Report: MBTA knew two years ago about Green Line ext. overruns
T releases sealed record after losing public records appeal
MBTA OFFICIALS KNEW or should have known more than two years ago that the price of the Green Line extension was running far beyond initial estimates, long before officials say they were caught off-guard by the mind-boggling increase that caused officials to scrap the construction contracts and start over, according to a previously sealed report.
The report, which was drafted by the Berkeley Research Group at the request of the T’s Fiscal and Management Control Board, shows the initial price estimate for the 4.7-mile project was $954 million in June 2010. That estimate was based on a rough design of the project. By December 2013, after several contracts had been paid out and price estimates continued to climb, the report said there were clear indications the project price tag had already risen to $2.46 billion, even though MBTA officials applying for federal grants for the Green Line extension said the cost was $1.99 billion at the beginning of last year.
“The awarded amounts were approximately 44 percent higher than the same budgeted scope embodied in the $1.99 billion… budget,” says the report. “Simply extrapolating the budget overun across the remaining construction budget would have resulted in a project budget of $2.46 billion.”
But, the report states, the transit agency had no in-house expertise to rein in the out-of-control costs and relied too heavily on an inexperienced private sector project manager for estimates that were constantly and significantly below the contractor’s estimates.
The Berkeley report criticized the state’s choice of a contract-bidding method that had never been used before but was authorized by the Legislature as a pilot program.
“The size, complexity, cost, and schedule constraints of the [Green Line extension] project as well as evolving best practices for [the] project delivery made the GLX Project a poor choice for a pilot delivery project,” said the report.
While several of the report’s findings were made public in a presentation to the T’s oversight board, the report itself had more detail about what went wrong on the runaway project and who was to blame. The report took direct aim at the bidding process, called Construction Manager/General Contractor, in which a contractor is selected based on qualifications and then the price is negotiated. The final agreed-upon cost is labeled a “Guaranteed Maximum Price” in which cost overruns, exclusive of changes requested by the MBTA, are assumed by the contractor.
The report criticized the Green Line extension contractor, White-Skanska-Kiewit Joint Venture, for taking advantage of the MBTA’s inexperience by shifting the risk of cost overruns onto the MBTA and by submitting requests for payments without detailing what the costs were for. For instance, the report said, White Skanska had been paid $206 million as of December but only $11.1 million – about 5 percent – was for documented allowable expenses.
White Skanska was tapped, in part, because it had submitted an offer to cap its profit at 4.25 percent, but the report said the T could not determine if, in fact, the company was adhering to that profit margin because there was no accounting breakdown required. The consultant’s report said there was every indication that White Skanska was dunning the T with higher-than-agreed-upon bills that were escalating the cost beyond what was sustainable.
“WSK can and likely will earn a far more significant profit on the remaining 95 percent of the awarded work and does not have any contractual obligation to limit its markup or refund any earned markup in excess of the 4.25 percent,” says the report, which was issued before the T fired White Skanska as well as its project manager, HDR/Gilbane, and its independent cost estimator.But the biggest share of the blame pie was reserved for the MBTA and its project manager. In a chart of eight critical areas, the report said the T and HDR/Gilbane came up short in all eight categories, including not understanding the bidding process they championed. The chart faults Stanton Constructability Services, the independent cost estimator, in three areas, including responsibility for cost overruns. White Skanska, the chief contractor on the project, failed in one area, budget reliability.
“Since identifying the troubling projected cost overruns developed under the prior administration, MassDOT and the MBTA’s Fiscal and Management Control Board continue to be transparent about the review of this project, which cannot be done at any cost or at the expense of other transportation infrastructure statewide, despite its merits,” Joe Pesaturo wrote in an email.