Virtual File - Item

Text: OFFICE OF THE LEGISLATIVE AUDITOR
STATE OF MINNESOTA
Joel Alter, Interim Legislative Auditor

October 28, 2021

TO: Senator Scott Dibble
Representative Frank Hornstein

FROM: Joel Alter
Director of Special Reviews and Interim Legislative Auditor

SUBJECT: Southwest Light Rail project costs and management

CC: Members of the Legislative Audit Commission
Senator Scott Newman, Senate Transportation Policy and Finance Committee

On July 29, 2021, you sent a letter to Legislative Auditor Jim Nobles requesting that our office
consider doing "an expedited special review of Southwest Light Rail Transit (Green Line
extension) project costs, cost overruns, delays, and management." You noted that the
Metropolitan Council recently requested an additional $200 million in contingency funds from
Hennepin County for this project. You also posed a list of questions that you hoped a special
review could address.

When our office receives complaints, allegations, or requests, we start by conducting a
"preliminary assessment." We request documents or seek answers to questions, largely for the
purpose of helping us understand the concerns that have been raised and to determine whether to
conduct further investigation. In the time since we received your request, we have
communicated multiple times with representatives of the Metropolitan Council and AECOM
Technical Services (ATS), which is one of the Council's contractors on the project.

Unfortunately, our office cannot conduct a full-scale special review of the concerns you raised at
this time. We have limited staffing for doing special reviews, and other commitments are
consuming those resources. However, in lieu of such a review, I can offer the following:

1. This memo summarizes a dispute that has arisen between the Metropolitan Council and
ATS that is pertinent to your concerns. If you have not seen the correspondence between
the Council and ATS on this subject, you may find that this summary (and the
correspondence itself, which is attached) gives you a clearer picture of the dispute than
you had previously. The parties to the dispute agree that the correspondence we
reviewed is classified as public under the Minnesota Government Data Practices Act.

2. We will add a topic regarding Southwest Light Rail Transit (LRT) Project Management
to the list of possible evaluation topics that the Legislative Audit Commission will
consider in 2022. The commission ultimately determines which evaluation projects our
office conducts. The Southwest LRT project is large and complex, and a team of
evaluators would be better able to examine the project's management than would the
more limited staffing resources available for a special review.

Our office generally does not involve itself in litigated issues, so we would probably not
undertake additional review if this issue becomes the subject of a lawsuit. ATS told us that it
hopes to continue working cooperatively with the Metropolitan Council and avoid "unnecessary
litigation with any parties on the project."1

Project Background

The Southwest LRT line will be a 14.5-mile extension of the Green Line that now connects
downtown Minneapolis and downtown St. Paul. Cities in the extension's path include
Minneapolis, St. Louis Park, Hopkins, Minnetonka, and Eden Prairie. The Metropolitan Council
is the lead public agency in the development of Southwest LRT, and the Council is working with
a variety of federal, state, county, and local agencies.

Project Budget and Funding

The project budget was $2.003 billion earlier this year, but the Metropolitan Council's
August 2021 decision to add $200 million in Hennepin County funding for contingency
purposes will, in effect, increase the project budget by that amount to about $2.203 billion.
Through June 30, 2021, total project expenditures were $1.176 billion. Of the $204 million
contingency budget that existed as of mid-2021 (prior to the subsequent approval of another
$200 million in contingency funds), about $153 million had been spent as of June 30, 2021.2

Funding for this project is mostly from federal and county sources. The federal government is
providing more than $900 million, Hennepin County and its regional rail authority will
provide--including the recently approved supplement to contingency funding--just under
$1.0 billion, and the Counties Transit Improvement Board provided nearly $219 million prior to
its dissolution in 2017. The State of Minnesota's contribution is relatively small (about
$30 million).3

Project Schedule

Construction for this project began in 2019. According to the Metropolitan Council, the
construction schedule has been affected by two "significant construction challenges": (1) the
need for a "Corridor Protection Wall" in the eastern part of the line to separate the Southwest
line from an adjacent railroad and (2) "unforeseen conditions related to construction of the
Kenilworth tunnel resulting in the need for a different support of excavation method called a
Secant Wall."4

In mid-August 2021, the Council told us that both issues will affect the project's
overall schedule, but Council staff were still determining the specific impact on project
completion dates.

I asked the Metropolitan Council why the wall to separate the LRT and railroad lines was an
unforeseen cost. The Council responded:

This work was not included in the Civil Construction solicitation scope of work
because at the time of the receipt of bids (May 3, 2018) the wall design was not
complete pursuant to the review and approval by [Burlington Northern Santa Fe
Railway] and was contingent on receipt of the Amended Record Of Decision
(AROD) and Finding of No Significant Impact (FONSI) for the Supplemental
[Environmental Assessment] which was issued by the [Federal Transit
Administration] on May 15, 2018. Consequently, the timing necessitated the
Corridor Protection Barrier be executed as a distinct change order....5

Change Order Process

The Southwest LRT project has a process for proposing and authorizing "change orders" in
construction contracts. A change order authorizes changes in the scope, terms, or conditions of
work, and it may result in changes to contract costs or work schedules.

The persons or entities with authority to approve change orders vary, depending on the proposed
change order's potential cost impact. For example, the Metropolitan Council is the entity
authorized to act on any change that would have more than a $2.5 million impact on the project
cost. Below that threshold, and depending on the estimated cost impact, there are various
individuals authorized to sign off on proposed changes.6
As of mid-August 2021, 461 change
orders had been executed on the Southwest LRT project. Some of these individual changes have
not had any estimated impact on project costs.

