HART board delays $18M increase for rail contractor

The board overseeing Honolulu’s rail project rejected a request by rail staff to increase a key engineering contract by nearly $18 million, with several board members saying they didn’t have enough information to approve the sizable request.

Sam Carnaggio, project director for the Honolulu Authority for Rapid Transportation, presented a request last week to the board to increase the so-called general engineering services contract for consulting firm CH2M Hill Inc.

HART initially awarded Colorado-based CH2M Hill a five-year, $46 million contract in 2013 to provide “oversight support” covering five tasks, including management support, cost analysis, environmental planning and management of design services. The requested change order would increase the firm’s contract to $64.8 million. (Three previous adjustments totaling $699,572 were made since 2015.)

Carnaggio said the additional funding is already built into the rail project’s budget, which stands at $8.2 billion. The request includes $7.5 million for environmental and planning services and more than $10 million for design management services.

He said most of the increased costs are tied to HART-initiated changes that have increased the contractor’s workload. CH2M Hill was brought on when the project was expected to be completed in 2019; rail’s estimated service date has since been pushed back to December 2025.

Carnaggio said that through August, 92 percent of CH2M Hill’s contract had been expended, including 104 percent of what had been budgeted for the environmental and planning tasks and 120 percent of the design management portion of the budget. He said work was able to continue because other task areas were running below the projected amounts.

“That does concern me: You’re robbing Peter to pay for Paul,” said HART board member Wes Frysztacki, director of the city’s Department of Transportation Services. “I know it’s all within the same contract, but it just gives me the message that when this scope was originally written … the people that wrote it and signed off on it … had no idea it would be costing millions and millions of dollars.”

Frysztacki added, “I have a severe case of sticker shock on this.”

Efficiency questioned

The HART board voted to approve only $3 million of the requested increase, and deferred action on the full amount until its Dec. 14 meeting. A decision previously was postponed from the board’s Nov. 6 meeting.

HART board member Ember Shinn, a former managing director for the city, said she wanted more time to meet with rail staff to get detailed information about the change order.

“I have 1,000 questions about it,” Shinn said.

Terrence Lee, HART board vice chairman, also raised concerns and questioned how efficiently CH2M Hill has been operating to date.

Speaking in general terms, Lee said, “There’s a temptation, if you will, to sort of spend more time on tasks than perhaps is necessarily warranted. And it’s not because they’re purposely padding their hours or trying to pad their bills. It’s just that on a project of this magnitude, when the contracts are that large, the sense is that there’s a lot of room to really do a lot of extra work.”

He asked staff to be “hyper diligent” about scrutinizing cost increases. “When you’re dealing with an $8.2 billion project, there’s a temptation to say, ‘Well, you know, $10,000 — that’s nothing,’” Lee said. “But it is something.”

The approved $3 million in interim funding was seen as a compromise after HART officials expressed concerns about running out of funds for the critical work CH2M Hill is performing.

“The window of completion for the work under the contract is shortening,” said Abbey Mayer, HART’s director of planning, permitting and right-of-way. “My concern in any extended delay is we won’t have enough time to do all this work under this contract and meet our requirements, deliverables that need to happen before interim service opens.”

HART Executive Director Andrew Robbins added that if the full $17.9 million change order were approved, HART could still negotiate savings.

“Even if this was approved … it doesn’t necessarily mean we’re going to spend all of this money, and certainly that would not be the intent,” Robbins said, but he added, “I am concerned about running out of funds.”

Carnaggio said HART would inform the board of any work initiated with the $3 million over the next few weeks before the board’s December meeting.

HART board member Terri Fujii asked rail staff how similar situations, where decisions have to be deferred due to a lack of information, could be prevented.

Rail officials acknowledged that discussions on the requested change order began in January, after CH2M Hill notified HART that it had expended 75 percent of its contract.

“For something of this magnitude, it seems like two months is not enough, so we’ll strive to brief you sooner,” said Robbins, who joined HART as executive director and CEO in September.