Most of the construction on San Francisco’s long-awaited Central Subway project will be completed by March 31, a new deadline that was approved by the San Francisco Municipal Transportation Agency Board of Directors on Tuesday as part of a robust set of contract re-negotiations.
As part of that process, the board also signed off on a collective $143 million to be paid to the Tutor Perini Corporation, the project’s contractor, to settle up on a wide range of claims against the agency as well as the latest round of work order modifications, also known as change orders.
The board’s actions keep the project “on track” to begin revenue service in spring 2022, nearly four years behind schedule and roughly $300 million over the original budget.
With the revised contract, Tutor Perini is obligated to complete the bulk of critical construction by March 31 so SFMTA can bring in its own people for the year-long testing process to make the decade-in-the-making railroad ready for passengers and paid service by this time next year.
The contractor will then remain on site for six months to handle minor fixes, complete cosmetic upgrades and address other outstanding items identified by SFMTA staff.
“It has taken a while for us to get to this point, but at the end of this month, what is going to happen is the contractor is going to finish all the work that is necessary for us to start the next major effort of our work,” said Nadeem Tahir, Central Subway project manager.
As reported by the Examiner, much of the delay can be attributed to the 1,000-plus change orders made to the contract, a regular occurrence on complicated capital projects where the contractor might encounter unexpected conditions in the field that alter the scope of the work. Historically, SFMTA has allowed Tutor Perini to continue with the work, foot the bill and charge the agency later for payment.
The board also approved an omnibus package of 671 change orders in October for about $48.8 million.
On Tuesday, it approved the second omnibus package for a total of 409 change orders and $53 million that includes all the work completed through January 2021. A third and final omnibus package will be presented to the board later this year to cover anything that comes up before project completion.
The remaining money paid out to Tutor Perini — $93.6 million — settled a litany of claims levied against the agency having to do with inefficiencies, incidentals and other accrued costs that the contractor said it had been forced to float.
SFMTA could either pay up, or risk exposure for “hundreds of millions of dollars” of claims down the line, so the agency chose to negotiate a deal that brought Tutor Perini’s original ask down from $176 million.
“None of us are all that excited to have to continue to pay out more for this project, but it is imperative that we finish it,” Director Sharon Lai said. The work has been conducted. Staff has religiously vetted all of these claims, and this is really all about risk minimization for us on the legal side, at this point.”
Staff told the board this settlement would “close the door” on any possible claims from the contractor through January 2021, assuring directors there wouldn’t be more surprises down the road and that the agency was widely protected from legal risk.
Total cost overrun, largely driven by the claims settlement, three change order omnibus packages, contingency reserves and additional project management and other services, puts the final cost at $1.89 billion and sticks SFMTA with a $184 million deficit for this single project alone.
“One way or another, the MTA would be responsible for paying these costs, so we need to put together a reasonable funding plan,” said Jonathan Rewers, SFMTA’s acting chief financial officer, of the need for a “clean slate” with regard to the operating and capital costs of the Central Subway upon its opening.
The agency will use a combination of measures to bridge the gap, including revenue bond refinancing, shift of some capital funds, and cost-cutting in the operating budget.
“We’re here to clean up a mess, and, look, messes are always harder to clean up than they are to make in the first place, but I believe we are obligated to make right the costs we’ve incurred and get this project to this next phase, which is going to be a difficult phase itself,” Director Steve Heminger said.
When completed, the Central Subway will extend the Muni Metro T Third Line from the Fourth Street Caltrain Station to Chinatown, providing a direct link between downtown and some of The City’s most congested areas, many of which have limited transportation options.
SFMTA already has budgeted for the cost of the operational staff members required to run the Central Subway, which include station custodians, track workers, station engineers and additional maintenance and track workers. Rewers said the agency is moving at “warp speed” to fill these positions in time for the testing period and, ultimately, the start of revenue service.