One tool for helping decisionmakers assess proposed changes is the "independent cost estimate"
(ICE). According to a Southwest LRT document, such estimates help determine

...the reasonableness or unreasonableness of a bid or proposal. The ICE, along
with the negotiations documented in [an internal memo], documents that the costs
are fair and reasonable. The ICE is prepared by the [Southwest LRT] Project
Office, which does not see the contractor's change proposal prior to completing
the ICE.7

The Metropolitan Council requires development of an independent cost estimate for every
procurement action, including contract modifications. The estimate is "based on product
knowledge, experience, and market status," and it must be completed before the Council receives
bids or proposals.8 The Council then analyzes the independent cost estimate and contractor
proposal to inform its negotiations with the contractor for the final change order amount.9

Change orders resulting in the use of at least $350,000 in project contingency funds require the
approval of the Executive Change Control Board (ECCB). ECCB's voting representatives
include two Hennepin County commissioners, a Hennepin County Regional Rail Authority
commissioner, and two Metropolitan Council members (including the Council chair). The
Metropolitan Council chair serves as chair of the ECCB.

AECOM Technical Services (ATS) Contract

In December 2014, the Metropolitan Council entered into a contract with ATS for architectural
and/or engineering services for the Southwest LRT project. Under the terms of the contract, as
amended, the Metropolitan Council has agreed to pay ATS up to a total of $140.3 million for its
services.10 As of late September 2021, the Council had paid ATS almost $132 million.
ATS--among its various responsibilities outlined in the contract--assists the Metropolitan
Council in the change order process. For example, ATS reviews the proposed changes and
determines the need for additional calculations, drawings, or specifications; develops
independent cost estimates on proposed changes; and helps analyze the potential impact of
change order requests on project scope, schedule, and cost.

ATS's Concerns

In light of the Southwest LRT project's pace of using contingency funds, we contacted ATS to
hear its perspective on the project's change management processes and decisions affecting the
overall project budget. ATS's Executive Vice President reported to us that, starting in about
January 2019, ATS began making verbal recommendations to the Metropolitan Council for
changes they believed were necessary in construction contract administration. These
recommendations were put in writing in a July 2021 letter sent from ATS's Executive Vice
President to the Southwest LRT Project Director.11

In the letter, ATS recommended:

• Changing the Metropolitan Council negotiation team to include more expertise in
heavy highway construction claims. ATS said the Council needed negotiators as tough
and skilled as the negotiators for the Southwest LRT project's main construction
contractor.

• Comparing contract change requests to actual costs so that the Metropolitan
Council can negotiate change orders more effectively with the project's main
construction company. ATS said the Council "is being significantly overcharged" for
contract changes.

• Ensuring that the main construction contractor submits proposals for "Part 1
Change Orders," which can then be "tracked for time and materials payment."12
ATS said the construction contractor was "moving forward with changes in construction
in the field without change orders first being executed."

• Adjusting the contract price based on the contractor's actual cost of work
performed in cases where there are large discrepancies between the cost estimates of
ATS and the construction contractor. 13

• Extending the overall construction schedule only in cases where it can be shown that
changes will affect the "critical path." (The critical path is the minimum time needed
to complete a project.) ATS said the Metropolitan Council "should be pushing [main
construction contractor Lunda McCrossan Joint Venture] harder to mitigate schedule
challenges."

• Giving higher priority to construction quality, and penalizing the construction
contractor for items not built to plans and specifications. ATS said it was concerned
about the quality of the construction, "including low strength concrete, work constructed
incorrectly, and incorrect pile layouts." ATS said the construction contractor's quality
program was not sufficiently robust, and the contractor "appears to be using potential
schedule delays as leverage in seeking approval to use subpar work as is."

In addition, ATS said there had been ongoing discussions between ATS and the Metropolitan
Council about how ATS should prepare "independent cost estimates" (ICEs). ATS began
preparing cost estimates related to the Southwest LRT project after the Metropolitan Council
awarded the design contract for the project in December 2014. Initially, ATS prepared estimates
using what it called "standard processes and procedures that had been previously approved and
used on the SWLRT Project under the Preliminary Contract, as well as the Met Council's prior
Central Corridor Light Rail Transit Project."14 But later, ATS's Executive Vice President said
there were "many instances" in which the Metropolitan Council's instructions to ATS were
"inconsistent with ATS's views on appropriate costs and factors."15 He expressed particular
concern about Council "instructions to apply specific contractor-negotiated prices in ICEs." He
said these instructions could undermine the independence of the estimates.

Starting in February 2020, ATS began adding disclaimers to its cost estimates to clarify that
components of the estimates were developed using Metropolitan Council directives. But,
according to ATS, the Metropolitan Council subsequently instructed ATS to remove the
disclaimers. In May 2021, ATS said the Council expressed openness to disclaimer language, and
ATS then proposed the following:

Disclaimer
Met Council has directed AECOM Technical Services ("ATS") Advanced Design
Consultant to use certain rates, prices, factors, and assumptions to estimate the
costs for change orders for the duration of the SWLRT project. Because ATS has
not exercised its independent judgment, but instead used Met Council-directed
rates, prices, factors, and assumptions, this cost estimate is not an independent
cost estimate.

