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KEMPTON-11-18-2010

KEMPTON-11-18-2010

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Nov 18, 2010The Honorable John PerezSpeaker of the AssemblyState CapitolP.O. Box 94849Sacramento, California 94249-0046The Honorable Darrell SteinbergSenate President Pro TemState Capitol BuildingRoom 205Sacramento, California 95814Dear Speaker Perez and Senate Pro Temp Steinberg:Please find attached the California High-Speed Rail Peer Review Group's(Group) summary comments on the California High-Speed Rail Authority's(Authority) 2009 Report to the Legislature (Attachment A). Also pleasefind the Group's full comments (Attachment B) in which all membersconcur.The Group appreciates the challenge the state faces in planning andmanaging
a
project of such immense complexity and long-time horizon.This is especially true in the current policy climate of budget shortfalls,limitations on spending, and uncertainty as to future federal and statepolicies and capabilities. It would be a daunting task under the best of circumstances. Meeting the challenge will requ
i
re a thorough re-assessment of a number of critical engineering, financial, economic,and managerial issues, and will require agreement among the Legislature,the Governor, and the Authority on what the resolution of those issuesshould be.If you should have questions regarding the group's comments, please do nothesitate to contact me.Sincerely,Will Kempton
 
ChairmanCalifornia High-Speed Rail Peer Review GroupWK:bec: Hon. Bob Dutton, Senate Republican Leader Hon. Connie Conway, Assembly Republican Leader Hon. Alan Lowenthal, Chair, Senate Transportation andHousing Committee Hon. Bob Huff, Vice Chair, SenateTransportation and Housing Committee Hon. BonnieLowenthal, Chair, Assembly TransportationCommitteeHon. Kevin Jefferies, Vice Chair, AssemblyTransportation Committee . Hon. Curt Pringle,Chair, California High-Speed Raii AuthorityRoelef van Ark, Chief Executive Officer, California High-Speed Rail Authority Members, California High-SpeedRaii Authority Peer Review Group
 
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California High Speed Rail Peer Review Group Summary Comments on the CaliforniaHigh Speed Rail Authority's 2009 Report to the Legislature
Attachment A
Below are the summary comments by the peer review group on issues as they appear in theHigh Speed Rail Authority's 2009 Report to the Legislature and other related documentsreviewed by the group.Authority Staffing_ Though not an explicit part of the 2009 Business Plan, we are concernedafter discussions with the Authority that the staff level now permitted is totally inadequate tooversee a project of this magnitude, no matter what business model is ultimately chosen. Oneof the dangers in public sector management of major projects is that staffing levels andcompensation are not always related to the needs of the job at hand because of bureaucraticrestrictions. The existing massive imbalance between the numbers of Authority staff andconsultants has been the source of continuing criticism; the problem will be muchexacerbated as the project moves into implementation. We urge the Authority, the Governor and the Legislature to ensure that the Authority has access to the staff numbers andcompensation needed for managing the project: anything less will ensure major problems of budget control, accountability and schedule. In addition, we suggest that the Authority andLegislature consider other organizational approaches, such as public corporations, that wouldimprove the ability of management to secure adequate staff and reliable funding.Business Model. The Authority should focus immediately on selection of an appropriate"business model." 'business plans," "strategic plans" and "business models" are notsynonymous. The business model must be a clear statement by the Authority of the roles tobe played by all involved parties concerning the project's ownership, construction, financingand general management. As the project moves toward implementation, the selection of anappropriate business model, though a complex task, will have great bearing on the project'simplementation and success.There appear to h five general business models that might he used in California, though thereare many variations due to local conditions. (1) fully public, mass transit !node): using BARTas an example, the Authority would acquire all needed property, manage and pay for thedesign and construction of the system, acquire rolling stock, set fares and manage theoperation and maintenance of the system; (2) management contracting, or "gross cost"franchising/concessioning: the Authority would plan, finance and build the project according tothe Authority's demand estimates, but contract with a private entity to take responsibility for operating and maintaining it at the Authority's specified demand level; (3) long term "net cost"concessioning: the Authority would plan and construct the system, and concessionaires

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