DESIGN/BUILD CONTRACTS

FACT SHEET

 

Design-build contracts are one of the most common types of Public-Private Partnership arrangements.  Authorizing the State Department of Transportation to enter into a design-build agreement, allows the public agency to contract with a single private contractor to design and construct the given project.  However, the shifting of accountability and construction procedures from the public agency to the private contractor may result in a number of problems for the public to manage, such as a lack of transparency of projects, overruns in cost and time, flawed design and shoddy construction.

 

NEW JERSEY:

Hudson Bergen Light Rail –

·         Agreement requires the contractor (21^st Century Rail Corporation) to deliver a fleet of vehicles, build the entire system infrastructure, and provide vehicle maintenance and operations for a period of 15 years, for a fixed price of $1.1 billion.

·         The first 9.5 miles of this system opened a month late.

·         At the end of the contract, in 2015, the system will be handed over to New Jersey Transit, there are concerns that due to the relatively short contracting period the contractor may have “disregarded long-term maintenance costs, leading to a design that is unnecessarily capital intensive.”

·         The 21^st Century Rail’s contract provides a bonus if more than 96% of trains arrive on schedule --- this clause may be the reason that there are complaints that the train operators skip stops and discharge passengers to get the trains back on schedule. 

 

Link(s) Used:

http://www.utrc2.org/events/assets/partnerships-papers.pdf -- specifically: Where Has This Been Implemented? Case Studies of Public-Private Partnerships, Alexis Perrotta and Jonathan Peters, Ph.D.

 

SOUTH CAROLINA:

Carolina Bays Parkway –

·         The public perceived this project as merely the promotion of real estate development.

·         Information such as the names of property owners receiving a profit from the roadway was kept from the public. 

·         Inferior resources were used on the Carolina Bays Parkway resulting in the replacement of eight defective concrete girders. 

·         The contractor knowingly using the defective materials. 

 

Link(s) Used:

http://www.cegltd.com/story.asp?story=5592

http://www.rumormillnews.com/cgi-bin/archive.cgi?noframes;read=28602

http://www.rumormillnews.com/cgi-bin/archive.cgi?noframes;read=28605

 

Conway Bypass –

·         South Carolina violated its own procurement laws by awarding a $386 million design/build contract to Fluor-Daniel Inc., which was NOT the lowest bid proposal for this project.

·         The planned funding source for this highway project was a sales tax increase (which was rejected). 

·         The design-build contractor chosen has a history of previous shoddy work – including over 1,000 violations at the Fernald nuclear facility in Ohio, and almost causing America’s Chernobyl disaster when a chemical tank exploded within 20 yards of ten tons of plutonium.

·         Fluor Daniel, Inc. was previously accused of “knowingly and deliberately submitting millions of dollars in false invoices to the Government.”

·         The contractor’s design for the Conway Bypass violated South Carolina DOT construction policy, by including the use of “pre-cast slab bridges,” to provide in the words of the contractor: “rapid constructability and economical cost.” 

·         The substandard roadway developed a 10’ deep “sinkhole”–eleven months after the road opened.

 

Link(s) Used:

http://www.rumormillnews.com/cgi-bin/archive.cgi?noframes;read=28605

 

The Southern Connector

·         Post completion this roadway has a low usage rate. 

·         The primary contractor for this project hired a management team that consisted of individuals previously found guilty of taking payoffs from a contractor during employment at SCDOT, and the contractor involved in the pay-off scheme was also hired by the primary contractor for this project.

·         The design/build team also had a felon who was convicted for an attempted bombing in an insurance fraud, as a project manager. 

 

Link(s) Used:

http://www.rumormillnews.com/cgi-bin/archive.cgi?noframes;read=28605

 

WASHINGTON:

Seattle Green Line/Monorail Project –

·         A narrow majority of Seattle citizens voted to authorize the creation of a monorail authority to build, own, and maintain a city monorail system.

·         Past experience in Seattle showed that the public interest in safe, high quality, low cost service was best served by a publicly operated transit system.

·         Only one bid was received by the city to build the new Seattle Monorail, and that bid was accepted.

·         The proposed contract included provisions that guaranteed the private companies a certain profit.

·         The Green Line project is funded by Seattle citizens who are required to pay a Motor Vehicle Excise Tax of up to 1.4 percent on most vehicles registered within the city of Seattle.

·         Due to high interest rate bonds, the proposed 14-mile Green Line, in reality, would cost $11 billion, by the time the bonds are paid off, which is almost $9 billion more than the contract’s fixed price.

