Sound Transit should collect more soil samples and spend more effort reviewing its design plans to avoid multi-million dollar change orders after construction begins, a state audit found.
The report, released Thursday, cites examples such as gushing groundwater that hindered tunnel construction between the University District and Northgate and the University of Washington Station escalators that often broke down and will be replaced with stronger models for $20 million.
The state began the audit last year, while citing past cost overruns on light-rail and commuter-rail projects, along with the escalator failures. Sound Transit’s financial problems have only compounded since then, with the coronavirus-driven economic downturn forcing spending cuts and possible delays to promised light-rail extension.
The state’s performance audit zeroed in on 300 change orders worth $172 million in 12 contracts. That analysis by itself required 4,900 audit hours, said Michael Huynh, a co-author of the report. Therefore, the team didn’t examine other performance issues such as safety, ridership, project delays or taxation.
Auditors concluded that $100 million worth of change orders resulted from mistakes or missing information. Spending more on planning upfront could reduce the likelihood of those changes, the audit said. Auditors advised assigning two transit staff experts in each specialty, such as electrical work, to review the engineering designs, using formal checklists.
Surprise soil problems, a constant headache in Western Washington, increased contract costs by $79 million. Every one of the reviewed projects turned up at least one change order related to soil conditions or underground obstructions, the audit said.
While designing a Sounder commuter-train segment in downtown Tacoma, the agency didn’t investigate underground conditions because of worry about drilling on high-traffic streets and having to pay to repair them afterward, the audit said. Sound Transit wound up adding $13 million to the contract to dispose of an extra 466,000 tons of contaminated soil, auditors said.
In a related difficulty mentioned only in passing, the report said Sound Transit typically needs years to identify and purchase land or easements, a process that sometimes stretches past the start of a construction contract.
Auditors calculated the number of soil sampling holes could be doubled for roughly $8 million a project but save money in the long run. The report also suggests that Sound Transit could adjust the path of its rail projects to avoid plumes of groundwater that can raise the cost of construction.
Just last week, Sound Transit told a governing-board committee that contractors need $35 million more to complete a streetcar extension from downtown Tacoma to the Hilltop neighborhood, because of underground utilities and contaminated soils that didn’t appear in the pre-construction plans.
Sound Transit is attempting a 25-year, $96 billion program to expand and operate regional rail and bus service. The audit didn’t estimate how much money the agency could save by following its advice.
In a response the report, Sound Transit CEO Peter Rogoff said the agency would incorporate the recommendations but defended the costly change orders, saying they “fall within industry standards, especially given the complexity of some of our work, such as tunneling.”
Change orders account for 8% of contract costs, Sound Transit said.
Staff and board members will discuss ways to drive down the rate of change orders, said Kent Keel, chair of the Sound Transit board and a city council member in University Place. Yet Keel said he was reassured that the agency’s change-order costs were within the industry range.
“This is not one of those clarion calls that we need to make a big deal about,” he said, noting the agency is dealing with billions of dollars. “A lot of our projects are way more complicated than typical projects most municipalities and localities go through.”
Pierce County Executive and Sound Transit board member Bruce Dammeier, however, said the auditor’s findings “validate concerns I’ve seen all along.”
“That should be a call to action to Sound Transit,” Dammeier said. “Sound Transit needs to reform its contracting process.”
The agency lacks a formal process for making sure lessons learned in past projects are applied to future projects, the audit said.
The agency did maintain a “lessons learned” program that expired in 2018 but wasn’t closely applied to new projects, Huynh said. Sound Transit has re-established it. Auditors suggest following the path of Denver’s FasTracks, which writes one-page summaries of past lessons that are added to its databases and design manuals.
Auditors say that it’s far cheaper to investigate and find problems early, when there is still competitive bidding available from contractors, than to fix the flaws later through negotiations. While the winning contract bids averaged 15% less than Sound Transit’s cost estimates, the change orders averaged 8 percent more than cost estimates.
Cost controls are especially needed now, auditors say, because of $500 million increases for light-rail expansions to Lynnwood and Federal Way, which transit executives blamed mainly on the hot pre-coronavirus economy.
But the agency’s multi-year public process — along with environmental and land-use permitting requirements, and non-essential features added to projects — also play a role.
Eight years ago, in the wake of the Great Recession, a similar performance audit under Auditor Brian Sonntag said the agency made reasonable decisions in its recessionary cuts, but questioned optimistic ridership predictions. Since then, light-rail use soared from 30,000 to 80,000 daily riders after three new stations opened in 2016.
Current Auditor Pat McCarthy is a former Sound Transit board member and recused herself from the study.