The Board of Directors for Honolulu’s $5.2 billion rail project approved an additional $6 million for two city contracts Thursday. But they didn’t do so easily, grilling city project managers and contractors about the necessity of spending more taxpayer money.

The scrutiny over the Honolulu Authority for Rapid Transportation’s spending will likely only increase in coming months with rail officials estimating that costs associated with project delays could reach $250 million. That includes money paid to contractors to remain idle while the project was tied up in legal challenges. 

But a more immediate concern for HART officials is the ripple effects those project delays could have on current and future contracts.

For now, cost increases, including about $120 million in delay costs that have already been approved, haven’t raised the overall $5.2 billion rail price tag. The costs are covered by built-in contingency funds or absorbed elsewhere in the budget.

HART construction column Kapolei  June 2014

Honolulu rail construction near Kapolei on June 5, 2014.

PF Bentley/Civil Beat

But HART CEO Dan Grabauskas told Civil Beat after Thursday’s monthly board meeting in downtown Honolulu that it wasn’t clear at this time whether the project will ultimately stay within budget in the long run.

The biggest worry right now is whether bids for contracts totaling hundreds of thousands of dollars will come in within budget in the next six months.

“We have all these cranes in the air, commodities are more expensive because of the time that has passed and it’s really a more competitive market,” said Grabauskas. 

Contractors Say They Need More Money

In order to keep rail construction on schedule and prevent costs from cascading because of delays, rail officials say they need to expedite the acquisition of about 160 properties, the majority of which lie along the easternmost part of the rail line.

Instead of buying up properties and helping people locate within a two-year time frame as originally planned, HART hopes to do it in six months, Elizabeth Scanlon, HART’s director of planning and right-of-way, told board members. And that means the price of the contract for the company in charge of property acquisition, Paragon Partners, heaquartered in Huntington Beach, Calif., needs to be more than doubled, she said.

Instead of costing about $3 million, it will cost up to $6.3 million overall.

“What concerns me is that this contractor with specialized expertise, the perception I have, is immediately taking advantage of our compromised position.” — Ivan Lui-Kwan, HART’s board chair

Board members took issue with the breakdown in new costs. At least two used the word “shocking.” 

The revamped contract includes about $130,000 for rental housing for mainland workers, as well as tens of thousands of dollars for meals, cars, fuel and travel to and from the mainland. 

The cost of additional office space is pegged at $82,500 and salaries for roughly 15 workers at $2.8 million for six months. 

“The thing that concerns me is the doubling of a contract just to achieve the same amount of work,” said Ivan Lui-Kwan, HART’s board chair, who opined that maybe the contractor was capitalizing on HART’s vulnerability in needing to speed up the rail project.

“It’s clear that as a result of this litigation, we are in a compromised position. We need to catch up,” he told HART managers. “What concerns me is that this contractor with specialized expertise, the perception I have, is immediately taking advantage of our compromised position.”

“The thing that causes me to feel like maybe this contractor is maybe, potentially taking advantage of our position, is I just can’t understand — maybe you can help me understand — these numbers.”

Scanlon responded that the cost breakdown for labor and added expenses was consistent with the terms of the original contract. The extra $3.3 million is also a maximum amount, she noted, and HART officials have some discretion in approving overtime costs. 

Paragon Partner’s CEO Neilia LaValle, who was on hand to answer questions, said that accomplishing the work in such a short time period wasn’t possible under the current $3 million contract.  

“I’m sorry to tell you, but that was extremely unrealistic for a program like this,” she said.

LaValle  also noted that Hawaii lacked some of the needed expertise in property acquisition, which is why workers needed to be brought in from the mainland, despite the added cost.

The board unanimously approved the contract, citing concerns that further project delays could could result in greater costs.

HART’s board also approved a $2.65 million increase for a contract awarded to Kiewit Infrastructure West Co. for the West Oahu/Farrington Highway segment of the rail project. The money will be used to test the foundations of all the rail columns and clean rail shafts for safety purposes. 

The contractor had initially built in $5.2 million to do this work, which only covered a portion of the columns. Changes in HART specifications require that they all be tested. 

“It’s basically running an expensive CAT scan on each one to make sure that one leg maintains the guideway,” Grabauskas explained to the board. 

Board members questioned why this wasn’t built into the cost of the contract to begin with and whether costs associated with the other segments of the rail project wouldn’t also increase because of the new testing requirement. 

“The bottom line is this may be a small number, but it is significant,” said HART board member Bobby Bunda, of the added cost. “And the question going forward is will the Honolulu leg cost more than this now. And my guess is that it would be.”

Lorenzo Garrido, director of engineering and construction for HART, conceded that the costs likely will go up in the other rail segments because of rockier and wetter conditions. 

HART board member Mike Formby, who is also the director of the city’s Department of Transportation Services, echoed Bunda’s concerns.

“Hopefully, the lesson learned from this is we have tightened up our specs,” said Formby before grilling Garrido about whether there were any other unanticipated project costs related to changing specifications that the HART board should be aware of. 

“Do you know something that we don’t know?” Formby asked pointedly. 

Garrido said, no.

The board ultimately voted in favor of the contract changes, noting the importance of safety.

You can view a breakdown of expenses for the Paragon Partners contract below: 

HART/ Paragon Contract

Change order for Paragon Partners


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