Audit: UC contract workers underpaid
Competitive-bidding, staff-replacement actions also criticized
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.
The auditor also cited some UC sites for misusing “solesource exemptions,” apparently to avoid the competitive bidding process.
In addition, the president’s office has no systemwide database for tracking all UC contracts or a plan for developing one, even though the office has said it will implement a contract database within two years, the auditor found.
The auditor also said that while the president’s office claimed to have saved $269 million in procurements in 2015-16 — and that it redirected the money to teaching, research and public service — audit investigators could find no evidence to support $109 million of the claim.
In her written response to the audit, UC President Janet Napolitano did not dispute the findings. She said that in 2015, UC approved its “Fair Wage/ Fair Work” plan, which requires that UC employees and contractors who work at least 20 hours a week be paid at the same rate: at least $15 an hour by October 2017. The current wage should be $14 an hour.
But the policy covers only contracts signed after the policy took effect, and the auditor acknowledges that the contract workers it cited who were paid less than their UC counterparts operated under contracts signed before the 2015 policy took effect.
It isn’t hard to find contract workers with UC who are in that situation and are paid less than their employee counterparts.
The Chronicle spoke with three at UCLA. One is a food worker who said the contractor he works for requires him to use a fake name to be compensated for any hours he works beyond 40 hours a week, and that even then he does not receive overtime pay. Another is a medical worker who said he’s paid less than his UC counterparts and is docked double pay if he calls in sick. The third is a parking valet on contract for 10 years who said he and his colleagues were paid less than their UC employee counterparts until they complained last summer. Now that their pay has improved, he said, their contract has been canceled.
“This is causing all of us so much stress,” said the valet, Jose Luis Carrillo, 55. The other contract workers declined to let their names be used for fear of losing their jobs.
Union leaders from the American Federation of State, County and Municipal Employees — who represent many UC workers, but not contractors — had harsh words for UC’s compliance with its labor policies.
Calling it a “shocking pattern of abuse,” union President Kathryn Lybarger said the audit report “illustrates that UC is actively working to subvert the wages and labor standards it has negotiated with its frontline employees.”
Among Howle’s recommendations are that UC revise its policies to ensure that all campuses, medical centers and other sites “justify contracts that will displace university employees,” and that UC monitor compliance.
UC should also change its policies to “limit the use of amendments to repeatedly extend existing contracts” so that the university can get services for the best value, the auditor said.
“We take your recommendations seriously and believe they are constructive,” Napolitano wrote.
The state audit is the second UC probe this year. The first, released in April, focused on spending practices at UC headquarters and revealed that Napolitano’s office had amassed $175 million in reserve funds that it failed to disclose to the regents before asking them to raise tuition for this fall.
In addition, that audit suggested that the president’s office had interfered with an auditor’s survey that intended to shed light on whether services provided by UC headquarters to the 10 campuses were useful and cost-effective, rendering the results useless. As a result, UC hired former state Supreme Court Justice Carlos Moreno and an Orange County law firm to look into the matter.