CONSTRUCTION COMMITTEE SEPULVEDA PASS...

'® Metro

Los Angeles County Metropolitan Transportation Authority

One Gateway Plaza Los Angeles, CA 90012-2952

213-922.20<

metro. net 55

CONSTRUCTION COMMITTEE JUNE 20, 2013

SUBJECT: 1-405 SEPULVEDA PASS IMPROVEMENTS PROJECT

ACTION: AUTHORIZATION FOR LIFE OF PROJECT BUDGET

RECOMMENDATIONS

Approve an increase to the LOP budget by $78.7 million, increasing the LOP budget from $1,070.7 million to $1,149.4 million (Attachment B), subject to the funding transfers and borrowing strategies summarized in Attachment A, the "Interstate 405 Sepulveda Pass Improvements Project Cost Management Process and Policy Evaluation."

ISSUE

On April 23, 2009, the Board established an original LOP budget of $1.034 billion for the 1-405 Project. The 2006 California State Senate Bill 1026 authorized Metro to conduct a demonstration program to enter into a design-build contract for the construction of the northbound high-occupancy vehicle (HOV) lane on Interstate 405 freeway through the Sepulveda Pass that would complete the final link in one hundred miles of HOV lanes stretching from Orange County to North Los Angeles County. The strategy to proceed with a design-build contract arrangement was undertaken as a means to facilitate acceleration of the project, reducing the duration of impact to adjacent communities and returning the corridor to full utility by a number of years, including significantly improved safety with new exchanges, ramps and bridges

The 1-405 corridor is noted as the second most congested in the nation and considered one of both regional and national significance. The design-build strategy also ensured a construction schedule that could incorporate $130 million of federal funding available under SAFETEA-LU. In addition to being a major interstate highway link, the Sepulveda Pass has served as a critical utility corridor between the San Fernando Valley and the Westside of Los Angeles for more than 60 years. Had the work proceeded under the standard California Department of Transportation (Caltrans) design-bid-build contracting method, potholing operations to attempt to locate all utilities would have been conducted in advance of compiling the documents for contractor bids. Instead, under the accelerated design-build method, previously unidentified major utilities became

known as the contract progressed. These utility relocations would have been part of the project irrespective of the contracting methodology, but the significant scope and number of utility related issues that have emerged as the work proceeded with the current design-build contract will cumulatively exceed the nominal contingency of 3. 7°/o ($38.3 million) included in the project's original budget. This is substantially lower than the 1 0-15o/o contingency typical for projects the size and complexity of the 1-405 Project. The project is now approximately two-thirds complete. Incrementally, a number of major milestones have been completed and the remainder of the work and associated risks are known to the project team.

To date, the Board has approved three (3) increases to the LOP budget: 1) $2.6 million to fund overlapping areas of the City of LA's Reversible Lane Project; 2) $8 million for betterment work to repair the Caltrans existing drainage systems, and; 3) $26.1 million to fund lane standardization and access improvements from the State of California Proposition 1 B Corridor Mobility Improvement Account (CMIA). As a result of these increases, the current LOP Budget is $1,070.7 million. Metro staff has prepared a forecast of costs-to-complete the project, and has identified a potential funding gap of $78.7 million (see Attachment C). The recommended action closes the funding gap and will increase Project Contingency to 1 0°/o of the revised budget, subject to the funding transfers and borrowing strategies summarized in Attachment A.

DISCUSSION

As Attachment C indicates, the additional Total Cost Forecast to Complete the project is $135.3 million. This is the cumulative added costs for Provisional Sum work, potential changes, Professional Services, and potential claim risk. To determine the funding gap of $78.7 million, the forcecast-to-complete price has been adjusted by cost recovery from the City of LA for the Reversible Lane Project, CMIA funding previously programmed for enhanced mitigation activities, potential cost savings, and available contingency.

