Light rail from EP to Target Field — a $3 billion project?

A critical evaluation of the Southwest Light Rail (SWLRT) project’s oversight of its major contractor was issued last week by the Office of the Legislative Auditor (OLA).

The second of two reports slated for this year of the massive, delayed project holds that the Metropolitan Council “has not adequately enforced” aspects of key construction contracts, does not have adequate documentation to support some of its decisions, and did not provide sufficient mechanisms for the council to enforce those contracts.

The 14.5-mile light rail line that will connect Eden Prairie, Minnetonka, Hopkins, St. Louis Park and Minneapolis was slated back in 2019 to be operating this year at an estimated cost of $2 billion. But construction of the SWLRT is only 75% complete, passenger service has been reset to 2027, and its final cost could creep upwards from the current estimate of $2.767 billion.

Note: The Legislative Auditor reports refer to “Southwest Light Rail” rather than “Metro Green Line Extension,” the project’s rebranded handle.

The Met Council’s written response to the June 28 report includes strong pushbacks to some of its conclusions and recommendations. But on the same day, Met Council Chair Charlie Zelle told the Legislative Audit Commission (a panel of lawmakers) that the council’s oversight hasn’t been perfect. During the course of the project and reviews by the OLA and others (including the Minnesota Department of Transportation), Zelle said the council has made changes.

Zelle also told the commission that the Met Council and general civil contractor Lunda/C.S. McCrossan Joint Venture (LMJV) had signed on to an alternative resolution dispute process that enables construction to continue while costs and schedules are negotiated or settled by arbitration to avoid delays and litigation.

“The cost overruns and delays of this project,” said Zelle, “stem from the unseen and unknown, although thoroughly warned conditions of the Kenilworth Corridor. … This actual project is costing more because it was always going to cost more. It was under budgeted … and it simply is not a $2 billion dollar project.”

OLA Project Evaluation Manager David Kirchner’s team was assigned to analyze how the Met Council oversees, negotiates and holds general contractor Lunda/McCrossan, JV accountable. The report references AECOM Technical Services, Inc., the project’s primary design engineering contractor and former cost-estimating consultant. The audit did not examine the installation of the systems infrastructure (contractor Aldridge/Parsons Joint Venture) that will supply SWLRT with electric power for train traction, signaling, lighting and safety.

Change orders

From March 2019 to October 2022, SWLRT processed 658 civil construction change orders, which were changes not included in the original contract. The final costs and schedules of these change orders are negotiated, sometimes with the help of independent consultants. Not all requests for change orders were authorized by the project. They ranged from no additional cost to millions of dollars. Out of the 658 authorized change orders, 550 resulted in a cumulative cost increase of $219 million for the project.

Spoiler alert: The 78-page June audit can serve as a mid-summer read on the complex mechanics and processes of different types of change orders. They are very complicated but click here.

OLA found problems with six of the nine change order situations it carefully reviewed. Among them is the aforementioned settlement agreement between the Met Council and LMJV (March 2022) to resolve disputed costs of the Kenilworth Tunnel.

Another is the change orders for Eden Prairie Town Center Station. They exemplify the complexity of even simple change orders. As noted in a May 23 EPLN article, a Federal Congestion Management and Air Quality Grant and a $1,191,449 local match from the City of Eden Prairie got the deferred station back into the project. Its re-inclusion happened too late for contractors to work the station into their bids. The price became an addition to the project’s revised total estimated cost.

Curb and gutter construction at Town Center Station is cited by the audit as an example of a change order that it found difficult to understand. The contractor first proposed using its own labor team for the $350,000 job but decided to use a Disabled Business Enterprise (DBE) subcontractor.

Even though the tab would be three times the original amount, the Met Council approved the change order. It explained that the hike was necessary to meet the contractor’s DBE goal (minority and women business ownership goals set by the Met Council to qualify for the federal grant).

Note: For more information on DBE programs, click here.

In his written response Zelle noted that federal regulations recognize that a DBE company can sometimes be more expensive and that “a contractor may not use the fact that it can self-perform work as a reason for not using a DBE.” The OLA report claims that the contractor did not submit documentation that would justify the higher price.

The recommendations

The 74-page OLA report makes 16 recommendations for better management of the completion of the line. The Met Council is not buying into all of them. Chair Zelle explains that some do not align with Federal Transit Administration (FTA) guidance or construction law, are not appropriate for large and complex projects and could contribute to additional delays.

Construction change orders, delays and extra costs, the regional agency says, are primarily due to construction challenges that were undetected or omitted by the design engineering consultant (AECOM Technical Services) prior to project bid submissions.

Zelle presented the Met Council’s comments on the audit in a June 23 letter to Legislative Auditor Judy Randall and during a June 28 hearing convened by the Legislative Audit Commission. The chief of the regional agency expressed appreciation for OLA’s work and reviewed the council’s adjustments to decision-making. Those adjustments, he noted, have been made as a result of recommendations from expert consultants, the FTA, MnDOT and the OLA.

“We have a far more focused and a far more robust process to insure we are doing it the right way,” said Zelle. The process, he added, has been reviewed and audited with “great oversight by the Federal Transit Administration.”

During the hearing’s Q&A session, Zelle was targeted by repeated finger-wagging.

“There’s been no accountability in this entire process,” claimed Sen. Mark Koran, R-North Branch.

Sen. Scott Dibble, DFL-Minneapolis, described the Met Council’s written response to the audit’s recommendations to be a hostile rebuttal that “impugns” the credibility of the Office of the Legislative Auditor.

Rep. Duane Quam, R-Byron, questioned the safety of light rail trains passing close to residential buildings. Quam also said that a federal look at SWLRT would not be as cordially nice as the Minnesota Legislative Auditor. He was unaware that SWLRT is under heavy oversight and scrutiny by the FTA. So too, it seems, were other commissioners.

The next Legislative Auditor report on the Southwest Light Rail project will examine the project’s finances. It will possibly be issued in January 2024.

Editor’s note: Writer Jeff Strate is also a member of the EPLN Board and served on the Community Advisory Committee of the SWLRT project.

Readers can dig deeper into the June audit and SWLRT by using the links provided below.

• Peter Callaghan’s June 29 MinnPost article. Click here to read.

• Southwest Light Rail Transit Construction: Metropolitan Council Oversight of Contractors, June 28, 2023, an Office of the Legislative Auditor evaluation report. Click here to read.

• The Met Council’s response to the June Evaluation. Click here. Scroll to page 65.

• A 58-minute segment of the Legislative Audit Commission hearing on June 28 with Met Council Chair Charlie Zelle and Nick Thompson, Deputy General Manager, Capital Projects, Metro Transit. After Zelle shares his comments on the OLA report, Commissioners (State Legislators) ask questions and share their own comments. Click here to watch the video.

• The video of the entire 2-hour and 45-minute commission hearing including Legislative Auditor Judy Randall and project manager David Kirchner’s presentation. Click here to watch the video.

• Metro Green Line Extension (SWLRT) website. Click here to browse for detailed information, videos and construction updates.