Sunday, July 10, 2011

California High-Speed Rail: Where has all the money gone?

We keep worrying about how to fund the California high-speed rail project.  They have about $6 billion promised now but will need many tens of billions more to actually produce an operating railroad.  With such concerns, we tend to neglect how much they have already spent and on what.  The short answer, according to this article by Tim Sheehan, is $630 million. 

Considerable sums have been devoted to public relations; that is, selling a project that there has been almost no interest in except by the promoters.  It's not like Californians were marching in the streets demanding a high-speed train between Los Angeles and San Francisco.  So, the back-room politicians serving on the CHSRA Board took on the task of marketing and sales. Hundreds of millions of dollars have already been spent on the effort to convince us that this is a good and necessary idea. 

In case you don't remembers, Prop. 1A appeared rather suddenly, when Governor Arnie did a turn-around and supported HSR after strenuously opposing it.  The voters where asked if they'd like to have a high-speed train which, since it was bond money, wouldn't cost them anything, would charge $55 for a one way ticket from SF to LA, create a million jobs and rebuild the California economy.  Four percent more of the voters said yes than no. 

From a transportation perspective, there really is no need for this train.  We do have other transit needs, but this HSR luxury train isn't one of them.  We need construction jobs and there are many better, sooner ways than this project.  We need to get the congestion off our streets in our major cities and suburbs.  This train won't do that.  You can begin to see that this is a train we don't need and don't want.  And, we can't afford to pay for it.  So, what is it?

It's something like the Music Man Broadway Musical made into a movie. <>

By now, the accumulation of substantive criticism has grown large enough that it must no longer be ignored or dismissed.

Case in point: The Parsons Brinckerhoff situation -- the CHSRA prime contractor -- is serious enough, given the company's ignominious track record. The entire history of hired consultants, and the lack of adequate book-keeping, presages further, and far more costly grief.  Having to hire TY Lin to oversee Parsons Brinckeroff is ironic since the two companies are so highly collaborative.  Remember, these are the Boston Big Dig guys, who had to pay nearly $500 million in fines for all their naughty behaviors. They screwed Massachusetts out of billions of dollars.

The train's supporters, including Assemblywoman Cathleen Galgiani, persist in their cause since so much funding would funnel into her district and she has been the voice of the rail authority in the Assembly.  But, all the public relations and spin generated by the HSR's advocates cannot silence the criticism, nor distract Californians from the vast sunk costs already incurred by the rail authority. 

You have to ask, as the article does, after having spent more than half a billion dollars, what do they have to show for it, besides having been awarded nearly $4 billion in federal pork?  They've initiated and then dropped many plans, changes necessitated by the requirements attached to those federal funding earmarks.  The rail authority functions by continuously accommodating to circumstances as those constantly change. They devise new verbal stratagems, like "phased implementation" to justify acquiring "ownership" of the rail route without actually having to do any construction for which they have no funds.  

As engineering progresses and the harsh reality of high costs become more apparent, the rail authority has switched to a new justification, " value engineering" which is a not so subtle way of saying corner cutting on all their design work.  

The approach, for a project more expensive than any other in the history of California, appears to be "quick and dirty."  Quick because the FRA has imposed time-lines on the funding eligibility of the already granted awards, and 'dirty' to come in with the lowest costs possible for any route section. For example, they intended to build at least four elevated train sections (on viaducts) in the Central Valley but dropped that idea due to costs. Voila, "value engineering."

And finally, despite the vast amount of discrediting information about the rail authority, oversight and accountability are still lacking. The lack is intentional.  No one, certainly no Democrat, is prepared to act decisively on all the information already in hand.  The procrastination continues as the criticism flow accelerates. In the State Legislature, the importance of bringing over $3 billion into California has become the over-riding consideration, regardless of the consequences.  

No politician can have the courage to stand up against their own Party and deny the state these funds. Without consequences for their actions, the rail authority has no incentive to alter it's behavior, and therefore to continue on its merry self-destructive way, spending everything they can get their hands on.

What California has to show on high-speed rail -- pages of reports and a chorus of concerns

By Tim Sheehan
Fresno Bee
Published: Sunday, Jul. 10, 2011 - 12:00 am | Page 3A

California is about to build the largest public-works project in the state's history: a system of high-speed, electric passenger trains. And even before a spade of dirt is turned, perhaps late next year, the state will have spent about $630 million.

What does California have to show for it?

Thousands of pages of strategies, studies and plans – and a chorus of concern over the California High-Speed Rail Authority's budget management and its ability to monitor an army of consultants.

Over the past two years, state oversight agencies repeatedly have cited problems – contract payments made without verifying that work was actually performed, payments for services or equipment not covered in consulting contracts, and a lack of policies and procedures to review invoices and payments.

