Sound Transit today announced that a lowest bid for the University of Washington to Capitol Hill tunnels came in $86 million, or 22%, less than the engineers’ estimate.
The tunnels are the the largest component of the University Link project. That project’s first construction contract came in $10 million under estimates last December.
Bruce Gray of Sound Transit noted these two bids reflected a positive environment for constructions projects. “Every day we see bids coming in lower than engineers’ estimate, as opposed to a few years ago when they were coming in higher than engineers’ estimate.”
The economic downturn has halted construction in other areas, meaning that there is less private demand for the contractors who are capable of work of this scale. Sound Transit engineers priced the tunneling project at $395,334,000. The lowest bid, from Traylor Frontier-Kemper Joint Venture, came in at $309,175,274.
Things aren’t completely rosy in the ST financial world. The same recession that has made the bid environment more favorable has also led to a projected $2.1 billion funding shortfall for Sound Transit 2 before it has even began collecting tax revenue. Still, these great bids reflect that it is the best time to make public infrastructure investment.
Sweet! Although I have to point out that’s $85m less. So where is all this saved money going? I say we put it towards DT Bellevue tunnel.
Oops, I’m bad at math! All fixed now ($86,178,726 less).
It can’t go to the downtown tunnel: sub-area equity dictates that it has to go to the “north king subarea”. This means it would go to North Link up till Shoreline’s station, the “Rainier” station in Eastlink or the First Hill streetcar.
I bet, though, that it just helps absorb some lost revenue.
Maybe we can do some complicated thing of questionable ethics in which we put all that money towards R8A as part of it’s in North King and it will benefit North King, and then we can put the other R8A money towards the tunnel. I’m sure they’ve done similar things before.
Sub area equity is one of the really great things about the ST structure. Messing with it is a slippery slope I’d hope we avoid.
I agree with Bernie. If you eliminate Subarea equity all kinds of bad things will happen.
Well can we at least use it to plug the R8A gap? It’s just $24mn…
In a word, NO. R8A is an East Link problem. If throwing money at it is the answer then it comes from the eastside. Trust me on this, the eastside can afford it.
East Link assumes we can use the surplus from Sound Move — so all the money is already committed, plus there is a massive budget gap that we all know about. I dunno if I’d describe R8A as affordable! :)
So, Bernie, you’re saying we should make it so East Link is pushed back maybe 10 years just because you don’t want $24mn dollars to get out of sub-area equity rules? That’s ridiculous. Every transit project benefits the whole region in some way; there’s no way you can say that R8A won’t help anyone in the North King sub-area; there’s quite a few people who commute to Microsoft and Downtown Bellevue from Seattle.
All of my comments on this thread have made the point that this $24M lack of funding has nothing to do with pushing East Link out at. There are so many places in the project where $24M can be saved ($340M between the low and highest cost alternates on Segment D) it’s a non issue other than the principle of not being able to negotiate in good faith with the State. If we are going to move funds around (which I don’t think we really need to do) I suggested moving HOV funding on 405 to R8A; eastside money for eastside projects.
The eastside sub area is the wealthiest of all the areas. If people on the eastside don’t want to pay for East Link then yes, I’d say scrap it before I’d advocate stealing bus service from Seattle. The eastside is currently the only sub area with a surplus in it’s account. I’m sure there are folks that think that should go to accelerating North Link. Doesn’t work that way. Violating sub area equity risks the collapse of the entire system.
How about the West Seattle MONO-RAIL
North King Subarea– they should put the money toward accelerating North Link.
I’m glad the most important piece of Link is chugging along. Maybe this means we’ll have Northgate and beyond in place far earlier.
I’d imagine the money will be eaten by sales tax revenue decreases.
Well, the amount of uninvested and non-saved money is increasing by the day. What that means, largely, is spending potential has shot through the roof, for lack of spending desire. I don’t imagine that this country will stick with this “save more” ethic and will more than likely begin spending more when the economy starts to look rosier.
Revenue projections often end up matching the mood of the moment and not the economists’ theory on the ultimate path of the economy. I’m a bit skeptical of the length of time non-essential spending will be depressed as proposed by the people making these projections, mainly because they are based on the summer and holiday buying seasons. As we know, the summer was depressed due to people being focused on the election, and the holiday buying season was scuttled by bad weather throughout the country.
