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Audit of Rainier Valley Construction of Link Light Rail Reveals Several Critical Issues

by John Niles

Gannett Fleming audit of Sound Transit Capital Projects Management Systems is available here for download in PDF, with annotations from Public Interest Transportation Forum

Quote from Joni Earl, Chief Executive Officer, Sound Transit in CEO Report of September 23, 2005:

Capital Audit results

On Thursday, September 22, Performance Audit Committee Chair Dave Asher and auditors Gannett Fleming presented the Sound Transit Board with the findings and recommendations from their Performance Audit of Sound Transitís Capital Projects Management Systems. The auditorís assessed Sound Transitís framework and practices for managing capital projects against industry best practices and generally accepted project management standards. Five Sound Transit capital projects, valued collectively in excess of $542 million, were audited. Industry best practices were developed and used to survey five large transit agencies around the country. Twenty three recommendations for improvement were made based on the audit findings. Overall, Sound Transit fared very well and is addressing the areas where the audit found room for improvement Ė establishment of a formalized training program for project managers and a formal lessons learned program.

The formal Auditorís Opinion stated: ďIt is the opinion of the audit team that Sound Transitís project management systems, as evidenced through the audited projects, are in good standing in comparison with other transit agencies. Although there are opportunities for improvement, the development of policies and practices for effective and efficient capital project management are appropriately progressing.Ē

The full audit, along with the agency response, will be posted next week.  The agency is always looking for ways to improve how it delivers quality projects and service to the region.

The auditors examined the performance of the Rainier Valley and Beacon Hill tunnel construction components of Central Link Light Rail Initial Segment.

The reported findings indicate significant problems requiring correction by Sound Transit.  The most serious was this one about the Rainier Valley segment of the Central Link project, as noted on page 54 of the report, under schedule management:

Schedule management practices on the Rainier Valley/ MLK Line Segment fall short of best practice standards primarily because the management team had been operating without an approved contractor schedule since September 2004. While it is not entirely uncommon to have disagreements about an acceptable schedule; it is poor practice to allow this matter to remain unresolved for such an extended period.

The team had been working to ensure that the project is progressing despite these unresolved issues and credit for this effort is well-deserved. Further the team was continuing to work with the contractor to address the many aspects of the contractorís schedule that were unacceptable. The project team had also demonstrated good practices by developing and using ancillary schedule tools to monitor the progress of work in the absence of an agreed-to critical path schedule. Nonetheless, despite continuing this slow schedule development process of working with the contractor, the team did not demonstrate a plan to resolve the disagreement.

Reflections on the schedule specifications indicate that they could be refined to require more specific requirements concerning resource loading and Bases and Assumptions. More importantly, the enforcement of the specification was of concern to the auditors. See the discussion in Contract Management below.

At the time of the audit, the team reported that there was 53 days of negative float in the contractorís May 2005 schedule submission. While this situation was not of immediate concern to the Central Link Project Schedule, it signaled a continuing and unresolved dispute over the obligations of Sound Transit and the contractor with regard to the contractual completion date. The dispute centers on the contractorís right to complete early versus the specified contractual duration of 1,000 days which, in this case would indicate there is float in the schedule. In addition, the critical path for the contract appears to be changing frequently. Further, the contractor had reserved schedule rights on many bi-lateral changes meaning that schedule issues will remain unresolved until some future date.

Under contract management on page 58 of the audit report, this was reported:

Although the audit identified several good practices in the area of contract management, such as, the appropriate inclusion of elaborated special provisions and a best-value contracting strategy that acknowledged the need to contract with an experienced contractor; important gaps were identified between the audit criteria and the contract management practices demonstrated on the Rainier Valley/MLK Line Segment.

For example, apparently in order to meet the broader Central Link Project schedule, the segment construction contract was awarded prior to obtaining all stakeholder design comments. Given the realities of the situation as it relates to the Central Link Project as a whole, this may have been an appropriate decision, but it is not consistent with best practices. While this issue manifests itself as a $1.7 million change order, its genesis is in scope and design management and their coordination with third parties.

More importantly, several audit observations indicate that the team has deviated from the best practices relating to enforcing the contract specifications and terms. For example, at the time of the review the construction contractor had been working for nine months without an owner-accepted schedule. Although this situation is not entirely uncommon in the industry, it is confirmation that the contract terms are not being effectively enforced. In addition, the project team has abandoned the contract terms of paying off the schedule and instead is paying the contractor based on a schedule of value. Paying from a schedule of values is a fairly common industry practice. It is a reasonable and practical response, however, in this instance, it does not conform to the contract terms. Contract terms should be revised to reflect the practices or Sound Transit should enforce the contract terms.

In addition, at the time of the review, Sound Transit had issued over 160 work directives for the contract. A work directive is in effect, a unilateral change where Sound Transit directs work to be performed on a time-and-material basis. Although work directives are a standard practice and allow work to progress despite disagreements, the volume is disquieting and often suggests that contractual relationships have deteriorated. The team is allowing unresolved contract disputes to linger longer than would be considered a best practice.

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                    Last modified: February 07, 2011

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