Mike Lindblom has the story:
The state of Washington has agreed to give millions of dollars more in new incentives to the two construction teams vying for the contract to build the tunnel that will replace the Alaskan Way Viaduct.
The agreement, however, means there will be a thinner cushion against cost overruns when tunnel excavation is scheduled to begin next year. The project is scheduled to be completed in November 2016.
Bids are due Thursday afternoon and a contract is to be signed in January. The new incentives come on the heels of another $230 million in allowances approved earlier this month.
The giveaways, which appear to be a last-ditch attempt to retain the two remaining bidders (two others already dropped out), include $50 million for a southern portion of the project, incentives of $100,000 a day to finish early, and $40 million for an intervention fund, Lindblom reports.
But that means the fund to manage cost overruns—the state has capped its spending at $2.8 billion and says it refuses to pay another dime—has now dwindled from $415 million to only $200 million. What sort of padding does that leave to pay cost overruns: the cost overruns that the state is legally banned from paying, the cost overruns lawmakers and media from other cities insist they refuse to pay, the cost overruns that state law says Seattle property owners must pay? Less than a seven percent pad of the state’s budget, when megaprojects like this one typically run about 34 percent over budget.
With dollars signs: The state’s obligation to the project is roughly $2.8 billion. Typical cost overruns on a project like this would be—at roughly one-third of the total—$900 million. Our backup fund is less than a quarter of that.
With nearly every day or week we’re getting bad news about this project (the state offering hundreds of millions in concessions to keep bidders, the state study failing to factor in tolling to cover $400 million it must produce to cover its share of the payment, bidders dropping out, and now another revelation of millions more in giveaways on the project).
Money is disappearing fast and the bids aren’t even in yet. And those bidders don’t seem so eager to take on the widest deep-bore tunnel ever attempted; it seems more like the state is desperate to keep the bidders, even giving away money it can’t really afford.
That albatross sure is getting heavy.
Ah, so now I’ll be driving on the Deep Bore viaduct from now on.
I’m assuming it will remain a ‘bouncy ride’.
Wish we could figure out a way for all of Conlin and Gregoire and company’s assets to be seized to pay for cost overruns.
Wasn’t the entire Seattle City budget shortfall this year about $69 million? The one that is forcing them to cut police, libraries and school food programs, to name a few.
And yet they’ve already given 4 times that much away to who knows who for doing what? “Staying in the bidding” for a tunnel that can’t be built?
I’m interested in how we should properly account for the $100,000 per day bonus for an early finish. Obviously, if the project doesn’t come in early then that concession costs the state nothing. On the other hand, megaprojects go way over budget in part because of delays, so it seems like a project with huge bonuses for early completion might be less likely to go as much over budget as is usually the case. Do other megaprojects tend to offer that high of a bonus for early completion? Any indication of whether it helps rein in the tendency toward late/overbudget?
I don’t think it’s a good sign that the guys who would actually have to build this thing seem to think that the project is so difficult that they need millions more than the state planned to make it worth the risk. But maybe the fact that they pushed for a big early completion bonus means that they at least think the plan is plausible? Presumably if they thought it unlikely to finish on time, they wouldn’t have used a portion of their bargaining power to push for contingent payments.
$900,000 million?
Hmm, I’m not sure giving contractors tons of money to rush one of the largest and most complex projects ever built in the nation is really the smartest idea.