Met Council must reform construction practices after Southwest LRT debacle, state watchdog says

The Metropolitan Council failed to effectively enforce the main contract overseeing construction of the $2.7 billion Southwest light-rail line, making decisions that contributed to many of the project's delays and cost overruns, according to Minnesota's watchdog agency.

In its fourth report on the controversial project, the Office of the Legislative Auditor (OLA) recommended at a hearing Wednesday that the Met Council improve its construction management practices for big transportation projects like Southwest.

The recommendations come as the regional planning body embarks on an extension of Blue Line light-rail service, as well as several bus-rapid transit projects throughout the metro area.

Next month, a commission will be named to recommend ways to reform the Met Council — a move made by the Legislature in the wake of Southwest's woes. A final report on the Southwest project, which will include a financial audit, is expected later this year.

Members of the Legislative Audit Commission on Wednesday expressed frustration and dismay with the findings in the 74-page report, which details problems with Southwest's construction.

"Jaw-dropping," said Sen. Scott Dibble, DFL-Minneapolis, who asked Legislative Auditor Judy Randall if the Met Council had broken the law.

"Certainly there were instances where best practices weren't followed, where recommendations weren't followed, but that's not breaking the law," Randall replied.

Sen. Steve Drazkowski, R-Mazeppa, wondered whether corruption was involved. "We have an agency that has gone rogue." he said.

"Had we seen any signs of corruption, we would have put it in the report," replied David Kirchner, the OLA's Southwest project manager.

While admitting the Met Council "is always looking for ways to improve," Chair Charlie Zelle said some of the recommendations don't align with federal guidelines or construction laws and aren't appropriate for a project of Southwest's size and complexity.

He added that, in some instances, the legislative auditor's recommendations could have delayed the project even more.

The 14.5-mile line between downtown Minneapolis and Eden Prairie, which goes through St. Louis Park, Hopkins and Minnetonka, is about 75% complete and expected to begin passenger service in 2027.

When construction began in 2018, the project was projected to cost $2 billion with service beginning this year. Met Council officials have blamed difficulties building a tunnel in Minneapolis' narrow Kenilworth Corridor, the addition of a station in Eden Prairie, and a $93 million crash wall separating light-rail and freight trains west of Target Field, for the project's ballooning budget.

Change orders

Much of the OLA report explores how Southwest project staff and the main construction contractor, Lunda McCrossan Joint Venture (LMJV), processed hundreds of change orders that cropped up while building the line. To date, the project has recorded some 1,017 change orders, according to the Met Council.

A change order authorizes a change in construction from what was defined in the original contract. That's not unusual in a project like Southwest, which includes 16 stations, 29 bridges and two light-rail tunnels. The Green Line, which began service between St. Paul and Minneapolis in 2014, racked up some 1,800 change orders.

The reasons for change orders vary. Sometimes new elements are added to a project, or a design error is corrected; other times, they're used to address site conditions that were unknown at the outset.

The process for change orders is spelled out in the $799 million contract awarded to Lunda McCrossan in 2018. Both the council and the contractor are supposed to include their own cost estimates for change orders, but the legislative auditor found that a dollar amount was attached to the proposals only a third of the time.

The report said the council should have held Lunda McCrossan accountable when it didn't include a cost estimate for a change order. But Zelle responded that due to the volume and complexity of the change orders, it would have been difficult to strictly implement the contract and could have opened up the council to litigation and more delays.

Of the 658 change orders for Southwest processed between March 2019 and October 2022, 550 resulted in increased costs totaling $219 million, according to the report.

Representatives from Lunda McCrossan declined to comment on the report Wednesday. In May, the firm said the OLA reports released so far were "inaccurately reported or incorrectly interpreted" by staff, and that many of the project's issues could be attributed to "faulty design."

Some change proposals sat unresolved "for months or even years," creating a backlog of more than 100 change orders. About 20% of the time, the Met Council permitted work to begin before a change order was approved to avoid more delays, the report said.

In some cases, there were no limits placed on what the contractor could spend to resolve a change order. "The process varied from change order to change order," the report said.

Although the Met Council used its consultant, AECOM Technical Services Inc., to craft independent cost estimates for change orders, the council "lost trust" in the firm's ability to do the work, the report said.

As a result, the Met Council would increase its consultant's cost estimates for change orders by 10 % to 50% to cover the job. Roughly 70% of the council's cost estimates for change orders were adjusted in this manner through last October, according to the report. About half the time, the council simply paid the price put forth by the contractor, even when its own cost estimate was lower. The council is now working with a new consultant.

By March 2022, the council had reached an agreement with Lunda McCrossan to resolve outstanding change orders and set a timeline to complete the job.

"I come to you with great humility," Zelle told the commission Wednesday. "Our team is working through the difficulties."