Legislative auditor's memo highlights troubled relationship between Southwest LRT and major contractor

A "prolonged and significant" difference of opinion on construction issues between the Metropolitan Council and a major contractor for the Southwest light-rail line has led to a series of cost overruns on the $2.2 billion project, according to the Legislative Auditor's Office.

A memorandum issued Thursday by the state watchdog wasn't a full-fledged review of the project, a 14.5-mile extension of the Green Line that will connect downtown Minneapolis with Eden Prairie.

But two Minneapolis DFL lawmakers who requested the expedited review said they will ask the office to do a fuller investigation or propose specific legislation to fund a review of the project next year.

"The memo hit the key messages why we wanted the Auditor's Office to look into the project," said Sen. Scott Dibble. "Stewardship of public dollars, safety of the project and as much transparency as possible. No matter who may be right or wrong, it's very concerning that entities involved in this project are having a dispute."

In July, Dibble and Rep. Frank Hornstein requested the audit amid a series of cost overruns and a dwindling contingency fund to cover unexpected construction costs. With the project only about half complete, the initial $204 million in contingency money was exhausted, and Hennepin County agreed to add $200 million more to cover unanticipated costs.

Most of the construction issues are related to work on a half-mile tunnel in the Kenilworth corridor in Minneapolis and a crash-protection wall to separate light-rail and freight trains just west of Target Field.

The Met Council said this year that those construction issues would delay the line's opening, which had been set for 2023, and add costs that haven't yet been quantified publicly. No new start date has been announced.

The 31-page Legislative Auditor's memorandum focuses on the relationship between the Met Council, the regional planning body in charge of building Southwest, and its main architectural and engineering contractor, AECOM Technical Services (ATS). ATS helps with change orders that crop up during construction and require independent cost estimates on work that must be bid.

Beginning in 2019, ATS officials suggested that the Met Council deploy staff with "more expertise in heavy highway construction claims," according to the memo.

ATS said the council was being "significantly overcharged" on change orders by contractors and that its construction contractor, Lunda/McCrossan Joint Venture, should push harder to "mitigate schedule challenges." It also expressed concern about construction quality, "including low strength concrete, work constructed incorrectly, and incorrect pile layouts."

ATS stated that Lunda/McCrossan's quality program was not sufficiently robust and that the contractor "appears to be using potential schedule delays as leverage in seeking approval to use subpar work as-is."

In an e-mail, Jason Marshall, AECOM's senior director for global communications, referred questions to the Met Council.

In a July 14 letter to ATS, Southwest Project Director Jim Alexander said the Met Council "strongly disagrees with the assertions and innuendoes" expressed by ATS in earlier correspondence.

The Legislative Auditor's memo outlines how Southwest officials "documented numerous incidents where ATS cost estimating data contained incorrect assumptions which contributed to large differences between the independent cost estimate and the contractor's proposal."

The Met Council alleges that ATS has repeatedly failed to consider the many risks associated with the project, including unforeseen conditions, down time due to freight train traffic, and noise and vibration mitigation.

In a statement, Met Council spokeswoman Terri Dresen said the council appreciates and respects the work reflected in the Legislative Auditor's memo.

"The information in the memo is not new, and we continue to work on these issues with our contractors," she said. "We are committed to building a safe and cost-effective transit system that connects our communities for years to come."

Hennepin County Board Chair Marion Greene said she was grateful for the review and added there wasn't anything in the memo that worried her.

"I want to make sure the exchanges [between the Met Council and the contractor] resolves itself in a way that feels right," she said.

janet.moore@startribune.com 612-673-7752

david.chanen@startribune.com 612-673-4465