Provisional Sum Work

Provisional Sum work alone is forecast to cost an additional $85.8 million. As has been previously reported to the board, Provisional Sums are used to pay for unknown but anticipated items of work that could not be accurately addressed in the preliminary engineering documents. Based on limited information, Metro assigned values to Provisional Sum Items and included those amounts in the Contract. The actual scope of such work is finalized during the design-build process, and funds are expended upon written authorization by Metro's Project Manager, based on an agreed price between Kiewit and Metro, or the work is performed on a Time and Material basis. Provisional Sum costs are summarized as follows:

1-405 Project LOP Budget

Bid Current Forecast

Funding to Provisional Sum Work Price Budget Complete Gap

Description (Cost in (Cost in (Cost in (Cost in Millions) Millions) Millions) Millions)

Utilities $112.0 $123.2 $159.7 $ 36.5 Hazardous Materials $0.2 $6.7 $7.9 $ 1.2 Local Drainage $10.0 $40.0 $71.5 $ 31.4 Additional Traffic and Transportation Management $5.0 $3.0 $8.5 $ 5.5 Plans (TMP) Westwood Hills Mitigation $7.4 $9.4 $16.3 $ 6.9 Maintenance during $5.0 $5.5 $11.3 $ 5.8 Construction All Other $17.5 $9.0 $7.4 $ (1.6)

TOTAL $157.1 $196.8 $282.6 $ 85.8

Provisional Sum work was significantly underestimated at the time of bid, due primarily to the following:

• Utilities: As required by the Contract, Kiewit performed an inspection to identify potential utilities in conflict with the project. Kiewit identified over 50 utility conflicts not shown in the bid documents, which require relocation or protection. Additional conflicts are uncovered as construction continues.

• Hazardous Materials: Surface soils along the 1-405, and all other freeways, is contaminated by particles from vehicle exhaust and must be handled as hazardous material. The original bid price estimate for this work did not take into account that, in accordance with the Contract, all work associated with hazardous materials is paid on a Provisional Sum basis.

• Local Drainage: In accordance with the Contract, installation, relocation and protection of all local drainage facilities are paid on a Provisional Sum basis. One item alone, a 12' x 12' box culvert that extends for miles along the alignment is estimated to cost $30 million to protect-in-place.

• Additional TMP: At the start of the Project, Kiewit was required to submit a traffic management plan for acceptance by Caltrans, and the City of Los Angeles. As construction proceeds along the alignment, the plan requires revisions to meet current conditions and requirements. Revisions to the plan are paid on a Provisional Sum basis.

• Westwood Hills Mitigation: This Provisional Sum item was included in the Contract to cover mitigation efforts required to settle the lawsuit brought by the community. Metro had not reached agreement with the community when the contract was bid and therefore the scope of work was unknown. Work compensated under this item includes such things as soundwalls, retaining walls, and property restoration.


• Maintenance during Construction: This item covers on-going maintenance required for existing Caltrans facilities within the right-of-way, including bridges and pavement. Excluded from this work is damage caused by the DesignBuilder.

Metro's forecast-to-complete price is based on Kiewit's cost proposals for Provisional Sum work. Although Metro's estimates for the work are substantially less than Kiewit's, the parties have not reached bi-lateral agreement on the costs for known work and therefore it is prudent to use the worst-case scenario in forecasting the Provisional Sum work.

Change Work

Also contributing to the funding gap are potential change orders. Potential changes are unknown at this time however, as approximately 1/3 of the work is yet to be performed, it is reasonable to presume that changes and claims will occur. Staffs forecast of $20.3 million for potential changes was calculated based on 35°/o of changes to date, excluding changes issued for Provisional Sum work.

Professional Services

Professional Services account for $20.2 million of the funding gap. Professional Services include Metro staff, Caltrans staff, and consultant staff required to administer the project. Caltrans staffing costs have increased due to added staff required for design and field oversight. Other professional services have increased with the addition of several staff members to prepare estimates, negotiate costs, review Time and Material documentation for Provisional Sum Work, and assist Metro with disputes and claims.

