Change orders added millions to cost of Honolulu rail project

30 January 2019

Repeated violations of state procurement laws contributed to massive cost overruns at a $9bn Honolulu rail project, according to an audit.

City auditor Edwin Young said the Honolulu Authority for Rapid Transportation (HART) had violated procurement requirements 18 times by issuing after-the-fact payments to contractors for work done without proper notice to proceed.

The City Council requested the audit – separate from a series of state audits – in September 2017. Concerns about the 20-mile project, whose costs had risen by approximately $4bn from $5.3bn cost in 2012, were growing. The project is still under construction.

Inexperienced HART managers and contractors caused cost overruns and schedule delays by making questionable change orders and contract amendments “without sufficient justifications, inadequate documentation ... and insufficient internal controls”.

The orders in question were worth $4.5m over two separate contracts, with Kiewit Infrastructure West and URS Corp.

“Of the 17 change order procurement violations (for the Kiewit contract), we identified eight instances where the contractor was directed to continue design work instead of following change order procedures," the audit said. Procurement and contract officers had failed to approve orders in nine of the 17 cases.

And while HART managers claimed to have addressed and completed previous audit recommendations, the auditor disagreed with this assessment.

“Unfortunately current HART operations, practices, staffing and succession planning remains incomplete and does not adequately prepare for the project's future,” Young said. 

“In our opinion, HART policies and practices are inadequate to prevent cost overruns and schedule delays from recurring.”

The audit said HART lacked internal controls to minimise costs and prevent schedule delays, while repeated warnings by the project management oversight consultant were ignored or addressed only partially.

A review of 208 change orders and 63 contract amendments issued for 10 contracts raised the project cost by $416m, 16% more than the original quote. Change orders added about six years to the project schedule, the report said.

HART CEO Andrew Robbins said the authority agreed with the need to update administrative procedures and had implemented or begun to put in place recommendations made in the draft audit it received.

The HART board is to consider the city audit's recommendation to either hire an internal auditor or employ an external auditor to help avoid future failures.

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