Meeting_Body
2nd REVISED
CONSTRUCTION COMMITTEE
NOVEMBER19, 2015
Subject/Action
SUBJECT: REGIONAL CONNECTOR TRANSIT CORRIDOR PROJECT
ACTION: ESTABLISH A REVISED LIFE OF PROJECT BUDGET AND AUTHORIZE CONTRACT MODIFICATIONS TO CONTRACT C0980 TO MITIGATE COST AND SCHEDULE IMPACTS
Heading
RECOMMENDATION
Title
A. INCREASING the Life of Project (LOP) Budget on the Regional Connector Project by $131.8 million, from $1,420 million to $1551.8 million;
B. INCREASING the Regional Connector FY16 Budget by $20 million;
C. AUTHORIZING the CEO to execute Contract Modification No. 32 to Contract C0980, Regional Connector Constructors (RCC) for additional utility work and schedule recovery measures, in an amount not-to-exceed $49,000,000, increasing the total contract price from $986,177,590 to $1,035,177,590; and
D. AUTHORIZING the CEO to execute Contract Modification No. 33 to Contract C0980, Regional Connector Constructors (RCC) for the addition of a fan plant at the wye junction, in an amount not-to-exceed $12 million, increasing the total contract price from $1,035,177,590 to $1,047,177,590. Upon Board approval of this recommendation and execution of Modification no. 33, staff will cancel Modification No. 4 $4.1 million. Therefore, the net effect of this additional work is $7.9 million.
Issue
ISSUE
In May 2014, the Metro Board awarded the C0980 contract to RCC for $927.23 million, and established a life of project budget for the project at $1,420 million, including $92.7 million in contingency. Since contract award, several significant costs have been incurred which have eroded project contingency. Furthermore, FTA requested a project contingency analysis be performed which indicated that additional contingency is required to complete the project. The staff recommendation includes additional funding of $132 million to cover cost growth on the project and to replenish contingency. Staff intends to aggressively manage all areas of the project and to continue to reduce costs wherever possible.
On April 30, 2015, the Metro Board approved Contract Modification No. 10, to transfer the remaining utility relocation work from Contract C0981R, for a not-to-exceed amount of $27.1 million. Staff has negotiated the direct costs this work in the amount of $18.1 million. The remaining amount is associated with extended overhead associated with schedule delay. These costs are currently being audited by MASD and the audit is expected to be completed by the end of November. As a follow-up to the Board’s previous authorization, this report also recommends the approval of a not-to-exceed Contract Modification of $49 million, to Contract C0980 to resolve all remaining costs associated with the additional utility work as well as schedule recovery measures, to ensure the project is completed by the FTA FFGA Revenue Service Date (RSD) of May 2021 and TIFIA. Staff is requesting approval of a not-to-exceed value at this time so that work critical to the project recovery schedule may begin by early January 2016. The recommended recovery measures must be started no later than January 4, 2016, or the Project will not be completed per the FFGA schedule agreed with FTA and TIFIA. If the FFGA schedule is not met, then as much as $587.24 million in FFGA/TIFIA funds may be at risk. Late completion will also entitle the C0980 Contractor to additional extended overhead costs of $3 million per month, as well as other Project costs, totaling approximately $5 million per month. Also, late completion of the Regional Connector may put at risk future FTA funds for other Metro projects.
This report also recommends the approval of a not-to-exceed Contract Modification of $12 million, to Contract C0980 to design and construct a fan plant at the wye junction. The addition of the fan plan resolves a long-standing project design issue to address on-going operational and fire/life safety recommendations. Upon Board approval of this recommendation and execution of the Modification no. 33, staff will cancel Modification No. 4 (Option 10 - Add Open Roof) as it will not be necessary when the fan plant is added, saving the project $4.1 million. Therefore, the net effect to this Project of this additional work is $7.9 million. Staff is requesting approval of a not-to-exceed value at this time so that work critical to the project schedule may begin in early December 2015. Overall design of the project is now 85% complete and delays in implementing the fan plant will negatively impact the overall project completion schedule and increase project costs.
There are a number of Lessons Learned arising from the content of this Board Report, many of which have already been implemented by staff and include, but are not limited to: timing of development of the final LOP in relation to the Full Funding Grant Agreement process project budget; additional risk assessments beyond those normally conducted; increased early utility investigations with a corresponding budget increase (additional community interface); and, close collaboration with the City of Los Angeles departments and Council to garner and receive support for granting of variances, permits and necessary street closures. These items are essential to progress and success of Metro projects.
