PECG's Testimony Before the Federal Commission Developing Recommendations
for Congress re: the 2009 Federal Transportation Funding Reauthorization Bill

February 22, 2007

To:          National Surface Transportation Policy and Revenue Study Commission

From:      Josh Golka, Representing the Professional Engineers in California Government

Subject:  Ensuring Safe, Cost Effective Expenditures of Federal Transportation Funds

Federal transportation funds are being wasted at an alarming rate, and the pace is increasing!  In California, 2006 was the year of infrastructure.  SAFETEA-LU increased federal transportation funding in California and nationally.  Then, in November, California voters approved a $19.9 billion infrastructure bond, plus ensured that another $1.8 billion per year in sales tax on gasoline will be used for transportation.  In several counties, voters approved an increase in sales tax for transportation.

Unfortunately, on many projects, half of that money is being wasted on unsafe facilities with high maintenance and repair costs.  As the “Big Dig” shows us, this is a national problem, not just one in California. 

The culprit? Misguided contracting procedures.   

Imagine, if you will, a procedure in which qualified engineers design a transportation facility -- either experienced state engineers or the most qualified engineering firm.  Then, after a complete set of plans and specifications is developed, qualified contractors compete for the right to build the project, using a competitive bidding system that awards the contract to the lowest responsible bidder.  Finally, the construction is inspected by engineers who work for and are loyal to the public, not a private firm pursuing the profit motive. 

That system isn’t hard to imagine.  It has worked in California and elsewhere for decades. 

Now imagine this system.  A construction company is awarded a contract without competitive bidding.  The construction company, not a public agency, selects the design firm.  The construction company must submit an estimated price for doing the work.  Because the project hasn’t been designed yet, it is full of risks and uncertainties, which inflates the price.  Finally, the construction company is allowed to hire inspectors who will tell the construction company if its work is acceptable.  During construction, costs escalate rapidly. 

That’s called “design-build.”  It’s an obvious recipe for disaster.  It’s a process which shouldn’t work in theory, and without exception in California, hasn’t worked in practice. 

Every design-build project to date -- Routes 91, 73, 22, and 125 -- have more than doubled in cost from the original estimate.  None have been completed ahead of schedule.  Three out of four of those projects required substantial taxpayer bailouts, even though two of them were public-private partnerships which were supposed to place the risk on the private consortium, not the taxpayer.  The fourth project was supposed to open last year, but still hasn’t been completed, as the cost on Route 22 increased from $270 million when it was supposed to use competitive bidding; to $390 million when the contract was awarded for design-build; to more than $550 million and still counting. 

You will hear from the Orange County Transportation Authority that Route 22 is a success story, blaming everyone except themselves and the process they used for the doubling of the cost.  They will also admit that $207.5 million was spent by the taxpayers to buy out the public-private partnership on Route 91, which was constructed for $139 million.  They don’t mention that the project was supposed to cost $57 million.  In 1995, the maximum toll on that project was $2.50, which the Orange County Register reported as “the nation’s highest per mile toll”.  Today, the maximum toll is $9.25. 

The collapse of Hollywood Boulevard during the Red Line Subway construction in Los Angeles several years ago was another example of private design, private construction, and private inspection, with almost unbelievable construction defects.  Ten thousand defective welds on the earthquake retrofitting of the 8-805 Interchange in San Diego was another disastrous example of private inspectors.  Of course, the design, construction, and inspection failures by private firms on Boston’s “Big Dig”, along with the death of a woman passenger in the tunnel underneath the collapsing concrete slab, is but the latest sorry legacy for that project, completed years late at five times the original cost.

On Monday, the LA Times reported on the Gold Line elevated station.  The same firm that built the “Big Dig” built that one.  Chunks of concrete are falling off.  Failures are being attributed to shear keys built shorter than they were designed, deviations in steel reinforcing bars, and other problems.  As is typical in these projects, the contractors point the finger at the public agency, in this case MTA, which has agreed to make the necessary repairs, even though MTA didn’t design, build, or inspect the project. 

Even when Caltrans awards construction contracts through competitive bidding, there is still a question regarding who will prepare the plans and specifications.  Based on Caltrans data, a state engineer costs $105,000 per year, including pay, benefits, and

Ensuring Safe, Cost Effective Expenditures of Federal Transportation Funds 

overhead; an outsourced engineer costs $193,000.  Nevertheless, despite the passage of Prop 1B last November, Caltrans is still refusing to hire even enough engineers to replace attrition, must less undertake what the Legislative Analyst says is a crucial role in delivering $12 billion in additional highways requiring an additional 4800 Person-Years of staff.  This refusal to hire guarantees that it will ultimately require nearly twice as many federal and state tax dollars to design and inspect these construction projects.

 As reported in a recent New York Times editorial and article, the Federal Government is having the same experience.  Outsourced services cost $200,000 per Person-Year, double the cost of using a federal employee.  As Representative Henry A. Waxman of California recently observed, “Billions of dollars are being squandered, and the taxpayer is being taken to the cleaners” as a result of federal outsourcing. 

In summary, the outsourcing procedures currently utilized by Caltrans and regional and local transportation agencies, particularly regarding design-build, have proven to be not only wasteful in every instance, requiring taxpayer bail-outs, but result in defective construction for which the taxpayers must foot the bill.  It is time for the Federal Government, and all taxpayers, to go back to competitive bidding for construction contracts and construction inspection by those who work for the public, not the profit motive.