Bechtel Transportation Seminar Series
University of California at Berkeley - Bechtel Center

Steve Heminger - "Cost Overruns for the Bay Bridge"

October 1, 2004 (4:00pm - 5:00pm)

INTRODUCTION: This seminar featured Steve Heminger of the Metropolitan Transportation Commission. The discussion focused on the cost overruns on the (Caltrans) Toll Bridge Seismic Retrofit Program. Specific focus is given to the Project to build a new East Span.. The audience consisted of approximately 50 engineering students. This transcript covers the 50 minute event, which includes a 30 minute power point presentation, and a 20 minute question and answer period. Following the transcript I have provided some important additional information about my involvement with this issue which seeks to clarify many of the important issues and motivations of the parties involved. The information is an independent objective analysis based on substantial information received which has not been made available to others. The conclusions and information offered is the result of considerable thought and analysis and history of involvement with this issue.

NOTE: Words in brackets were either inaudible, unclear, or unknown, or a description of the something pertaining to the discussion. A <best guess> is sometimes provided.

Facilitator Introduction: Steve Heminger is the Executive Director of the Metropolitan Transportation Commission or MTC. He also serves as Vice-Chair of the Policy Committee for the Association of Metropolitan Planning Organizations and Chair of a Special <Panel> on Congestion Pricing. He is also a member of the Trustees for the Minetta Transportation Institution and the Board of Advisors for the <Gino> Transportation Foundation. I also found out today he is on the Advisory Board for the I.T.S..(Institute of Transportation Studies at the University).

Prior to joining MTC, in 1993, he was Vice President of Transportation for the Bay Area Council, a regional public policy group. He has served as staff assistant in the California State Legislature, and also the U.S., Congress. He has received a Master of Arts Degree from the University of Chicago, and a Bachelor of Arts Degree from Georgetown University. Please welcome Steve Heminger.......


STEVE HEMINGER: Thank you. MTC actually has a couple of other names some of you may be familiar with. One of them is SAFE. Service Authority for Freeways and Expressways. We run the call boxes and the tow trucks out on the roadside.

Our most recent hat that we wear is the Bay Area Toll Authority and that's really what I'm here to talk to you about today. The basic division of responsibility on the State owned toll bridges in the Bay Area. The Golden Gate Bridge is its own little special thing, is that BATA or MTC manages the money on the State Owned Toll Bridges, except for the Seismic Surcharge which is administered by the State.

We sell bonds and administer the financial side of the Program. The Bridges continue to be owned and operated by the State of California, but, we have the role, and as of about a couple of weeks from now we'll have about a Billion Dollars worth of debt outstanding on these bridges to build new bridges in the region, including the expansion of the San Mateo Bridge, the new Carquinez Bridge that just opened, and the new Benecia Bridge that's under construction as well as the latest increase in tolls, Regional Measure Two, which is primarily a transit expansion program, in those bridge corridors and we have charge of those monies as well as the duty to administer that program..

So, when you think about it, you go across the Bridge every day, and you're paying three bucks. the first and the third come to us, and the second goes to Caltrans to pay for what I'm about to discuss with you which is the Toll Bridge Seismic Retrofit Program.

You know in preparing for today I've been trying to think of some historical or fictional figure that describes the role that we and I play in this program. You know Sandra comes to mind. Paul Revere, you know the lone boy who cried wolf too many times. For me personally I'm beginning to feel a little bit like <Ahab> and this is my whale <laughter>

It has been a long an winding road, as many you know who have lived in the Bay Area for a some time. The earthquake which prompted this work is 15 years ago by now....., and that earthquake was also 60 miles away from the site of this Bridge when it dropped a deck from the top to the bottom of it, and we're still several years away from having this done.

In fact, news this week suggests that we might even be further away than that because the State, even though you can see from this picture, the Bridge is well under construction.

This is the replacement portion of the East Span of the Bay Bridge which is the largest of the retrofit project. Even though it's under construction, the State is saying maybe we ought to consider redesigning it.

So, I'm going to talk to you about some of the history. Maybe I'll start with the good news since the bad news predominates. There is actually some good news and that is the whole Seismic Retrofit Program throughout the State of California involves not just bridges over water, but all the bridges over land. All those overpasses and highway bridges you see when you travel on the roads.

Caltrans has finished retrofitting about two thousand of those structures,. which is a really monumental feat of engineering and we will find out how good of a job they did, and what kind of investment we have made when we have the next shaker and we hope more of them strand up than the last time we had earthquakes here in the Bay Area and in Southern California. But even on the toll Bridges, which they've saved for last because they';re the hardest to do. You can see that the San Mateo, the Carquinez, 'the Benecia and the West Span part of the Bay Bridge are complete. Those retrofits are finished.

