The opaque budgeting process for major public works projects throughout Hawaii fuels distrust of government that is especially apparent when big construction jobs encounter cost overruns or expensive delays. The government agencies overseeing the projects have limited information to offer taxpayers as evidence that every feasible action is being taken to contain costs, thus weakening the persuasiveness of their assurances.
The Honolulu Authority for Rapid Transportation, the semiautonomous government agency overseeing construction of Oahu’s elevated rail-transit system, faces this very dilemma now, as it struggles to overcome a projected $910 million budget shortfall and needs more help from public coffers.
Of particular concern is the lack of information available about the hundreds, if not thousands, of subcontractors and consultants working on this now $6 billion rail project, which will include 21 transit stations stretching along the 20-mile route from East Kapolei to Ala Moana Center and is scheduled to be fully operational in 2019.
HART is following state and federal requirements by mainly tracking the prime contractors awarded contracts, who in turn hire and oversee others — subcontractors — to do a large amount of the work. The state Department of Transportation manages its large-scale construction projects the same way.
By law, these government agencies are required to track only a limited set of subcontractors, including those who qualify under a disadvantaged business program and those who require special licenses. The idea is that the government focuses on holding the prime contractors accountable for their overall contracts, and the prime contractors keep the subcontractors on time and on budget, theoretically, at least.
A glaring problem with this approach is that the taxpayers paying for all this construction work are left with precious little insight into who is actually doing it, what exactly they are doing and how much it actually costs.
"Even the subs have subs," a HART spokeswoman said, acknowledging that the agency does not know how many subcontractors and consultants are involved in the rail project.
Hundreds or even thousands was the best estimate.
It’s no wonder that taxpayers question the size of profit margins through each level of each prime contract.
The information gap raises other serious concerns as well.
For one thing, it is impossible to accurately assess potential influence peddling when the subcontractors are not identified and therefore their campaign contributions are not scrutinized.
Safety records of the subcontractors likewise are unknown to the public, as is an accounting of whether they are properly registered and licensed to do business in Hawaii, and are paying the required general excise tax.
This last point seems especially relevant because one reason the rail project ballooned beyond initial budget projections was that GET revenues to help fund construction came in lower than expected.
The GET is 4.5 percent on Oahu — where a half-percent surcharge funds rail construction — and 4 percent in the rest of Hawaii. Strict and accurate GET collections fuel the state government’s fiscal vitality overall, and Oahu’s rail-transit project in particular.
Federal and state laws that make disclosure of most subcontractors voluntary must be strengthened; disclosure should be mandatory for all public-works projects, in the public interest.
In the meantime, HART should go beyond what is legally required to document the rail-transit project’s bottom line.
A procurement process that awards prime contracts to the lowest qualified bidder provides only limited assurances that the money is carefully spent.
Oahu taxpayers want to know more, and they deserve to; they are the ones footing most of the massive bill.