Potential Claim Risk

Also included in the forecast to complete is $9 million of potential claim risk due to disputes and claims from Kiewit. The primary causes for claims are work that Kiewit considers a change but Metro considers to be base contract work, and items that Kiewit considers to be Differing Site Conditions. When the parties cannot agree, the issue is taken to the Dispute Review Board for resolution.

Potential Cost Savings

Staff has taken action to reduce the funding gap by $14.9 million in potential cost savings. This reflects on-going efforts to identify cost-effective methods for performing the work, and opportunities for deleting scope from the Project. Potential cost savings have been identified in the following areas:


• Landscaping may be deleted from the project, with the approval of the City of LA and Caltrans- $2 million.

• Best Management Practice (BMP) facilities may be deleted. In addition BMP costs will be reduced by allowing Kiewit to install Low Impact Development (LID) biofiltration swales, in lieu of more costly facilities- $10 million.

• Savings in third-party mitigations (excluding cost recovery) may be realized through the design process and on-going discussions with stakeholders- $2.9 million.

Schedule to Complete

The current Substantial Completion date for the Project is May 31, 2013. At this time, Kiewit has not substantiated any excusable delays to the project, however, Kiewit has informed Metro that the anticipated Substantial Completion is now September 2014. Metro believes that the work will be completed in June 2014, but in any case the original Substantial Completion date will not be met. Staff has requested a recovery schedule from Kiewit to mitigate delays, but Kiewit has not provided an acceptable recovery schedule to date. Metro is preparing a time impact analysis for the project, and will update the Board as schedule revisions are accepted.

DETERMINATION OF SAFETY IMPACT

The changes identified in this board report will have no impact on safety of the overall 1-405 at completion.

FINANCIAL IMPACT

Funds approved as part of the recommended action will be added to the budget in cost center number 8510, Construction Contracts/Procurement under Project 405523, 1-405 Sepulveda Pass Widening Projects, account 53101, Acquisition of Buildings and Structures as follows:

FY 13-$00.0 FY 14-$63.0 million FY 15- $15.7 million TOTAL $78.7 million

IMPACT TO BUS AND RAIL OPERATING AND CAPITAL

The source of funding for this work is FHWA funds, State of California Department of Transportation funds, and Local matching funds, more specifically, Prop C 25°/o from


------------------ ------- --- ---------· -·-----·--·-- - -- --·-·--·-

other measure regional highway and transit projects as per Attachment A. These funds are not eligible for bus and rail operating and capital projects.

ALTERNATIVES CONSIDERED

The original Project budget contained an inadequate contingency of 3.7°/o. Staff has undertaken efforts to identify potential savings to reduce the forecast cost increase, including efforts to contain Provisional Sum costs. Efforts to mitigate the funding gap will continue, however, the cumulative value of Provisional Sum work, changes, claims, and Professional Services will exceed the original LOP budget contingency in the original budget.

NEXT STEPS

With the approval of the recommendations, staff will work with Caltrans to identify and reprogram additional funds for the 1-405 Project and make other necessary funding exchanges, budget actions, and funding agreements to fund the project.

ATTACHMENT(S)

A. 1-405 Sepulveda Pass Improvements Project Cost Management Process and Policy Evaluation

B. Proposed Project Cost and Funding Plan C. Summary of Funding Gap

Prepared by:


Michael A. Barbour Executive Officer, Highway Project Management 31 0-846-3522

David Yale Executive Officer, Countywide Planning and Programming 213-922-2469

Krishniah N. urthy Executive Director Transit Project Delivery

Arthur T. Leahy Chief Executive Officer


ATTACHMENT A

Interstate 405 Sepulveda Pass Improvements Project Cost Management Process and Policy Evaluation

February 1, 2013

Introduction

The Measure R Cost Management Process and Policy was adopted by the LACMTA Board of Directors in March 2011. While the 1-405 Sepulveda Pass Improvements Project is not funded with Measure R, LACMT A staff has prepared this analysis consistent with the Measure R Cost Management Process and Policy Evaluation for use in the event the LACMTA Board of Directors wishes to apply an approach similar to the MeasureR policy. LACMTA staff has extensively evaluated the 1-405 Sepulveda Pass Improvements Project in accordance with the Measure R policy to identify up-to-date cost estimates and alternatives to address the existing funding gap. The 1-405 Sepulveda Pass Improvements Project extends from the lnterstate1 0 near West Los Angeles and Santa Monica to the U.S. 101 in the San Fernando Valley. The project will close a 1 0-mile carpool lane gap on 1-405 by adding a northbound carpool lane between Interstate 10 and U.S. 101.