Carquinez, Is a bit of a complicated story. As you know there used to be two Bridges there, two cantilever Bridges. There's now a new suspension Bridge. That new suspension Bridge is a retrofit of the oldest cantilever Bridge which is the one now in the middle. the one built in the 20's, and that Bridge will be demolished. So it won't need to be retrofitted. The 1958 Bridge is the one that has been retrofitted. That's the one you head on to get to Sacramento from here.

So, the good news is that quite a bit of work has been complete. The Richmond Bridge will be done next year, around about the summer time, so that's also good news that it's nearly complete. The two projects that are left are at either end of the Bay Bridge. The West Approach, which is the piece of the Bridge from the Anchorage down into the City, and the East Span.

In that case the retrofit strategy is to replace the structures. It's not to fix them. We can't fix them, it's too hard. Let's build a new one and knock those down, and those are underway, but both of them will be many years in construction from today.

I'm going to spend a lot of time today, on the Bay Bridge because that's the big < ? ?..yahoota>. That gets all the press attention. That's most of the cost. It's most of the sex appeal, in terms of all the issues we've dealt with, bike access, rail access and the like. Even on the East Span project though, it is, I think, worth mentioning what's underway and what's not.

The East Span project as you can see (pointing to an overhead chart) is actually several different contracts stretched out over time, and you can see the dark shading up here. Some of those contracts are underway. The SAS superstructure, the acronym is Self Anchored Suspension Bridge. That's the portion of the Bridge that's usually in all the glossy brochures. That's the piece that is the subject of the big debate right now. the bid for that. The sole bid that was received by the State was just rejected by the State this week. Whether of not the State decides to re-bid that design or bid a new design is, I think the question you'll be reading about over the next several weeks.

You'll also see that there are some projects that are still in design, and are not yet under construction. The basic way to look at it, end to end, Oakland to the Island. This piece of the Bridge, there's a little bit of earth fill out there. that's where all the cars are parked for the guys who are building the Bridge. That's done but most of the Oakland touchdown is still to be awarded. The skyway is 50% complete, and is well under construction and that's all the cranes, and all the activity you see.

This is the Self Anchored Suspension Bridge. The superstructure of this design is the contract that is still to be awarded. The foundation portions of that design, over here,and here (pointing to a picture), those contracts have been awarded, and in fact, this contract is complete, and then the transition into the Island, because even though we're building a new Bridge, we've got the same old tunnel. So, we have to bring this Bridge into that tunnel.

This Bridge is a side by side Bridge. The tunnel is double deck so the Bridge has to come in and do get into the tunnel. And there needs to be a detour there to allow that to occur so we don't shut the Bridge for several months while you finish it. So that, end to end, is the story. Let me show you a couple of pictures. The schedule, the short story. It's going to take a long time.

The blue bars...., It';s going to take longer than we thought. <audience laughing> There's not a whole lot <..?..> about that. This is a bit of the..., I think, untold story of the Bridge. .We're going to spend a lot of time, and have for a couple of months, and will for the next few months, talking about the suspension portion oft the Bridge. This portion (pointing to the picture of it) and whether we should go ahead and award a bid to build that, or redesign it, or something like that. I think what a lot of folks don''t know is that it's under construction.

In fact this is the west pier, for that Suspension Bridge. This is sticking out of Yerba Buena Island. You can go out there and see it today. This picture is a few months old in fact, and its basically done. So, if in fact, there was the idea of redesigning the project you'd have to do something with those....either rip them up or try to use them for some other design. So that is a piece of the Bridge that is under construction.

The skyway is the most visible piece and as you can see these are all the piers. These are the piers I believe... I've got to get this right... These are the piers for the eastbound Bridge. The westbound Bridge is where this construction is starting to occur and you can see the piers gradually rise in height as the Bridge has to get into that incline out to the island.

The other really cool thing going on right now are all these deck sections that have been fabricated in Stockton and are being floated down from that facility, and then hoisted into place on the pier tables. Basically what happens is you have the pier, and one gets up on this side, one gets up on that. You keep cantilevering out like that, until you get to a gap and then you close the gap and you've got a Bridge.

They repeat that over and over and over again. There are several hundred of these. I think 400 hundred deck sections that will be floating down., and that construction will be going on for a couple more years, and they're really getting the hang of it. They're really moving along on that. so that's a basic orientation.

What I wanted to talk to you about is a report that we completed with the Bechtel Corporation to really look at two questions that arose when the disclosure was made that there is a pretty big cost overrun on the program. and this isn't the first big cost overrun there's been.

The two questions were, number one... Are these costs closer to being the truth than the ones we had before, and the ones we had before and the ones we had before that.? Are we getting any closer to accuracy...?

