Tunnel Expert Review Panel: Project won't exceed $3.1 billion budget

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The fourth annual report from the tunnel project's Expert Review Panel is cautiously optimistic that the project will come in on budget.

The annual Bertha Report is in.

The Expert Review Panel (ERP) tasked with assessing the finances, schedule, management and risks of the Alaskan Way Viaduct Replacement Program — known to insiders simply as "the tunnel" — released its annual accounting of the massive boring project on April 3rd. This most recent report, the panel's fourth, is a mixed bag of high praise and deep (pardon the pun) concern that spares neither WSDOT, Seattle Tunnel Partners nor the City of Seattle from blame.

The cautiously optimistic report cites concerns about communication, problem solving, responsibility for post-tunnel projects and the plague of unresolved disputes. Most notable is the conclusion that the tunnel project can still be finished without running over budget: "... the Program can be completed and there does not appear to be a need for additional State or local funds above the amounts already contained in the $3.1 billion budget.”

Considering the slew of media pieces speculating about cost overruns, to hear that the tunnel can remain within budget is surprising, to say the least.

Then Gov. Christine Gregoire and state legislators created the ERP in September, 2011 to watchdog Seattle’s tunnel mega project. The three-member panel is an independent body with virtually unrestricted access to all aspects of the Highway 99 viaduct replacement. Two of the panel's members are local engineers specializing in large scale construction projects. Dr. Patricia Galloway lives in Cle Elum and is the president of Pegasus Global Holdings, a management consultant firm. Bob Goodfellow is the senior vice president of Aldea, an underground construction design firm. The third member, John Rose, has experience with mega-project financing and is currently working as a finance advisor in Seattle.

When the panel released last year’s report (in February 2014), Bertha had been stalled for only two months, a mere eye blink compared to the 16 months the machine has been idle to date. Since its initial stall, the tunnel project has become something of a political soap opera, with local and state elected officials, WSDOT and STP all struggling to communicate and agree with another. The ERP allowed as much in its 2014 report. “Several factors have strained the relations between WSDOT and STP, primarily at the executive level," wrote the authors. "The ERP finds that the Project has not benefited from an open exchange of technical ideas and information.”

Things would only get worse.

In late November, 2014, Seattle City Councilmembers felt blindsided by news that the viaduct had sunk more than an inch. Then came the leaked letter from Brierly Associates, one of the tunnel engineering contractors, warning of a potentially “catastrophic failure” of Bertha’s access pit. Meanwhile, two bills to cut funding for the project surfaced in Olympia. Both were shut down by Rep. Curtis King, R-Yakima — who felt that calls for a shutdown were premature and extreme — but not before the bills made headlines in Seattle.

Bertha has had a better run lately. Successfully boring into the Alaskan Way access pit eased some of the city’s frustration with WSDOT. The smooth exhumation of Bertha’s cutterhead last month gave tunnel advocates one more reason to cheer. But Bertha and the tunneling project have a very long way to go.

There have been cost increases and someone will have to pay for them. The question of who picks up the tab (STP, the City of Seattle or WSDOT) will be settled in court — and will likely take years to sort out. But based on current and anticipated change orders from STP, the report concluded that even if, worst-case scenario, courts force the state alone to pay the estimated $317.5 million in cost overruns, letting STP totally off the hook, there will still be enough money in Bertha's $3.1 billion budget to cover those costs. (That calculation is based on $124 million in contingency funds, $70 million in estimated savings on post-tunnel projects such as the viaduct tear-down, $85 million in Bertha insurance and the $50 million that STP will apparently forfeit for contract delays.)

The ERP credits WSDOT’s initial STP contract for foreseeing the potential risks associated with such a huge undertaking. In a statement, WSDOT said it was "pleased" with the report's conclusion that "the project can be successfully completed based on its current course." But Councilmember Mike O'Brien isn't buying it. "The report feels a little like engineers reviewing other engineers in awe of a major feat,” he said. “The whole financial analysis seems a little suspect. It feels like an engineering solution to a budgeting problem.”

