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'Lessons learned': Metro will pay nearly $300 million more to company that widened the 405 Freeway

The Metropolitan Transportation Authority has agreed to pay nearly $300 million more to the contractor of the 405 Freeway widening project, capping a years-long dispute over responsibility for schedule delays, design changes and cost overruns.

The settlement will push the cost of the controversial Sepulveda Pass project above $1.6 billion, about 55% higher than the original budget.

The $297.8-million agreement follows years of disagreements between Kiewit Corp. and Metro over how the freeway widening was managed. Kiewit has said in legal filings that Metro’s repeated changes to the project’s design and failure to identify and relocate utilities added significantly to delays.

The 10-mile northbound carpool lane through the Sepulveda Pass opened more than a year behind schedule. Its construction caused five years of traffic headaches on one of the nation’s most congested corridors. 

Metro’s directors approved the settlement in closed session earlier this month. They will be asked Thursday to formally increase the project budget to nearly $1.61 billion.

“Frankly, there were deficiencies,” said Duarte Mayor John Fasana, the chairman of the Metro board, referring to how the agency handled the project. Metro could have continued to negotiate the settlement, he said, but “we had some culpability, and it was time to move forward.”

In a report to directors, staff members wrote that the “significant lessons learned” from the 405 Freeway settlement included the importance of “detailed underground utilities investigations” before beginning a billion-dollar project.

Metro’s board of directors approved the settlement less than two weeks after voters approved a new half-cent sales tax to fund transit operations, highway projects and a dramatic expansion of the county rail network.

The expansion will include a multibillion-dollar, high-capacity rail tunnel through the Sepulveda Pass. The plans have already raised eyebrows among some Westside residents who endured five years of construction. 

Still, advocates point out, the tunnel would provide a crucial link between the Westside and the San Fernando Valley — and would create more capacity than the 405’s carpool lane, which studies suggest has not significantly changed traffic flow.

In an email, Kiewit spokesman Bob Kula said the firm had been “working positively with Metro” to resolve “key issues” on the project, and declined to comment further.

Kiewit filed suit against Metro in 2014 in the same month the carpool lane opened, seeking hundreds of millions of dollars in reimbursements.

The Omaha-based construction company said in court documents that the design changes made after work began, as well as tasks that were not included in their original contract, created “staggering” expenses.

The “bureaucratic quagmire” at Metro, the company said, forced Kiewit to double to 300 the number of employees on the project.

Rather than litigate the claims, Metro and Kiewit agreed to nonbinding arbitration, Metro spokeswoman Pauletta Tonilas said. The settlement agreement doesn’t acknowledge fault on the agency’s part “so much as it is acknowledging the substantial scope changes that happened,” she said.

Metro was pleased to finish arbitration relatively quickly and settle for less than Kiewit’s original claim of $518 million, she said.

The settlement will be funded through the sale of bonds financed by Proposition C, a half-cent sales tax that Los Angeles County voters approved in 1990, she said.

Saving on legal fees and settlement costs, she said, will make Metro “the best possible steward of the taxpayer dollar we can be, given the challenges that came up.”

Those challenges include utility relocation. In a 140-page claim sent to Metro in 2013, the company said seven of the 13 main causes for schedule delays came from problems with third-party utility companies.

Crews discovered more than nine miles of utility lines buried in the Sepulveda Pass. In one instance, they said, protecting a drainage culvert that had not been included in the bid documents added nearly $30 million to the project’s cost.

After Kiewit began work, it learned that Metro’s agreements with companies that control access to gas pipelines, data cables and electrical lines in West Los Angeles did not apply to the 405 projects, creating further delay. 

“If only one of these third parties fails or falls behind, there is a domino effect that impacts everything else,” project director Richard Raine wrote in the claim.

laura.nelson@latimes.com

For more transportation news, follow @laura_nelson on Twitter.

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