The second is, what to do about that single bid that was received for the suspension Bridge. should we accept it...? Should we re-bid it...? ..Should we redesign it and look at some other options, since it was significantly higher than expected..?

The cost review. We mainly focused on the two Bridges that, as I showed you, are still underway. Why focus on the project's that are done. We know what they cost. We'll just write that down.

This is the summary. the little acronym up there AB1171. That's the State law. Assembly Bill 1171 that governs the program, and that law established an overall budget of a little over 5 Billion Dollars for the whole Toll Bridge Seismic Retrofit Program.

It assumed, that the Bay Bridge East Span. the New Span was going to cost about 2.6 Billion Dollars. You can see that the review that was completed shows that-that East Span has doubled in cost, but that there have been significant increases in costs..... this is the difference column. in many of the structures. The skyway portion, other projects on the East Span. The SAS is obviously the largest of the bunch, Significant increases on Richmond, small increases on the Wast Approach. So, then overall you have something on the order of a 3 Billion Dollar cost overrun, and a new total estimate for the program of about 8.3 Billion Dollars. So overall again, about a 3 Billion Dollar increase in cost.

One of the issues you may have seen discussed in the papers, because it was debated in the Legislature in the last two months of August was........Who's to blame for all this..? and who ought to pay for these new overruns..? Because the basic approach to date has been one of cost sharing between the State Highway Account, the Gas Taxes and Tolls. That's why that 1 Dollar out there is on the Bridges, to help pay for the prior estimates of the program.

The question before the Legislature is.....Is there going to have to be another Dollar, a 4th Dollar to pay for what we thought we already paid for before. One of the interesting things is that the Bay Area tends to get blamed for this fancy design.

The way it was handed down. Governor Wilson decided, actually, to build a new Bridge, in 1997 instead of retrofit the existing Bridge. But then the question became, well, what Bridge do we build...? If, we're going to build a new one and that is where we came in.

It was actually our first job as the Bay Area Toll Authority, was to select that design. and so there is a tendency to say...... Well, the Bay Area picked that design. so they ought to pay for it. But, as you can note, only about 50% of this cost overrun is even attributable to that design. You're going to have to build some Bridge there. So it's not like we're on the hook for all of that. You have to build some structure to close that gap. There's no question, the structure we picked was more expensive than others, but it's certainly not the total amount of this 2 Billion Dollars.

Just to give you another sense. I'm going to get a couple of little pieces of the salami here to show you what the overrun is comprised of. You can see, not only a very significant increase in the capital outlay costs. the hard costs for the program, but a very significant increase in the capital outlay support cost, that's Caltrans staff, overhead, consultants, engineers... Some of you will, some day, be support costs. You can see 1.3 Billion Dollars is a lot of money for support costs.

That, number one, tells you how big this program is.... And number two, how complex it is. Caltrans is doing in many places, Richmond, Bay Bridge, elsewhere, the only engineering of its kind in the world to these kinds of seismic standards. There is also, and this I actually take comfort in.... There is a much larger uncommitted contingency in the new estimate, than in the old one. If we had a bigger one in the old one we wouldn't have had such a big overrun.

I mean one lesson we have clearly learned, and should take away from this... is that the contingency on a lot of these big programs in California ought to be much larger than they are, and we ought to be much more humble about what we know, and what we don't, especially with underwater construction. We've seen it on Benecia, on Richmond on Carquinez.

The soil in the Bay Area really stinks. The rock is really horrible, and time after time Caltrans is having to invent new procedures to deal with that fact and we should acknowledge that things like that might happen. It's what Donald Rumsfeld calls, the unknown unknowns. They're the biggest. We know we don't know. But, then there are the things we don't know, we don't know., and those are the ones that really bite you in the bottom.

This is another way of looking at that increase. This adds up to 2.8 (Billion Dollars) because that's the base amount not including this uncommitted contingency. You can see that the largest single item is that the bids came in higher than folks thought.

That has a lot to do with the size of these jobs, and the fact that there isn't the same kind of competition for building the skyway Bridge, as for building a highway interchange.

I has to do with the steel industry and the immense amount of construction going on in China and other places around the world. Concrete is going through the roof these days.

So there are significant constraints in the bidding environment that is causing much higher bids than Caltrans was expecting. You can see schedule delay, you can see change orders and claims. That's the stuff about the rocks not working the way we thought and now..... we have to do something different, as well as when all this stuff takes longer, and is more difficult than you thought the support costs rise with it.

They're still pretty shocking numbers. You see how big we missed it. There's a book I just finished reading.and some of you probably have, called "Mega Projects and Risk." It quotes, in fact, Marty (Wachs), some of the work that you've done. It systematically examines a series of projects, not only in this country, but elsewhere, and the fact that the costs always tend to be higher than estimated and the benefits often tend to be lower than estimated, and concludes that this looks like something besides a coincidence, and I think recommends some strategies. The one that really hit home with me was this notion of contingency and of really planning for things not to go according to plan.

