Process blamed for Green Line project’s soaring cost
As the Massachusetts Bay Transportation Authority struggles to contain the costs of the long-awaited Green Line extension into Medford and Somerville, critics are pointing to the T’s use of a relatively new procurement process as one of the main reasons the price tag has ballooned.
T officials in August revealed that the estimates for the frequently delayed project could cost up to $1 billion more than the last estimates they publicly unveiled, bringing the total project estimates to nearly $3 billion. The transportation secretary has gone so far as to say that the costs, which will be paid for with nearly $1 billion in federal money, could be prohibitive enough for the state to drop the project altogether.
Officials say the T will seek an outside audit to discover why the estimates have gone up so quickly. But critics say they have the answer: a contracting process that allows the company that’s building the Green Line to name a maximum price at each stage of construction, instead of agreeing to a fixed price.
Under the “construction manager/general contractor” process currently being used, the T chooses companies to design and build the projects based largely on their expertise proven by other past projects. Once the companies are selected, the project is then broken up into phases, and the construction company is allowed to name a maximum price for construction with each phase.
According to the terms of the process, the T can negotiate the price of each phase, with the help of an outside company that gives its own cost estimate. If the T can’t come to an agreement, it can put part of the project out to bid again — but that also causes delays.
This contrasts with the traditional construction bidding process in which prospective contractors are chosen largely based on the price they offer.
Proponents say that the CM/GC process is faster than the traditional process because the construction company doesn’t have to wait for the design of the entire project to be done.
But critics argue it ultimately gives little leverage to the T because the construction manager is chosen first, then is able to name its price without competition.
“Until you have a competitive process, you don’t know how much it’s worth,” said Rafael Mares, a vice president of the Conservation Law Foundation, a Boston environmental group.
At a recent MassDOT meeting, Mares was one of a parade of critics who said the T should put several aspects of the project out to bid again, even if it causes more delays.
When compared with six other light rail projects in the same phase of the same federal grant as the Green Line extension, the project’s estimated cost — more than $638 million per mile — ranks as the third highest. It follows projects in San Francisco and Los Angeles, other dense urban centers with relatively high construction costs. It is more expensive than projects in Honolulu, Portland, Ore., and Charlotte, N.C.
Mares has publicly accused the contractor, a consortium called White-Skanska-Kiewit, of taking advantage of the process by naming higher prices for each stage.
For three out of four contracts that have been awarded to White-Skanska-Kiewit on the Green Line project, three were higher than the estimates the T had submitted to the federal government last year.
For a phase that included drainage improvements at Millers River and relocating the Fitchburg commuter rail track, the T last year predicted it would cost about $62 million. The contract that was eventually awarded to White-Skanska-Kiewit was $116 million.
For one of the largest portions of the project, which includes the construction of three of the seven stations, the T expected to spend $487 million, including contingency costs. But White-Skanska-Kiewit’s cost estimates were about $400 million higher.
William Shea, who works for JF White Contracting, one of the companies in the consortium, said officials did not want comment on the project because it was under contract with the T.
Brian Perlberg, the senior counsel of contracts and construction law at the Association of General Contractors of America, said that people often think they have cost certainty with a fixed price from a traditional bidding method, but it’s usually not the case.
“Unfortunately, in construction history, there’s always a lot of change,” he said. “And in some ways, dealing with it becomes harder when it’s more rigid.”
Transportation Secretary Stephanie Pollack said the cost increase cannot be entirely attributed to the contracting process. She pointed out that the engineers hired by the T to design the project also believed they had to raise their own early estimates.
That’s why Pollack doesn’t necessarily agree with putting the project out to bid again with traditional processes. At a public meeting last week, Pollack noted that no bidding process has zero risk — and that it could even make the project more expensive at this point.
Frank DePaola, the interim general manager of the T, did not want to speculate on whether the process is why the costs are so high, but agreed that it does cut down on competition for the selected contractor. He also pointed out that the T had plans to build more complex stations than may be necessary. For example, every one of the seven stations involved in the project was initially designed to be completely enclosed, have fare gates, and include escalators, in addition to elevators.
But DePaola pointed out such costs may not be necessary for each station: Some stations may not need escalators, stations could be covered by a roof but not fully enclosed with walls, and they wouldn’t need to include fare gates.
For now, the T is still negotiating with White-Skanska-Kiewit and waiting for the audit before going forward. The result is more delays for a project that’s already been decades in the making.