Home ARC Tunnel NJ suspends ARC Tunnel work to review costs

NJ suspends ARC Tunnel work to review costs

by Benjamin Kabak

The $8.7-billion project could come in up to $1 billion over budget. (Map courtesy of The Star Ledger)

The State of New Jersey is shutting down all new work on the Trans-Hudson Express Tunnel for 30 days to assess the project’s budget. Officials believe the project, with its $8.7-billion price tag, could see budget overrans of up to $1 billion, and the state simply does not have the money to foot that bill, The Star-Ledger reported last night. The fate of the project and the state’s plan of action after this 30-day review is up remain unclear.

Despite its flaws, this tunnel, the centerpiece of the plan known as the Access to the Region’s Core, remains a key piece of New York’s infrastructure expansion plans, and New Jersey Transit has imposed this 30-day moratorium at the behest of the Federal Transit Administration. Officials hope that the review shows a project on or close to budget. “During that 30 days, we’re going to do a full evaluation of our go-forward costs,” NJ Transit Executive Director James Weinstein said. He later added, “The governor has made it clear to me that this project must stay on time and on budget. Anything short of that is unacceptable. During the next 30 days we will work to meet that directive.”

The tunnel is currently under construction with work proceeding apace in North Bergen and under the Palisades. While these aspects of the project will be permitted to go forward, no new bids will be accepted or contracts issued until the 30 days are up. While nothing specific to the ARC Tunnel’s plans have triggered this review period, FTA officials have compared it to the now-late and over-budget East Side Access and Second Ave. Subway digs. Ted Sherman of The Star-Ledger has more:

[T]he estimated cost of the new tunnels has steadily climbed since the project was first approved. The initial projection in 2005 was $5 billion. As recently as 2008, the Federal Transit Administration had asked the state to put in as much as $1.1 billion in contingency expenses to accommodate potential increases in construction costs and interest rates, bringing the price tag from $7.6 billion up to $8.7 billion.

The new questions over the tunnel’s cost come in the wake of reviews by the FTA of other high-profile New York regional transit project — some well over budget and significantly behind schedule. According to FTA projections, the Long Island Rail Road’s $7.3 billion East Side Access project was $800 million over budget and more than 18 months behind schedule. And the plan to create a Second Avenue subway line was found to be roughly $500 million over budget, and now 14 months behind schedule.

The federal agency has not yet come up with its projections on the Trans-Hudson Express Tunnel, said Weinstein. But following a five-month review, it told the state that “based on experience with other major tunneling-projects in the region, additional contingency factors could impact the project’s overall cost estimate.” Weinstein expects to meet soon with Peter Rogoff, administrator of the FTA, who in public statements has been pegging the tunnel cost at between $9 billion and $10 billion.

When — or if — completed, this new tunnel will allow 48 trains per hour to enter New York City from New Jersey. That would represent an increase of over 100 percent of current capacity, but the new tunnel, as Sherman notes, “does not add any capacity to Amtrak” and will feed New Jersey Transit trains into only a new terminal west of Penn Station and not Grand Central.

Still, New Jersey politicians are concerned with this development. “This stoppage could put billions of dollars in federal funding at risk. These funds are dedicated to New Jersey and could deprive the state of thousands of desperately needed good-paying jobs,” Senator Frank Lautenberg said. “We have worked hard together for years with the state of New Jersey and the federal government to advance this project, which is critical for New Jersey’s economy and our future.”

Other transit advocates too voiced their concerns for the future of this project. “It casts a dark shadow over the project’s future,” Kate Slevin head of the Tri-State Transportation Campaign said to The Times. “This calls into question the Christie administration’s commitment.”

New Jersey officials remain committed to the project on the record, but as Sherman points out, New Jersey’s transit money is in scarce supply. The Transportation Trust Fund has nearly run dry; New Jersey Transit recently enacted steep fare hikes and service cuts; and the political will to raise gas taxes, which haven’t kept up with inflation or the state’s fiscal needs, is non-existent.

Reportedly, this review will not impact the projected 2018 completion date, but that could easily change over the next 30 days. “My fear,” Jeffrey Zupan of the Regional Plan Association, said to The Times, “is New Jersey will say, ‘Oh, it costs just too much,’ and delay it further. That would be awful.”

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31 comments

Ben September 13, 2010 - 12:28 pm

Schiavone/Shea/Skanska: Prime contractor for ARC and for the Second Avenue Subway. Anything wrong with this picture?

