Honolulu Rail Spent $100 Million To Relocate Utilities. Much Of It May Have Been A Waste
Some cash spent on Honolulu utility relocation work under a rail contract with Nan Inc. went to mobilization costs, or to work in areas beyond the end of the rail line.
An executive with the city rail authority estimated Friday that only 50% to 75% of utility relocation work done by contractor Nan Inc. in downtown and along the Dillingham Boulevard corridor before 2021 will actually turn out to be useful.
The Honolulu Authority for Rapid Transportation has budgeted $101 million to pay Nan Inc. for work done from 2018 to 2021 to relocate utilities in those areas and other parts of the city center to clear a path for rail construction, but HART isn’t certain yet how much of that work was completed properly.
HART terminated the original $400 million contract with Nan in January 2021, and solicited new bids to finish the city center utility relocation work under a different contract.
Nan then won a new contract for nearly $500 million for the utility relocation work to be done from the corner of Kamehameha Highway and Laumaka Street near the Oahu Community Correctional Center to Dillingham and Kaaahi Street in Iwilei. That work is ongoing under the new contract.
HART Project Director Nate Meddings told the rail authority board Friday that Nan did an estimated $30 million to $40 million of work along the Dillingham segment under the old contract, and another $20 million to $30 million of additional work downtown.
Nan also did $10 million to $20 million of work under the old contract in areas that are now beyond the end of the rail line near the intersection of Halekauwila Street and South Street, Meddings said.
That work between South Street and Ala Moana was done at a time when HART planned to run the rail line all the way to Ala Moana Center, but cost overruns ate up all available funding. That prompted the city to truncate the project, ending it at South Street.
The rail authority still hopes to extend the rail line in the future at least to Ala Moana, and HART Board Chairwoman Colleen Hanabusa said the utility work done by Nan beyond South Street may be usable one day if the city can find the money to continue building.
Nan was also paid early on under the old contract for significant mobilization, project management and professional services costs, Meddings said. Those upfront costs are one of the drawbacks of the “indefinite delivery, indefinite quantity” (IDIQ) contract that HART signed with Nan in 2018, he said.
“One of the problems with an IDIQ contract is you pay for a lot of the … costs for that work up front before the work is in place,” Meddings said, and some of that value may be lost if the contract is later canceled.
In fact, HART terminated the original contract in January 2021 “because it was not the best way to deliver a big infrastructure project like this,” Meddings said.
On the other hand, Meddings has said some of the $101 million was spent on materials that Nan ordered or purchased under the first contract such as transformers, cables and poles, and those materials can still be used.
Meddings told members of the HART board on June 8 that “we know the material on hand is useful,” but HART is not certain about all of the work that was completed.
Kevin Whitton, vice president of Pang Communications, did not respond to a request Friday for an interview with Meddings. Pang is a public relations company hired by HART.
Meddings also did not respond to a request for an interview emailed directly to him, and also did not respond to an emailed request for comment.
Meddings has said HART won’t know exactly how much of Nan’s work under the old contract was actually completed and useful until it can be verified and put into use.
Verifying the value of the work Nan already did requires a process of “verification and acceptance” of the work that is done with the owners of the various utilities, Meddings said.
“That’s why we can’t count all of it as gold right now,” Meddings said.
“Right now, it was built, Nan said it was good, but it was never finished, verified, tested and marked accepted by the utility owners,” Meddings told the committee. He said HART will continue that process with Nan over the next three years.
Meddings told members of the HART board on June 8 that Nan will only get the full $101 million that HART incurred under the old utility relocation contract if Hawaiian Electric and the other owners of the utilities deem the work Nan did to be acceptable.
HART board member Anthony Aalto asked Meddings on June 8 for an estimate of how much of the money spent under the original Nan contract was wasted, and Meddings said he would do that calculation.
“There will absolutely be some wasted money, sadly, but then there will be some usable work as well,” Meddings said.
In another briefing on the subject on Friday, Meddings again said that “what value we got for that work is still to be determined.”
“I don’t have a good estimate of that $101 million exactly how much we’re going to use,” Meddings told the HART board on Friday. “I would be surprised if it’s anywhere outside fifty to seventy-five percent of that $101 million.”
The discussion of the value of Nan’s work comes as HART staff seek to settle accounts with Nan and transfer unused funds from Nan’s old utility relocation contract to make the money available to pay for work under new contracts with Nan and Co.
Meddings told the HART board in a briefing on June 8 that the old contract was awarded to Nan “per task order,” which he described as a “very confusing” approach to the job.
The contract specifications detailed some 50 to 100 task orders, with values based both on the specific work to be done and how much area or distance was completed for each task.
Closing out the contract required that HART staff verify the areas where work had been finished as well as “verifying quantities that were out there,” Meddings said.
“The project team had to go through every task order, come to final agreement with Nan on what the quantities were, come to that agreement, pay them out, and close it per task order,” he said.
In cases where there “quantities and claims that the team that couldn’t resolve,” those disputes were referred the HART Executive Director Lori Kahikina to negotiate, Meddings said.
HART also needed Nan to produce as-built documentation for the work that had been done, which was required to complete the new procurement process to award a contract for the utility relocation work. That alone took about six months, he said.
The utility relocation work along Dillingham under Nan’s new contract is scheduled to be completed in 2025.