These I think, I'll go through and just show them to you. This stuff is all on our website up the wazoo.. but it just breaks down in individual contracts, the kinds of cost increases we're seeing. Let me get to this one because this is the more the topic of today. These bridges are going to cost what they are going to cost.....

These decisions are still ahead of the State of California and in fact this week they announced that this option is off the table. There was a bid submitted in May. Caltrans was hoping for two or three bids. They got one. The single bid was for 1.4 Billion to build the SAS. That's a huge number. Caltrans' estimate was 700 Million. No one believed it. We had a betting pool at the office and a Caltrans Engineer was in at $1.2 You know, I don't think anybody was hoping for $700, but then sometimes you hope against hope. That bid was extended for 60 days to give the Legislature a chance to come up with a funding plan, and we came close at the end of the session on the very last day and the very last hour and it didn't happen. So the decision facing the State this week was to seek another extension of that bid, or to let it lapse.They decided to let it lapse So, really what;'s on the table are these two options.....To re-bid that current design, try to get more competition, more bids. Or to redesign it...?

And there are obviously different options you could pursue here. The one the State is focused on is a cable stayed bridge. It's actually an option that we looked at, in detail, when we picked the original design, and it was a close vote the suspension Bridge and the cable strayed Bridge several years ago.

This is a lot of words, and I think, just for the sake of time and trying to get to your questions. I'd rather not focus on a lot of words. The numbers, I think, in this chart tell the short story. This is sort of the punch line of the analysis, and let me set the context for it. You know when you think about re-bidding, redesigning... You know on the one hand, boy if we get some more competition we might get low bid prices. You know, that's what competition tends to do. On a redesign, there's no question that you can find a cheaper bridge to build than the one we picked,. Cable Stay Bridges, on just a unit price, will probably cost something on the order of $500 million less for that space, that gap. The Viaduct Bridge, the notion of just continuing that skyway all the way into the tunnel would probably save on the order of 700 million.

The trick is you can't stop there, You've got to carry the analysis through and say... Now, the problem is this.... This SAS design is 100% complete and ready to build. Is there a 100% cable stay design for this Bridge. No, there's not a zero percent. there's nothing. So, you've got to factor in the time it would take to develop that design. The support costs it would take to develop that design.The risk of permits will delay you even further because we have to go back into the NEPA (National Environmental Protection Agency) process, back to all the permitting agencies that have already said, OK.

The fact that you would have to change that tie down, at the Island. The one I showed you that's already sticking out of the ground.... The fact that you would have to fix the skyway portion of the Bridge because it was designed to hook into the suspension Bridge, not the cable stayed Bridge, not the viaduct.

The fact is, that what you're really doing here, and this is what I got to say, it sort of throws me for a loop. The State originally decided not to retrofit the current Bridge because they really couldn't come up with a good strategy to do it. They couldn't come up with a strategy that they felt confident would keep the Bridge open after an earthquake, and went to a new design.

And the virtue is...You build a new Bridge, you can design the whole thing, state of the art, end to end. What redesign really means,. with this Bridge under construction is.... you're retrofitting a brand new Bridge. When you think about putting a patch on the roof at your house verses putting a new roof on. Where does the thing leak. It leaks at the patch, and so that is a significant risk with this option

I mentioned those ideas only because I think you need <montenize ? > both the potential savings as well as the potential costs, and delay, and that's what this analysis that we did with Bechtel does, both for capital costs, and support costs, and when you get to the middle in the blue, that's sort of the bottom line. And, the bottom line, according to this analysis, is that if you went to re-bid the current design. The likely outcome is you're going to cost the program money. You're not going to save.

You might get more than one bid. You might get a lower price but that price is going to happen a year and a half from now, and longer when inflation has taken into account, and you're going to be pushing out some of those other contracts that have yet to be awarded, even further which means they're going to cost more, and so on.

The same kind of analysis here. There is the potential that significant savings on unit price to actually save some money, but I think the policy question here is.. Do you want to take 4 years of seismic risks to save $85 million bucks . That's not a very good bet, in my mind. and we just had another earthquake this week to remind us where we live and why we're doing this.

Those are the questions, in any event, that will be before the State as they wrestle with this issue. The conclusions of our analysis were that awarding the current bid is the fastest path to seismic safety. That apparently is not the path we're going to take. There does not appear to be an opportunity for significant cost savings either with a re-bid or redesign, but we're going to do one of those two things. One of those two things are going to happen and we'll find out how good this analysis is..

