HART plans to use unspent contingency funds to cover expenses tied to relocation of utility lines

The city rail agency projects an extra $140 million to $240 million will be needed to relocate utility lines along the final stretch of the 20-mile route, on top of the $400 million originally allocated for the work. That’s an increase of up to 60% that, in turn, will add about $45 million to the total cost of the rail project once contingency funds are factored in.

The additional expenses for relocation of utility lines would increase the total rail cost to $8.210 billion from the $8.165 billion the Honolulu Authority for Rapid Transportation has previously cited.

Nathaniel “Nate” Meddings, HART’s director of project controls, said that’s still below the $8.299 billion that Federal Transit Administration officials have estimated is needed to complete the East Kapolei-to-Ala Moana Center line.

The extra cost for utility relocation work could be lowered significantly to between $135 million and $235 million if HART were to procure at least one other contractor to finish the work along with the original contractor, Nan Inc., Meddings told the HART Board of Directors’ Project Oversight Committee on Thursday.

To help pay the difference, HART is using $130 million to $150 million in surplus contingency money — funds previously allocated but no longer required for work already closed or nearly completed.

The project’s independent management oversight consultant last month said that through Feb. 29, Nan was only 3% completed with the utilities relocation work and is four months behind schedule.

The bad news came via an independent cost estimate that was recently completed. The issue of delays with the Nan Inc. Middle Street-to-Ala Moana utilities relocation project was first raised in January. The situation prompted Project Oversight Committee members on Thursday to create a subcommittee dubbed the Permitted Interaction Group to look into the matter.

Glenn Nohara, Project Oversight chairman, said after the meeting that the increase is troubling and that the subcommittee will look into greater detail at what’s causing the higher costs.

“Several board members have concerns,” he said. “The budget is increasing and the contingencies are getting smaller.”

Board member Jade Butay, director of the state Department of Transportation, questioned use of the contingency money.

“I mean, it seems like there are other things that maybe don’t go as planned,” Butay said. “Given the history of the project, don’t you think you’d want to hold onto the contingency?”

But HART CEO and Executive Director Andrew Robbins said none of an estimated $88 million in unallocated contingency funds will be used to hire the second contractor. “We will not touch that,” he said.

Paul Johnson, HART’s risk management director, said that even after anticipating added costs associated with the COVID-19 pandemic, his models project a 65% probability that total rail construction costs will fall under the FTA estimate of $8.299 billion.

Nohara said when the $400 million contract was first awarded to Nan Inc. in May 2018, HART had much less design information available to accurately determine what the ultimate cost of the relocation work would be. It didn’t help that the project involves relocating lines for at least a dozen different utilities, he said.

About 95% of design work for the relocation project is now completed, making it easier to accurately estimate the cost, he said.

The unused contingency money that will make up the difference could have been used elsewhere, Nohara said. “We’ve still got the guideway contract to get … . We would’ve preferred to keep that freed contingency for future uses.”

He added: “We need to make sure that the process, because it’s so complicated, is optimized.”

Nohara said he doesn’t doubt there is an increase in costs, he just wants his Permitted Interaction Group to see more details and determine if more savings can be found.

The relocation of utilities needs to be done to make way for construction of the rail line’s elevated guideway. Three stations are planned along Dillingham Boulevard, a situation that was discussed at length Thursday.

Robbins said Dillingham poses unique challenges because it’s well-traveled and densely populated. But that’s also the reason why the route was chosen, he said. “Dillingham is considered the center of the Kalihi community. We have a lot of people who walk in the area, we have a lot of students, a lot of businesses.”

Staff determined last spring that the utilities work needed to be accelerated in order for the entity that will eventually finish construction of the guideway — the so-called public-private partner — to be able to begin its work on time, Meddings said. A selection of the “P3” entity is expected in September.