State audit calls out city for ‘fragile’ rail financial plan

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A scathing audit of Honolulu’s rail project says city officials are neglecting their responsibility on a project it says has a “fragile” financial plan and an “artificial” timeline.

The auditor accuses HART of reporting two different sets of numbers over the years — one to the board to minimize public criticism, and another to a federal oversight contractor that had different financial, forecast and contingency numbers. It says prematurely awarded contracts caused major cost overruns with more yet to come due to unresolved change orders. The audit states HART management and the board were uncooperative and made access to information difficult.

The HART executive director responded to the auditor with a 4-page rebuttal, stating that it has a more robust system to track risk assessments, change orders, and monthly financial reports for the board. HART questioned if the auditor dug into the past beyond the 2017-18 years. The HART CEO told the auditor there was no deliberate refusal to provide full cooperation with the inquiry.

The cost of the project has swelled to nearly $9.2 billion dollars, and the state audit was mandated by the legislature as part of a bailout that allowed the general excise tax surcharge to be extended, and added a 1 percent hike in the hotel tax to help cover capital costs.

The CEO of HART, Andy Robbins, says lessons were learned and costs are now well under control.

The state auditor says that while inflation and lawsuits added to the cost, there were also mistakes made that could have been avoided, such as change orders, scheduling delays, and unanticipated expenses. 

Change orders led to more than $354 million in additional costs. In the first few years of the project, HART and the city awarded contracts even before government approvals were given to start working on the project. 

“Those delays that came out of those contracts that added to some of the construction costs. Those are the delay damages, the change orders that we see that almost doubled the construction costs or doubled the contract costs from those early contracts,” said state auditor Les Kondo.

Robbins points out that contract agreements are no longer done that way so change orders are minimized.

“We can work in multiple locations and if we encounter a problem in one location the contractor just doesn’t stop and say what next. He now can move to another location and keep working,” said Robbins.

The auditor says HART also withheld information to the legislature, the board of directors and the public, which led to additional costs and eroded public trust.

“Is this something you’re going to make sure that doesn’t happen down the line?” KHON2 asked Robbins.
“Absolutely, we do not do that with my management team. We will not do that,” said Robbins.

The state auditor will release another report next week, which will also include recommendations. Overall, the state legislature has asked the auditor to issue four reports on the rail project.

Click here to read the full state audit. 

Click here to read the summary of the state audit. 

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