Representation and Warranty
Met Council represents and warrants that it will not make any representations or
characterizations that an ATS-prepared cost estimate is an "independent cost
estimate" when the estimate is based, at least in part, on rates, prices, factors, and
assumptions that Met Council directed ATS to use in preparing the cost estimate.
Further, Met Council represents and warrants that it will not submit or present any
cost estimate prepared by ATS without this disclaimer.16

ATS also asked the Metropolitan Council in May 2021 to agree to indemnify ATS and hold it
harmless against any legal actions or claims arising from the use of Council instructions that
were incorporated into ATS's cost estimates.

In addition, ATS asserted in May 2021 that it remained concerned about the Metropolitan Council's
directives and might, in some instances, disregard them when preparing independent cost estimates.
In a May 24, 2021, letter to the Southwest LRT project director, the ATS Executive Vice President
said:

Absent clear direction from the government funding agencies that the Met
Council's instructions concerning [independent cost estimate] preparation are
acceptable, ATS will prepare [independent cost estimates] based on our
professional judgment in order to preserve the independence of the [independent
cost estimates]. ATS will continue to prepare all [independent cost estimates] in
accordance with [Design Task Protocol] 13, without applying additional process
related instructions from the Met Council when those instructions are contrary to
ATS's view of the appropriate costs for the particular change. Of course, ATS
will continue to be open to discussions with Met Council about specific
[independent cost estimates] and make appropriate and reasonable adjustments at
the request of the Met Council.17

ATS offered to conduct additional analyses that would reflect the Metropolitan Council's
instructions, but it wanted these supplemental analyses to be separate from ATS's independent
cost estimates.

In June 2021, ATS reached an interim agreement with the Metropolitan Council on a procedure
for preparing independent cost estimates. ATS said it would follow this procedure "until we
resolve the issues raised" earlier.18

Metropolitan Council Responses

In a July 14, 2021, letter to ATS, Southwest LRT project director Jim Alexander said: "The
[Metropolitan] Council strongly disagrees with the assertions and innuendoes in your [July 1,
2021,] letter."19 He added:

Given AECOM's substantial involvement with the Project, you should be aware
that the Council has retained outside expertise to support the cost and schedule
re-baselining efforts currently underway with the Civil Contractor (LMJV) and
the Systems Contractor (APJV). The Council is supported by a team of seasoned
professionals: (1) Metropolitan Council Chair, Charlie Zelle, the former
Commissioner of the Minnesota Department of Transportation; and (2) the same
scheduling and legal support team engaged by the Minnesota Department of
Transportation on its most recent complex claim resolution process, Trauner
Consulting and Venable's Construction Law Group.20

In an August 25, 2021, letter to ATS, Alexander disputed ATS's notion of an independent cost
estimate. He said:

...AECOM's assertion that Independent Cost Estimates (ICE) are independent of
input from the Council is incorrect. AECOM ignores that a cost estimate is
independent because it is performed independently from the Contractor's proposal
not because it is independent from the owner's input.21

Alexander said that the Metropolitan Council's perspective on independent cost estimates was
consistent with federal guidance. He said the federal government did not require the
Metropolitan Council to contract with a different entity to prepare independent cost estimates;
those estimates could be prepared by the Council itself. He said the Council's decision to use a
consultant to prepare the estimates "does not prevent the Council from providing input on
historical cost data or constructability."22 Furthermore, he said:

ATS has an obligation to consider actual conditions and the risks associated with
performing the work. It is the Council's right to point out to ATS when its
estimate fails to consider actual site conditions, access constraints, and other
issues related to the performance of construction work on a tight urban site
adjacent to operating freight rail lines.23

Furthermore, Alexander asserted that ATS's prior estimates had contained many errors.
He said:

The Council has documented numerous incidents where ATS cost estimating data
contained incorrect assumptions which contributed to large differences between
the [independent cost estimate] and the contractor's proposal. ATS has repeatedly
failed to factor into its data the Project's many risk factors: working with the
potential for unforeseen conditions; low productivity due to site constraint
restrictions; down time due to train delays; and down time due to noise and
vibration mitigation....

ATS failed to identify many constructability elements and constraints that were
either missing or found to be incorrect through the cost analysis process. The
Council's review found consistently missed scope or underrepresented costs for
factors including, but not limited to, site access, site maintenance, site
supervision, re-mobilization, trucking, off-site staging due to constrained
corridors, over-estimation of efficiencies, [support of excavation], drilling, slurry
removal, walls (rebar coupling work, method shaft, etc.) and stray current.24

He added:

There is no contractual basis for ATS asserting that the Council has no right to
review and comment on ATS's estimate, especially when ATS's estimate is
demonstrably incorrect. If ATS questions the accuracy of the Council's input,
ATS has both the right and obligation to investigate the accuracy of that input on
its own.25

Alexander said:

[T]he Council has worked with AECOM on [independent cost estimate] process
changes, in particular the Means and Methods Checklist, to help ATS improve its
understanding of the field conditions that affect change order cost pricing. This
effort has successfully brought Council [independent cost estimates] more in line
with market and field conditions.26

Conclusion

The above summary illustrates that there has been a prolonged and significant difference of
opinion between representatives of the Metropolitan Council and a Southwest LRT project
contractor (ATS) regarding the preparation of independent cost estimates on the Southwest LRT
project, as well as other project issues. We have not examined the validity of ATS's allegations
or the Council's responses. This would likely require looking in detail at the decision processes
and supporting information for a variety of individual instances in which there have been
proposals for changes in project costs. As noted earlier, our office does not have the capacity to
conduct such a review at this time.