Presently, the 1-405 Sepulveda Pass Improvements Project and related mitigation measures have a total funding gap of $135.3 million. Of the $135.3 million funding gap, $126.3 million is due to unforeseen mitigation and inspection costs. The remaining $9 million amount is an additional reserve for successful claims against the project. After actions by the State, the City of Los Angeles, and Metro are taken into account, the cost to complete Life of Project budget is now believed to be $1,149.4 million, revealing a net funding gap of $78.7 million. To address the total funding gap of $135.3 million, the State, the City of Los Angeles, and Metro are recommending the following financial strategies, arranged here in a manner consistent with the Measure R Cost Management Process and Policy.

Measure R Cost Management Policy Summary

The adopted Final Unified Cost Management Process and Policy stipulates the following:

"If increases in cost estimates occur, the LACMTA Board of Directors must approve a plan of action to address the issue prior to taking any action necessary to permit the project to move to the next milestone. Increases in cost estimates will be measured against the 2009 Long Range Transportation Plan as adjusted by subsequent actions on cost estimates taken by the LACMTA Board of Directors. Shortfalls will first be addressed at the project level prior to evaluation for any additional resources using these methods in this order:

1) Value engineering and/or scope reductions; 2) New local agency funding resources; 3) Shorter segmentation; 4) Other cost reductions within the same transit corridor or highway corridor; 5) Other cost reductions within the same sub-region; and finally, 6) Countywide transit cost reductions and/or other funds will be sought using pre

established priorities. "


We followed the six steps prescribed by the policy to address the funding gap and developed the following plan of action:

Value Engineering and/or Scope Reductions

LACMTA staff has identified approximately $14.9 million in value engineering recommendations that, if implemented, would narrow the funding gap from $135.3 million to $120.4 million. This reflects on-going efforts to identify cost-effective methods for performing change work, and efficiencies in administering the Project.

New Local Agency Funding Resources

Acting for the State of California on December 6, 2012, the California Transportation Commission allocated $26.1 million of their Corridor Mobility Improvement Account (CMIA) bond funds from the 1-5 North Empire Avenue/Burbank Boulevard Project to the Interstate 405 Sepulveda Pass Improvements Project. These funds were made available due to very favorable bids received for 1-5 North project. The State's CMIA funds will be used for the construction of enhancements and standardizations related to the 1-405 project.

There is $13.0 million available in project contingency and the City of Los Angeles has agreed to contribute approximately $2.6 million to the 1-405 project and its related mitigations. Once the project contingency and the additional City of LA revenues are included, there remains a $78.7 million funding gap. We are also expecting further cost and revenue recoveries that are not yet final for approximately $3.7 million 1•

As a result of the State and Local agency actions above, the remaining funding gap is believed to be $75.0 million, as shown in the table below.

Funding Gap CMIA Reprogramming Available Contingency City of LA Cost Recovery for Reversible Lane Project

Net Funding Gap Further Cost/Revenue Recovery from Others

Remaining Net Funding Gap

Shorter Segmentation

$120.4 M ($26.1 M) ($13.0 M)

($2.6 M) $78.7 M ($3.7 M)

$75.0 M

Since this project closes a gap in the carpool lane network, shorter segmentation would negate the value of the project and potentially introduce safety impacts. Shorter is not feasible.