And three, and I think most seriously, there is a substantial risk to re-bidding this project in terms of delay,. And that delay, who knows, I mean who knows when the next earthquake is going to come. It could come tomorrow. It could come a decade from now and if it's a decade from now, well maybe then no one is the wiser, but if it is in the middle of the completion of this project and we count back in time and say well what time did we lose in getting this done. I think there are going to be regrets all around.

The last thing and I'll probably just buzz right through this because i think I've probably given you enough to ask a few questions about. The financing is going to be a bear on this. Because everybody feels like they've paid too much already and no one wants to pay more. You can see that in general terms we had a 50-50 deal with the State about 2-1/2 billion from tolls and about 2-1/2 billion from State funds and where do the funds come from next..?

One idea that been discussed that involves us, is actually taking Caltrans out of the middle of the toll structure and having us administer all three Dollars locally. We think, on a finance basis that would provide a much stronger credit. We could probably leverage more toll money out of the existing toll stream than having the toll revenue separated in two different enterprises.

You could always increase the toll. That's the Legislatures call. All this shows is that the sooner you do it the more money you raise. And finally there are obviously some things that the State could pick up. For example on the contingency there are some in Caltrans who think this contingency is too big, and my own view is well if you think it is then why don't you agree to pay for it. And I'm willing to take the risk if you're right.

There is also the potential for the State to pay for the demolition. Remember, once we finish all this, and someday we will. Caltrans will need to demolish the existing East Span. My own view is maybe the Governor will work it into his next movie and then we can blow it up for free. <everybody laughing> I guess that's a good <?>

So, hat's the slide show. So, maybe we can hit the lights and see who has fallen asleep. I'd be happy to answer any questions you have....

Q: = Question from the audience
A:. = Steve Heminger response

Q: How would you compare this to the other famous mega projects on the other coast..?

A: The Big Dig, huh.... Well, we knew we were in trouble. This was about a month ago when we got a call from the Boston Globe. We said, oh man.. It's funny we';re not as expensive as they are yet. I think the Big Dig is where..,..? Around 13, 14, 15, Billion.(dollars) We're only at 8 (Billion Dollars)... We've got a long way to go, but I think clearly there are parallels and the parallels involved, again, getting back to this question of uncertainty and risk assessment and reasonableness.

You know, when we got into this I mentioned...., We were vested with the authority to select a design. The way it was working is. again. Governor Wilson said, we need to build a new Bridge, and so the assumption was the State's on the hook to build a viaduct all the way. plain vanilla into the tunnel, right... If the Bay Area wants a prettier Bridge you pay for it. If the Bay Area wants a bike path, you pay for it. And so the structure that was set up is, we could add those.... They were called "amenities". They're not amenities in my view, but that's what he called them.

We could add amenities, but we would have to pay for them on an incremental basis. And to do so we needed an incremental cost estimate, right... Well, we were told that this Self-Anchored Suspension Design would add 160 Million Dollars. to the cost of this Bridge. We were told the whole Bridge was going to cost about 1.3 Billion (Dollars), and both those numbers were way wrong.

And so, I have Commissioners today saying, Gee, if I knew then what I know now, would I have picked this thing...? and I think the answer might very well be NO, We might have made a different decision. I think the bigger question is Governor Wilson was told that a brand new Bridge would cost about, a little bit over a Billion Dollars. The brand new Bridge is going to cost you 4-1/2 (Billion Dollars). at least. Whether you build our pretty design or not. So, the first decision was made on the basis of poor information.

Now, would he have made a different choice. I'm not sure. The simple fact is that Caltrans didn't have a good retrofit strategy for the East Span, irrespective of cost. They couldn't figure out how to do it, and if that's true....? . If you believe that point, then building a new Bridge becomes more attractive, whatever the cost might be...., If you place a premium, which the State does, under the law, on seismic safety.

So, I think like a lot of things.. I know one of your colleagues, Karen Flick, who used to work for us is actually writing her thesis, I believe on this project, and I keep kidding her that someday we'll finish the Bridge before the thesis <audience laughing>

I think she is going to win. She is going to, I think, unravel that whole chain of decision making. You know one thing leads to another, and boy if you had a chance to unravel things back, would you have made a different decision..?

Personally, I think the Governor Pete Wilson, made the right call. I mean because we're not just getting a safer Bridge, we're getting a Bridge that's going to last a hundred years, we're getting bicycle-pedestrian access, we're getting traffic shoulders. Clearly we're getting a more attractive Bridge than what we have now. I mean we're getting a lot of benefits. It's cheaper to maintain than painting that steel structure out there, day in and day out.

So, we're getting a lot of benefit with this new design, and I think 50 years from now, are people going to remember that this thing cost 50 million or a 100 million, or 500 million more than we thought.?.. NO, if this thing falls down before we get it fixed, they'll remember that.

