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Thursday, February 11, 2010

HRT chief: Light-rail 'soft costs' are way out of line

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Nearly half of the budget to build Norfolk's light-rail starter line is "soft costs" such as consulting, legal and administrative fees, which are almost twice the norm for this kind of project, Hampton Roads Transit's new leader, Philip Shucet, told the Norfolk, Va., City Council, The Virginian-Pilot reports.


"They just don't make any sense to me," said Shucet, who took the helm of HRT last week. "If I divide them by two, they don't make any sense to me."

Shucet said he's still crunching numbers to grasp what went wrong. As former Virginia Department of Transportation commissioner, he's accustomed to soft costs - expenses other than construction - of 15 percent to 18 percent of a project.

Former HRT president and CEO Michael Townes told the council in December that soft costs were 30 percent of the total project cost, which at the time was estimated at $328 million. Townes was pressured to resign last month amid spiraling cost overruns on the project.

"This is absolutely astounding," said Councilman W. Randy Wright, who serves on HRT's board. "It shows how poorly things had been managed."

Vice Mayor Anthony Burfoot called the soft costs "outrageous."

"I like the fact that (Shucet) is going to pull this thing apart like an onion to understand where it is and how we got there, then extract from that to get us on the right track," he said.

The true cost of Norfolk's 7.4-mile light-rail line is still not clear, Shucet said. HRT staff, with input from consultant AECOM, is working to develop a final cost-to-completion number and present it to the HRT board at a special meeting Feb. 18.

"It will be a number that everyone at HRT will own," he said.

The previous HRT administration over the past several months estimated that the cost had risen 47 percent - from the original $232 million budget to $288 million, then to $328 million and again to $340 million.

"None of those numbers are reliable," Shucet said. "We will determine a reliable number.... Our goal will be to stop the continued upper trend of this cost."

The financial and construction challenges have pushed the opening date of The Tide, as the rail line is known, to late spring or, more likely, summer of 2011, Shucet said. He said HRT is still searching for funds to complete the project. At $288 million, the federal share was $167.2 million, the state was contributing $67.1 million and the city $53.7 million. The state has committed an additional $20 million, and federal authorities are expected to add $7 million. Norfolk could be responsible for the balance unless other funding is secured.

A number of steps have been taken to contain costs. Shucet said they include consolidating the two biggest construction contracts, saving $7.5 million; ending the practice of open-ended task orders with no defined costs; implementing double work shifts downtown; and adding incentives and penalties in construction contracts.

In a related story, a sometimes angry, sometimes resigned Virginia Beach City Council was split on a request from new Hampton Roads Transit chief Philip Shucet for about $245,000 to finish a now-delayed light-rail feasibility study for the city. The council previously thought HRT would pay for the study, now estimated to cost $6.6 million, without city money.

Two council members said they won't support giving HRT money, four said they reluctantly would, and four said they needed time to digest the news. HRT is asking for a decision at the Feb. 23 City Council meeting. The city money, which Shucet called "critical," is needed to match part of a $1.2 million federal grant that would keep the study going. Without it, the study would come to a halt, possibly ending the quest for light rail in the Beach.

The HRT study is looking at extending the Norfolk Tide line to the Oceanfront. The city has a deal with Norfolk Southern Corp. to buy a 10.6-mile right-of-way for $40 million.

City Manager Jim Spore said the city could use $244,800 from its contingency fund for the study.

Shucet said the $4.3 million represented only the consultant's cost.

"What you apparently were not given was project management, legal services, ridership studies," and several other costs, Shucet said.

So far, about $1.5 million has been spent on the study, money that is almost gone, he said. If the City Council approves the money, HRT could access the federal grant in April.

The study is now estimated to be finished between August and December 2011. The previous finish date was late 2010.

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