For years, the local agency overseeing Honolulu’s rail construction failed to properly manage dozens of change orders that eventually amounted to nearly half a billion dollars in added costs, a new city auditor’s report found.
The latest report on rail, released Friday, was conducted last year and mostly covered the Honolulu Authority for Rapid Transportation’s handling of the project from 2008 to 2016.
Nonetheless, the new report exhaustively chronicles multiple instances during that period in which “inexperienced” HART employees approved “questionable” change orders that either lacked necessary documentation, served to improperly cover payments to contractors after the fact, or even violated state procurement law.
“Much more needs to be done to control project costs and to ensure more schedule delays do not occur,” the city report states.
As with recent similar reports coming out of the state Auditor’s office, city Auditor Edwin Young’s office points out that rail’s federal overseers had repeatedly warned HART that its measures to control and to predict costs weren’t enough.
“Since I’ve been here I’ve seen mistakes from the past that have come across my desk. And you know, we have to deal with those now,” HART Executive Director Andrew Robbins said Friday as he addressed the fourth audit released in the past two weeks to scrutinize the agency he leads.
“Some of the change orders that have come up recently are really closing out some of these issues from two, three years ago or even longer than that,” Robbins said.
“In some cases I think it could have been avoided,” he added.
Many of the problems originated under Robbins’ predecessor, Dan Grabauskas, who resigned as HART’s executive director under mutual agreement with the board in 2016.
Robbins, who joined HART in September 2017, said the agency has already taken steps to reform its once lax oversight over change orders. The agency created a “change control committee” to review those and determine whether they’re justified.
“We’ve added a series of checks and balances, so we’re doing a much more effective job in terms of change-order processing and risk management,“ Robbins said Friday. “We’ve achieved good results so far. For the last two years, we have not had an increase on budget at all.”
The rail agency further created four new oversight positions to review and approve change orders, according to the city auditor’s report.
The city auditor previously examined HART in 2016, when it faulted the rail agency for inefficient management and for relying on outdated budgets and financial figures. The report made 16 recommendations to improve HART’s handling of rail.
At the time, Grabauskas took the unusual step of holding a press conference the day prior to the audit’s release in order to sharply criticize it and dismiss much of the report as politically motivated.
Rail costs continued to climb steeply, however, and several months later Grabauskas was gone.
To complete its latest report, the city auditor examined the 69 rail contracts that had racked up some 641 cost increases or changes through 2016. Those changes drove the rail project’s price tag up by more than $488 million, representing a 15 percent increase in the total cost, according to the report.
Those changes added some 2,246 days of work to the rail project’s schedule, the report stated. The auditor found more than half of the changes to be questionable, with HART staff often ignoring their own internal procedures.
Some change orders lacked the required independent cost estimates.
Others, such as an order to pay Ansaldo Honolulu JV $8.7 million to cover nine months of delays, lacked any supporting documents whatsoever to detail how that claim was “negotiated and justified,” the report said.
In all, some $198 million in contractor invoice payments lacked the necessary documentation or approvals, the report stated.
“In our view, HART made questionable decisions to override basic internal controls,” it added.
The report looked to shed more light on how the state’s largest-ever public works project saw its costs balloon from just over $5 billion in late 2014 to more than $9 billion today.
The report only made brief mention of the state and federal lawsuits that in 2012 halted construction for about a year. HART has consistently flagged those lawsuits as a primary reason for the cost increases.
“That definitely has an effect when there’s a year and a half delay,” Robbins said. “There’s no doubt about it.”
The city auditor’s office didn’t see the same pushback from Robbins as it did from Grabauskas nearly three years ago — likely because much of the report covers HART before Robbins arrived.
But Robbins and the city auditor still disagree on key issues. HART maintains that it’s already taken action on all 16 of the auditor’s recommendations from 2016.
“We feel like we’ve addressed just about all of those,” Robbins said Friday.
The auditor disagrees.
HART still “needs to demonstrate not only that it has established policies, procedures and plans that address the recommendations, but that they are actually being implemented and making an impact,” the report stated.
Until then, the project remains vulnerable to more cost increases, it added.
Robbins said the auditor staff will continue to visit HART’s offices in the coming year to see whether the steps taken are actually working. “We’re fine with that,” he said.
More reports on rail from the state auditor are expected to be released in the coming weeks.
Read the city auditor’s report here:
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