Q: <..? Inaudible>

A: That's a really good question. It gets a little bit.. Why is there only one bid instead of more. You know, part of it is that that is a really weird bridge to build. Let's just face it. When you build a Self Anchored.(Suspension Bridge)....., and I don't know, can I go backwards on this...? Let me put the design up just to show it to you..... I really don't have a good picture. I have this little thing......

A self anchored suspension Bridge is very unusual. When you build a regular suspension Bridge you build the towers, and then you build the anchorages, you put the cable up high into the anchorage, then you hang the suspender ropes, and then you build the deck off the suspender ropes. You've all seen that picture of the Golden Gate Bridge with the decks hanging out there in the air, and you saw the Carquinez.

The difference here is that you build the tower, but since the cable is anchored into the deck you actually need to build false work towers underneath the deck, put the tower on top of it, then put the cables up, the suspender ropes to secure the deck to the top to the cables and then you knock out the false work.

So, it takes longer and it gets more costly, and so in part I think the reason is, it’s a very unusual construction method and a lot of firms are scared of an unusual construction method.

The second thing is. We were very much expecting that the guys who were building this one, the lead firm in the consortium is <Keewit> ...We figured for sure they would build this one. They, in fact have to contract to build these two piers. They decided not to... We think that might have been because when they actually bid for this contract to build these piers, they were the sole bidder, and Caltrans threw that bid out, and so we think they might have thought well, hey I'm not going to do that twice.

If there is a chance there is a sole bid, I'll let somebody else be the sole bid, and maybe that bid will get thrown out, and I'll see what their bid is and then I'll come in later with my price. So, there's a lot of that kind of stuff going on in the industry, in terms of looking over your shoulder at the other guy.

So, I think it's a combination of factors. Not only the complexity of the design and the risk involved with finally delivering it, and there's some pretty high profile risk, but also the issues about thinking that maybe the first round isn't going to be the last round.

Q; I"m going to ask a question that may be somewhat ... undiplomatic.. You probably know one of our colleagues here, on the faculty, has been quite vocal on his comments on the way that the entire design selection process was done. Among the things he alleges...... is that 4 of the people on the selection panel were partners or members, I'm not sure exactly, which submitted some of the designs and that coincidentally, maybe, maybe not, the 4 semi-finalists happen to be <?> and I wonder if you have any comments on that..?

A: You know probably more than you want to hear...<laughing> You know Professor Astaneh was a prominent player in our design selection process. I mean we first encountered him when he came in with his own design to build a new Bridge, and his design was quite captivating. It was eventually rejected by our expert panel for not aesthetic reasons, but for engineering reasons. Subsequently, he became a crusader for retrofitting the current Bridge. When he had come in with his new design, he said you shouldn't retrofit the current Bridge, you should build a new one.You should build mine. When we decided not to build his, all of a sudden retrofitting the Bridge made more sense. That's one point I want to make.`

The second point on the question, about conflict, is a serious one, and I don't know if we did it the right way or the wrong way. I'll tell you what we did. We assembled...... when we given this job to pick a design, we didn't know how to pick a Bridge design. We'd never done one before, and I promise you we'll never do one again. <everybody laughing>

We needed some expert advice. We know about public involvement and outreach and trying to get people to consensus. But, in terms of the seismic, the engineering and the architectural issues.... So, what we did is we assembled a group of pre-existing panels. Caltrans had a Seismic Panel and a Peer Review Panel, and BCDC has two panels. Their Engineering Criteria Review Board, and their Design Review Board. We went to the AIA, (American Institute of Archetects) We went to of couple of other folks, and we just put this big group of experts together. That's the best we could think of to do, especially given the time constraints the State gave us.

They wanted to pick the design yesterday, right, that's how much time they gave us. So, that's how we assembled it, and then we had to face the question that you raise. Well, some of their... they're not on these panels full time. This is something they do as a volunteer. They have affiliations, and so we went in the nature of disclosure. Everyone disclosed who you've worked with...Who you have arrangements with...? and all those hands went up. Not every hand went up with every presentation, but it was fully available information to everybody, who knew who....

Personally, I think trying to assemble a panel of people who knew how to build these Bridges, who had nothing to do with people who build Bridges, would be a pretty impossible task. So, I think there was bound to be some level of conflict when you have a knowledgeable panel. That conflict, if it existed, was disclosed. I did not see any of that working itself out in the decision making, myself.

I saw everybody trying to deliberate. They were all volunteering their time. And,they volunteered an incredible amount of time, under incredible pressure to do so, and I have to say I somewhat resent the insinuation, and its common in our business, that when someone doesn't like the result, they'll just accuse the process of being corrupt.