I have attached to this memorandum the correspondence we reviewed between the two parties, in
case you wish to read the parties' complete statements on their positions. Both parties in this
case have cooperated fully with our office's requests for information.

lease feel free to follow up with our office if you have additional questions, or you may wish to
pose questions directly to either of the two parties.



1
Sarah Levitt, Corporate Vice President and Assistant General Counsel, AECOM Technical Services, letter to Joel
Alter, Director of Special Reviews and Interim Legislative Auditor, Office of the Legislative Auditor, "Re: Draft
Memorandum re. Southwest Light Rail Transit project," October 22, 2021.
2
The contingency budget is intended to help ensure that a project can meet the overall project budget by providing a
cushion to deal with known or unforeseen risks. Some contingency amounts are allocated to certain project
components, while others are unallocated. According to the Metropolitan Council, Federal Transit Administration
projects typically fund all change orders and unforeseen costs from a project's contingency budget.
3
The state contribution consists of $16.0 million in state vehicle sales tax revenue, $7.3 million in General Fund
revenue, $5.0 million in general obligation bonds, and $2.0 million in Department of Employment and Economic
Development bonds.
4
Tamara Rein, Metropolitan Council, on behalf of Matt LaTour, Director, Program Evaluation and Audit,
Metropolitan Council, e-mail to Joel Alter, Office of the Legislative Auditor, "Metropolitan Council Response to
Legislative Auditor information request," August 17, 2021.
5
Matt LaTour, Metropolitan Council, e-mail to Joel Alter, Office of the Legislative Auditor, "Re: Following up,"
August 23, 2021.
6
For example, the Metropolitan Council's Regional Administrator may sign off on changes of between $1.0 million
and $2.5 million, and the Council's Director of Construction may sign off on changes between $50,000 and
$100,000.
7
Metropolitan Council, "TSD-50-08 Change Orders Procedure, Revision 03-00" (August 2019), 3.
8
Metropolitan Council, "FM 14a Procurement Procedure," Revision 17 (January 2020), 14.
9
This analysis--called a "cost or price analysis"--is a determination that the cost or price is fair and reasonable.
10
As of September 2021, the contract as amended was scheduled to end December 31, 2021.
11
Richard Wolsfeld, Jr., Executive Vice President, AECOM Technical Services, letter to Jim Alexander, Southwest
Light Rail Transit Project Director, Metro Transit, July 1, 2021.
12
A two-part change order is one in which the scope of additional work is unpredictable or the cost of the work is
unclear at the time the contractor is directed to move ahead with the work. Part 1 of a change order authorizes a
change in the scope of work, up to a specified price that may not be exceeded.
13
In his letter, the ATS Executive Vice President said such an approach would be preferable to making price
adjustments based on unit prices or lump sum agreements.
14
Richard Wolsfeld, Jr., AECOM Technical Services, letter to Joel Alter, Office of the Legislative Auditor,
September 8, 2021, 2.
15
Richard Wolsfeld, Jr., AECOM Technical Services, letter to Jim Alexander, Metro Transit, May 24, 2021, 2.
16
Richard Wolsfeld, Jr., AECOM Technical Services, letter to Jim Alexander, Metro Transit, May 27, 2021, 1-2.
17
Richard Wolsfeld, Jr., AECOM Technical Services, letter to Jim Alexander, Metro Transit, May 24, 2021, 2.
18
Richard Wolsfeld, Jr., AECOM Technical Services, letter to Jim Alexander, Metro Transit, June 8, 2021, 1.
19
Jim Alexander, Metro Transit, letter to Richard Wolsfeld, Jr., AECOM Technical Services, July 14, 2021, 1.
20
Ibid.
21
Jim Alexander, Metro Transit, letter to Richard Wolsfeld, Jr., AECOM Technical Services, August 25, 2021, 1.
22
Ibid., 1-2.
23
Jim Alexander, Metro Transit, letter to Richard Wolsfeld, Jr., AECOM Technical Services, August 25, 2021, 2.
24
Ibid., 2-3.
25
Ibid., 2.
26
Ibid., 3.