Basically, I’m thinking a little more optimistically than “fingers crossed”.
Every little cent helps.
Uninvested and non-saved money? You mean in Sound Transit?
They really do budget for every penny that comes in – there’s nothing delayed right now, I don’t know what money you’d be referring to.
No, the tax base.
Wait, that’s kinda gross– I need to stop reading OFM stuff.
Anyhoots, the tax base is wider and broader by the day due to unspent wages on the part of the employed. It’s just that as the economy starts to recover a bit, it still takes a few months for consumers to be inspired to shop. If the economy starts looking nicer about now like it might be (knock on wood), we should see a good late-summer shopping season and more travel. If it’s later in this season, the holiday season will be nice to follow a fairly flat summer.
If it improves sooner, the sales tax revenue projections might ease up quite a lot, mainly because a good summer will boost the holiday season will boost general consumer confidence (sales outside of shopping seasons) in the first part of 2010 will boost jobs in 2Q and 3Q, etc.
I’m hoping this is the bottom here because it would be an excellent start to the process of what I said above.
Then again, we could slip again or every factory could rust over immediately. Oh, and there’s also the fact that there are no trend items or industries that are in high demand. Electronics are kinda stagnant in terms of demand, cars really aren’t that great after the gas run-up, and nobody has really caught onto the Smartphone trend. The rise in consumer electronics pulled us out of the slump in the 80s.
/Wonk
If bids continue to come in 20-30% under initial estimates and the revenue shortfall projections of $2.1B (~12%) continue then indeed, dig’em if you got’em. North Link comes from the same sub area equity fund right? So I’d expect full steam shovel ahead on that project would be the next step.
Ideally! But it might not be so rosy. As the economy recovers, bid price will likely begin to close in on estimates. But raising a lot less in the first handful of years than expected will stay with the ST2 for the duration of the project.
The other nice thing is the low interest rates means faster bond repayments. In all it’s not quite a wash, Sound Transit is still on the short end, but it’s definitely better than high bids and low revenues.
Hold on, it’s not that simple. Sound Transit’s costs aren’t all construction bids – something like half their costs are operations and administration, which aren’t decreasing. So if your bids come in 20-30% under estimates, they would only really save 10-15% of ST’s budget. The sales tax is cutting into the whole budget.
Also, watch the year your dollars are in. The $2.1B shortfall might not be in year of expenditure dollars, I didn’t check – I think it’s more like 15% down, not 12%.
It really is a wash.
That’s a very good point. What percentage is ST’s operational budget vs capital improvements? If fuel prices remain low one would hope operations would also see some relief but I suspect the providing transit districts aren’t going to be keen on passing along any of those savings to ST. Not to dump on Metro (it seems the rest of County Government does enough of that) but from a tax payer point of view it would be nice if ST was allowed by law to shop for operational service.
ST is allowed to shop, but the marginal cost of adding a bus to a base is a lot lower than the cost of a new facility, so the transit agencies generally do pretty well.
I’m not sure what the percentages are.
Wow, 22% below estimates! Contractors are sure hungry for this work. Though if you look at the bids, the second lowest bid is $360mil, or 9% below the engineer’s estimate, which isn’t so unusual. ST now has to vet the lowest bid to make sure that they have covered all of the stipulations of the contract. If it turns out that they aren’t there and can’t make the changes to meet all the requirements, then they will turn to low bid No. 2.
I wonder when the engineer’s estimate was done. The bidding environment has been changing fast. If this was estimated before September (before the construction market burst), I wouldn’t be too surprised at these numbers, but if this was a more recent estimate from ST, then they should have taken some of the downturn into account, and this low bid would be all the more striking for how far off it is.
I’m pretty happy with ST not taking downturns into account, it means they remain solvent when sales tax revenues drop 15%…
JCM U-Link Joint Venture was the second and higher bidder…who are the companies that make up this joint venture? Are they local or nationwide guys?
JCM is a joint venture of Jay Dee Contractors (Livonia, MI), Frank Coluccio Construction Company(Seattle), and Michels Pipeline Construction (Brownsville, WI).
Michels Pipeline, eh? That sounds familiar for some reason.
Isn’t Frank Coluccio the strip club guy?