Discussion
DISCUSSION
Project Description:
The Regional Connector Transit Corridor Project (the Project) consists of the design and construction of a 1.9-mile light rail transit subway in downtown Los Angeles which creates an underground trunk line, connecting the existing Metro Gold Line, Metro Blue Line, and Metro Exposition Line light rail transit (LRT) systems.
The Project begins at the existing 7th/Metro Station and extends north to 2nd Street and Hope Street, turning east along 2nd street to a new underground rail junction on Alameda street. The Project will include three new underground stations at 2nd/Hope, 2nd/Broadway, and 1st/Central Avenue.
The contract currently calls for construction to be substantially complete on October 23, 2020, followed by two months of pre-revenue testing to be completed on December 23, 2020. The Revenue Service Date (RSD) required under the FFGA is May 29, 2021, which provided five months of schedule float for project completion.
Background
In February 2014, the FFGA budget of $1,402.9 million was approved for the project, including $670 million in federal New Start funds. In May 2014, the C0980 design-build construction contract was approved awarded for $927.23 million establishing and the life of project budget was established at $1,420 million, including $92.7 141.7 million in project contingency. The design-build construction contract (including options) was $111 million higher than what was the estimated construction line item in the approved FFGA budget. The budget and estimate was set very early in the process with only a conceptual engineering design since Metro wanted to expedite the execution of the FFGA and secure the funding early to advance the project.
Contingency Recovery: The current project contingency is $67.5 million including allocated and unallocated contingency. A project risk assessment has been performed in accordance with FTA guidelines, which establishes contingency level recommendations for the project. The revised LOP budget in amount of $1,551.8 million contains Accordingly the revised LOP budget contains the FTA recommended the contingency of $114.9 million., including allocated contingency of $34.6 million and $80.3 million of unallocated contingency (FFGA and Non-FFGA). This will increase the current project percentage contingency from 4.87.1% to 7.410.7% of remaining project budget that is within FTA guidelines.
Since the inception of the contract, additional work scope has been identified requiring the issuance of contract modifications to the design-builder. Additionally, there has been a corresponding increase in associated support costs which collectively have eroded contingency levels on the project. A summary of 1) design-build contract costs, and 2) associated project support costs is provided below. A detailed discussion of each major project cost element is provided in Attachment D.
Since the award of the Design-Build contract (C0980), the following three significant events have occurred which have increased, or will potentially increase, the contract cost.
1.0 Design Build Contract Costs
A. Selection of Design Options: During the Best and Final Offer negotiations with the Design-Builder, a number of project elements were identified as possible options and were added to the contract as potential cost saving measures. The intent was that after award, the Design-Builder would have time to fully investigate these elements and to determine if they were necessary, potentially reducing costs to within the available budget. A total of 21 options totaling $58.7 million were added to the contract. After award, nine options were exercised, which added $35.7 million to the contract. By not exercising the remaining 12 options, the project was able to reduce potential costs by $21 million, along with a corresponding drawdown from contingency.
B. AUR Transfer: Due to continuous and multiple unforeseen conditions and schedule delays, the AUR (Advanced Utility Relocation) contract (C0981R) was terminated for convenience and the Board approved transferring the balance of this utility work to the C0980 contract in April 2015, at a cost to the project of $27.1 million. Since transferring this work to C0980, significant additional discoveries have occurred, including the discovery that electrical utilities, which were originally anticipated to be suspended under the deck, could not be temporarily supported for safety reasons, and which now all must be relocated in advance of construction. This and other unforeseen discoveries have added additional scope, costs and schedule impacts to the project. These additional scope, costs and schedule impacts are addressed in Item C (Schedule Delay Mitigation) below.
C. Schedule Delay Mitigation: With the transfer the AUR work, the Board action recognized that the project schedule would be impacted by six months, based on the best information available at that time. As mentioned above, the additional work required as a result of the additional utility discoveries have extended the project schedule by a minimum of 2 and potentially 4 additional months, for a total impact of 8 to 10 months to contract C0980. These delays need to be recovered to meet the FFGA RSD of May 29, 2021. Staff has aggressively analyzed multiple schedule recovery scenarios and has worked collaboratively with the Design-Builder over the last several months to jointly develop a schedule recovery plan to meet FFGA schedule. A significant contributor to the LOP budget request is the estimated not-to-exceed amount of $49 million associated with performing additional utility work required, as well as accelerating construction to meet the FFGA schedule. Without proactive measures to recover lost schedule, the contractor has the contractual right to submit a request for extended overhead costs for the actual utility caused delay. With 8 to 10 months of project delay, the potential cost to the project if mitigation measures are not adopted, ranges between $49 and $59 million. The incremental net cost to Metro for accelerating construction for an on-time completion is estimated at up to $10 million. With the continued support of the City, the recovery strategy is scheduled to begin in early January 2016, subject to Board approval.
