Costs are mounting for a botched utility relocation effort for Honolulu rail, demonstrating how snafus in Hawaii’s largest-ever infrastructure project often have expensive ripple effects.

Private construction company Nan Inc. so far has charged about $100 million on a contract worth up to $400 million to relocate utilities for rail’s last four miles into town. Nan only managed to finish about 8% of the work involved, according to official reports

That’s largely because the Honolulu Authority for Rapid Transportation, under its new leadership, canceled the Nan contract earlier this year after the rail agency failed to secure approvals for the utility work. 

HART Rail guideway construction approaches Oahu Correctional Community Center near Middle Street on Dillingham Avenue.
Utility relocation that’s critical to rail guideway construction stalled near Middle Street, yet the canceled contract for that work continues to draw charges from multiple rail contractors. Cory Lum/Civil Beat/2021

As a result, rail’s whole utility relocation effort imploded.

Nan continues to submit charges related to the canceled contract, rail officials said last week. They didn’t specify how much. 

In March, HART Interim Executive Director Lori Kahikina said too much of the money was going to executives and top-level employees at Nan. She added that the company was often being paid to mobilize crews that didn’t have work to do.

But it’s not just Nan that’s billing. 

Stantec, the rail project’s construction engineering and inspection contractor, has also recently asked HART for millions of additional dollars, much of it to cover its own costs associated with Nan’s defunct contract. 

During a recent board presentation, HART officials laid out the need to add some $15 million to Stantec’s contract, with an unspecified amount of that going toward a ramp-up of utility work oversight. 

The firm originally was awarded a four-year contract in 2015 for $55 million to provide construction support for rail through 2019. HART then gave Stantec a two-year extension for $47 million to keep working through 2021.

The latest $15 million is to cover even more costs through the same period ending in December 2021, HART Construction Director Steve Cayetano told board members in early July.

Stantec has been burning through cash faster because HART added more tasks to its plate, Cayetano and Project Director Nathaniel “Nate” Meddings said. One of those new tasks was to oversee the Nan utility relocation effort.

Stantec “staffed up” for the utility contract “thinking that work would be awarded and going into construction,” Meddings told HART board members. By December 2020, the company had deployed nearly 100 staff members to help oversee rail’s utility relocation plus handle several other tasks across the project.

Those other tasks included resolving any lingering construction issues along the system’s first 10 miles on Oahu’s west side and overseeing construction near the airport and Middle Street, the HART officials said.

‘Infuriating’ Extra Costs

Nan has done utility relocation work further west on the rail line. It was awarded the $400 million contract to finish utility work in town in 2018.

The most recent contract was structured differently than the previous ones, however. HART essentially hired Nan to be on-call and to complete the relocation as required.

Technically, the approach is called “indefinite delivery indefinite quantity,” or IDIQ. The agency’s former executive director, Andy Robbins, touted it as a way to avoid paying Nan when its services weren’t needed — especially since the design work had neither been completed nor approved.

Lori Kahikina, Director Dept of Environmental Services City of Honolulu gives press conference about a COVID-19 positive workers that are in quarantine now.
HART Interim Executive Director Lori Kahikina: “You do not do a massive infrastructure project that way.” Cory Lum/Civil Beat/2020

Kahikina, who took over at HART in January, disagreed with her predecessor’s approach.

“You do not do a massive infrastructure project that way,” she told City Council members in March, referring to the IDIQ method. “So basically, the contractor, he gets task orders to go out, but we have to pay him every day for mobilization” — even if Nan crews aren’t doing anything, she said.

Kahikina previously worked for eight years as the city’s environmental services director, overseeing various underground repair projects near the rail route. She was one of the city department heads to reject HART’s designs as shoddy before later joining the agency.

In March, Kahikina further told council members that she had reviewed Nan’s invoices and line items and found that HART was paying about 20 “high level” staff members for the utility relocation contract, including a company vice president, managers, engineers and superintendents.

“You don’t do that in a major infrastructure project,” Kahikina said, adding that it was “infuriating to me to see all of these extra charges.”

Civil Beat requested the invoices that Kahikina referred to from HART. The rail agency provided neither the invoices nor detailed, updated information on how much Nan has been paid for the IDIQ contract.

The rail agency also did not provide information on how much Stantec has billed for its oversight of the IDIQ contract beyond what Meddings and Cayetano told HART’s board members.

HART now plans to issue a new contract in December for some of the canceled utility relocation, according to Cayetano.

The 20-mile, 21-station transit project’s estimated price tag has more than doubled since 2012, increasing from just over $5 billion to around $12.4 billion earlier this year.

Civil Beat reporter Kevin Dayton contributed to this report.

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