State government moves toward accountability... on highway construction cost overruns

An 11/16/11 press release from Gov. Andrew Cuomo indicates a new effort to protect taxpayer dollars from cost overruns on state highway construction projects.

It's not a direct parallel to Atlantic Yards, but it points to several principles that could apply to construction/development projects like Atlantic Yards, including inadequate planning, lack of oversight, and limited accountability.

The press release:

Governor Cuomo Announces New Reforms Designed to Keep State Highway Construction Projects on Budget and on Time

Changes Come After Independent Review of Problems Affecting Interstate 287

Albany, NY (November 16, 2011)

Governor Andrew M. Cuomo today announced new reforms designed to keep state highway construction projects on budget and on time.

These changes come after a series of recommendations from an independent review, ordered by the Governor, of delays and cost over-runs which have affected I-287 in Westchester for over a decade.

"I have repeatedly said that government must protect every taxpayer dollar by being efficient and effective," Governor Cuomo said. "For over a decade, the I-287 project has been mired in delays and cost over-runs, and that's why I ordered an independent review and that's why the Department of Transportation is making these important reforms."

The I-287 Cross Westchester Expressway Corridor project began 15 years ago. The original cost of the first five stages was expected to be $490 million, but ended up being $568 million, as overruns drove the price up by 16%.

In June, Governor Cuomo ordered an independent and comprehensive review of the I-287 project in response to the significant, unexpected costs and delays. Peter Lehrer, a renowned national construction expert, led the review. Lehrer's work includes the restorations of the Statue of Liberty, Ellis Island, Grand Central Terminal, and the American Museum of Natural History.

The review team conducted two months of interviews with NYS Department of Transportation (DOT) management staff, contractors and construction experts. The team also reviewed project metrics, project cost and schedule data, contracts, change orders and bid documents. They also conducted research on best practices within DOT and other states.

The key problems identified by the review include:

• Inadequate planning before designing the project
• The use of design teams that were not qualified for such a large project
• Rigid regional funding formulas which forced the project to be broken into six phases, increasing duration, complexity and cost
• Lack of oversight that failed to keep the project on schedule and on budget
• Limited accountability

The review called for two categories of reforms: one for project management and one for agency-wide reform within the Department of Transportation.

Regarding project management, steps DOT has taken include:

• Monthly meetings to review issues and coordinate communication, including with utility companies, to ensure projects stay on schedule.
• The use of expert consultants to analyze the designs of a project before it begins.
• The establishment of a Capital Program Delivery Committee (CPDC), comprised of DOT employees, that will closely scrutinize the complexity and size of each project to make sure the best designers and project managers are used.
• The acceptance or rejection of change order requests within a two week period- a process that previously has taken as long as a year- to save time when unexpected issues arise on a project site.

Regarding agency-wide changes, steps DOT has taken include:

• Monthly meetings to review projects and performance.
• No large project should be approved until CPDC reviews and approves the budget and design.
• A redesign of the funding process to better direct money to major projects.
• DOT will look across all regions when staffing projects and do a better job at sharing resources. This will allow DOT regions to share staffers with specific expertise with other regions, reducing costs and ensuring the project is in the best hands possible.
• The implementation of a revised performance review process to ensure all DOT initiatives and projects meet the highest standards.

DOT has consistently had overruns on its projects in the 7% to 11% range, resulting in $530 million in total overruns over the past five years. Best-in-class state DOTs have achieved cost overruns that are less than 5% of their capital program. In addition to overruns, nearly half of DOT projects are delayed, with average delays of over six months. During the last seven years, projects over $25 million have been an average of 306 days late. Best-in-class DOTs deliver 80% to 90% of their projects on-time.

With this new approach to project and agency operations and management, DOT has issued new program goals including 90% of projects delivered on-time and no more than 5% overruns for all projects. As a result of the revamped approach to state construction, the I-287 project will be substantially completed by December 2012 instead of August 2013.

Joan McDonald, Commissioner of the New York State Department of Transportation, said, "Since taking office, Governor Cuomo has made it a priority to make government work more efficiently for the taxpayer and today is another step in this direction. As a result of these recommendations, DOT is transforming the way we manage construction projects across the state, while also making important changes within the agency. As we strengthen New York's infrastructure and build new highways and roads across our state, we must continue to do all we can to make sure projects are managed efficiently and completed on time."

Peter Lehrer said, "While our state and country continues to find ways to fund much needed infrastructure projects, we cannot forget the importance of spending the limited dollars that we do have in an efficient manner. Although the work on I-287 has created a better highway for the residents of Westchester, our infrastructure dollars could have been spent more wisely. I am pleased that Governor Cuomo tasked me with undertaking a comprehensive review of this project, and I believe our findings and recommendations will help transform DOT into a stronger, more efficient organization that will save taxpayer dollars while building and strengthening New York's infrastructure."