State auditor finds UC underpaid contract workers

By Nanette Asimov

The University of California has failed to fully justify replacing employees with contractors, has allowed contractors to be paid less than comparable UC employees, and has repeatedly extended contracts instead of seeking competitive bids, says a new state audit released Tuesday.

The review by California’s independent state Auditor Elaine Howle looked at 31 service contracts signed from 2011 through 2016. The contracts came from the Office of the President, — which spent $8 billion on contracts last year alone — from the campuses and medical centers of UCSF and UC Davis, and from the UC Riverside campus.

“The California state auditor has found a troubling pattern of low wages and second-tier treatment of contract employees, as well as poor contract oversight” at UC, said state Sen. Ricardo Lara, D-Bell Gardens (Los Angeles County), who called for the audit.

Despite a finding that UC generally adhered to its contracting rules, the audit found three major problems:

• Failing to ensure that replacing employees with contractors was always justified. UCSF displaced 49 employees and 12 staff members on contract when it outsourced information technology services in July 2016. Its own analysis concluded that the change would save the campus $30 million over five years, but it failed to give the president’s office a formal, written notice after that analysis was done, as required by UC policy. As a result, the president’s office couldn’t review the cost analysis or determine whether it complied with personnel policies.

Similarly, the UC Davis Medical Center replaced 12 employees with contractors in 2015 and also failed to properly notify the president’s office of the layoffs that saved $57,000 a year. The person in charge told the auditor that she was unaware of the guidelines.

The auditor also faulted the president’s office for failing to ensure that UC sites follow the university’s employee-displacement guidelines.

• Underpaying contractors. Low-wage contractors — including food workers, parking valets, medical assistants and others — earned an average of $3.86 less per hour than comparable UC employees. The wage difference ranged from $1.43 to $8.50 an hour. One in four vendors contacted by the auditor also gave no health or retirement benefits to workers contracted by UC. Among those that did, the benefits were “irregular or less generous” than those received by comparable UC employees.

• Avoiding competitive bids. Rather than trying to save money through competitive bidding, six of the contracts studied were simply extended repeatedly, potentially costing the university more than if they had been put out to bid. In one case, UC Davis paid $71 million to a food contractor for a seven-year term. It then amended the contract 24 times and increased the time frame to 19 years. The contract’s value ballooned to $237 million, with no evaluation of whether doing so made economic sense. In June, Davis replaced the contractors altogether with its own employees.

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[Source]: SF Chronicle