WSDOT Says Contractors Have to Pay for Tunnel Overruns, Can't Estimate Length of Delay
The state DOT claims taxpayers won't end up paying if the tunnel costs more than expected, and can't predict the length of the ongoing construction delay.
WSDOT Alaskan Way Viaduct replacement project manager Todd Trepanier, speaking on a conference call to reporters this morning, said taxpayers will be "protected" against any cost overruns on the deep-bore tunnel project by "a new streamlining mechanism called design-build"—a feature of the tunnel contract in which the tunnel builder, Seattle Tunnel Partners, takes responsibility for both designing and building the entire project.
Last week, WSDOT revealed that they now believe sand is gunking up the seal that protects the boring machine's bearing—a change from the agency's previous theories about why the machine has come to a halt, which involved an eight-inch pipe the machine bumped into or other refuse that got lodged inside the machine's cutterhead.
"Anything that happens with the project, any nuances, any changes, that is up to" STP to pay for, Trepanier said. "To date we haven’t seen any evidence from STP that suggests that the state or the taxpayers would be responsible for any cost of this delay. ... We’re very confident at this point that that, contractually, is on them." (We have a follow-up call out to WSDOT to find out what specific language in the contract, if any, Trepanier was referring to).
Additionally, Trepanier touted the members of the STP team itself, Tutor Perini and Dragados Corp., saying the international construction firms "are very sound financially and are very respected in their field. Because those are the kind of companies that never walk away [from contracts], Tutor Perini and Dragados are respected worldwide. ...
"They have their reputations on the line [and] there is nothing that they would gain from walking away" if costs get out of hand, Trepanier continued. "That is not in the cards at this time, nor do I think it ever will be."
Hmm. Two points in response.First: Dragados and Tutor Perini are indeed internationally known and respected companies. They've also been, as I reported back in December, 2010, the subject of numerous high-profile lawsuits over everything from minority contracting to shoddy work to—yep—cost overruns.
To name just a few:
• In February 2010, Tutor-Salibas and Perini (the two companies that make up Tutor Perini) agreed to pay $19 million to settle fraud and racketeering charges involving a San Francisco airport construction project.
• Since 2000, according to the Bay Citizen newspaper, Tutor Perini's projects in the Bay Area have cost, on average, 40 percent over bid. In other words, the company has a reputation for gaining contracts by under-bidding, then boosting their prices through change orders.
• Tutor Perini has also been accused of shoddy construction: In L.A., where a lawsuit contends that a runway it built at the city's airport is falling apart, and in Las Vegas, where MGM Resorts International sued to tear down a hotel they say fails to meet basic structural standards.
• In an early foreshadowing of its current conflict with WSDOT over minority contracting (the agency has accused the company of failing to meet its 8-percent minority- or women-owned-business contracting requirements, the head of Tutor Perini's civil division was convicted of fraud and conspiracy to launder money in New York, charges that arose out of his false representation that disadvantaged businesses were doing work that actually went to businesses that were not owned by minorities or women.
• Meanwhile, in 2012, the U.S. government charged Dragados with fraud—also for alleged false claims that the company had hired disadvantaged businesses—in relation to its work on the $447 million East Side Access tunnel in New York City.
• On the same project, Dragados was sued by one of its construction partners, Judlau Constructing, which alleged that Dragados had mismanaged its part of the project, resulting in losses of as much as $250 million.
Second point. Design-build contracts may be new to WSDOT, but they aren't new. In fact, the most notorious design-build contract in Seattle's history was the monorail, which was supposed to be whisking riders in elevated luxury from Ballard to downtown to West Seattle starting in 2010. Instead, after massive cost overruns (thanks to a hugely expensive financing plan), voters shelved the project in 2005.
While voters don't get a say in whether to move forward with the tunnel, making it fundamentally different from the monorail proposal, the monorail agency took pains to reassure Seattle taxpayers that they couldn't possibly be on the hook for overruns, because of its absolutely ironclad design-build-operate-maintain contract, which would have required the contracting team, led by Hitachi, to not only design and build but to also operate and maintain the system.
Asked whether there was any possibility that the contract could fall through, Trepanier said, "I think that you should be fairly confident" that the contract is solid. "The folks who preceded me [at WSDOT] spent a lot of time working on this contract, and it is an impressive contract."
He noted that STP is doing "about 90 percent of the contract for a fixed price."
Trepanier also said he has no idea how much delay the current tunnel troubles might add to the project's timeline; that will depend, he said, on whether workers have to go in through the back of the excavation chamber (the inside) or the front (the outside).
"Those dates are constantly in flux," he said. "[STP has] said they can’t give me any idea of schedule at this time."
And he said he didn't know whether there would be any conflict between tunnel construction and construction of the downtown seawall, which, as we reported earlier this week, is moving forward even without tunnel construction.