State auditor questions Honolulu rail spending on contract hires

The Honolulu rail project is spending more than $42,000 a month on contract hires including some who hold senior management positions within the Honolulu Authority for Rapid Transportation, but the agency does not evaluate the performance of those non-city workers, according to a new report issued by the Hawaii State Auditor today.

The new report also questions aspects of the relationship between the HART board of directors and the staff of the rail authority, noting that HART refuses to release to its own board some key information about anticipated “contingency” funding that is budgeted for individual contracts.

“Without this information, how can the board ensure that the CEO is accountable for the work being completed within a contract’s budget?” the report asked. “How does the board ensure that the project stays on budget? How does the board assess HART’s budgeting process?”

The report is the second in a series of four that the auditor is expected to release early this year probing the fiscal management of the rail line, which is under construction and is wildly over budget. The state Legislature in 2017 instructed the auditor to scrutinize rail’s finances as a condition of a $2.4 billion state financial bailout of the city rail project.

Rail is the largest public works project in state history, and in 2012 the city pledged to construct the 20-mile elevated rail line and 21 stations for $5.12 billion.

However, the latest official rail construction budget for the line from East Kapolei to Ala Moana is nearly $8.3 billion, and the total cost is expected to climb to more than $9.2 billion when financing costs are figured in.

The auditor’s first report released last week concluded that a series of “prematurely” awarded rail contracts awarded to construction companies starting in 2009 prompted delay claims and change orders that increased the cost of the Honolulu rail project by more than $354 million.

That number now appears likely to increase to more than $514 million in total change orders and delay claims with HART’s announcement Monday that it has tentatively agreed to pay rail contractor Ansaldo Honolulu JV another $160 million in delay claims. The HART board is scheduled to consider that proposed settlement on Thursday.

The contract Ansaldo signed with the city in 2011 called for the company to complete its design-build work on rail by 2019, but the project is now running about six years behind that schedule.

The new audit report on HART’s management structure questions the cost and oversight of 18 contract employees provided by the engineering first HDR Engineering Inc. who fill “many of HART’s senior management positions and and other positions directly responsible and critical to the designs and construction of the project.”

HART pays HDR $9.6 million a year, or more than $505,000 per employee, for the use of those staffers who fill high-level positions including project director, director of design and construction, and risk manager. In many cases the HDR workers oversee the work of other HDR employees as well as outside consultants, the report found.

The auditor noted the HDR employees are paid and evaluated by HDR, not the city, and HDR’s evaluations of its employees are not shared with HART. The use of these consultants has been an “ongoing concern” for the Federal Transit Administration, according to the report.

In 2017 HART raised its own concerns about the performance of HDR employees, alleging they failed to enforce the terms of HART contracts in some cases where claims should have been filed against contractors for late work, according to the audit. HDR disputed those allegations.

HART CEO Andrew Robbins told the auditor the rail authority hires consultants instead of city employees to fill management and staff positions “because it is unable to find highly qualified candidates willing to accept a city salary for the positions.”

HART is supposed to shut down its operations after the rail project is finished in 2025 or 2026, and Robbins told the auditor he “does not want HART to be in a position where it will have to terminate civil service employees at the conclusion of the project.”

To deal with the issue of oversight of HDR employees who are staffing the rail project, HART has initiated a new formal procedure for review and approval of staff performance reports, according to HART’s response to the audit.

Not counting the HDR workers, HART had a staff of 117 in November, including 112 employees on personal services contracts and five civil servants.

HART Audit Report Jan. 2019 by on Scribd