Skanska in its various forms has won most of the major New York contracts of this type in recent years — with a deplorable history for completion. Should we jeapordize the city’s infrastructure to this reckless and selfish organization? Skanska should be banned from even bidding on new public contracts in NYC until it cleans up its act and completes something. It will be a lesson for other contractors, too.

Let’s look to companies with better records and better ethics.

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Larry Littlefield September 13, 2010 - 1:45 pm

Right. One could also blame the construction unions, or blame the mafia, or the consulting fees. Of once could decide it isn’t our problem.

The cost of this and other projects should be cut by 1/3 — due to lower costs not a diminished scope — and the contractors, unions, consultants and mafia can work out who takes the loss. Construction employment has plunged, and those with work are lucky to get it. Our public sector should not be paying housing bubble prices for construction with Great Recession tax bases.

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Scott E September 13, 2010 - 12:52 pm

Why is this article categorized under PANYNJ? Do they have anything to do with this project, or is it all NJ Transit?

And in response to criticism over the contractor on the project, there simply aren’t many companies out there who own TBMs, have the requisite experience, and have relationships with local labor and local subcontractors. Finding someone to build a tunnel isn’t nearly as easy as finding someone to build a house.

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Benjamin Kabak September 13, 2010 - 12:54 pm

Around $3 billion of the $8.7 billion comes from PANYNJ. I should just make an ARC Tunnel category.

And to respond to your contractor point, you’re right with a caveat. There aren’t many American companies with that expertise, but if the laws allowed for foreign-owned companies to bid on projects, I think you’d be seeing better and more reliable work.

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Marc Shepherd September 13, 2010 - 3:23 pm

I think there’s an error in the post — or at least, a point worth clarifying.

ARC will not connect to Penn Station as we now know it. They are constructing what amounts to a brand new station with a pedestrian connection to the old one, but no track connection between the two. This is the reason for the comment that the project “does not add any capacity to Amtrak,” which will continue to use the old station and will have no access to the new one.

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Alon Levy September 13, 2010 - 7:26 pm

Ben, do you know what the specific rules are for foreign-owned companies? For example, is there an absolute ban on foreign companies, or just a ban if there’s federal funding, or a rule allowing foreign companies to bid if the American companies are too expensive? For example, for the stimulus projects, the Buy American provision has an out if the cheapest American product is more than 25% more expensive than a foreign import.

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Redbird September 13, 2010 - 7:59 pm

Alon,

As far as I know there is NO such ban. Indeed, Skanska is a Swedish company and Dragados (the lead contractor on East Side Access and the parent company of Schiavone) is a leading Spanish contractor. Right now, China Construction America (CCA Civil) is in joint venture with Halmar building a vent shaft for East Side Access at 50th Street and at Site L on the 7-Line so there is no such ban. If someone knows otherwise, please correct my understanding.

What people fail to realize is that no matter which contractor gets the job they MUST use NY union labor which dictates the price of labor. No contractor can get around this. Unless something can be done to get around using sandhogs, operators and laborers, the prices will continue to sit where they are.

Also, no mater who the contractor is, there is still the issue of utility relocation. ConEd, DEP, Verizon and Empire City Subway own these and control how they are relocated. It seems that if more miles of tunnel were dug, the cost per mile would be lower as the fixed cost of making the launch box would be the same and the marginal cost of mining would be relatively small.

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Scott E September 13, 2010 - 8:44 pm

“What people fail to realize is that no matter which contractor gets the job they MUST use NY union labor which dictates the price of labor.”

Only this project has a good portion of its work in New Jersey. I wonder if they use different laborers on each side of the state line, and how their productivity, cost-effectiveness, and quality measure against each other. That would certainly be an interesting analysis to look at.

Alon Levy September 13, 2010 - 9:08 pm

Labor rules double costs; they don’t raise them by a factor of 7.

Nathanael September 16, 2010 - 2:45 am

In the case of ARC, the tunnel under the Hudson should require few or no utility relocations.

It’s that giant deep underground cavern station not connected to Penn Station which is the source of the massive budget bloat.

Connect the two new tunnels to Penn and worry about station capacity later.

Adirondacker12800 September 20, 2010 - 9:48 pm

That it work out real well, trains that pedestrians can’t get to.

Matthias September 23, 2010 - 11:23 am

Pedestrians can obviously get to trains in Penn Station. It only makes sense to add redundancy and capacity to our existing network.

