June 18, 2020
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Sound Transit has one of the most significant transportation funding packages in the country. Some lawmakers have sought to increase accountability and oversight around how Sound Transit uses tax dollars. For example, lawmakers have proposed bills to mandate direct elections of Sound Transit’s Board of Directors. Cost increases and equipment failures on high-profile Sound Transit projects have also raised concerns. For example, estimates for two light rail extensions increased by $1.1 billion, 27 percent more than originally estimated. On another light rail project, the station’s escalators, which were not designed for heavy use, broke down repeatedly.
Given current funding uncertainty following voter-approved Initiative 976 and concerns about cost increases, controlling costs is vital if the agency aims to deliver its construction program on time and on budget. This audit examined how Sound Transit can improve project planning and design to reduce costs.
Read a two-page summary of the report.
Report Number 1026355
State Auditor’s Office contacts
State Auditor Pat McCarthy
Scott Frank – Director of Performance and IT Audit
Christopher Cortines – Assistant Director for Performance Audit
Tania Fleming – Principal Performance Auditor
Michael Huynh – Lead Performance Auditor
Holland Kitchell – Performance Auditor
James Geluso – Performance Auditor
Marisa Sanchez-Reed – Associate Performance Auditor
Willa Hevly – Performance Audit Intern
Kathleen Cooper – Director of Communications
The audit’s key results involved several areas. First, Sound Transit’s contracts and change orders show the potential for cost savings obtained through competitive bidding. We found the agency’s change order prices were consistently higher than cost estimates, while competitively bid contracts were consistently lower. Among the reasons given for these change orders were:
- To correct design deficiencies, such as electrical systems that lacked power supplies
- To amend structures that did not meet building codes
- To address costs incurred by contractors when they encountered adverse underground conditions not described in contract documents
Many change orders we reviewed resulted from similar mistakes. This leads to the second key result area: the lack of a robust lessons learned program. While lessons learned programs do not necessarily prevent an issue from happening the first time, they reduce the likelihood it would recur in future projects.
Sound Transit was created in 1993 by King, Pierce and Snohomish counties. It is building and operating a high-capacity transit system for the Puget Sound region. Sound Transit has received most of its funding through three voter-approved measures that provide the agency with portions of local sales and property taxes and car tab fees. The most recent measure, called ST3, is one of the largest in the country. It funds an estimated $54 billion for construction, operations and maintenance over the next 20 years. When complete, Sound Transit’s system will connect 16 cities by light rail, 12 cities by commuter rail, and 30 cities by bus in the three counties.
In 2019, voters approved Initiative 976, which caps the state’s car-tab fee at $30. If the initiative survives legal challenges, Sound Transit could lose $328 million annually, nearly 15 percent of its annual budget.
Costly change orders
Change orders are contract amendments that modify a contract’s scope of work. State and local agencies often anticipate change orders in large, complex construction contracts. However, they can be costly and agencies try to minimize using them. Change orders are costly because they sometimes involve redoing work and do not take advantage of competitive bidding. The audit concludes that Sound Transit could reduce remedial work and other change orders with additional upfront planning.
Although Sound Transit has policies and procedures in place to minimize project changes, the agency still issued hundreds of change orders. We examined more than 300 change orders worth $172 million. We found Sound Transit issued more than 160 change orders, worth $100 million, to address mistakes or missing information in its designs and contracts.
To limit change orders that result from design deficiencies or unanticipated ground conditions, Sound Transit may need to spend more money upfront to complete more planning. Spending on additional planning work could reduce the likelihood of addressing the problem through more expensive change orders during construction. Striking the right balance can be difficult. However, other transit agencies and leading practices suggest Sound Transit could reduce overall project costs through more upfront planning.
Strengthen design reviews
Large construction projects like Sound Transit’s are complicated. For this reason, there are risks of overlooking deficiencies and missing information in designs, which may be costly to fix later. Sound Transit’s design documents can be thousands of pages long and full of complex drawings.
We reviewed about $172 million in change orders. Of that sum, Sound Transit spent $23 million, or 13 percent, to correct mistakes in design and contract documents. These are not the most common type of change order. Nonetheless, they offer good opportunities for more cost savings than other types of changes. Examples include:
- $1.9 million to correct electrical mistakes such as power supplies missing from electrical equipment
- Almost $4 million to revise plans to meet existing building code requirements after the construction contract had already been awarded
Sound Transit does not employ full-time design reviewers. It could strengthen its design review process by adding staff to review teams. In addition, leading practices recommend double-checking key areas and adopting standard review checklists.
One of the areas where the agency has spent millions of dollars on change orders is to address unexpected soil and groundwater conditions.
State and federal guidelines for underground investigations state they should “fully define the subsurface conditions for design and construction purposes.” Furthermore, “improved site characterization directly reduces the likelihood of encountering unforeseen ground conditions during construction.” Agencies typically achieve these goals by drilling exploratory holes. Drilling costs are often substantially less than costs to remedy the conditions during construction.
We made some estimates based on the average cost of drilling approved through change orders. We found that by spending an additional $2 million, Sound Transit could have increased the amount of underground exploration on all five of the projects we examined by 25 percent. Spending an additional $8 million would have doubled the amount of exploration. Drilling more would not guarantee Sound Transit finds every adverse underground condition. However, the additional work could have reduced the risk of unexpected issues.
Many organizations develop internal programs to collect and use lessons learned from past mistakes. At Sound Transit, an agencywide program would likely produce two results:
- A consistent use of best practices
- Fewer repeated mistakes on future projects
Best practices in project management include capturing lessons learned in a database and reviewing them before beginning new projects. Although Sound Transit collected data from previous projects, it currently lacks a formal process to ensure the lessons learned inform future projects. It is in the early stages of renewing an agencywide lessons learned program.
From 2009 to 2016, State Auditor Pat McCarthy was a member of Sound Transit’s Board of Directors. Auditor McCarthy recognized that the appearance of independence could be jeopardized if she were involved in this audit in any way. Once we began the audit, Auditor McCarthy recused herself from all meetings and decisions pertaining to it. The team conducted this audit with complete independence.
We made a series of recommendations for Sound Transit to improve aspects of its planning and design processes and develop a systematic way to learn from past experiences. Our recommendations to improve planning and design processes include:
- Strengthen the design review process to catch more deficiencies
- Perform more underground exploration to avoid costly change orders when the risk of adverse conditions is high
We also recommended Sound Transit develop an agencywide lessons learned program to learn from past projects and avoid repeating mistakes.