Canceled WSP Contract Sends Message To NY Construction Industry
The only contract known to be terminated so far in connection with the fee cut demanded by New York City's primary transit agency, the Metropolitan Transportation Authority, is WSP’s $10-million, multiyear contract for lead-and-asbestos monitoring and design, part of a set of indefinite quantity contracts.
The MTA’s public affairs staff did not immediately respond to email and a phone request for comment. WSP declined to comment, as did other companies that work for the MTA.
Faced with a looming $1-billion operating deficit by 2022 and the need for costly capital projects, the MTA has imposed a 10% fee cut on current projects by hundreds of professional, technical and advisory firms. Contractors apparently are not subject to the required fee cut, and the status of construction and project management contracts is unclear.
The fee cut demand on engineers is “shortsighted,” says Jay Simson, chief executive of the American Council of Engineering Companies of New York. “The MTA … runs the largest transit system in the western hemisphere. They have their work cut out but we believe they should look at smarter design and not try to solve part of the financial problem on the backs of engineers.”
In a letter sent to the MTA in March, ACEC’s state chapter, together with the American Institute of Architects New York chapter and the New York Building Congress, noted that the MTA already reduces federal audited overhead rates and limits profit to about 8%. As a result, the letter argued, a 10% reduction will mean that firms will work at a loss or for little to no profit on many MTA projects. Critics fear that the cut will be passed along to small subcontractors working for the engineers and could impose hardship for minority and women-owned enterprises.
Announced in a letter to vendors in February, the cut was to be applied to all invoices beginning April 1. The Wall Street Journal first reported the terminated WSP contract and resistance to the cut by engineers in May.
Gov. Andrew Cuomo (D), who controls the MTA, is seen as the force behind the fee cut and other changes in New York State’s infrastructure and procurement practices. They include centralization of MTA’s construction management, more use of design-build, debarment for contractors whose projects run more than 10% over budget and schedule, and reviews by academic engineers.
The fee cut demand and revamping of the MTA comes as the MTA chairman and chief executive, Patrick Foye, has made pointed criticisms of the authority’s engineers. His assessment drew on a recent crisis involving repairs needed to a crucial subway tunnel and the review and last-minute switching of the plan. The original plan, on which WSP was a consultant, would have involved a year-long tunnel shutdown. Intervention by Cuomo and a review by Columbia and Cornell University engineering faculty led to a new plan involving the cable supports that result in comparatively brief, intermittent shutdowns, much to the relief of commuters. At an April 17 MTA board meeting, Foye called the original tunnel renovation concept a major failure of imagination on the part of the MTA’s consulting engineers.
Foye also referred to the MTA and its consultants and contractors as part of a “transportation industrial complex” where previous employees of the MTA now work for engineers and contractors and sit across the negotiating table from former colleagues. He lauded the new debarment approach as one that would land a heavy blow on the “publicly traded, billion-dollar market capitalization engineering consultants” who regularly work for the MTA.
Cuomo has made congestion pricing and an electronic tolling system for drivers in New York City’s midtown business district the keystone of the new MTA financing plan—a legislative victory won early this year. He has linked his public image to infrastructure and often appears at ribbon cuttings. Philip Plotch, assistant professor of political science at St. Peter’s University, says that the MTA demand for concessions is not entirely novel for Cuomo. In 2016, he pressured contractors to finish New York City’s Second Avenue Subway in Manhattan on time, says Plotch, “including paying things they weren’t expecting to pay for but did.”