Ben September 14, 2010 - 6:31 am

The alarm bells are ringing because of crippling delays — which leads to these projects going over budget and over schedule. There are a few primary contributors:

1) The original design (including business and political requirements)
2) The ability of management to professionally manage the project.
3) The contractors’ honesty or lack of regarding the ongoing work
4) Risk assessment and mitigation
5) Availability of resources (cash flow, personnel, land, etc)

There’s always “slippage” (delays) in a project. To start a project and within a year announce 25% or more increase in budget and a year added to the schedule: This is game playing, not construction. This is what’s going on.

The limitations of geography, labor cost availability, strength and weaknesses of individual vendors are generally known. Good managers take care of all of the above, and report accordingly. No excuses.

We need better oversight. Better management. Higher standards for design, budgets, choosing contractors, making sure that work is actually achieved as promised. Financial incentives for getting the jobs done on time. Right now we through money and time into a trough and the pigs feed on it, then oink for more. The lack of professionalism is astounding.

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Zell September 14, 2010 - 11:56 am

Ben…Skanska is one of the largest and most successful contractors in the world. I knew the former CEO very well and the United States (and all their projects here) were their single biggest losers. ITs not the company, its our country. All points made earlier about our work force and who u have to pay and dealing w/ ConEd (or other utility companies) is a COMPLETE nightmare for these contractors. They would rather blow through these jobs and move on to the next one. The Schiavone and the Barnard projects were some 40 to 30 million under budget too. They should let our guys just work and do their jobs…

Ben September 14, 2010 - 4:14 pm

Zell…Citibank, Bear Stearns are/were large organizations. Better to judge by the merits. No doubt Skanska has done good work and has many competencies. They are smart businesspeople. They seem to be doing the same thing that I’ve seen other firms do. They are willing to take advantage of weak clients.

There’s a pattern in the New York area that seems to repeat itself. They win with a low bid, and then almost instantly the project is put behind schedule. In the case of the Second Avenue Subway, almost no significant work was done for the first year. So they go back, and get more funds and more time. The ARC project went into jeopardy in the first year also.

Skanska knows how to play weak clients for suckers. It’s a profitable business. When they have stronger clients, they don’t seem to have the same issues. You can say, all they are doing is maximizing profit, it’s their right. I think it’s an ethical issue.

If the MTA, Port Authority, what have you were stronger clients, with world class managers, the shenanigans would cease. The ultimate blame belongs on the client’s head. I believe Skanska is guilty of its own sins and have basically snookered its clients. First by low bidding the contracts to win them, and secondly by playing the client for every penny they can get in overages and change orders. My hat is off to them.

Alon Levy September 14, 2010 - 7:09 pm

Do Skanska and Dragados get contracts in their home countries?

Ben September 14, 2010 - 7:45 pm

They are both huge multinationals, with contracts in their home countries — and they need to be watched and managed carefully…or find other ones.

Skanska is quite capable of taking advantage of local conditions. It’s record in South America is quite tainted. Here’s an article on the games it’s played in Argentina. Some of it may sound familiar.
http://www.offnews.info/verArt.....idoID=8510

Ben September 15, 2010 - 8:03 am

It’s really the public agency managers who are falling down on the job.

Skanska is a multinational chameleon. It will do whatever it can do in whatever market it is in to maximize its position. Profit, or otherwise. It’s the client’s job to get the best that Skanska can do. Skanska completed the design and the construction of the New Meadowlands in less than three years (Jan 2007- July 2010). During much of this same period it often struggled with putting even a skeleton crew on the Second Avenue Subway site to dig a hole! Indeed, the MTA impeeded progress as well. It’s been a mess. The professional football teams demanded a that they play football this season in the stadium. Whatever they did, they got it done. The MTA and public agencies don’t have the right stuff to get Skanska to focus and be responsible.

Like oil companies, they will be whatever citizen they need to be to profit. In South America, some of Skanska’s practices don’t pass local muster (as you can see in the link above).

The key for these projects is to get better management at the public agencies. That’s the first step. The agencies need to ride these projects hard and smart. Including the best damn guy they can get at the top. Skanska is good enough, as long as it is made to be good.

Douglas John Bowen September 13, 2010 - 2:10 pm

Too bad little mention is made, by the Star-Ledger and by this excellent Web site, of the New Jersey transportation/rail advocates who have serious problems with this project as it now stands. Tri-State, a useful organization, does not speak on behalf of all rail advocates within New Jersey.

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rhywun September 13, 2010 - 8:13 pm

Gotta love how a politician’s only concern is getting the dollars and funneling them into election-friendly construction jobs. No mention of whether anyone can afford this or whether the project is worthwhile, let alone whether transit projects ought to be judged on something other than their merit as jobs programs.