What our process did is select a design concept. We did not select a design team. So, the winner of our design process didn't make any money. The winner of our design process was this design, and then Caltrans subsequently put that out to bid, competitive bid, and subsequently they're now going to put that out to competitive bid to build. So, in terms of a financial interest, which I think is at the heart of conflict of interest, I don't think there was any. The design winner perhaps may have been influenced by some of that, but the financial winner wasn't..

Marty, you had your hand up.

Q: There was a report that was done by Bechtel and MTC that suggested, as you summarized it for us, that the bid period should not be allowed to expire and yet that was the decision that was made. How was that report used...? How was your agency view considered when the Secretary (McPeak) announced yesterday that she would allow these bids to expire..?

A: You know I consider myself, Marty, in many ways, a lucky man. And one way I'm lucky is I have one boss. I do have 19 bosses who sit on my commission, but, all I've got to worry about is them. that's who I work for. Caltrans, on the other hand, works for a lot of different bosses. They work not only for the Business, Transportation & Housing Industry, where Secretary McPeak sits, but they work for the Governor's Office. And the Governor hears from a lot of people.

The Governor hears from contractors who tell him, appropriate to your question. Hey, I've got a design over here I can build for you that's a lot cheaper than this suspension Bridge, so why don't you throw that bid out and let me bid.

The Governor hears from political people who point out, you know, the Bay Area really didn't vote for you so what do you care...? <Laughing>

So, there's a lot of that going on, just to be candid with you. We did this analysis at the request of Caltrans and at the request of Secretary McPeak's agency. I think it's a defensible analysis. You can clearly change assumptions, and if you change assumptions you change outcomes.,

If you assume for example, that instead of 2-1/2 to 4 years to do a new cable stay Bridge, it will take half a year... Well guess what, this will get a lot better, but is a half a year to design an entirely new Bridge reasonable....? I think there continues to be a suspicion, Marty, in Sacramento that there is some home run out there that we're missing, and that... Gee, we only got one and it was so over what we thought it would be, there must be something out there that's cheaper...

And I think we, MTC sometimes get accused of... well, you're just so vested in this suspension Bridge, you picked it, and for <cryne out loud> all the abuse you had to suffer, You're just never going to change your mind.,

And, I think the commission really isn't so tied down to this design. They are tied down to the question of the fastest route to safety, and like it or not that's our design because it's done. And that would be true whether our design was a cable stay or a <stockway,> or a loop-de-loop.

I think the folks in Sacramento just have a hard time accepting that, and I was joking to Ann, I think, before we started that. I fully expect that when we go to the day where we cut the ribbon, and open this new Bridge, we'll be talking about re-design.

You know, you will have people talking about, gee.. couldn't you move the tower over here, or wherever ever else. I just think we have this mania for second guessing, and then we all wonder why projects cost so much.

Q: Have you given any thought to alternative contracting like a design build, or a privatized thing, or any other considerations..?.

A: You know this option, and there is actually a 4th option we evaluated. I didn't bring it with me which was the Skyway Option. We assumed design-build because that is going to be faster typically than the design-bid-build process that we went through here.

You know I'm not sure we could have done what we did in a design-build framework because the basic idea there is that you shove a lot of the design flexibility and risk on the contractor, and away from the government agency. In our case we really didn't want to go through this public involvement process and let people in the region help influence what that design is and that probably is not that compatible with design-build. So, I think that was probably a choice that we missed, way back when, and I think it's a fair question, if we had done design-build back then. If the Bay Area, had been willing to relinquish what this thing would look like, to a great extent to a private firm could we have got it done faster and cheaper, and the answer to that probably is, Yes.

At the same time this is going to be a landmark in our region that we're going to be looking at for the rest of our lives, and the lives of our children, and their children, and I think this region probably.foremost among many, has a very strong view about what is built, is going to look like, and so design-build is probably something that works better in Orange County than it does work here. <laughing> That's just a <?...?>

Q: Speaking of the environment has anyone floated the idea of shutting the current Bridge down..?

A; Shutting the current Bridge down...?

Q; Yes

A: Or the current project down...?

Q: The current Bridge. Why not just get rid of it <inaudible>

A: Well, it would do wonders for BART ridership. That's one thing it would do., You know we did without the Bridge for a month, remember, after the earthquake, and BART ran the wheels off the trains, and some of the ferry service did come in. I think as a long term strategy that's probably not that workable. We actually did have a lot of discussion, I see Ken Bukowski here, during the design process...

I think a lot of people were very frustrated with it, because the parameters we were given by the State, were just... Replace the Bridge.