Attachments
[This page intentionally left blank.]
ADDENDUM:
Key Correspondence
between
AECOM Technical Services (ATS)
and
Metropolitan Council/Metro Transit
Regarding the Independent Cost Estimate Process
for the
Southwest Light Rail Transit Project
This addendum supplements the Office of the Legislative Auditor's memorandum
(October 28, 2021) regarding the Southwest Light Rail Transit project. It includes
key 2021 correspondence between the Metropolitan Council/Metro Transit and a
contractor on the project (AECOM Technical Services, or ATS).
Page 1 of 3
Suite 1100
800 LaSalle Avenue
Minneapolis, MN 55415
www.aecom.com
May 24, 2021
Jim Alexander
Metro Transit
Southwest Project Office
6465 Wayzata Blvd, Suite 500
St. Louis Park, MN 55426
Jim.Alexander@metrotransit.org
VIA EMAIL
Re: Southwest LRT ADC
ATS Project #60336960
Metropolitan Council Contract No. 14P125
Independent Cost Estimates
Dear Mr. Alexander:
I write regarding ATS Technical Services ("ATS") Advanced Design Consultant ("ADC")
independent cost estimate ("ICE") process, which has been a recurring topic of conversation
since construction began on the project. ATS continues to be concerned about Met Council's
instructions regarding the ICE process, and the instructions' impact on ICE independence.
ADC Contract Task 6030, Assistance with Change Orders and Field Modifications, provides that
ADC will "develop independent cost estimates for proposed changes." ATS Design Task
Protocol 13 ("DTP 13"), previously provided to the Met Council, "describe[s] the process for
preparation and control of ADC-prepared Independent Cost Estimating (ICE) for contract
deliverable packages and change orders." As described in DTP 13, ATS will consider the
following cost data in developing its ICEs:
• Association of General Contractors of MN Chapter (Wages)
• RS Means/NECA (Productivity)
• Equipment Watch (Equipment Rates)
• Vendor and Supplier Quotes (Contract-Specific or Project Library Pricing)
• MnDOT Average Bid Prices
• Contract Documents (Mark Up, Mobilization, Allowances)
The previously-provided C-3 Checking and Verification Procedure that applies to DTP 13
defines "Independent" as "those parties who maintain a level of objectivity with respect to the
particular work product (internal or external) and who have not been directly involved with the
production of the specific work product."
During the project, Met Council has instructed ADC regarding modifications to the ICE process.
ATS employees have summarized and documented these regularly changing instructions
several times, including:
May 24, 2021
Page 2 of 3
(1) a memorandum titled "Civil Change Order Independent Cost Estimates Process,"
dated April 23, 2020;
(2) an email titled "ICE's - list of 'direction' received from MC" from Michelle Julius, dated
September 16, 2020; and
(3) a memorandum prepared at the direction of Met Council titled "Independent Cost
Estimate process changes," dated December 21, 2020.
Some of these communications include ATS-driven requests, including creating a paper trail for
audit purposes. The majority, however, reflect specific direction from the Met Council to ATS
about how to develop the ICEs. As the Met Council team is well aware, in many instances
these directions were inconsistent with ATS's views on appropriate costs and factors. Copies of
the above-referenced communications are attached hereto.
ATS employees have voiced concerns regarding the Met Council's instructions regarding the
ICE process, and whether incorporation of those instructions would undermine the
independence of the ICE by requiring ATS to apply costs and other markups not reflected in the
contract or supported by ATS's standard sources of cost estimate data. ATS employees have
been particularly concerned about instructions to apply specific contractor-negotiated prices in
ICEs.
Recently, Met Council again instructed ATS to revise its ICE process in a manner that would
significantly increase the ICE costs. For example, Met Council instructed ATS to apply
contractor-negotiated pricing to all ICEs involving electrical work going forward. Met Council
likewise instructed ATS to make numerous changes to the ICE for CHG-624, including various
contractor-negotiated pricing, limiting credits, applying various price adjustments on supplies
and equipment, and applying an additional train delay. These CHG-624 comments also
included several items to be applied to all future ICEs. In addition, Met Council instructed ATS
to produce revised ICEs on CHG-354 and CHG-375 that incorporate contractor-negotiated
electrical pricing and ICE process revisions from the December 2020 memorandum.
Absent clear direction from the government funding agencies that the Met Council's instructions
concerning ICE preparation are acceptable, ATS will prepare ICEs based on our professional
judgment in order to preserve the independence of the ICEs. ATS will continue to prepare all
ICEs in accordance with DTP 13, without applying additional process-related instructions from
the Met Council when those instructions are contrary to ATS's view of the appropriate costs for
the particular change. Of course, ATS will continue to be open to discussions with Met Council
about specific ICEs and make appropriate and reasonable adjustments at the request of the Met
Council.
May 24, 2021
Page 3 of 3
ATS will continue to work with Met Council in a productive and collaborative way. To the extent
the Met Council would like additional analysis that includes specific factors, prices, or other
mark-ups--including the Met Council instructions reflected in the attached communications that
conflict with ATS's view of the appropriate cost for each individual change--we are happy to
prepare an estimate that reflects those additional costs. However, any such estimate must
