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High stakes: Bertha contractor, state at odds over labor dispute costs

To make up for costs and delays that a dispute with a labor union caused last summer, the contractor digging the Highway 99 tunnel in downtown Seattle is pressing the state for $17.6 million in additional compensation for the troubled project.

Major mechanical woes with Bertha, the machine boring the tunnel, now promise to delay the project for over a year. Those problems have long since overshadowed last summer's conflict between the contractor, Seattle Tunnel Partners, and the International Longshoremen and Warehouse Union's Local 19. But deciding who will foot the bill for the labor dispute remains unresolved. Under the current contract terms, WSDOT has agreed to pay Seattle Tunnel Partners $1.4 billion to complete the technically challenging underground roadway project. The contractor's request for more money has the potential to add to that amount.

The standoff between Seattle Tunnel Partners and the ILWU crescendoed when the longshoremen picketed Terminal 46, which is adjacent to the tunnel site, for 28 days during last August and September. The union said its members were entitled to four jobs, on each of two shifts, loading excavated tunnel muck onto barges at the port terminal.

Washington State Department of Transportation and the contractor are negotiating over whether the state should pay some or all of the costs related to the union unrest. The contractor asked WSDOT for the extra compensation and a 32-day schedule extension in four “change order requests” submitted in November and December of last year. Crosscut obtained the documents through a public disclosure request.

Asked if the state could end up paying some or all of the money Seattle Tunnel Partners has requested, a WSDOT spokesperson, Laura Newborn, said: “We are in negotiations right now, so it’s a difficult question to answer.” She also said that WSDOT and Seattle Tunnel Partners are talking directly about the change order requests, not through lawyers or third party negotiators, and that there is currently no timeline for completing the negotiations.

Seattle Tunnel Partners declined to comment on the matter, saying only that they are in negotiations about the change order requests with WSDOT.

An overview of the Highway 99 tunnel site. The muck conveyor (highlighted in yellow) is designed to carry excavated soil from the back of the boring machine to waiting barges at Terminal 46. Image: WSDOT 

Correspondence attached to the change order requests offers a glimpse at Seattle Tunnel Partners' readiness to play hardball with the state over contract clauses and money — and WSDOT’s willingness to push back. The still-unsettled disagreement could provide some indication of how the two parties will handle any similar situations that arise in the future. WSDOT officials have pointed repeatedly to the ability of the project's design-build contract to shield taxpayers from cost overruns.

The negotiations about the labor dispute costs are set against the backdrop of Bertha's mechanical problems.

Seattle Tunnel Partners said on Monday that the machine is not expected to start digging again until late March 2015. Bertha has already been at a near standstill since last December. If the March 2015 restart date is accurate, the total length of the delay will be about 16 months. The stoppage is due to problems with Bertha's main bearing assembly. Seattle Tunnel Partners is planning to dig a roughly 11-story deep, 83-foot-wide pit near South Main Street to access and fix the machine. Construction of the pit is scheduled to begin in late May and repairs are slated to get underway in October. In a meeting with The Seattle Times Editorial Board on Tuesday, a representative for the contractor said that the cost to repair Bertha and get the machine digging again could total around $125 million.

The costs Seattle Tunnel Partners earlier included in the change order requests are related to delays and inefficiencies that they say the picket line caused and the agreements that were forged afterward to settle the labor dispute.

Foss Maritime Co., a subcontractor providing the muck barges, signed a memorandum of understanding with the longshore workers' ILWU on Nov. 22 last year. It gave the longshoremen two “line-handling” jobs positioning the barges under a conveyor at Terminal 46.

Seattle Tunnel Partners had originally intended to use remote controlled winches to position the barges, which did not require any line-handlers, according to information included in a change order request the contractor submitted to WSDOT last Dec. 19. 

The line-handling jobs, the contractor said, added new costs to the project.

The ILWU day-rate to provide two line-handlers for one 10-hour shift was $2,720. The price, according to documents attached to the request, rose to $3,070 on nights and $3,275 on weekends. The rates included not only wages but also items like radios, safety gear and insurance. On July 1, 2014 the prices are set to rise by five percent.

Cameron Williams, president of ILWU Local 19, declined to comment on the arrangement the union reached with Seattle Tunnel Partners.

Muck barging began on Nov. 23, according to documents attached to the change order requests. Seattle Tunnel Partners estimated that barging operations would last 198 days and that the cost of the two line-handler positions during that time would total $1,290,520.

After a 29 percent "labor markup" from Foss and a 7 percent "subcontract markup" from Seattle Tunnel Partners, the total rose to $1,781,305. The five percent July 1 ILWU rate increase bumps the projected amount up to $1,825,838.

