Kiewit’s Payments On Hold Pending Findings Of Rail Investigation
The contractor’s payment denials are among $77 million in freshly rejected rail invoices that didn’t meet state standards for legitimate construction costs.
State finance officials rejected more than $30 million in payments to this past quarter because they believe the former rail contractor may be part of the federal criminal probe into the multibillion-dollar transit project.
Kiewit’s payments will be withheld pending the findings of the feds’ rail-related investigation, according to state comptroller Curt Otaguro.
鈥淲e鈥檙e not comfortable pursing that reimbursement until other information is provided,” Otaguro said Wednesday. “If everything鈥檚 cleared and Kiewit鈥檚 off the hook then that鈥檚 all the certification we need.鈥
If there’s no closure and the federal authorities don’t actually release any findings, Otaguro said the state would accept something in writing from the “at face value” instead.
The withheld payments to Kiewit, the prime contractor that built Honolulu rail’s first 10.5 miles of elevated track and its Pearl City operations center, are among more than $77 million in invoices that the state Department of Accounting and General Services, or DAGS, rejected in the quarter ending Sept. 30.
HART spokesman Bill Brennan said that the rail agency could cover those payments with its federal funds until the issue is resolved.
As part of their聽, state leaders charged DAGS with verifying that all rail expenditures are legitimate 鈥 that they relate directly to construction 鈥 before reimbursing HART for the costs. The state agency has been scrutinizing rail invoices since 2108 and has two full-time employees working at HART’s Alii Place headquarters, Otaguro said.
Notably, the recently withheld Kiewit payments include last year’s $13.2 million negotiated settlement with HART, according to Otaguro.
That deal aimed to resolve all of the Omaha-based construction firm’s outstanding claims, and close out its rail work in West Oahu going back to 2009.
Insiders in 2016 described the relationship between Kiewit and HART as聽, asserting that the construction firm was 鈥渇ed up鈥 with the city.
Kiewit saw on its three major rail contracts to build roughly half of Oahu’s steel and concrete guideway and the system’s operations center.
Nonetheless, at one point a former project consultant said Kiewit鈥檚 Honolulu rail contracts were costing the company .
Despite all its recent rejections, DAGS also expects to approve a separate $104 million in rail invoices for the quarter, which will be paid out to various rail contractors.
Trust, But Verify
Otaguro said he met with HART’s Chief Financial Officer and Fiscal Officer, , earlier this week to discuss the invoice rejections.
鈥淎s soon as she received it she gave us a call. She understands the state鈥檚 position,” Otaguro said. “I told her we鈥檙e doing our job and it鈥檚 our obligation to make sure the costs” are legitimate.
Besides the Kiewit invoices, DAGS rejected other invoices because they included design-related change orders, or cost increases, that state employees determined to be HART’s fault, and thus not qualify as a legitimate construction-related expense that should be paid out of the state’s special mass transit fund, Otaguro said.
鈥淲e just need more information. Ruth Lohr and her team need to provide it,” he added. 鈥淲e don鈥檛 want to sound like we鈥檙e at each other鈥檚 throats. Our game is not 鈥榞otcha.鈥 We are supportive of this, but we take the responsibility seriously.鈥
Part of the issue, Otaguro said, is that HART is short-staffed and unable to submit the documentation DAGS needs to see for approval in a timely manner.
Eventually, he said, the rail agency might reverse much of those rejections by providing the proper paperwork.
鈥淲e have every reason to believe that most of these are justified,” Otaguro said.
But believing and proving are two different things, he added.