stand separate and apart from ATS's ICE. We believe this approach is in the best interests of
both the Met Council and ATS.
Please let me know if you have any questions.
Sincerely,
Richard Wolsfeld, Jr.
Executive Vice President
AECOM
CC: Travis Boone, Executive Vice President, Regional Chief Executive, West
Dan Manojlovski, Senior Vice President, Regional Business Line Leader, Transportation
Matthew Crane, Senior Vice President, Regional Chief Operating Officer, West
Attached: (1) Memorandum titled "Civil Change Order Independent Cost Estimates
Process," dated April 23, 2020
(2) Email titled "ICE's - list of 'direction' received from MC" from Michelle
Julius, dated September 16, 2020
(3) Memorandum titled "Independent Cost Estimate process changes," dated
December 21, 2020
April 23, 2020
1
Civil Change Order Independent Cost Estimates Process
Independent Cost Estimate (ICE) is completed in two stages
1) Change Order Request (COR) Estimate Stage
2) Change Order (CHG) Estimate Stage
1- Change Order Request (COR) Estimate Stage
a. ADC Project Controls develops quantity takeoff's and coordinates any additional internal
ADC Design review of quantities, scope limits and general construction approach.
b. ADC Project Controls incorporates Design comments into quantity Take-Off's and develops a
Draft COR Estimate utilizing HCSS and Contract Specification 0700 (10.4.1 - 10.4.4 and
10.4.5.10) and 0800 (10.6.2) direction for Overhead and Profit Fee estimate without a
mutually acceptable fixed fee; a working calendar of 10 Hours a day - 5 Days a week; and
NECA difficult rate for the electrician production rate
c. ADC Project Controls completes the COR Estimate via the SFO directed modifications below:
i. The Contractor's credit for all the base work on equipment(s) is 50% of the
estimated equipment(s) cost From Blue Book/Equipment Watch (not the changed
work per 0800 10.6.2.7).
ii. Add 8% to the estimated total adjusted cost as a DBE requirement allowance.
iii. Productivity adjustments (ie Freight Train Delays)
iv. For Change Adds, apply a 23% Overhead and Profit mark-up to the overall cost
v. For Change Deducts, deduct 5% on materials and 5% on labor for Overhead and
Profit
vi. Base Bid Unit Costs for Contaminated Soil (200 series) and Piling (300 series) are
calculated but are independent of the final COR Estimate
d. ADC Project Controls will then request review comments from the Construction Team
regarding general assumptions and construction approach via the COR Estimate with
quantity take-off sheets as supporting documentation.
i. Construction may then identify and request scope clarifications by modification to
the scope narrative, requesting plan/spec alterations or additions, or attaching
additional information.
e. Once Construction has confirmed the scope and construction approach included is sufficient
for pricing, the COR Estimate is updated in eBuilder by ADC (Summary page, Pivot Table,
and HCSS backup)
2- Change Order (CHG) Stage
a. ADC Project Controls develops the Draft CHG Estimate by:
i. Reviewing the Construction Teams COR takeoff notes and incorporate applicable
comments into the quantity takeoff's
ii. Obtaining final quantity take-offs from attached plans & specs and confirming with
Design as needed.
April 23, 2020
2
iii. Building the Draft CHG Estimate in HCSS with the above information and
procedures shown in (1b)
b. ADC Project Controls completes the CHG Estimate by Incorporating the standard
adjustments from above (1c) and including any additional General Condition Scope items
determined by the Construction Team
c. ADC Project Controls requests review comments from the Construction Team confirming the
scope general assumptions and construction approach via the CHG Estimate with quantity
pivot-table take-off sheets as supporting documentation.
i. Any adjustments or modifications required by the Construction Team will be made
to the applicable quantity Take-Off's and CHG Estimate.
ii. No costing information recommendations will be incorporated.
iii. After modifications have been made ADC will start the request review comments
process again.
d. Once ADC and the Construction Team align on scope and constructability approach, ADC will
hold submission of the CHG Estimate into the e-Builder CHG process until notified by the
Construction Team that the Contractor is nearing completion of their RFCP. This is in case
the contractor discovers something in their process that impacts the scope.
e. Once Construction notifies ADC that the scope and information included is sufficient for
pricing, the CHG Estimate is uploaded in eBuilder by ADC (Summary page, Pivot Table, and
HCSS backup)
f. Independent Cost Estimate (CHG Estimate) is complete
3- Side-By-Side Cost Comparison & Summary Narrative
a. If Requested by the Construction Team, ADC Project Controls will utilize the CHG Estimate
and Contractors RFCP Supporting documentation (supplied by the Construction Team) to
support the creation of a Side-by-Side cost comparison summary of the contractor
quantity's and pricing.
i. Determine congruency in scope and quantity.
1. Confirm accuracy of ADC quantity if discrepancy is identified.
2. Identify Cost effects of the CHG Estimate for confirmed missing
components.
3. Provide comments on items that appear missing or inconsistent from the
Contractors RFCP.
ii. Support development of a narrative identifying possible causes for unaligned cost
between CHG Estimate and Contractor's RFCP.
1. Provide component pricing and/or quantity adjustments and resulting cost
implication associated with those adjustments.
2. Provide documentation supporting a need for a possible revision to
Contractors RFCP
4- Project Controls Requests
a. As requested, a new ICE entry may be required if scope or constructability approach is found
to need significant revisions.