The labor was not the only new cost included in the change order request. Using line-handlers instead of the winches meant that an extra tugboat would be required to position the barges. After a 7 percent markup from Seattle Tunnel Partners, the total price for the tug checked in at $3,983,610.

Covering the added cost of two line-handlers per shift, the tugboat and the markups, according to Seattle Tunnel Partners, would be $5,809,448. The contractor asked the state in their Dec. 19 change order request to compensate them for these costs.

Seattle Tunnel Partners had also asked for $9,349,096 and the 32-day schedule extension in a request submitted on Nov. 15. Even though the picket line lasted only 28 days, the contractor says in the request that it delayed tunneling by 32 days and that extending the schedule by that length of time would add $7,872,186 in project costs. The other $1,476,910 was for “tunneling crew inefficiency,” which resulted from the picket line's affect on the work that could be done at the site.

Dozens of workers were pulling shifts in spite of the picket line. An area closer to Alaskan Way was not affected by the union protest. Information attached to the change order request shows at least 2,092 shifts logged between Aug. 20 and Sept. 22. Daily pay for workers on those shifts, with overtime, ranged from $101 to $1,723 and totaled $1,501,437.

An aerial view of Terminal 46 shows the muck conveyor and a barge. Photo: WSDOT

Some of that work involved repairs to Bertha. Throughout August, daily shift reports show that workers struggled to unclog the machine's "screw conveyor." The "screw" moves soil toward the machine’s rear, eventually discharging it onto a belt conveyor system. The belt conveyor is designed to then carry the material across the job site to Terminal 46 and deposit it onto the muck barges. Seattle Tunnel Partners later attributed the screw conveyor clogs to chunks of fiberglass, which had been mixed into a cement headwall that the machine broke through when leaving its “launch pit.”

When the picket line appeared on Aug. 20, workers were in the process of removing material from the screw conveyor, and from other areas at the front of the machine, according to a "delay analysis" attached to the change order request. Tunneling was stopped and expected to resume on Aug. 23. The contractor says that it decided to undertake more extensive work cleaning material from in front of the machine, and repairing the cutter-head, only after it became clear that the dispute with the longshoremen would not be quickly resolved.

That tunneling crew inefficiency figure included in the Nov. 15 change order request excluded any labor costs associated with the cleaning and cutter-head repairs. It did include all of the other labor costs that the contractor incurred between Aug. 23 and Sept. 22. The cutter-head repairs were completed on Sept. 22, according to the shift reports. Bertha began mining again early the following morning, at 4:38 a.m. on Sept. 23.

The dispute over the muck loading can actually be traced back to last spring. In April 2013, Bertha’s parts, freshly delivered from Japan, were sitting on the Jumbo Fairpartner in Elliott Bay. For three days the vessel was anchored there and the parts were not moved. The reason for the delay was a squabble between Seattle Tunnel Partners and Total Terminals International, LLC over a “Stevedore and Terminal Service Agreement.”

The agreement is mentioned in a Sept. 13 letter sent from Seattle Tunnel Partners’ project manager Chris Dixon to WSDOT Deputy Program Administrator, Matt Preedy.

TTI leases and operates about 80 acres at Terminal 46 from the Port of Seattle and is an ILWU employer. The boring machine parts were set to be off loaded at the terminal. The agreement that Seattle Tunnel Partners finally signed with the TTI on April 5, 2013 not only said that ILWU workers would get to unload the parts, it also included a clause guaranteeing the longshoremen's union the future muck loading jobs.

Seattle Tunnel Partners has said since that they were cowed into that agreement and signed it under duress. In his Sept. 13 letter to WSDOT, Dixon reiterated that position.

The Jumbo Fairpartner docking at Terminal 46 on April 6, 2013, one day after Seattle Tunnel Partners signed a terminal services agreement with Total Terminals International, LLC. Photo: WSDOT

“STP wishes to remind WSDOT of the undeniable fact that WSDOT, and the Port of Seattle, encouraged, supported and witnessed STP's signing, under duress,” Dixon wrote. The delay offloading the parts last April, he said, was “creating a sensitive and difficult public relations issue that WSDOT was anxious to resolve.”

Last November, Seattle Tunnel Partners finally worked out a settlement with TTI to get out of the April 5 agreement and the requirement to use four ILWU muck handlers per shift. In a Nov. 21 change order request submitted to WSDOT, Seattle Tunnel Partners said the settlement would involve a $1,963,269 payment to TTI. The settlement payment, the contractor said, was a necessary condition for moving forward with muck barging operations at Terminal 46. With Seattle Tunnel Partners' 21 percent markup, the amount included in the change order request submitted to WSDOT totaled $2,375,555.

