Stay in the Loop

Could the latest setback to Southwest LRT actually jeopardize the project?

It was an odd meeting.

At a gathering of the Met Council earlier this week, the organization’s staff spent a lot time talking about why they couldn’t talk about the only thing most of those in the room wanted to talk about: why they were recommending that all four bids to do the bulk of the construction work on $1.858 billion Southwest LRT project should be rejected.

Because the bid process is still active — and will be until either a contract is awarded or 14.5-mile extension of the the Green Line is spiked — all information is nondisclosable under state procurement law.

Nondisclosable to the public. And nondisclosable to the bidders, including the apparent low bidder. Even the members of the Met Council who have to make a major decision about the future of the massive project have to get an information about the bid one-on-one, or just accept a “trust me” from staff.

Nonetheless, when the council meets again on Wednesday, September 20, it’s expected to go along with the recommendation and restart the bidding process for what’s known as the civil construction contract.

That will set back Southwest LRT by as much as six months. Rather than make application for a funding commitment this fall from the federal government, known as the Full Funding Grant Agreement, the Met Council’s request for $928.8 million for the project won’t be made until next spring. At best, construction won’t start until next summer, and completion has now been set back from 2021 to 2022.

Signs of trouble

The project’s latest setback comes a month after Metro Transit passed a milestone, when staff opened the bids for the civil construction contract — the project’s largest. Among other things, that contract covers the building of 29 miles of tracks (14.5 miles in both directions), 15 stations, eight park and ride facilities, seven surface lots, a parking ramp at the Southwest Station, 117 retaining walls, 29 new bridges, six pedestrian tunnels and two light rail tunnels.

The apparent low bid was from Ames Kraemer, for $796,517,023. The next closest bid came from Lunda/C.S. McCrossan for $807,888,309.39.

Even though Met council staff was, even then, prohibited by state law from commenting on the bids (or even saying whether they were within the budget), there was some indication that the bids were higher than hoped. The Ames Kraemer bid for Southwest LRT would amount to almost 43 percent of that budget. By comparison, the two civil construction contracts for the Green Line’s Central Corridor — there was one for the St. Paul segment and one for the Minneapolis segment — totaled $314 million, or about one-third of that project’s $957 million budget.

‘Flying blind’ about bid problems

The two most-used words heard at the meeting this week were “disappointed” and “frustration.”

“We understand the stress and the disappointment our recommended action places on bidders and frankly on our own project team,” Met Council chief financial officer Mary Bogie told council members. “While I know the bidders and others still have lots of questions, we are still in an active procurement and the only information that is public is the names of the bidders and the total amount of their bids. All other data is private or non-public.”

Based on what Bogie was able to say, the problem with the bids were twofold: they were too high and they were not responsive, a term that refers to whether a proffer is complete, timely and conforms to bid specifications.

But price got most of the attention. “As we prepare to resolicit these bids, we will be looking for ways to modify bid specifications to reduce costs where possible,” Bogie said. “We believe there are modifications that can be made without compromising the benefits and performance of the project.”

In her announcement, Tchourumoff also focused on dollars: “I think we can bring innovative cost reduction strategies to the table and ultimately find efficiencies in this procurement. We’re going to be sharpening our pencils and we encourage the contractors to do the same.”

Wednesday, Tchourumoff began her comments by saying how disappointed she was in recommending the council reject the bids. “I do not make this recommendation lightly and I wouldn’t do it if I didn’t think it was absolutely necessary.”

She said she met with FTA officials as well as members of the state’s congressional delegation this week to explain the issues with the bids. The FTA said it wasn’t uncommon for projects to require “modest rescoping,” she noted.

Winning federal transit dollars, however, is a competition and projects in other parts of the country have an opportunity to move up whenever a project like SWLRT is delayed. Each month delay also adds inflationary costs.

And then there’s this: Any new bid must be low enough to fit the project budget, but not so much as to change the scope of the project too much. Substantive changes to the scope and alignment could trigger a new round of municipal consent, the state-mandated process by which all cities touched by the line must have a public process and give formal consent.

Even the delayed schedule depends on the council staff getting better bids the next time out. And there’s no guarantee that will happen. An attorney for the low bidder told the council Wednesday that it would be difficult for his client, Ames Kraemer SWLRT Joint Venture, to rebid if it doesn’t know what the problem was with its current bid. “It would be a bad case of pin the tail on the wrong donkey,” said attorney Dean Thomson.

Ron Ames, the Midwest president for Burnsville-based Ames Construction, said the joint venture spent millions of dollars and many hours on the bid and noted that the two lowest bids were within a percent and a half of each other.

Dave Zanatel, president of Kraemer North America, called the joint venture’s price “a uniquely competitive bid.” “We have to ask ourselves: do we spend millions more dollars to pursue a job that if we do everything we can do to get it, we may not be at the right number,” said Zanatel. “So we’re flying blind.”

Tchourumoff said staff would be meeting with the four bidders to explain why bids were considered nonresponsive, but couldn’t do that until the council votes to reject all bids. Hennepin County Commissioner Peter McLaughlin, who said he is also bound by the non-disclosure rules, said that a the rebid process will allow for a pre-bid conference with the contracting consortiums that could “resolve some of the ambiguities among the bidders.”

He agreed with the characterization that the bid problem is “a blip, not a disaster” but said there wasn’t anyone more disappointed than he was.

Still, “we’ll keep bumping it forward,” he said, adding that rail projects are getting good news out of Washington, D.C. The GOP-controlled Congress has rejected President Trump’s request to zero out money for transit expansion, and the FTA has continued to sign full funding grant agreements, most recently for the Purple Line in Maryland.

The Met Council expects to grant two additional contracts next year, one for construction of a maintenance and operations facility in Hopkins and another for the electrical power, signaling and communications system. It has already has a contract for the 27 light rail vehicles needed for the line. That went to sole bidder Siemens for $118 million.

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