State Contractor Confirms: GLX Cost Overruns Due to Bid Process

As Pioneer first pointed out in a September blog post and again in Research Director Greg Sullivan’s interview with Fox 25 Investigates, the bid process is to blame for the sharp increase in price estimate for the MBTA’s Green Line Extension project.  The contractor the state recently hired to investigate the price increase came to the same conclusion: the new procurement method (called Construction Manager/General Contractor, or CM/GC) used for the GLX contract did not foster price competition and left the MBTA open to financial risk.

Echoing Pioneer’s past statements, the contractor claims that the MBTA should have foreseen cost-overruns and that “officials botched the implementation of a new contracting process — one that had not been used in Massachusetts.”  Under CM/GC, the MBTA awarded the GLX contract based on qualifications, not price. The contractor that was chosen, White Skanska Kiewit (WSK), won the bid before ever submitting a price estimate.  As Greg Sullivan explained to Fox 25 interviewers, “one bidder means, no bidder.” Without competing with other vendors to win the contract based on price, WSK had no incentive to control costs, leading to the $1 billion overrun the MBTA faces today.

So what can be done? As both Pioneer and the state contractor have stated, the MBTA still has the option to rebid all or part of the project.  But if the same procurement method is used, the agency will be in the same predicament it is now.  Perhaps, it is time to rebid the project using an alternative method to CM/GC that ensures true price-based competition.

Watch the Fox 25 interview:

Lauren Corvese is a student at Northeastern University working as a Research and Programs Assistant at Pioneer Institute through the Co-op Program. Lauren tweets at: @laurencorvese