Response letter to the Legislative Auditor
The following letter is included at the end of the report as a response to the contents of the report.
Judy Randall
Legislative Auditor
658 Cedar Street, Room 140
St Paul, MN 55155
June 23, 2023
Dear Ms. Randall:
Thank you for the opportunity to review and respond to the Office of the Legislative Auditor’s report on the Southwest Light Rail Transit (SWLRT) Construction: Metropolitan Council Oversight of Contractors. As part of the special review process, the Metropolitan Council (“Council”) was afforded an opportunity to provide feedback on the draft report. Attached to this letter is the Council’s technical response to the final report.
While we appreciate the Office of the Legislative Auditor’s attention to this matter, several of the report’s recommendations do not align with the U.S. Department of Transportation’s Federal Transit Administration (“FTA”) guidance or construction law, are not appropriate for a project of this size and complexity, and in some instances could have contributed to additional delay.
- Cumulative Impact of Change Orders. The root cause of the change order administration issues and inefficiencies on the Project are not the result of the Contractor’s paperwork delays, but due to the extraordinary number of change orders on the Project. The Council estimates a substantial number of civil change orders were a result of the Advanced Design Consultant (“ADC”) errors and omissions.
- Delay Impact of Complex Change Orders. To address the delay impact of the complex change orders, the Council and Contractor worked cooperatively to re-baseline the schedule and implement a streamlined turnover sequence. The Council’s construction claims and schedule consultant estimates that the re-baselined schedule mitigated the overall delay to the Project by at least two years. It would have been far more difficult, if not impossible, to implement the new turnover sequence had the Council followed the recommendation in the Report to resolve each schedule delay separately.
- Benefits of the Settlement Agreement. Under the Settlement Agreement, the Contractor continues to advance construction in accordance with the re-baselined schedule while the Council’s experts review and analyze the Contractor’s cost documentation related to the delays. The processes established through the Settlement Agreement provide undisputed best practices for dispute resolution while construction is ongoing. The Settlement Agreement provided Council with a more thorough evaluation of the schedule and cost impacts to the Project than the original contract terms allowed.
- Enforcing Compliance. The recommendation to withhold payment due to the Contractor’s delay in submitting documentation would not serve a productive purpose which is why it is not an industry standard on complex construction projects. Due to the volume and complexity of the change orders, it would have been difficult, if not impossible for the Council to strictly implement the submittal requirements outlined in the contract. There is also a risk that the Contractor would stop work and litigate the matter, causing additional project delays.
- Independent Cost Estimate (ICE) Deficiencies. The recommendations related to ICE deficiencies are not actionable because they do not address AECOM’s refusal to accept Council’s input on missing scope and underrepresented costs. Following input from MnDOT during its Peer Review of the Project, in April 2023 the Council awarded a new cost estimating contract to a separate consultant.
- Nonconformance Process.
- The Report suggests that the Contractor should pay for additional testing, reviews, engineering, or design resulting from nonconforming work. However, under the terms of the civil construction contract, these costs can only be considered when the non-conforming work is used as-is or not corrected; the Council is tracking nonconformance reports applicable to this contract provision. The Council does not consider this recommendation to be actionable for nonconforming work that is corrected.
- The Council’s documentation of nonconforming work complies with applicable Federal requirements and guidance. The Council takes project oversight seriously which is why it retained experts in construction law, scheduling, claims resolution, forensic engineering, construction management, and quality assurance to advise the Project team and Council management on complex construction issues. The Council also reviews nonconforming issues regularly with the FTA.
- Minnesota Department of Transportation (“MnDOT”) Coordination. The Council worked closely with MnDOT during its Peer Review addressing construction management methods, change order processes, and contractor oversight. The Council is committed to continuous improvement which is exemplified by the implementation of Peer Review recommendations, including procuring new construction cost-estimating services. Furthermore, the Council intends to review applicable recommendations by MnDOT, and within the Report, for contract changes on future projects.
In closing, I would like to reiterate my appreciation for the opportunity to respond. The Council has a proven track record for delivering significant Transitway projects which are significant investments that improve our transportation system and advance the region’s vision for the future.
Sincerely,
Charles A. Zelle
Chair