizes the Managed Competition reform voters approved more than three years ago.

“At a time when city residents are seeing their water and sewer bills skyrocket, this flawed employee bonus program should immediately be reformed to base rewards strictly on the achievement of legitimate cost savings,” DeMaio said.