Plan to Cut Metro Rail Costs Irks Contractors

Southern California Rapid Transit District officials said Thursday they are examining a controversial proposal to terminate certain contracts connected with the Los Angeles Metro Rail project as part of an effort to reduce escalating costs of the 4.4-mile-long first segment of the subway line.

The disclosure, which angered representatives of a contractors’ group involved in the $1.25-billion project, came after the RTD’s Board of Directors approved operating and capital budgets totaling $1.14 billion for fiscal 1989-90.

The budget, which amounts to a 14% increase over the year before, will provide for an increase in RTD service by, among other things, adding 75 buses to help alleviate overcrowding, and beefing up graffiti removal, transit officials said. It also provides for no fare increases.

Meanwhile, facing potential cost overruns on the Metro Rail project, transit officials have begun discussing a series of options for reducing expenditures and preserving the project’s steadily shrinking contingency fund.

Contingency Fund Shrinks

Since February, the contingency fund has shrunk from $66 million to $23 million, transit officials said. The fund has been set aside for unforeseen expenses and to resolve unsettled contractors’ claims and change orders, which now stand at $49.7 million.

“We are going through a staff analysis and discussing options to reduce costs of Metro Rail,” James Crawley, director of engineering for the RTD’s rail facilities, said in an interview. One of those options, he added, “may be to suspend or rebid portions of contracts.”

Crawley pointed out that all of the RTD’s Metro Rail contracts include a clause that allows the agency to terminate a contract for reasons of “convenience or cause,” but calls for a penalty from the RTD for the cancellation.

“Cleary, we will pay a penalty for that,” Crawley said, “but the penalty would not exceed the cost of finishing the contract.”

However, “We would not consider such an option if it would increase cost or result in a delay in schedule,” Crawley said.

Calls It ‘Outrageous!’

“That’s outrageous!” Gary Butler, spokesman for the Associated General Contractors of California, said of the contract-canceling proposal.

“How could you stop a company from working, bring another one in, then get their people and equipment in place without having delays? I can’t imagine bringing someone in who has never worked the project before and expect them to do it as cheaply. There are so many unknowns in this kind of work,” Butler said.

Added Ken Perry, who handles labor relations for the association, “The impact it would have on unions and contractors would generate a tremendous amount of heat.”

But the RTD’s Crawley responded, “I expect more heat should we be over budget.”

Earlier this month, RTD General Manager Alan Pegg responded to a federal report warning of potential cost overruns by ordering independent audits of the so-called Metro Rail Red Line. The audits are aimed at reassessing projections of the overall cost of the project and establishing how much it will cost the district to settle disputed contractors’ claims and and contract change orders estimated at $49.7 million.

As it stands, project officials have spent half of the $1.25 billion earmarked for the first phase, running from Union Station through downtown to MacArthur Park. Yet the segment is only one-third complete and 18 months behind schedule, transit authorities said. The delays have also been responsible for increased costs of the system, half of which is being funded by the federal government.