Firm Under Fire for Terminal Estimate Says It Was Correct

Breaking a monthlong silence, the consulting firm under fire for allegedly underestimating the cost of the new John Wayne Airport passenger terminal by $18 million insisted Thursday that its estimate had been correct, that construction bids had been inflated and that the county is being overcharged.

Concord-based Lee Saylor Inc. estimated the cost of the new terminal at $40.8 million, but five contractors delivered bids that ranged from $59.8 million to $66 million.

“It’s not a $59-million building,” said Lee Saylor, president of the firm. “We think the county got a high price. The contractors ran scared and priced themselves up to a comfortable level.”

That theory was disputed Thursday by the construction firm on the project and airport and county officials, who said they do not believe construction bids were inflated.

County Budgeted $39 Million

The county originally budgeted the project at $39 million. Leason Pomeroy Associates, the airport architect, hired the Saylor firm to provide cost estimates so that the cost of the terminal design would not exceed the county’s target.

The cost of the new terminal became an issue recently when county officials accused the architect of mistakes and delays that resulted in cost overruns and a need to cut more than $10 million in the terminal’s price tag.

The county is trying to cut costs by eliminating items such as marble floors and by redesigning the structural support for the curved roof. The building now is expected to cost something more like $48 million, part of a larger $300-million expansion of the airport that constitutes the largest public works project in county history.

But after trimming such niceties, the county will end up with a “bare-bones” building, Saylor said.

Many of the people interviewed Thursday said privately that they believe the closeness of the bids on the terminal by the contractors precluded large amounts being hidden in the bids to cover possible late penalties.

On the other hand, construction estimates are rarely that far off, particularly ones made by prominent firms such as Lee Saylor. Lee Saylor’s estimate was so far off as to be almost inexplicable, say experts in the construction industry.

A member of the Board of Supervisors said Thursday that Saylor was questioning the motives of the county airport staff.

“Obviously they (Saylor officials) are impugning the character of the airport manager,” said County Supervisor Thomas F. Riley, whose district includes the airport. “Neither I nor any other member of the board would accept that. . . . I’m not prepared to criticize our people until I find out what happened.”

In a wide-ranging interview Thursday, Saylor insisted that his $40.8-million cost estimate for the new terminal was “right on the money,” given the information on which it was based. He said his firm advised the county in writing not to accept any of the bids because they were too high. He added that his firm was refused a chance to adjust its cost estimate after 240 additional architectural drawings were completed in May.

Saylor said he believes, but cannot prove, that construction bids were inflated to cover anticipated lawsuits and the $25,000-per-day fines that contractors would have to pay the county if they didn’t meet the airport terminal construction deadlines.

A spokesman for Taylor Woodrow Corp., the low bidder, said Thursday that it had not added any additional money to its bid to cover expected penalties, or “liquidated damages,” as they are called in the construction industry.

The company declined further comment, but William Ostfeld, a Taylor Woodrow vice president, said the firm would issue a joint statement with county officials today.

According to Saylor, Taylor Woodrow’s contract mandates completion by the end of February, 1990, despite Saylor’s written advice to the county that the construction schedule is 6 months too short. The county plans to open the terminal to the public on April 1, 1990.

Saylor on Thursday released copies of an Aug. 5 letter sent by Saylor Vice President M. Roy Stauffer to architect Pomeroy, copies of which went to county officials on Aug. 8.

In that letter, Stauffer stated that Orange County-based contractors refused to bid on the project because of the tight construction schedule and the potential fines. The letter added that a lack of such bid competition helped boost the project’s price tag. “We feel that the county is paying a premium price and that given a different set of conditions, a substantial price reduction could be realized,” Stauffer wrote.

Assistant Airport Manager Jan Mittermeier said that Saylor’s statements about inflated bids imply “collusion” among contractors and “I don’t think that’s possible.”

“We considered whether, in fact, we should deny the bids, but we decided that would cost us a lot of time, and we did not know whether, in fact, that would buy us a cheaper building,” she said.

Mittermeier said that Taylor Woodrow Construction, which was awarded the contract for the new terminal, was questioned about possible price inflation due to the stringent conditions imposed. “Taylor Woodrow assured (us) that it wasn’t a factor in their bid,” she said.

“Mr. Saylor is entitled to his opinion, and I can’t address that,” Mittermeier added. “The county has not said anything to criticize Mr. Saylor. We know that he’s very good and one of the best in his field.”

Last month in a settlement between the county and the architect, Leason Pomeroy agreed to pay $245,000 in penalties for delivering the terminal design drawings late, $180,000 for additional design work done by the county and to perform $350,000 worth of additional work on the terminal free. The total penalty amounted to $775,000.

As the lead architect, Leason Pomeroy accepted responsibility for the cost underestimate and the tardy designs but blamed Lee Saylor and another of the architect’s consultants, Cygna Consulting Engineers of San Francisco.

Each of the consultants, including Lee Saylor, will be asked to contribute to the $775,000 in penalties, said Philip L. Kroeze, the Leason Pomeroy architect who led the design team.

“All team members share some proportional responsibility for the problems, and that includes Lee Saylor,” Kroeze said Thursday.

But Saylor said Thursday that Pomeroy still owes him $7,000 of his $67,000 contract. He said he would not pay a share of Pomeroy’s penalties.

Richard Begley, project manager for HPV Inc., the consulting firm that is supervising the airport expansion program for the county, said “it’s possible” that some bids were inflated.

“But in fact,” Begley said, “we have determined that that is not true for the low bidder (Taylor Woodrow). We have asked Taylor Woodrow if that was a factor in their bid. They made it very clear that they believe they could get the job done on time and could take advantage of incentive bonuses for early completion.”

The Times reported last month that a consulting firm hired by the county to review Saylor’s cost estimates reported that Lee Saylor Inc. made “an abundance of errors” in underestimating the cost of the terminal by at least $15 million.

In one instance, Lee Saylor underestimated the amount of structural steel needed in the terminal by 1,100 tons, a $4.5-million error, said the consulting firm, O’Connor Construction Management Inc. of Santa Ana.

On the roof of the building alone, Vice President Colm O’Connor said, Lee Saylor’s estimates were too low by 66%, or about $4.6 million.

O’Connor said Thursday that his firm stands by its analysis of Lee Saylor’s estimates.

“If Lee Saylor wants to defend their estimate, they’re going to look awfully silly,” O’Connor said.

Saylor said Thursday that O’Connor’s report reflects unreasonably high prices for some materials, including $4,500 a ton for steel that should cost $1,600 per ton or less.

Taylor Woodrow PLC is a giant, $2-billion British engineering and construction firm that maintains an office in Irvine but whose U.S. unit is headquartered in New York.

Another local unit, Taylor Woodrow Homes, builds homes in Southern California and elsewhere in the United States and was one of the first of a small wave of British builders to locate in Southern California.