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Brandi September 13, 2010 - 9:12 pm

This seems like really bad news. I kind of figured Christie would try to gut the project eventually. He has no interest in anything but cuts. Now granted the project is really flawed. But it is better than getting no new capacity in the next 15 years? I think probably. The thing I don’t get is why will Amtrak get no new capacity out of it? Won’t NJ Transit give up a few slots once they have a whole tunnel and station to themselves? Or they plan to use all the new capacity. I really think Amtrak is in need of increased capacity as well. Maybe they should be making a new four track tunnel exclusively for NJ Transit and free up the other tunnel from through running services.

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Zell September 14, 2010 - 11:59 am

NJT has two dozen new locomotives coming to N. NJ in 2011.

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Mad Park September 13, 2010 - 10:01 pm

This suspension, which will hopefully lead to a major re-design, is very good news. These days, no transport system can or ought to be designed unless it increases interconnectivity. Grand Central, LIRR, Metro North and Amtrak are totally excluded from this project, rendering it ill-suited for improving transport and increasing ridership in the 3 state region.

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Bolwerk September 14, 2010 - 1:35 pm

Oh, why bother? The new terminal is a good stop to transfer to LIRR and Amtrak. For the sake of distributing passengers, I can understand putting the actual terminal on the east side,* where most commuters want to go, but putting NJT into Grand Central is nothing more than a wet dream for NJ suburbanites who don’t want to ride the Subway with black people. MNRR can be made accessible to the west side with relative ease after ESA and ARC are finished.† There are plenty of more worthy transit projects, worth spending billions$ on, that aren’t even discussed. Want to move people in the region? Focus on expanding PATH.

* Tail tracks with provisions for access to Sunnyside via a new tunnel wouldn’t exactly be the worst thing. If ESA proves popular, more expansion might be needed anyway.

† And if ridership ever justifies it, then looking at connecting NJT and Amtrak to MNRR might be worth it.

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Alon Levy September 14, 2010 - 3:20 pm

Bolwerk, the cost estimate for connecting NJT to Grand Central was actually lower than the estimate for the cavern.

And the problem with the transfers isn’t black people. It’s that a trip from Penn to the Grand Central area requires two transfers to go two stops, both of which are among the most annoying, labyrinthine transfer points in the city.

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Bolwerk September 14, 2010 - 7:21 pm

Really? I never heard that. Since I assume there is more or less room at GCT, why was this option pursued, then? And is that assuming lack of Amtrak/MNRR intransigence?

Still, Grand Central isn’t much of an end in and of itself. The goal should be getting people who need to go to the east side to the east side. If Grand Central is the cheapest way too do it, cool with me. Other transfers could be pursued more cheaply.

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Alon Levy September 14, 2010 - 11:13 pm

It’s not very clear. The suspicions in the railfan community is that the MTA was being intransigent, and that the real estate dealings favored the cavern option.

Nathanael September 16, 2010 - 2:51 am

Grand Central was not only cheaper to build (according to estimate), but would have actually reduced operating costs if through-running could be arranged (having NJT pay Metro-North to run New Haven Line trains through the new tunnels and Penn into New Jersey to provide off-peak service).

And increased ridership the most. 😛 This was “alternative G”.

It was rejected, according to the official report, because it was too scary in terms of potential unanticipated costs to tunnel at a relatively shallow depth under three blocks of Midtown. While that *is* scary, the 34th St. Cavern station is far worse, so the argument doesn’t hold water.

Therefore most transit advocates suspect that the actual cause was agency turf wars, or perhaps politically powerful developers living over the blocks where the tunnels would be.

Bolwerk September 16, 2010 - 11:49 am

Hmm, I never read the report. How was the connection to Grand Central to be made? By way of the new LIRR connection, or somehow directly connecting to the existing MNRR yard?

And yes, it sounds like a turf war. But that’s not surprising, given how little cooperation there has been between any of those competing agencies. Within the MTA, LIRR and MNRR can’t even seem to work together.

For Christie, a wavering ARC commitment :: Second Ave. Sagas September 16, 2010 - 1:01 am

[…] news broke over the weekend that New Jersey was suspended work on the ARC tunnel for 30 days to review, New Jersey Transit’s Executive Director James Weinstein appeared as […]

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Report: New Jersey pulls plug on ARC Tunnel :: Second Ave. Sagas October 5, 2010 - 5:08 pm

[…] had been on the wall for this project since September 13 when New Jersey Gov. Chris Christie suspended work on it to “review costs.” The state’s leaders feared that the $8.7-billion price […]

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