Honolulu’s top rail executive told members of the City Council Budget Committee on Wednesday that the project has a “healthy contingency fund” despite the fact that recent construction bids came in more than $100 million higher than expected.
Dan Grabauskas provided this rosy view based on the historical drawdown of the set-aside fund, which was put in place to deal with unexpected cost increases related to the $5.26 billion project.
“Sometimes the contingency funds are called rainy day funds,” Grabauskas said. “That’s when it’s used, is when it rains.”
A HART rail column at sunrise.
PF Bentley/Civil Beat
Earlier this month, the Honolulu Authority for Rapid Transportation opened bids for construction of the first nine rail stations and officials were surprised to find that they had grossly underestimated the cost.
HART had initially budgeted $184 million for construction, which included $34 million in contingency funds to account for unexpected cost increases.
But when the three bid proposals were opened the lowest bidder, Nan, Inc., at $294.5 million, was 60 percent more than budgeted. The other two bidders, Nordic PCL and Hensel Phelps, proposed amounts of $312.5 million and $320.8 million, respectively.
Grabauskas, who is the executive director and CEO of HART, blamed construction delays due to legal challenges and competition from a building boom in Kakaako, where the skyline is dotted with cranes erecting high-rises.
Market conditions, he said, are “red hot.”
There was $563.4 million in HART’s contingency fund, according to the agency’s July monthly progress report. That’s down from $643.6 million that was set aside as contingency in the project’s overall budget.
Grabauskas and other officials have said that the contingency funds are there for these unexpected costs and that the money would be used to cover the difference between the rail station budget and the actual bid amounts.
HART has yet to sign the contract for the rail stations, and is currently reviewing the bids to find out exactly why the proposals came in so much higher than anticipated.
No decisions have been made yet as to whether any work will be scaled back to reduce costs. The agency also has the option to go back out to bid.
Grabauskas told the council members that HART is now revising its estimates for upcoming contracts to get a better idea of what to expect in the future.
The agency expects to open bids this fall for the construction of a 10-mile leg of the project that will include guideway construction past Pearl Harbor, through the Honolulu International Airport and to the Ala Moana Center.
Officials have said the contract was estimated to cost about $750 million.
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