To: Kronzer, Ryan[Ryan.Kronzer@metrotransit.org]; Ghandour, Sarah[Sarah.Ghandour@metrotransit.org]
?
From: Julius, Michelle[/O=EXCHANGELABS/OU=EXCHANGE ADMINISTRATIVE GROUP
(FYDIBOHF23SPDLT)/CN=RECIPIENTS/CN=C4F1CF86325A45AFAC2EE38088E48A42-MICHELLE.JU]
?
Sent: Wed 9/16/2020 1:01:24 AM (UTC)
?
Subject: ICE's - list of 'direction' received from MC
?
Ryan & Sarah



Per our discussion on Friday 9/11, here are the items that ADC cost estimating has been asked to do in relation to ICEs
?


Identify Quantity Change but not Cost Change for all Contract Unit Price Bid Items.
Additional Report out of HCSS Cost & Price Report
Bid Item Pivot Report
Bid Item with Activity Pivot Report
Modification of cost in the Pivot Report for 50% Equipment Credits
Modification of cost in the Pivot Report for 23% Contractor Markup
Modification of cost in the Pivot Report for 8% DBE add (16% DBE project requirement)
Modification of cost in the Pivot Report for 40% train delay (in applicable areas)
Electrical NECA Production adjustment to Difficult
Submit to construction in e-Builder for preliminary review
Preliminary Construction Review no longer in e-Builder, sent via email to Mark Watson for review, then once OKd submit
in eB
Side-By-Side Comparison of the Pivot Report and the Contractors Pricing
?
What-If Estimate for any changes identified from the S-B-S
?
Negotiation Positions and summary write-up
DRAFT Position Papers
ICE Revisions in e-Builder
No more ICE updates need new ICE if scope changed from original ICE
Scope meetings with SFO & LMV receive direction to estimate scope using contractor preferred construction methods
Direction to include additional temp sheeting, survey, testing, and mobilization
Crew make-up to include full time cranes on rebar crews instead of part time off road forklift
Develop Contract Change Orders without any changed contract documents. (ie RFI, un approved CSUB shop drawings,
Corr, e-mails) often RFIs, etc. come after ADC ICE complete & submitted
Develop Unit Prices for items based off of the contractors submitted pricing
Provide weekly ADC ICE priority list
Work with SFO to review CHG HOT list
Ongoing requests for ASAP return of ICEs for Part 1s
Ongoing work to navigate the middle ground that we are in between MC construction, MC design, ADC design, LMJV,
etc. while trying to remain independent
Continue to receive direction from multiple parties, and changing priorities and work thru the challenges this creates
Creating a paper trail of all ICEs for future audits (MC, FTA, etc.)
Any questions please let me know
?
Thanks
?
MJ
?
Page 1 of 2
Suite 1100
800 LaSalle Avenue
Minneapolis, MN 55415
www.aecom.com
December 21, 2020
Ryan Kronzer
Metro Transit
Southwest Project Office
6465 Wayzata Blvd, Suite 500
St. Louis Park, MN 55426
Re: Southwest LRT ADC
AECOM Project #60336960
Metropolitan Council Contract No. 14P125
Independent Cost Estimate process changes
Dear Mr. Kronzer:
As a follow up to various discussions over the last several months about the Advanced Design
Consultant (ADC) independent cost estimate (ICE) process on the project, I offer the following
process changes moving forward.
Based on our review and assessment, I believe these are defendable changes based on prior
project experience in this market.
• Means & Methods Checklist (draft attached): This checklist would be used by the ADC cost
estimating team to ensure that these specific elements are addressed for each change. The
ADC cost estimating team will discuss the checklist with the Council's construction team
(SFO, ACAR's, Mark Watson) for each change to see if they concur with the assumptions
that have been made, or based on what they are seeing in the field for this particular
location or type of work, the item may need to be adjusted. The checklist will also serve to
highlight where gaps in information for pricing changes might exist and where a scope
meeting is required with the Contractor.
• Production factor: ADC will continue to utilize the resources for production rates that we
have been utilizing for the entire project (RS Means, MnDOT average rates, etc.). But now
that the project is no longer in a competitive bid environment, and is in a change order
environment, ADC will also utilize factors on the labor and equipment costs depending on
the complexity of the change. This is a method that I have used on previous projects, based
on either type of work, complexity of work, location of work, etc. for change order pricing in
this market. Proposed factors include:
o +25% on all changes to account for non-competitive / change order pricing
o An additional +50% for complex scope changes
o An additional +50% for complex scope changes that include coordinating with multiple
subcontractors, stakeholders, etc.
o NOTE: already include 40% production loss within the BNSF corridor. The factors listed
above would be in addition.
• New ICE: Often the ADC ICE is submitted well in advance of the Contractor reviewing the
change documents, in order to submit within our contract time frames. If the ADC ICE has
already been submitted to the Council, but additional information is later presented, ADC will
produce a new ICE to reflect. This would only happen if the Contractor has NOT yet
submitted pricing. This includes but is not limited to:
o Contractor RFI(s)
o Revised plan sheet(s) and/or specification(s)
Page 2 of 2
o Scope meeting(s)
Performing the items identified above, ADC ICEs should be more in line with market conditions
in this area, as well as project specific issues.
If you have any questions, please let me know.
Sincerely,
Michelle Julius, PE
ADC Project Manager
Vice President
AECOM
CC: Richard Wolsfeld, Mark Ryan, Dan Ward, Sarah Ghandour
Attached: ICE Means & Methods Checklist
ICE "Means and Methods Checklist" to aid scope discussion with ACAR's
CHG#_______ ADC Estimator_______________ SFO staff_____________________________ Updated: 12-21-2020
ID Description Applicable N/A Notes / Explanation
Page 1 of 2
1 Survey & Layout
2 Mobilization / Remobilization
3 Site Access
3.1 Temporary Roads
3.2 On-site hauling from remote delivery
site
4 Special site conditions
4.1 Crane mats
4.2 Crane pads
4.3 Existing utilities / Temp utilities
4.4 Dewatering
4.5 Potential underground obstructions
4.6 Narrow site constraints
4.7 Noise & vibration constraints
5 Extended site conditions & maintenance
5.1 SWPPP (erosion control, street
sweeper)
5.2 Traffic control
5.3 Temp Business &/or Ped access
5.4 On-site job trailers / restrooms
6 Contractor required staffing
6.1 Scheduler
6.2 Site supervisor
6.3 Subcontractor supervision
6.4 Quality staff
6.5 Survey
6.6 Additional engineering services
7 Off-site Work
7.1 Staging
7.2 Storage
7.3 Warehouse
8 Additional Demolition
8.1 Removals beyond original scope
8.2 New removals
9 SOE
9.1 Type
9.2 Additional
9.3 Design / Redesign
10 Down Time / Standby / Idle time
11 Resequencing of future work
12 Mock-ups
13 Testing
13.1 Material
13.2 Compliance
ICE "Means and Methods Checklist" to aid scope discussion with ACAR's
CHG#_______ ADC Estimator_______________ SFO staff_____________________________ Updated: 12-21-2020
ID Description Applicable N/A Notes / Explanation
Page 2 of 2
13.3 Destructive
14 Winter Conditions
14.1 Material upcharge
14.2 Labor inefficiencies
14.3 Temporary heating / blankets
15 Escalation
15.1 Labor
15.2 Equipment
16 Constructability approach regarding
16.1 Stray current
16.2 Drilling
16.3 Walls / panel construction
Page 1 of 2