You know if we would have had the parameter, consider a new crossing at that location, then we could have, I think thrown the doors a lot more wide open. But, as it was this bridge is really must hooking into a tunnel that's hooking onto anther Bridge that's already there, and so a lot of folks came in and said, hey, why don't you put 7 or 10 lanes on this thing, and we said, well we could but we have to go down to 5 lanes on the other end. You know, put a train on it, but you know there's no train on the other side. I mean so, We got into a lot of those kinds of questions, and those are all fair questions, but we were in the confines of a safety project.

I have to say though, and it seems... I think this is the sorry part of the tale that safety is the thing that everyone keeps very tight. There always seems to be value when it comes down the line to determine. The value now is.... Can we save a couple of hundred million bucks. and saving a couple of hundred million bucks sounds great to me. But, what we're talking about here is an 8 billion Dollar Program, and a 5 Billion Dollar Bridge. And if we're going to take a 4 year safety risk to save a couple of hundred million bucks, I think we're being penny wise and pound foolish.

Q: The engineering firms are bidding low on this project knowing full well the costs are going to explode. I mean this is very typical of major programs. They get their foot in he door, and get the Project started, and they make a whole bunch of money for the rest of your career, can you comment on that..? I mean it's just..

A: That's a good question for Marty..too because he has been writing about this. I guess my own personal view is, it's fairly uninformed and it's based on a thoroughly narrow band of experience. One of my commissioners has this phrase... how does it go... " I used to believe in conspiracy until I met incompetence" <audience laughing>

And, I would tend to think that-that implies here, and it's not just incompetence. It's a word I've used before and that may not be the right word either. Humility...... I think a lot more of it has to do with the fact that there are assumptions made at the outset that are just completely unreasonable about how long something will take.

How long will it take the public and the Bay Area to talk about this Bridge. Well...., a long time. OK, not 6 weeks. How good are the soil conditions.. Let's assume they're not great, instead of assuming we know it all. My own personal belief is that there is a lot more of that going on, than you know let's get the project and then we'll hit them with the cost increases later on. But, I can't rule that out either, and I know the evidence that I've seen of this work, and I know that Marty has done would tend to suggest that-that's going on too.

Q: Could you talk a little bit about the practices for developing a contingency figure for projects like this.. ? Who makes that decision, who makes that call.. is it consultants <?> government agencies.. Is it a standard percentage I'm sure that on the other side I'm sure that private firms <?> their own budgets. they make sure there's a profit margin..?

A; You know, I don't think there is a standard, and I'll tell you one of the regrets that I clearly have on this project is that when we were given an estimate, way back when we were given a bid that this SAS would add 159 million bucks, that we didn't call Bechtel then, and say, hey guys, why don't you come in and look this thing over, and see what you think. You know we called them in, on the second cost overrun, and by that time, you know the horse is out of the barn. So, I think that's one thing we could have done better.

We do have a practice now, as the Bay Area Toll Authority, with the Regional Measure One Program, that's not the Seismic Program, but that's the one building the new Bridges, and our practice is.. Caltrans builds contingency into their estimates, so they've got contingencies on support, contingencies on capital costs on each of those projects. That adds up to a number. We take that number and add 10% to it. So, we've got a double contingency you might say. And guess what...We've spent it all on each project, and on Benecia we've spent more than that.

And so I think one practice is the practice that we've sort of bumped into, and that is... in addition to the project firm or construction manager handling estimates, the financial team ought to build more on top of it. You know the worst that's going to happen is you're going to have to give some money back, and that's not the worst thing in the world.

Now. there is a down side to this, and the way you have to carefully manage it and Caltrans is always getting mad at us, when we put all this stuff out in the newspaper and the web site like this... and that is If you show the contractors a number they're going to bid to it.. So, you've got to protect yourself both ways. But, I think there's a way to do that. I don't think that's a good excuse not to have enough contingency in your estimates.

But, again, I would get back to this question of just having confidence in what you
ought to have confidence in, and not having confidence in what you don't, and say so, and leveling with people about it.

Q: Another thing on the cost, I'd like to <?> down on that question. Economically there's no way to compare it to...... <?>..... the high cost of building the Bridge. And. It's perfectly reasonable to charge 5 Dollars to cross the Bridge, and still get huge volumes. I've seen with BART and the ferries, and there's no way you can approach the cost per person trip with any other form of traffic <..?..? become charge 5 Dollars to get across the bridge and still get huge volumes with any other form of transit.

A: Well, on the Bridge remember gets you a bunch of buses and carpools across the Bay That Bridge actually functions quite efficiently. I think, the last numbers I saw, I think carpools and transit, and BART in that corridor handle you know, 50 or 60 percent of the person trips. I mean if we can get more of those folks into that mode with buses and carpools, the Bridge would function even better.

Facilitator: Well, I think we've asked enough questions. Thank you very much for coming...


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Ken Bukowski
5880 Doyle Street, Emeryville, Ca 94608
(510) 547-2101