With spending set to leap from millions of dollars per year in planning to billions per year once construction begins, those worries are now magnified.

The first 520-mile phase between San Francisco and Los Angeles, through the San Joaquin Valley, is expected to cost at least $43 billion over the next decade – and likely much more.

"We're rapidly approaching a time when I'm going to have to ask myself, 'Is (the rail authority) capable of delivering?' " said state Sen. Joe Simitian, D-Palo Alto, a frequent critic of the authority's management.

The authority says it needs consultants because the scale of the project is bigger than the agency's staff can handle on its own.

"Through consultants, we can leverage a lot more experts rather than hire someone into a state job that we'll only need for a few months or years," said Jeffrey Barker, the authority's deputy director for communications.

Escalating spending

The California High-Speed Rail Authority was created by the state Legislature in 1996 to develop a high-speed train system. In its first decade, only twice did the agency's annual budget exceed $4 million a year – enough to employ a handful of staff, cover administrative expenses, and hire consultants to do the heavy lifting.

That included a preliminary business plan at a tab of about $5.4 million between 1997 and 2000, and a statewide environmental assessment that totaled more than $17 million between 2000 and 2006.
Intensified planning over the past several years has ramped up the authority's spending dramatically.

As construction approaches, the agency's budget rocketed from less than $5.2 million in 2005-06 to more than $220 million in the 2010-11 budget year that ended June 30.

The acceleration has been sharpest since California voters approved Proposition 1A in 2008. The bond measure provides up to $9 billion for construction of the statewide train system. Since Prop. 1A was approved, nearly $400 million in bond money has been allocated to the authority for its operations. The federal government also kicked in more than $144 million in 2010 and 2011.

Most of that continues to flow to consultants.

The authority's single largest current contract is with Parsons Brinckerhoff, an American subsidiary of English engineering and construction firm Balfour Beatty. Under its $199 million, seven-year deal, Parsons Brinckerhoff is managing the overall high-speed rail program on behalf of the authority. That includes overseeing regional engineering and environmental contractors – each of which is being paid tens of millions of dollars.

The authority has more than $800 million in contracts with consultants handling different agency functions.

Not all of the contracts are for engineering. There are multimillion-dollar contracts for video and animation production and for financial services. The authority even hired a consultant to monitor its project-management consultant.

Management concerns

As the rail authority gets closer to asking for billions in Prop. 1A bond funds to start construction in 2012 and 2013, some observers are getting nervous about whether the agency can meet its deadlines and effectively manage all of its consultants.

The authority currently has a staff of fewer than two dozen state employees handling administrative, clerical and contract management functions.

Since 2009, the state Legislative Analyst's Office, the California state auditor, the state Office of the Inspector General and the rail authority's own Peer Review Group have issued separate reports that cite, among other issues, weaknesses in the agency's overall management and its oversight of contracts.

"It is clear … that current authority staff resources are not at all adequate for the job at hand," peer review chairman Will Kempton wrote in May in a letter to authority CEO Roelof van Ark.

Questionable bill-paying practices were targeted by other analysts. "The days of paying bills that show no deliverables, no progress reports, no tasks performed and no timesheets must end," then-Inspector General Laura Chick stated last fall.

The authority acknowledges the problems and says it's taking steps to solve them. It's trying to hire more in-house staff – and it's hired yet another consultant. San Francisco-based T.Y. Lin International has an $8 million contract to monitor the work of Parsons Brinckerhoff.

"We recognized that we needed better oversight of the main contractor," Barker said. "We didn't have the staff to do it, so we hired an engineering firm to look over (Parsons Brinckerhoff's) shoulder."

Experts say it's not unusual for states to rely on highly paid consultants for specialized expertise on major engineering projects.

"Would California be able to hire hundreds of employees who are experts in high-speed rail?" said Christopher Barkan, director of the Rail Transportation and Engineering Center at the University of Illinois at Urbana-Champaign. "And if it did, where on Earth would it find them?"

The authority's spokesman said the consulting contracts are effectively putting hundreds of people with specialized expertise to work on the overall project when they are needed most.

Still, there are calls for greater accountability for the authority.

Two bills in the Legislature would bolster oversight of the rail authority by putting it under the auspices of the state's Business, Transportation and Housing Agency.

Simitian said he believes the authority is making progress on its management issues, but added that it's happening far more slowly than he and other lawmakers had hoped.

"Perhaps in hindsight, it was naive to think the authority could make that transition quickly or easily," he added. "But here we are, pushing three years since Prop. 1A, and this is still an organization that's struggling, to say the least."

© Copyright The Sacramento Bee. All rights reserved.

No comments: