Lodi News-Sentinel

Changes add to highspeed rail constructi­on costs in Fresno region

- Tim Sheehan

Increasing costs for constructi­on of 119 miles of a high-speed rail route through Fresno and the central San Joaquin Valley have pushed allowances for changes to “near exhaustion,” the project’s chief financial officer said Thursday.

The prevalence of change orders to the California High-Speed Rail Authority’s constructi­on contracts, as well as rising inflation over the past two years, have drained what once was a budget contingenc­y of about $4 billion for Valley constructi­on at the start of work in 2013 to less than $275 million as of January, with an expectatio­n for that to shrink further to less than $160 million by April.

The authority’s board of directors, meeting Thursday in Sacramento, voted 7-0 to increase the authorized budget for three Valley constructi­on segments from the December 2021 amount of $17.9 billion to just over $20 billion – an increase of about $2 billion to replenish the contingenc­y. That’s expected to be enough, authority CEO Brian Kelly said, to complete the current scope of constructi­on contracts in the Valley over the next two to three years.

The contingenc­y represents a cushion in the constructi­on budget to absorb the potential risk of rising costs. For the constructi­on segments now under way in the Valley – three separate contracts that span from north of Madera to Shafter in Kern County — costs have been affected by change orders related to the evolving scope of the project. Those factors include inflation and rising supply costs, design changes that add new structures or tweak the route, or delays in securing the right-of-way property needed for constructi­on, and added costs for relocating utilities such as gas, electric and communicat­ions lines as well as canals and irrigation ditches.

“Our existing contingenc­ies are near exhaustion” for Valley constructi­on, said Brian Annis, the rail authority’s chief financial officer, in the agency board’s meeting. “The high inflation environmen­t has affected projects internatio­nally and in California.”

Payments to contractor­s to cover change orders have been a constant headache for the rail authority since the first constructi­on contract was awarded in the summer of 2013, prompted by a headlong rush to meet deadlines imposed by the Federal Railroad Administra­tion for about $3 billion in American Recovery and Reinvestme­nt Act economic stimulus act grants.

What’s behind the change orders?

When California accepted its first ARRA grants from the Obama administra­tion in 2011 and 2012, among the key conditions were that the money be spent for constructi­on of the rail route in the central San Joaquin Valley and that the funds be exhausted by September 2017.

“In that period of time, there was no time for delay,” said rail authority board chairman Tom Richards, a Fresno real estate developer.

Rather than forfeit the grants, leaders of the California rail authority acknowledg­ed that they pushed to award constructi­on contracts before most of the pre-constructi­on work typical of major infrastruc­ture projects – including substantia­l design work, purchasing land for the railroad right of way, and identifyin­g and relocating hundreds of utilities — was not even started before the constructi­on contracts were awarded. In effect, the project was working in an out-of-sequence manner from the start, Kelly said. Because the agency awarded contracts so early in the process, and then had to adjust its plans as time passes or conditions change, “everything we do requires a change order,” Kelly told the board.

Since 2015, at least 1,161 change orders have been submitted to or processed by the rail authority for its Valley constructi­on contractor­s amounting to almost $3.9 billion in added costs beyond the original contract amounts. Those change orders include:

Almost $2.1 billion for contractor Tutor Perini/Zachry/Parsons in Constructi­on Package 1, a 32-mile stretch of the route from Avenue 19 in Madera County to American Avenue at the southern edge of Fresno. The original bid submitted by TPZP in 2013 was for about $985 million. More then $1.5 billion for contractor Dragados/Flatiron Joint Venture in Constructi­on Package 2-3, which spans about 65 miles from American Avenue to the Tulare-Kern county line. The Dragados/Flatiron team’s original 2014 bid for the contract was about $1.23 billion.About $275.6 million for contractor California Rail Builders in Constructi­on Package 4, which covers about 22 miles from the Tulare-Kern line to Poplar Avenue near Shafter.

 ?? TRIBUNE NEWS SERVICE ?? Highway 180 passes over a trench constructe­d for the California High-Speed Rail project next to the Union Pacific Railroad tracks near G Street in downtown Fresno on Friday, Feb. 17, 2023.
TRIBUNE NEWS SERVICE Highway 180 passes over a trench constructe­d for the California High-Speed Rail project next to the Union Pacific Railroad tracks near G Street in downtown Fresno on Friday, Feb. 17, 2023.

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