Rail delay costs to exceed $114M

The Honolulu Authority for Rapid Transportation now estimates that contractor delay claims, change orders and new expenses tied to the court-ordered construction shutdown of the rail project will cost the city more than $114 million, the City Council was told Wednesday.

A consultant overseeing the project on behalf of the Federal Transit Administration is now expressing concern about the project’s change orders, and the city has hired a new "claims management consultant" to help control the unexpected costs, according to a report filed with the FTA during the summer.

Daniel Grabauskas, executive director of HART, notified the City Council by letter on Tuesday that the Hawaii Supreme Court ruling that stopped all construction on the project in August will likely cost the city an estimated $64 million to $95 million in delay expenses in the months ahead.

That estimate includes only delay costs associated with three design-build construction contracts the city awarded from 2009 to 2011. It does not include "additional cost impacts due to escalation for future contracts and extended agency and consultant staffing," according to the letter from Grabauskas delivered to the Council on Tuesday.

The final cost of the delays related to the lawsuit will depend on how long the court ruling stalls the project. HART estimates that each month of delays costs the city an extra $7 million to $10 million.

The city stopped all rail construction after the court ruled on Aug. 24 that the State Historic Preservation Division violated its own rules by allowing construction to begin on the project before the city had completed an archaeological inventory survey for the entire 20-mile rail route.

The ruling also invalidated a special management area permit the city issued for the project.

The city has now accelerated work on the archaeological survey in an effort to quickly restart construction, but the survey likely will not be finished until the first quarter of next year.

The delay costs Grabauskas described in connection with the lawsuit do not include a variety of other change orders that HART approved before the court ruling.

A new tally of those earlier change orders was also delivered to the Council Tuesday. That list included more than $22 million in earlier delay claims related to the design-build contracts, and an additional $13 million in miscellaneous other change orders.

The HART board has also approved another $15.9 million change order to cover increases in the cost of steel and other materials.

Additional delay claims by contractors have been filed, but the city has not yet made those claims public because the HART is still negotiating to determine how much the city will actually have to pay.

Grabauskas stressed the rail financial plan includes a $644 million contingency fund to cover unexpected costs, but Council Budget Chairwoman Ann Kobayashi described recent events as "really worrisome."

Kobayashi questioned Grabauskas at length about the possibility that HART might run out of money, and in the years ahead would draw on a $450 million line of credit the city established to cover any project cost overruns or cash shortfalls.

Mayor Peter Carlisle and HART officials have said repeatedly they do not plan to draw on the $450 million. But Kobayashi said she is concerned city taxpayers will eventually foot the bill if the project runs out of cash and goes into debt.

"Just say it, then," she pressed Grabauskas. "Just say it. If HART cannot pay, the city taxpayers are going to pay."

"I think we always said that that was a possibility," Grabauskas replied.

"No, no one ever said it," Kobayashi retorted. "Today is the first day you’ve actually said ‘Yes, the city taxpayer is going to pay.’ "

"We hope never to have to tap the funding," Grabauskas said.

"I know. We do, too," Kobayashi said. "The city taxpayer hopes more than you."

The change orders HART approved have also attracted the attention of a consultant hired by the Federal Transit Administration to oversee the project,

A report by Jacobs Engineering Group Inc. warned the FTA in July that Jacobs "has some concern with the amount of change orders that have been processed" by HART. The report was recently made public by HART and the FTA.

The city has hired a claims management consultant to assist HART with claims, but Jacobs will continue to "closely monitor" claims management as the project moves forward, according to the report.