Why Massachusetts Agencies Hit Pause Button on Green Line Extension
Massachusetts transportation officials confront ‘cost growth’ as terminated contractor hopes for future role on the project
Green Line Blues The Boston area’s Green Line Extension light-rail project came to a screeching halt as cost overruns alarmed transportation officials.
There is one bright spot in the December “termination for convenience” of the main contracting joint venture on the Boston area’s Green Line Extension light-rail project: No one is pointing fingers at the contractor as the key culprit behind the project’s soaring cost, which currently is $700 million to $1 billion over its roughly $2-billion budget. In fact, Peter S. White, the chief executive of J.F. White Contracting Co., the joint venture’s main partner, hopes to return to work on the project in the future.
More important, White defended the so-called construction manager/general contractor (CM/GC) method being used to build the 4.7-mile-long Green Line Extension. The approach allowed the Massachusetts Bay Transportation Authority (MBTA), the agency directing the project, to sequence the work in packages as the designs were developed, with input from the contractor.
In a statement, White, whose company is based in Framingham, said the sysem has worked successfully in other projects. Using the CM/GC approach, White Contracting and its partners, Skanska and Kiewit, had “worked hard and collaboratively” with MBTA to provide a “fair, accurate price” and efficiently build based on “the design provided,” White said.
It isn’t clear what went wrong, if anything, with the contracting and project delivery method. Frank DePaola, the MBTA general manager, in October warned of “very challenging” cost growth and raised the prospect of changing or abandoning the project. He didn’t say (as some suspect) that, in the MBTA’s rush to meet a court deadline, the agency hurried ahead without a completed design and full knowledge of final costs. The authority also terminated HDR/Gilbane, the project’s design oversight consultant.
Under the CM/GC procurement method, MBTA in 2013 awarded the main construction contract to the White-Skanska-Kiewit venture based on a two-part proposal consisting of qualifications and price, with the award based on best value.
According to the Massachusetts Dept. of Transportation, the joint venture’s contract value exceeded the project budget on three out of four of the initial major contract packages. The contract values for three other packages have not yet been determined or awarded, and the next package, budgeted at $387 million, appears to have been fully designed but not awarded. The anticipated price of this package may have produced the sticker shock that halted the contract.
Fee Calculations
Apparently, the agreed-upon award prices were treated as guaranteed maximum prices (GMP), with the joint venture’s fee based on its costs and the value of the work performed. Under this hybrid type of contracting, the contractor’s profit rises in proportion to the project’s cost.
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 CM/GC system creates little incentive for the contractor to limit total project cost, according to a report by the Pioneer Institute, a public-policy research group. In the institute’s view, “the CM/GC—White-Skanska-Kiewit—won the bid without submitting a price estimate.”
A few years ago, the Pioneer Institute was a plaintiff in a clean-air lawsuit involving Boston’s infamously overbudget Central Artery/Tunnel project, and the settlement included extending the Green Line. Failing to build the Green Line Extension would cost Massachusetts federal transportation funds, but meeting the deadline could drive the costs higher, according to a 2011 Federal Transit Administration report, .
The MBTA’s Fiscal and Management Control Board on Jan. 11 announced it had hired Weston & Sampson executive Jack Wright, a former state transportation official who worked on the “Big Dig,” to oversee the project. Value engineering and cuts of all kinds now will be evaluated. The board also set a timetable for a series of big discussions on the fate of the mothballed Green Line Extension, with a new budget estimate to be presented on April 7.
