Rail requires high-speed spending
If California starts building a 130-mile segment of high-speed rail late this year as planned, it will enter into a risky race against a deadline set up under federal law.
The bullet train track through the Central Valley would cost $6 billion and have to be completed by September 2017, or else potentially lose some of its federal funding. It would mean spending as much as $3.5 million every calendar day, holidays and weekends included -- the fastest rate of transportation construction known in U.S. history, according to industry and academic experts.
Over four years, the California High-Speed Rail Authority would need as many as 120 permits, mostly from a tangle of government regulatory agencies not known to rush their business. It would need to acquire about 1,100 parcels of land, many from powerful agriculture interests that have already threatened to sue. And it would need to assemble five teams of contractors with giant workforces positioned from Fresno to Bakersfield, moving millions of tons of gravel, steel rail and heavy equipment across the valley.
Even if the authority avoids any delays, its ability to complete the first construction section on time will require a breakneck pace of activity.
“It is a very aggressive plan,” said Manuel Garcia, associate director at the Construction Industry Institute affiliated with the University of Texas at Austin. “It does appear that it will be a challenge.”
If the rail authority runs into technical problems, legal disputes, permit delays or political roadblocks, it could end up building less track and potentially leave an uncompleted project, according to warnings contained in its own business plan. If the project blows past the federal deadline, for example, the flow of money could be stopped. And the scramble to meet that deadline could lead to construction problems and drive up costs.
Rail officials acknowledge that their plans are aggressive but describe them as not unprecedented, pointing to the fast construction pace of the new Bay Bridge in Oakland and the Alameda Corridor freight rail line in Los Angeles.
But state reports show the $6.5-billion Bay Bridge will have an average spending pace, or “burn rate,” of $1.8 million per day when it is completed in 2013, less than half what the rail authority is planning. The Alameda Corridor had a similar $1.8-million-per-day burn rate by its completion in April 2002, much less than planned for the bullet train even when adjusted for inflation.
The hurried project to improve I-15 in Salt Lake City before the 2002 Olympics, known in the construction industry as one of the fastest well-executed work packages, spent $1.6 million per day, according to John Njord, executive director of the Utah Department of Transportation.
“That was a burn rate like we have never seen before,” he said, which was on schedule only because of careful planning. The California effort would more than double that pace.
John Popov, a construction expert at Parsons Brinckerhoff, a consulting firm working with the rail authority, said he believes the project can be completed on time.
Popov calculates that the job will spend $2.7 million per day, which excludes the cost of land acquisition, environmental work, management oversight and reserves. Construction experts say that including all of its costs, the authority would spend $3.5 million per day. Popov added that the authority is considering whether it can legally shift as much as $1.3 billion of work past the 2017 deadline, an option that has not been vetted with the Legislature.
Outside experts say that only careful management like that in the Utah job can ensure that the Central Valley rail plan does not go haywire. The rail authority has just 37 employees and has been operating for months without a chief executive, a deputy chief executive or a chief financial officer. It also has no single executive overseeing construction, which outside consultants say is needed.
“You have 37 mere mortals who have never done anything like this before,” said Robert Bea, a member of the National Academy of Engineering, a retired UC Berkeley professor of civil engineering and director of the National Science Foundation’s project on California’s transportation infrastructure. “They need God, because he’s the only one who can handle this management challenge.”
A final environmental report on about half of the 130-mile project is uncompleted and months behind schedule, forcing the agency to start work initially on a 29-mile section from Madera to Fresno and hope that it can get the review problems with the rest of the line cleared up later this year.
In a status report this month, Mark Ashley, a senior vice president with the rail authority’s consultant T.Y. Lin International Group, noted that the project has identified 25 issues in the Merced-to-Bakersfield construction plan as high risk or very high risk and that the project is now nine months behind schedule in securing official approval from the Federal Railroad Administration.
“Fresno to Bakersfield is going to be really tight,” Ashley said. The acquisition of land is facing problems, including slow progress in getting agreements with freight railroads, he added. “It is dicey right now whether that is going to hold up our construction or impact our schedule.”
The rail authority’s plan is to break the construction into four contracts to design and build the railroad bed. A fifth contract would cover installation of hundreds of tons of steel rail. The very first construction contract on the section from Madera to Fresno is projected to cost $1.5 billion to $2 billion, and five teams of contractors are supposed to submit bids by September.
But the separation of the project also creates another set of risks because each section’s design, engineering, construction and workforce management must be integrated.
“The more packages you add, the more interfaces you have, and that’s where projects break down,” Bea added.
One strategy of the rail authority is to shift the schedule and cost risk to the contractors. Under its contract terms, builders would face $1 million per day in penalties for failure to meet final deadlines after March 1, 2017. That is the highest penalty rate known to exist in the U.S.
“That would be very punitive, very harsh,” said C. William Ibbs, a UC Berkeley civil engineering professor who consults on construction projects around the world. “Any time an owner puts in an onerous clause, the contractor is going to increase their bid.”
Popov, the Parsons Brinckerhoff executive, said he did not consider the penalty excessive.
There is deep concern about the construction pace within the teams, particularly because the state wants contractors to shoulder that risk or face big damages, according to interviews with industry officials who would not speak if identified because they worry that their opinions could be held against them.
“If anybody tells you that a day doesn’t matter, don’t believe it. Every day counts now,” said one construction executive.
At least two companies that are on consortiums qualified to bid on the project are backing away, The Times has learned. The project is further complicated by tinkering designed to placate communities: Contractors must agree to set aside nearly one-third of their work for small businesses, for example, a far higher amount than in other projects.
The contractors will have to spend more than $8 million on engineering work by the time they submit bids in September, of which only $2 million will be compensated by the rail authority, industry sources estimate. Yet the Legislature recently decided to delay a decision to provide the state’s share of initial construction money until August, just before it adjourns for its summer break.
Construction executives are worried that after investing millions of their own money into the contract this summer, the state may not go forward.
“These contractors need certainty and that certainty is that the Legislature is committed to this project,” Transportation Secretary Ray LaHood said last week after urging state leaders to speed up their budget decision. The state, LaHood said, should be confident in rail authority Chairman Dan Richard.
“Dan Richard will meet every deadline that needs to be met,” LaHood said.
But a number of key California senators are skeptical about the entire strategy of starting construction in the Central Valley.
“It is a big enough problem for me to vote no, as of right now,” said Sen. Mark DeSaulnier (D-Concord), chairman of the Senate Transportation and Housing Committee.