This was not the first settlement proposal TTI and Seattle Tunnel Partners had discussed. Just 30 minutes after the ILWU picket line appeared at Terminal 46 last Aug. 20, TTI's general manager, Rick Blackmore, sent the tunnel contractor an email with an attached letter dated Aug. 19. The letter offered to dissolve the April 5 agreement, which would have eliminated Seattle Tunnel Partners' obligation to use ILWU muck handlers. In exchange, TTI asked for $2,323,254. Dixon described the details of that proposal in an Aug. 23 letter sent to WSDOT.

Seattle Tunnel Partners rebuffed TTI's settlement proposal in a strongly worded reply also sent on Aug. 23 by Dixon. "We see no useful purpose in providing a detailed response to your August 19, 2013, demand letter which was obviously drafted by your attorney," he wrote. "We disagree with your letter and your demand is rejected." As for the amount in TTI's proposal, Dixon wrote: "We cannot help but observe that we are surprised to see that Total Terminals International, LLC's $2,323,254 demand reflects anticipated profits of 73%. That is not only an unconscionable and outrageous amount, but it is also contrary to your representations when the Agreement was signed."

The $2,323,254 figure is $52,301 less than the amount Seattle Tunnel Partners asked WSDOT to pay in their Nov. 21 change order request.

TTI's Blackmore did not return a phone message left by Crosscut.

The other change order request is the smallest. It included $91,434 in legal fee reimbursements for two building trades labor unions, the Pacific Northwest Regional Council of Carpenters and the Northwest National Construction Alliance.

Those unions had been promised muck loading jobs in a "project labor agreement" Seattle Tunnel Partners signed at the outset of the project. Some of these jobs were the same ones the ILWU wanted, though they were not the line-handling jobs they longshoremen would eventually get. After the picket line formed, the building trades unions filed National Labor Relations Board charges against the ILWU. In December they filed an NLRB case against Seattle Tunnel Partners.

In exchange for withdrawing those cases, Seattle Tunnel Partners agreed to cover the unions’ legal fees. After Seattle Tunnel Partners added their own 21 percent markup, the change order request submitted to WSDOT totaled $110,635.

The correspondence attached to the change order requests shows that throughout the time the picket line was in place, WSDOT argued that the terms of the project's contract made Seattle Tunnel Partners responsible for maintaining “labor harmony” on the job site. Any costs and delays caused by picketing were therefore the contractor’s problem.

"The Contract specifically provides that strikes, labor disputes, work slowdowns, work stoppages, boycotts or other similar labor disputes are the responsibility of STP for which STP has no right to an increase in compensation or time," WSDOT contract administrator, Brian Nielsen, wrote in a Sept. 4, 2013 letter to Dixon.

Seattle Tunnel Partners disagreed. They said their responsibility was only for maintaining harmony with unions that had signed the project labor agreement at the start of the job. The ILWU had not signed.

WSDOT said this was not the case, and that the scope of Seattle Tunnel Partners' labor harmony obligations went beyond maintaining good relations with the signatories of the project labor agreement. "In fact," Nielsen wrote in the Sept. 4 letter, "STP's obligations under the Contract are to address Labor Harmony on a Project wide basis."

Dixon dismissed this view in his Sept. 13 letter to WSDOT's Preedy. And he even went a step further, saying that responsibility for the picket line fell squarely on WSDOT.

The Port of Seattle agreed in 2012 to lease WSDOT about five acres of Terminal 46 for the muck disposal operation. A clause in the lease, Dixon said, required WSDOT and the port to work together to avoid and resolve labor unrest that could affect port interests. "If any party has responsibility for ensuring labor harmony with the ILWU, it is WSDOT, not STP,” he wrote in his letter to Preedy.

He also said that without using barges to get rid of the muck there was no way to finish the tunnel on time. "The only tunnel muck transport option to complete the tunnel boring on schedule is barging," he said, "not trucking."

Asked last week if the dispute had strained the relationship between the agency and the contractor, WSDOT program administrator Todd Trepanier downplayed any tension.

“WSDOT and STP have a professional working relationship,” he said. “We are currently in negotiations over the costs associated with the labor issue and we would not characterize those as ‘strained’.”

For better or worse, the relationship will remain in place for the foreseeable future. Even after Bertha's months-long mechanical repairs are complete, Seattle Tunnel Partners will need to finish digging the tunnel. The machine currently sits near South Main Street, about 60 feet underground and roughly 1,000 feet along the planned 9,300-foot tunnel path.

Seattle Tunnel Partners, which is a partnership between Dragados USA and Tutor Perini, originally planned to have the tunnel completed by December 2015. The contractor said on Monday they are now hoping to meet the November 2016 tunnel-opening deadline that WSDOT proposed when taking bids on the project.

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