A joint venture terminated on a multibillion-dollar light-rail expansion project in the Boston area, amid an uproar over cost overruns, should be given a chance to compete for the remaining work when parts of the project are rebid, according to one key player.
Although White-Kiewit-Skanska was terminated for convenience after a state review found the potential for a billion-dollar overrun on what had been a $2-billion project, the joint venture should not be barred from bidding on sections of the 4.7-mile extension, argued Rafael Mares, head of the Conservation Law Foundation’s environmental justice unit.
Made up of J.F. White Contracting Co., Skanska USA Civil Northeast, and Kiewit Infrastructure Co., the joint venture is not blameless, Mares claims. But at the core of the problem was the Massachusetts Bay Transportation Authority's inability to hold costs in line while using a relatively new and sophisticated construction approach, he said. (Story text continues below interactive graphic)
Indirectly, the foundation was a key player in bringing about the Green Line extension, which involves expanding the Green Line from Cambridge to neighboring Somerville and Medford. The foundation had filed a lawsuit against Massachusetts related to the $24-billion Central Artery/Tunnel highway project, completed years earlier. To settle the lawsuit, state officials agreed to offset the increased air pollution the massive highway project would generate by taking measures that included expanding public transit.
White-Skanska-Kiewit should be allowed to compete with other companies for remaining work on the Green Line extension project when it comes out to bid again, said Mares, because that would stoke competition and ensure the best possible price.
“At this point, the best the state can do is have a competitive bidding process,” Mares said. “I would let everyone in and not exclude anyone at this point.”
Disappointment Over Termination
Meanwhile, the contracting joint venture said it wants another shot at the work and that the contracting method wasn't new.
White-Skanska-Kiewit is "disappointed with the MBTA board’s decision to stop the Green Line extension project under its existing contract," said Peter S. White, chief executive of Framingham, Mass.-based J.F. White, the venture's principal partner, in a statement.
The contractor and its joint venture partners "worked hard and collaboratively" with MBTA to provide "a fair, accurate price" and efficiently build based on the "design provided," the statement said.
White said his company, which has performed numerous contracts for the MBTA, believes strongly in the construction management/general contractor approach and that it has worked successfully in other places. The company hopes the joint venture "will have the opportunity to participate in future bids," White added.
Exactly what went wrong, if anything, with the contracting and project delivery method isn't completely clear yet. Of some concern is whether MBTA officials, rushing to a meet a court deadline, hurried into a process without a completed design and full knowledge of the true project costs.
The authority had hired a design joint venture, AECOM Technical Services, Inc./HNTB Corp., and a design oversight consultant, HDR/Gilbane.
Under the CM/GC procurement method, MBTA awarded the main construction contract to the White-Skanska-Kiewit venture in 2013 based on a two-part proposal consisting of qualifications and price, with the award determined on a best-value basis. The Green Line extension design had not yet been completed, and information in a Massachusetts Dept. of Transportation summary shows that the joint venture's contract value exceeded the project budget on three out of four of the initial major packages or phases of the project. In three other packages still to be awarded, the segment contract values have not yet been determined.
The prices agreed to for the various segments of the project were apparently treated as guaranteed maximum prices, with the joint venture's fee calculated based on its costs and the value of the work performed.
Thus, the contractor’s profit rises in direct proportion to project cost, creating little incentive for the contractor to limit total project cost, according to a report by the Pioneer Institute, a state public policy research group. In the institute's characterization, "the CM/GC—White-Skanska-Kiewit— won the bid without submitting a price estimate, which is generally the basis of a rigorous bidding process."
Matters came to a head earlier this year when the estimated cost of the project in public meetings and documents was said to balloon by 50% over the initial public cost projects, to around $3 billion.
After reviewing the results of an internal review of the project, the state department of transportation and the MBTA Fiscal and Management Control Board voted on Dec. 10 to cancel contracts with White-Skanska-Kiewit and HDR/Gilbane.
Critics now have the luxury of second-guessing MBTA for dividing the project into segments, failing to obtain an overall GMP and starting work before design was done.
The Pioneer Institute says MBTA in this manner “eliminated any form of meaningful price competition from the procurement process, resulting in the cost overrun catastrophe the MBTA faces today.”
Contractors working on the project were also under pressure to meet an initial state-mandated Dec. 31, 2014 deadline to complete the Green Line extension project, the result of the settlement between the Conservation Law Foundation and Massachusetts officials over the Big Dig pollution litigation.
A Federal Transit Administration report in 2011 called that deadline unrealistic and raised concerns about the impact it was having on the project, including “excessive parallelism” in the way contracts were being implemented.
“The completion date is a constrained milestone that will result in increased escalation, professional services, and overhead costs if not achieved,” the report warned.
Still, in a hopeful development, consultants brought in to evaluate the troubled project have already identified some potentially major cost savings, the Conservation Law Foundation's Mares said.
A portion of only one commuter rail line may need to be relocated instead of two as previously believed, Mares noted.
Another recommendation calls for streamlining the seven different stations along the route of the planned Green Line extension, he said.
However, one of the biggest possible cost savings would involve shutting down and rerouting parts of two major commuter rail lines connecting Boston with its northern suburbs. Shutting those down would allow the work to be done during business hours, as opposed to current plans, which call for night and weekend work, Mares said.
The MBTA took a similar approach when it was revamping the Government Center T station in downtown Boston, which reduced costs by as much as 20%.
“You want your contractor to suggest value engineering (options) and to do that without having a cost to them,” Mares said, referring to the structure of the Green Line extension contract that is being scrapped.