O'Brien has issues with the report's faith in tolling and praise of the WSDOT contract with STP. The ERP, he argues, talks about tolling as a funding source and mechanism for balancing cost overruns, but they “haven’t acknowledged how we’re going to do it. They talk about how this WSDOT contract is really well designed to settle disputes and puts the emphasis on the contractor. All it does is shift the impact until after the project's done and we can't do anything about it."

One suspect calculation is the $50 million referenced above that STP apparently owes for contract delays — one of the reasons cost overruns will not affect the $3.1 billion budget. According to ERP's Patricia Galloway, that number was given to the panel by the state. In the state's contract with STP, failures by the contractor to complete the project on time result in fines of $100,000 a day. The state's $50 million calculation comes from its estimate that STP will be 500 days late in finishing the project. When asked to explain further, Galloway would only say the contracts were complicated. But it seems that WSDOT is preemptively deciding that STP is at fault for the projected delays.

O'Brien does find common ground with the ERP on one thing: bad communication between the city and WSDOT. “Communication protocols between WSDOT and the City,” reads the report, “are not clearly identified as would be expected at this point during a megaproject of this size and this level of complex stakeholder involvement.” The report advises WSDOT and the City to “move expeditiously to complete and implement the formal communication protocol ... to avoid future misunderstandings that can arise between both WSDOT's and the City’s executive levels.”

WSDOT's communication, or lack thereof, has been a source of frustration for O'Brien. "When something goes wrong, there's always a reluctance from WSDOT to notify us," he said. When asked if he'd been alerted about reports of the viaduct sinking another quarter inch, he said, "I saw that headline. I see I have some e-mails from WSDOT, so maybe."

The ERP also questions the ability of STP and WSDOT to solve day-to-day problems. On most mega-projects, individual government departments and contractors maintain a structure that allows for problems to logically ascend the organizational rungs until a solution is found. Because STP and WSDOT lack that clear hierarchy, noted the ERP report, problems tend to bounce around before finding the right person to solve them.

The panel also expressed great concern over the lack of agreement about who is responsible for post-tunnel projects, such as the viaduct tear-down, the Alaskan Way redevelopment and closing the Battery Street tunnel. “There remains an urgent need for a formal agreement regarding their respective expectations, roles, and responsibilities,” says the report. “For program budgeting purposes, it is essential to know the amount WSDOT will be contributing to the Alaskan Way surface street.”

WSDOT and the City are currently finalizing the plan for Alaskan Way; a cost estimate is expected in June. But the report warns that without an agreement, money may not be available to complete these projects.

In the interests of a more positive working relationship, the report urges involved parties to begin settling commercial and legal disputes as quickly as possible. A dispute review board (DRB) is in place to settle issues as they arise, but the report found that the review “process has not been effective as envisioned by either STP or WSDOT ... due to both parties’ reluctance to acknowledge the decisions made in the process.” Both STP and WSDOT appear to be holding back, scared to admit to anything because they don't want to be the one stuck with the check.

The nearly 40-page ERP report praises the improvements made in the last year. It gives all departments good reviews for identifying and managing risk. It also acknowledges the large amount of work done at the north and south portals, which it says are nearing completion.

In all, the report's authors are cautiously optimistic about the future of the tunnel project. But the optimism is tenuous. Last week, WSDOT’s Alaskan Way Viaduct Replacement Program Director, Matt Preedy, announced he was moving to Sound Transit late spring. Although the report doesn’t call Preedy out by name, it warns that “turnover in the program leadership would be harmful to the program, as the tunnel project continues to be in a critical phase.”

As for Seattle City Councilmember Mike O'Brien, optimism is in short supply: "I anticipate more will go wrong."


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About the Authors & Contributors

David Kroman

David Kroman

David Kroman is formerly a reporter at Crosscut, where he covered city politics.