Report: Tunnel Bidder has History of Overruns, Lawsuits

By Erica C. Barnett December 13, 2010

This post has been updated with comments from state viaduct program coordinator Ron Paananen.

According to a 1,600-word report in the Lower Hudson Journal News this weekend, the Perini Corp. and Tutor-Saliba, the two companies that make up Tutor-Perini, one of the partners that won a state contract to build the deep-bore tunnel last week, has a long history of litigation and cost overruns, including allegations of fraud and racketeering.

Some salient bullet points from the story:

• In February of this year, Tutor-Saliba and Perini agreed to pay $19 million to settle racketeering and fraud charges in a San Francisco airport project. That lawsuit alleged the companies had deliberately lowballed their bid to build a new airport terminal with the intention of later billing the airport for additional costs. That lawsuit also alleged that the companies had used phony minority-owned companies to meet public-works project requirements.

• In 2004, Perini agreed to pay the federal government $998,500 to settle fraud claims, plus damages and penalties, in the construction of an embassy building in Venezuela. The company initially sought more than $8 million from the government, claiming delays.

• The two companies have been battling the Los Angeles Transportation Authority in court for 11 years over a Los Angeles subway job. The companies claimed the MTA failed to pay it for $16 million in costs; the city countersued, claiming the companies falsely inflated costs. The MTA won but the case was overturned on appeal; the MTA is now suing the companies for fraud.

The Washington State Department of Transportation's viaduct project manager, Ron Paananen, said this afternoon that he wasn't familiar with the allegations in the story, but that WSDOT had "looked very carefully at the capacity of these teams to do this project, their ability to get bonding and insurance, and their management structures" before narrowing the list of qualifying teams down to four. Paananen said the type of contract the state plans to use---a design-build contract, in which the same contracting team agrees to pay a set price to design and build the project---is less immune to overruns than a traditional low-bid contract, in which the team that proposes the lowest bid automatically gets the contract.
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