2. Associated Project Support Costs:
Additional support services costs are included in the project budget. These costs include: Third Party Work, Right-of-Way Acquisition, P3010 Light Rail Vehicles, Professional Services, Other Support Costs, and Environmental Planning. A detailed discussion of each of these project cost elements is provided in Attachment D.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
This Board action will not have any negative impact on established safety standards.
Financial_Impact
FINANCIAL IMPACT
The funding increase of $131.8 million will be included in the Life-of-Project budget under Project 860228 (Regional Connector Transit Corridor), in Cost Center 8510 (Construction Project Management). The FY16 Budget will be increased by $20 million.
Since this is a multi-year capital project, the Executive Director of Program Management and the Project Manager will be responsible for budgeting costs for future years.
Impact to Budget
As discussed in Attachment F, the analysis required by the Uniform Cost Management Process and Policy for Measure R projects, the increase to the Life of Project budget for this project presents a special challenge in that the Metro Reform and Accountability Act of 1998 made underground work ineligible for Propositions A and C. In addition, the Regional Connector LOP already includes its full complement of Measure R funding, $160 million. This leaves very few alternatives for addressing the LOP increase. To address the funding eligibility challenges, we recommend the funding transfers shown in Table 2, Strategy to Address Regional Connector Funding Gap in Attachment F.
The recommended transfers keep the LOP of project budgets whole for the projects already under construction. In June of 2015, we reported to the Metro Board of Directors that a shortfall exists in the SRTP forecast. At that time, the shortfall was still manageable, but we identified the risk of changing circumstances, such as rising costs and the possibility of a recession. Next spring, we will be updating the SRTP forecast and returning to the Metro Board of Directors with a recommendation for addressing this continuing problem.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board may decline to approve recommended actions A and B. This is not recommended as not approving the LOP budget adjustment and funding under recommendations A and B, would have a significant impact on the Agency’s ability to deliver the project with the current total unallocated contingency of 2.27.1% ($67.530 million). The Board may also decline to approve recommendation C. This is also not recommended as not approving the additional utility work and adoption of schedule recover measures means that work required to complete the project could not be performed, and that the Project would not be completed per the FFGA schedule agreed with FTA and TIFIA. This puts at risks the receipt of future FTA funds for other Metro projects. This late completion also entitles the C0980 Contractor to additional extended overhead costs as well as additional Project costs totaling approximately $5 million per month.
Next_Steps
NEXT STEPS
Under the terms of the Design-Build contract and as part of risk sharing, Metro and the Design-Build Contractor have respective responsibilities for applying for, and obtaining, the necessary City permits, variances and approvals under the terms of the base contract. In this regard, Staff anticipates working closely with City staff and the Council representative to obtain all necessary permits, variances, and approvals to expedite the project schedule so that Metro meets its commitment to FTA.
At this time, the project is approximately 20% complete. By FY18, Staff anticipates the project will be over 50% complete (design will be complete, and tunneling and excavation for stations will be substantially complete). In the intervening period, Staff will undertake a formal risk assessment with FTA. The results of this risk assessment will be shared with the Board, along with a recommendation for the appropriate Board action in FY18, which could include a request for additional funding resources.
Attachments
ATTACHMENTS
Attachment A - Procurement Summary
Attachment B - DEOD Summary
Attachment C - Contract Modification Authority (CMA) Summary
Attachment D - Project Cost Summary by Element and LOP Variance
Attachment E - Funding/Expenditure Plan
Attachment F - Uniform Cost Management Process and Policy Analysis
Attachment G- Regional Connector Presentation
Prepared_by
Prepared by:
Girish Roy, Deputy Executive Officer, Project Director, (213) 893-7119
Ben Bootorabi, Acting Director, Project Controls, (213) 893-7121
David Yale, Managing Executive Officer, Countywide Planning & Development,
(213) 922-2469
Bryan Pennington, Deputy Executive Director, Program Management, (213) 922-7449
Reviewed_By
Reviewed by:
Ivan Page, Executive Director, Vendor/Contract Management (Interim), (213) 922-6383
Richard Clarke, Executive Director Program Management, (213)922-7557
