Acquisition creates rail project conflict

A global engineering and design firm that holds three Oahu rail project contracts has purchased a rival company that holds the contract to oversee the design firm’s work, forcing city officials to look at ways to resolve an apparent conflict of interest.

Dan Grabauskas, executive director for the Honolulu Authority for Rail Transit, detailed the situation after being questioned by City Council Budget Chairwoman Ann Kobayashi at a Budget Committee meeting Wednesday.

AECOM Technical Services has three design contracts totaling $99.2 million: the Aloha Stadium-Honolulu Airport section of the 20-mile guideway ($42.6 million); the Airport-Ala Moana section of guideway ($45.2 million); and the airport section’s rail stations ($11.4 million).

Meanwhile, URS Corp. has a $63.1 million construction management contract with HART that will conduct construction engineering and inspection of the airport and town sections of the project, in effect reviewing the work being conducted by AECOM, HART officials said.

On Oct. 17, Los Angeles-based AECOM Technology Corp. completed acquisition of San Francisco-based URS for $6 billion.

"Everything sounds so incestuous," Kobayashi said.

Grabauskas said that the day the sale was closed, he contacted both companies and informed them that "they need to address the conflict and explain to us … exactly what their position is."

A conflict exists because "now that AECOM has purchased URS, you effectively have the same company watching, you know, someone at the neighboring desk," he said.

HART is looking at several ways of resolving the conflict, such as having the company "reconstitute how it delivers the service" or actually re-soliciting and re-bidding one or several of the contracts, Grabauskas said. What he doesn’t want, Grabauskas said, is simply setting up a "firewall" between the two companies. "We think that that’s too cumbersome — it’s just too big and … the appearance isn’t good."

The issue came up during an informational briefing called by Kobayashi to address concerns raised by local contractors who believe that not enough work from the $5.26 billion rail project is going to Hawaii-based firms. Kobayashi said the acquisition of URS by AECOM is concerning because it suggests "we give all this stuff to one company … and yet there are no major local architects, local engineering firms involved in this."

Grabauskas said two major local firms are partners of the URS contract.