·         The “extra” $9 billion in interest was said to have stem from uninsured, non-rated “junk” bonds.

·         The project was based on a financial plan that placed most of the risk and responsibility on the taxpayers or the city. 

·         The reduction of staff was approved as a means to salvage the already failing project.

·         On November 8, 2005 Seattle citizens once again were able to vote on the construction of the Seattle Monorail, when the proposition was defeated the Seattle Monorail project came to an end, but this did not end the financial troubles. 

·         Due to the agency’s debt, even after the shutdown of the Monorail project, the City drivers continue to pay the Motor Vehicle Excise Tax. 

 

Link(s) Used:

http://seattlepi.nwsource.com/transportation/160374_monorail12.html http://www.kclc.org/list%20of%20resolutions.htm

http://www.seattlechannel.org/issues/monorail.asp

http://www.washington-apa.org/sections/pSound/bbFall04.shtml

http://www.seattlechannel.org/issues/monorail.asp

http://seattlepi.nwsource.com/transportation/233457_monorail21.html

http://www.elevated.org/project/funding/cartax/

 

MASSACHUSETTS:

Boston’s Big Dig – Central Artery/Third Harbor Tunnel (CA/T) –

There were certain documents that refer to the Big Dig as a “traditional design-build contract.”  However, several documents connected the contractor that helped design the project as one of the several contractors that helped build.

·         The Big Dig is notorious for its vast cost overruns, a virtually unchecked management scheme and ongoing design problems.

·         Joint venture of Bechtel Corporation and Parsons Brinckerhoff  (B/PB) was responsible for administering the CA/T project. 

·         With Bechtel being the company that designed the project, received several of the construction contracts and given responsibility to manage the project –there was a major conflict of interest.

·         A May 2001 Office of Inspector General letter identified numerous concerns regarding cost, compliance, and planning.

·         Construction on virtually all of the Big Dig’s major contracts began with incomplete and error filled designs, such as Bechtel’s error of forgetting to include the Fleet center, all of the errors led to other construction cost overruns. 

·         The design/build contractor neglected for 17 years to perform basic work called for in its contracts – a clear indication of the loss of independent oversight that plagued this project.

·         With Bechtel designing, building, and overseeing the project, as well as having created the IT application specifically to manage the Big Dig’s finances --- and with reportedly a number of files missing, computer drives allegedly destroyed and many documents shielded from the public – Bechtel has been described as being like “the fox guarding the chicken coop.” 

·         B/PB operated for three years without a state engineer overseeing its quality assurance program – the result: faulty construction and lagging repairs.

·         Bechtel recommended that the state approve hundreds of millions of dollars in payments to contractors for additional work, to solve self-created “design problems,” with a total of at least $1.1 billion in construction cost overruns to date, tied to Bechtel mistakes. 

·         As B/PB tries to avoid responsibility for the multi-billion dollar cost overruns, it is placing the entire cost on the taxpayers and turnpike users. 

 

Link(s) Used:

http://www.corpwatch.org/article.php?id=6549

http://www.boston.com/globe/metro/packages/bechtel/

http://www.nashtu.us/download/Fraud-Detection-Barriers.pdf

http://www.mass.gov/ig/publ/annrpt01.pdf http://www.badtransit.com/twatch_more.php?id=1836_0_2_45_M

http://www.cio.com/archive/120100_pit.html

http://www.absoluteastronomy.com/reference/big_dig

http://www.usatoday.com/news/nation/2003-01-19-bigdig-usar_x.htm

 

BRITISH COLUMBIA:

Lion’s Gate Bridge –

·         BC taxpayers paid the consultant for every “extra” night-time closure and delay on the Lion’s Gate Bridge project, which was contracted out to American Bridge/Surespan. 

·         Night time and weekend closures increased, slowing the project down, and eventually delaying the opening, when it was discovered that the contractor’s engineering was flawed.

·         In spite of the contractor’s engineering flaws and late finishing date, the contractor received an additional $7.5 million on top of the original contract, valued at $86.6 million, an 8.6 percent increase. 

·         This project lacked public control and was not required to meet Ministry Transportation specifications or design, and unfortunately while the contractor’s engineering was flawed; the engineering done by Ministry staff on this project was accurate. 

·         Approximately 81% of the Ministry staff said in regards to design/build projects that delivery failed to achieve savings or improvements in completion time.

·         Nearly 75% of Ministry staff said in their experience design/build failed to improve risk management. 

 

Link(s) Used:

http://www.bcgeu.bc.ca/brief_020913.html

 

 

 

 

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