Other Cost Reductions within the Same Highway Corridor

We considered closing the funding gap with funds from the Measure R San Fernando Valley 1-405 Transit Project. However, funding for this project is not scheduled to be available until 2031 and cannot be transferred from a transit use to a highway use until after the year 2019, per the

1Betterments were requested by the following parties: Caltrans, City of Los Angeles Department of Water & Power, County of Los Angeles, J. Paul Getty Trust, and the United State General Services Administration.


Measure R ordinance. We also analyzed deferral of Segment 3 of the Westside Subway Extension. Staff does not recommend deferral of this project because such funding cannot be transferred from a transit to highway use until after the year 2019 and is not available until after 2026 and thus could not be advanced for this project. We move on to the next step of the policy with the same funding gap of $75 million.

Other Cost Reductions within the Same Subregion

The mileage between the 1-405 project limits at Interstate 10 and U.S. 101 is split 75 percent ($56.25 million) within the Westside Sub-region and 25 percent ($18.75 million) within the San Fernando Valley Sub-region. To close the $75 million funding gap, we recommend the following funding transfers:

• Transfer $56.25 million (75% of the $75 million shortfall) in Proposition C 25%, funds from the Exposition Light Rail Line Phase II to the 1-405 Sepulveda Pass Improvements Project;

• Restore the Exposition Light Rail Line Phase II budget to its original funding level by moving $56.25 million in Measure R 35%> transit bond funds into its funding plan;

• Reduce the Measure R 35°/o Westside Sub-regional equity project by $56.25 million, from $111.3 million to $55.05 million;

• Transfer $13.25 million in Proposition C 25%, funds from Interstate 5 North project;

• Restore the Interstate 5 North project budget with $13.25 million in MeasureR 20% highway bond funds;

• Transfer $5.5 million in Proposition C 25%, from the Metro Orange Line Canoga Extension to the 1-405 Sepulveda Pass Improvements Project; and,

• Reduce the Measure R 20% San Fernando Valley Sub-regional equity project by $13.25 million, from $84.00 million to $70.75 million.

Restoration of the Exposition Phase II budget from Measure R 35%, is only possible because the LACMTA Board approved Term Sheet for the Exposition Phase II project did not utilize $111.3 million of the total Measure R 35°/o funds made available for the Expo project. Similarly, the LACMTA Board approved funding plan for the Interstate 5 North project did not utilize $272 million in Measure R 20°/o funds for that project. The net impact of the Proposition C 25°/o/Measure R 35o/o/Measure R 20°/o transfers above will be to reduce an as yet to be determined Westside Sub-Regional equity project required by the Measure R ordinance by $56.25 million and a San Fernando Valley Sub-regional equity project by $13.25 million. In order for these transfers to occur, the LACMTA Board of Directors will need to authorize the additional borrowing to accelerate the $69.5 million in MeasureR funds. We will be recommending an update to our Long Range Transportation Plan Financial Forecast that reflects these transfers and others that we anticipate in the coming year in June 2013.

Countywide Transit Cost Reductions and/or Other Funds

As a result of current economic conditions, bond interest rates are lower than the rates assumed in the Long Range Transportation Plan. As a result, interest costs are lower than anticipated,


which would allow for additional borrowing. A more complete analysis of our additional borrowing recommendations, including one for the 30/10 plan, is scheduled for June 2013.


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North Los Angeles

County

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South Los Angeles County

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ORANGE COUNTY

R Measur11 R fonded pr*cts '* Projea alignments to be derumined

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ATTACHMENT B

LOCAL PROPOSITION C 25% PE/DS

CONSTRUCTION STATE TCRP

CONSTRUCTION STATECMIA

CONSTRUCTION CITY OF LA111

CONSTRUCTION FURTHER COST/REVENUE RECOVERY FROM OTHERS\Ll

~.., > LACMTA-SOBTQJ"j\L -. ~·· ' \i . ..,..;,';'~~~;''lf~hfl.:~

Route 405 HOV lanes from Route 1 0 to Route 101 Project Cost and Funding Plan

13,000 000

14,000,000 48,000,000

614 000,000

o;n ;OOO;OOO n'.,-ll!.r .":·~~~~:;'~ ~· &fiz;ooo;ooo !'~ifl'tj~~ ~~..;!l .. . ~ "' '~.; ;.:;.

