High turnover and distractions over old contract disputes are hampering Honolulu’s over-budget and behind-schedule rail project, according to a panel of independent transit experts commissioned to review the project’s management.

In a report to the Honolulu Authority for Rapid Transportation, the panel gave the current management high marks in several areas.

But it suggested that the rail project consider making employees, especially in critical positions, part of the civil service system instead of relying on one-year contracts that might impair recruitment and retention.

It also found contract cost overruns “far in excess of the normal industry standards,” attributing them not to current management but to “decisions made previously.”

HART Rail Salt Lake Boulevard Aloha Stadium2. Near Kamehameha Hwy. 23 feb 2017

A future HART rail station at Salt Lake Boulevard is under construction. A new report by an independent panel of experts finds old problems are still hampering the project.

Cory Lum/Civil Beat

The review by the American Public Transportation Association was done at the behest of the Federal Transit Administration, which is contributing $1.55 billion to the rail project and has required the city to submit a plan for how it will deal with cost overruns and delays.

The HART board formally requested the review in September.

The panel of four transit experts reviewed documents, made field observations and talked to HART staff, as well as the consultants who are building the project, which is supposed to extend 20 miles from East Kapolei to the Ala Moana Center and include 21 stations.

The project has been mired in delays and cost overruns, with one estimate putting the total bill at $9.5 billion, including finance costs. That’s about $2.7 billion more than the money currently available for rail construction from the FTA and an Oahu-only 0.5 percent surcharge on the general excise tax.

City officials are now asking the Legislature for an extension of the GET past the current expiration date in 2027 to cover the costs, but have run into resistance from lawmakers. Meanwhile, the city must give the FTA a plan for how it will pay for it all or scale back the project by the end of April.

The peer review focused on the staff’s technical management capabilities, contract administration and its process for approving change orders for cost overruns. The panel also offered observations and recommendations in other areas.

The report, first published in January, is likely to be presented and discussed at the HART board meeting next week.

The panel said that HART’s high turnover rate “impacts project delivery. This often leads to key management positions that are vacant and working knowledge of past activities diminished.” Moving workers to civil service might help with recruitment and retention, it wrote.

The project is being bogged down by past problems such as negotiations with contractors over cost overruns, the report says. “Staff seems compromised in their ability to deliver the work going forward while also handling previous and outstanding issues resulting from past decisions,” the panel wrote.

HART might consider setting up a separate claims department to resolve past contract disputes, according to the report, allowing the project team to concentrate on finishing the rail line.

The panel did have one word of caution about change orders, however. In an attempt to be transparent, the staff has been reporting the amount the contractor claimed in cost overruns, HART’s counteroffer and the final negotiated amount.

“Our concern stems from contractors using this information to develop pricing and negotiation strategies that might work against the better interests of HART,” the report stated.

The panel noted that change orders for certain contracts have been far above industry norms. In the contract with Kiewit Infrastructure West Co. to design and build the West Oahu-Farrington Highway section of guideway, for instance, change orders added up to 36 percent of the original contract value.

Likewise, change orders for the project’s maintenance and storage facility totaled 43 percent of the contract’s original price.

The peer review team noted that HART’s Project Management Plan, a valuable tool for coordinating very large projects, has not been updated since 2011. The report recommended revising it immediately and at regular intervals in the future.

It also suggests that HART tighten up its process for getting schedules from contractors, both when the contract is awarded and each month as it progresses. HART is updating the schedules on its own, which could lead to contract disputes, the peer team wrote.

HART also should consider setting up a dispute resolution board to provide a formal process to avoid cost overrun disputes, the team stated.

In other areas, the panel found that HART was meeting industry best practices.

“The project sections that have completed construction or are under construction appear to be of good quality and have been well designed for future operations,” according to the report, which also found that the rail line “will significantly improve mobility throughout Honolulu.”

It added that “legal challenges and previous contracting decisions have had a significant impact on claims, budget and schedule.”

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