July 12, 2014: What is the big deal?

The STB today denied the Authority’s request to get its blessing for the next segment it wants to construct from Fresno to Bakersfield.

The Authority apparently applied in September for a “conditional approval” to move forward with construction. It should be noted that as of September, the Authority hadn’t even decided which route it would take between the two cities.

A “get out of jail free card” from the STB could have helped the Authority get out of a sticky situation, that appears to be largely of their creation.

The Authority, led by its consultants Parsons Brinckerhoff, decided to issue a design-build contract that would span two different environmental review segments. The 29 mile contract has about 22 miles entirely in the Merced-Fresno leg, 5 miles entirely in the Fresno-Bakersfield segment and the other two spanning both. To make matters worse, the boundary between the segments has changed several times over the pas five years and the two different segments were being planned by two entirely different set of consultants.

In what may be a first, the Authority signed a contract with Tutor Perini for a design-build contract that included the five miles which were not very far down the permitting process.

It is against the law to start construction before environmental review is complete, and it is still far from over for the Fresno to Bakersfield leg.

Early versions of the contract included separate prices for the different legs (see the Price page of Addendum 6) so that it would be easy to drop the last five miles from the scope if there were delays in the planning process.

Because the bidding process failed to weigh these different prices, bidders had an incentive to low ball the last five miles, which would give them a windfall profit if the Authority did not have all necessary approvals by a given date (which has turned out to be July 12, 2014). Nine months into the procurement process (addendum 7), the terms of contract changed to simply have a negotiated change order if the deadline was not met. Tutor Perini has a reputation for making most of its money on these types of negotiations.

It should be noted the delays in the environmental clearance are much more attributable to serious mistakes made by the Authority and its consultants than to any angry farmers or judges with a penchant for the rule of law. This fact, along with the strange lack of competency in procurement strategy, make the Authority’s arguments to the STB for mercy a little hard to stomach.

From the Authority’s September filing:

“The Authority’s design-build contract requires the Authority to give the contractor separate notices to proceed wilh construction of the 5-mile and 24-mile segments. The notice to proceed for the 5 miles of track and facilities must be issued by July 12, 2014. If the Authority cannot issue the notice on the 5-mile segment by July 12th, it will be removed from the contract and the Authority will need to re-negotiate the price for the construction of the 24-miIe segment and the price and timetable for the 5-mile segment. Since the construction contract does not contain a separate price for the 5-mile and 24-mile segments, this could result in a substantial aggregate increase in the cost of construction of the two segments.”

Critics have complained about the routing of the high speed rail project and the lack of funding. These are minor details compared to the propensity the High Speed Rail Authority has to fumble the ball when it comes to anything but playing the political game.