Home Capital Program 2010-2014 Facing budget gap, MTA eyes cuts to capital costs

Facing budget gap, MTA eyes cuts to capital costs

by Benjamin Kabak

As the 2011 calendar pages melt away, the MTA and Albany are no closer to a solution on the authority’s capital budget woes. As we know, the agency has a hole in its five-year capital plan that is at least $10 billion deep, and the authority has essentially reached its bonding limit. Yet, before it heads north this summer to argue for the dollars, Jay Walder is looking for ways to cut costs, Crain’s Insider reports today.

Many of the ideas are basically just common sense. Take a read:

Cuts resulting from the talks are intended to show legislators that state funds will be used efficiently. The New York Building Congress board of directors told Walder in a March meeting that their top cost-savings priorities included streamlining procurement and paying contractors damages if the MTA delays a project, President Dick Anderson said. “If you sign a contract that says you are responsible for delays no matter who causes them, what do you do?” Anderson asked. “You factor it into your contract.”

Some MTA agreements allow contractors to collect damages for delays, which helps them manage risk and puts pressure on the MTA to approve construction changes more quickly…Jay Simson, executive director of the New York American Council of Engineering Cos., said a pilot project to select project designers based primarily on qualifications rather than the lowest bid could produce savings.

In exchange for any changes, many of which would require legislative approval, builders would be expected to reduce fees on already contracted projects. “We hear you, and we expect this to be a two-way street,” Walder told contractors, according to Anderson.

The emphasis is mine, and it’s a change long overdue. For too long, the requirement that the MTA automatically select the lowest bidder has led to too many shoddy construction jobs, delayed projects and cost overruns. Reforming that system would do wonders for the authority’s capital project.

In addition to these changes, the authority may also consider delaying some less important projects currently slated for 2012 and beyond. Doing so would ensure funding for the big-ticket expansion efforts currently under way beneath Second Ave. and the East River, and overall, these changes could lower costs by as much as 20 percent.

For now, Albany hasn’t yet taken up the issue of capital expenditures, but it should become a major political issue throughout the summer and into the fall. As hyperbolic as it sounds, the future of our transit system depends on it.

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Alex C April 22, 2011 - 1:21 pm

Oh God I hope the MTA finally picks the best contractors. The contractors they keep hiring are a joke. “Renovated” stations look like crap even before being open to the public.

Scott E April 22, 2011 - 2:52 pm

I’m confused by the part of the first quoted paragraph which states: “their top cost-savings priorities included … paying contractors damages if the MTA delays a project …”. Is this an accountability thing — holding the MTA (and its wallet) accountable for delays rather than contractors (who cushion their bids to cover such delays), as an incentive for them to get things done? It seems to contradict the first sentence of the following paragraph, and potentially the whole theory of avoiding unanticipated expenses.

Donald April 22, 2011 - 3:46 pm

“In exchange for any changes, many of which would require legislative approval, builders would be expected to reduce fees on already contracted projects.”

So Walder wants to break contracts? Hmmm, I wonder what a judge will think about that. Walder’s plan to break contracts did not go too well the last time when he tried to block the TWU’s 3% raise for 2011. Why does Walder like breaking contracts so much?

Anon256 April 22, 2011 - 4:40 pm

His incompetent predecessors left the MTA with contracts it simply can’t afford. Renegotiating them isn’t easy, but what other choice does he have?

Donald April 22, 2011 - 6:28 pm

You CANNOT re-negotiate a binding contract. That’s like your landlord raising the rent in the middle of a lease because he is broke.

Benjamin Kabak April 22, 2011 - 6:31 pm

I’m not sure why you’re getting so up-in-arms over this. The contractors themselves have expressed a willingness to renegotiate their own contracts. As Denise M. Richardson, the head of General Contracts Association and a former MTA staffer, has said, it’s far better for the contractors to renegotiate the deals so that there’s more work to be done than for them to suffer through an unfunded capital campaign. If both parties to a binding contract are willing to renegotiate, of course you can do so. This really isn’t as big a deal as you are making it out to be.

Bolwerk April 23, 2011 - 12:00 am

They also probably realize, down the road, they might get some more work – so it might be in their best interest to be considerate now.

Alon Levy April 22, 2011 - 3:49 pm

I can’t argue with this. Just one question: where exactly does the 20% saving in big-ticket project costs come from? Is it an issue of accelerating construction while delaying less important projects?

Al D April 25, 2011 - 9:32 am

It sounds like retaining better qualified design and engineering firms will result in better planned porjects and less contract changes during the construction. So I guess the increased cost of the firm is more than offset by the resultant construction cost savings.

Bolwerk April 22, 2011 - 4:26 pm

What about penalizing contractors who are the source of delays? Somehow I doubt this isn’t a factor, especially when the lowest bidder is automagically selected.


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