13,000,000 1.13%

75 000,000 75,000,000 6.53%

62 000 000 5.39%

26 100,000 640 100 000 55.69%

2,600 000 2,600 ,000 0.23% 3,700,000 3,700,000 0.32%

·~,~f07'~;000 ~ t:ll ... v· ~···~ .r 19&;400,000 ill,;.>' , '69.29%

ICAL TRANs MANAGED FUNDING ,,~~,~- - r 1 1 1 11 1 1 STATE TCRP

PA&ED 22 000,000 22,000 000 1.91%

PEIDS 6,000,000 6,000,000 0.52%

STATE SHOPP CONSTRUCTION 8 000,000 8,000,000 0.70%

FEDERAL SAFETEA-LU PEIDS 20,000,000 20 000,000 1.74%

Rf\N SUPPORT 15,000,000 15 000,000 1.31%

Rf\N 82 000 000 82,000 000 7.13%

STPL-R-STP Local Regional CONSTRUCTION 10 100 000 10 100,000 0.88%

FEDERAL ARRA ES-RSTP CONSTRUCTION 189 900 000 189,900 000 16.52%1

;: .. ~~:~~:c_.At.:rpNS SUBTOTAL ·: .: ?tir"JF: :~ •. -... ·:, ·~ Jl '::C!.~.'- i;28~QO();OOQ ;~l~·3~l®it100 { ' 10; 100'000 ~.::.=.,.~.:.. ,,. '~:.·h~.&,. '-.\~>W·:·$,000,000 -~·---~~~~- ~353 000,000 't,li,.:<-., 30.71% !TOTAL.. PR(fGRAMlJiEDBUDGET________ __ __ - :1155,000,000 I 306,900,000 I 10,100,000 I 662,000,000 I -- --T 115,400,000 I II 1,149,400,000! 100.0%!

Rev: 1/31/13

Notes: (1) Of the $6M originally programmed for this project, City informed staff that a maximum of $2.6M is available to cover this work. Therefore the LOP budget must be decreased by $3.4M. (2) Further cost and revenue recoveries are expected but not yet finalized at an approximate amount of $3.7 million.


ATTACHMENT C

Summary of Funding Gap

Cost in Description Millions

$ 85.8 Provisional Sum Forecast to complete $ 20.3 Potential Changes Forecast to Complete $ 20.2 Professional Services Forecast to Complete $ 126.3 Subtotal $ 9.0 Potential Claim Risk

$ 135.3 Total Cost Forecast to Complete $ 2.6 City of LA Cost Recovery for Reversible Lane Project

$ 132.7 Subtotal $ 26.1 CMIA Funding Reprogrammed

$ 106.6 Subtotal $ 14.9 Potential Cost Savings

$ 91.7 Subtotal $ 13.0 Current Available Contingency

$ 78.7 Total Funding Gap

Funding Sources - See Attachment A

Summary of LOP Budget Board Actions

Cost in Millions

$ 1,034.0 $ 1,040.0

$ 1,048.0

$ 1,070.7

$1,149.4

Description

April 23, 2009 - Board approved Original LOP Budget February 23, 2011 - Board approved an additional $6 million from the City of LA for overlapping areas of the Reversible Lane Project July 26, 2012 - Board approved an additional $8 million from Caltrans for Caltrans Drainage Repair Betterment February 28, 2013 - Board approved: A) deletion of $3.4 million from the LOP budget for the City of LA Reversible Lane Project thereby reducing the value for this work to $2.6 million, and; B) an additional $26.1 million in CMIA funding to the LOP Budget for project enhancements May 23, 2013- Recommended Board action to approve an increase of $78.7 million to the LOP Budget, subject to the funding transfers and borrowing strategies summarized in Attachment A


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