FC Quarterly Audit: Dulles Metrorail Project, February 2012

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DULLES METRORAIL PROJECT

The Audit Committee requested that OFPA monitor the Dulles Corridor Metrorail Project (Project) with a focus on the project costs and project timeframes. OFPA is tracking the following areas: 1) Project Cost, 2) Start of Revenue Service and 3) Funding Obligations. 

Currently, only Phase I is under active construction. Information used in this OFPA report is based on the December 2011, MWAA Monthly Progress Report, dated February 1, 2012 and the Comprehensive Monthly Report issued by the Project Management Oversight Contractor (PMOC) for the FTA dated January 20, 2012.

I. PROJECT COST STRUCTURE

Phase I Budget

Phase I of the project has a total budget of approximately $3.2 billion. As of December 2011approximately $1.77 billion of the Project funds have been expended.1 The Project team assesses Phase I as 61% complete.2 The overall project expenditure and construction completion rates are running roughly in parallel. The Contingency budget of $297.7 million and the Allowance budget of $485.7 million are 9% and 15% of the total Phase I budget respectively. The Project faces challenges in containing the usage rates of the Contingency and Allowance budgets.

[1]Change Orders

The MWAA report divides change orders into two broad categories: Amended and Restated Design Build, and Utility Relocation. Through December 2011, there were $78.3 million in total changes to the Design Build category3 which represent approximately 4.6% of the original total contract amount.

There have been $22.9 million in total changes to the Utility Relocation category, which represent 17.7% of the total original contract amount.4 MWAA assesses this project phase as 99% complete.5 The Utility Relocation category data has been unchanged for approximately one year.

Contingency Utilization

The tracking of contingency fund use is helpful in monitoring the progression of a project and its financial commitments. Contingency funds are classified as federal and non-federal and are tracked separately by MWAA. In the event there are unspent contingency funds in one project phase, those funds are moved to the Project’s contingency reserve account. Any positive amount in that reserve account is used prior to the contingency allocation for the next phase. The federal contingency had a starting balance of $297.7 million. Of this amount, $222.3 million has been utilized through project phases 1- 7, as noted in the following table:

There is an additional $34.1 million of Federal Contingency that has been obligated for Project phases 8 through 12. Since those obligations have not been utilized they are not included in the above MWAA table. To summarize the status of the Federal Contingency, of the original $297.7 million budget, $222.3 million has been utilized and $34.1 million obligated – leaving a balance of $41.3 million as of December 2011, or 14% of the original allocation. This is down from a remaining balance of $70.8 million or 24% from September. The following MWAA table shows the contingency balance after utilized and obligated amounts have been subtracted. These figures do not include contingency amounts which are currently being reviewed or negotiated by MWAA.

There is approximately $28.3 million in additional Contract Change Orders currently under evaluation by MWAA.6 Depending on the outcome of these evaluations all or a portion of these change orders could be applied against the contingency budget.

Allowance Items

There is a $485.7 million budget for allowance items. As the table below shows there are 17 major allowance items, each of which may contain multiple sub-projects.

Total committed allowance item funds through the December 2011 MWAA Progress Report is $359.4 million, representing 74% of the allowance budget. Overruns are funded by contingency drawdowns. There have been $64.6 million in overruns through December 2011. DTP has submitted requests for Contract Price Adjustments which could exceed the Allowance Item budget for those categories by approximately $85.9 million.7 On a case by case basis MWAA examines if the DTP request is appropriate to the project scope and within the contract terms.

Cost Mitigation

The PMOC report dated January 20, 2012 notes two significant cost mitigation possibilities. The first is $71.8 million through savings, relative to budget, in finance charges.8 The second area of mitigation is related to ‘betterments’.  Betterments are features that have been added to the project but could be billed to outside parties. The PMOC’s current assessment of the amount of betterments is approximately $94 million.9 A significant portion of these betterments would require negotiation with WMATA.

[4]II. START OF REVENUE SERVICE FOR PHASE I

Overall Project Schedule

Key milestone definitions have been established over the last quarter. These definitions do not make any material changes in the status of the Project. However, it is important to understand the definitions in the context of current and future reports. What had commonly been referred to as Revenue Operations Date or ROD (established as 12/16/2013) is now referred to as Project ROD. This differentiates it from the revenue operations date established by the FTA in the FFGA. That date is now referred to as the FFGA ROD (established as 12/1/2014). OFPA has reported on the Project ROD in this and prior reports and will continue to do so.

The MWAA report for December 2011 now anticipates a lag of 20 days (as projected by DTP) with the start of revenue operations in January 2014.10 (Note the official schedule has not been changed, this is a DTP projection.) The 161 day lapse reported as of September has been closed through an agreement between DTP and MWAA on a mitigation schedule. The cost of the mitigation schedule is not available.

Previous quarterly reports noted the ongoing disagreements between MWAA and DTP related to the West Falls Church rail yard and the railcar delays caused by the March 2011 earthquake in Japan. The DTP schedule projections do not include the rail yard or rail car delivery risks. WMATA has developed a fleet plan to use excess rail cars from within the existing fleet to mitigate the impacts of a delivery delay. This plan will need to be monitored and revised as the rail car delivery schedule develops.

III. FUNDING OBLIGATIONS OF FAIRFAX COUNTY 

Based on the current funding agreement, Fairfax County is obligated to pay 16.1% of the total project costs. If Fairfax County decides not to proceed with Phase II of the project, the obligations would be for 16.1% of the final cost for Phase I. The Phase I activities will continue in 2012 through at least the early part of 2014. Over the next 3 to 6 months, as significant project phases are completed, the ability of MWAA to complete the Phase I - Design Build contract within budget will become apparent.

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1 MWAA December Monthly Progress Report: Table 5, Page 12

2 MWAA December Monthly Progress Report: Page 5

3 MWAA December Monthly Progress Report: Table 11, Page 28

4 MWAA December Monthly Progress Report: Table 12, Page 29

5 MWAA December Monthly Progress Report: Page 5 

6 MWAA December 2011 – Monthly Progress Report, Tables 13 & 14, Pages 30 & 31

7 MWAA December 2011 – Monthly Progress Report, pp. 24 - 25

8 PMOC January 20, 2012 – p 3.

9 PMOC January 20, 2012 – p 4.

10 MWAA December 2011 – Monthly Progress Report, p. 44