Minneapolis, MN 55415
www.aecom.com
May 27, 2021
Jim Alexander
Metro Transit
Southwest Project Office
6465 Wayzata Blvd, Suite 500
St. Louis Park, MN 55426
Re: Southwest LRT ADC
AECOM Technical Services Project #60336960
Metropolitan Council Contract No. 14P125
Independent Cost Estimates
Dear Mr. Alexander:
As we discussed following your receipt of my letter on May 24, 2021 (the "May 24 Letter"),
AECOM Technical Services ("ATS") desires to work with the Met Council to provide cost
estimates for the Southwest Light Rail Transit ("SWLRT") Project that are both useful to the
Met Council and consistent with ATS' contractual and legal obligations. From our
conversation, I understand that the Met Council's position is that ATS must incorporate the
directed rates, prices, factors, and assumptions, including contractor-negotiated rates, into
ATS cost estimates. In light of ATS' concerns expressed in the May 24 Letter, including
concerns regarding independence, you suggested that "preamble" or "disclaimer" language
could be attached to each cost estimate, reflecting that the estimate contains these rates and
is not independent.
ATS notes, however, that it previously included disclaimer language in its ICEs and supporting
documentation, beginning in approximately February 2020. The Met Council then expressly
instructed ATS to remove this language. When one estimator later included the language in
supporting materials in December 2020, the Met Council again instructed ATS to remove such
language from the eBuilder upload and all ICEs going forward.
Consistent with your suggestion from May 24, 2021, however, ATS proposes to proceed using
the following "disclaimer" and "representation and warranty" language related to cost estimates:
Disclaimer
Met Council has directed AECOM Technical Services ("ATS") Advanced
Design Consultant to use certain rates, prices, factors, and assumptions to
estimate the costs for change orders for the duration of the SWLRT project.
Because ATS has not exercised its independent judgment, but instead
used Met Council-directed rates, prices, factors, and assumptions, this cost
estimate is not an independent cost estimate.
Page 2 of 2
Representation and Warranty
Met Council represents and warrants that it will not make any representations
or characterizations that an ATS-prepared cost estimate is an "independent
cost estimate" when the estimate is based, at least in part, on rates, prices,
factors, and assumptions that Met Council directed ATS to use in preparing
the cost estimate. Further, Met Council represents and warrants that it will
not submit or present any cost estimate prepared by ATS without this
disclaimer.
In addition, ATS requests that someone duly authorized at the Met Council commit to ATS that
the Met Council--when it directs or has directed ATS to use specific rates, prices, factors, or
assumptions in its cost estimates--will not assert that ATS has breached any contractual
obligation, performed negligently, or otherwise seek any indemnification or other legal remedy
against ATS based on ATS' use of rates, prices, factors, or assumptions incorporated into cost
estimates at the direction of Met Council. ATS cannot proceed to prepare cost estimates
according to the current directives from the Met Council without this guarantee.
We also want Met Council to agree that, should ATS ever face any legal action or claim that
arises out of, or is related to ATS' use of rates, prices, factors, or assumptions that were
incorporated into its cost estimates at the Met Council's direction, Met Council will indemnify
and hold harmless ATS and its respective members, agents, officers, affiliates and employees
with respect to all such claims, expenses (including reasonable attorney's fees), losses,
damages, or lawsuits.
Upon agreement to the above language and conditions, ATS will agree to prepare cost
estimates using the contractor-negotiated rates and other prices, rates, factors, and
assumptions as instructed by Met Council.
Please let me know if you have any questions.
Sincerely,
Richard Wolsfeld, Jr.
Executive Vice President
AECOM Technical Services
CC: Travis Boone, Executive Vice President, Regional Chief Executive, West
Dan Manojlovski, Senior Vice President, Regional Business Line Leader, Transportation
Matthew Crane, Senior Vice President, Regional Chief Operating Officer, West
Page 1 of 1
Suite 1100
800 LaSalle Avenue
Minneapolis, MN 55415
www.aecom.com
June 8, 2021
Jim Alexander
Metro Transit
Southwest Project Office
6465 Wayzata Blvd, Suite 500
St. Louis Park, MN 55426
Re: Southwest LRT ADC
AECOM Project #60336960
Metropolitan Council Contract No. 14P125
Independent Cost Estimates
Dear Mr. Alexander:
I write to follow up on my May 27, 2021 letter regarding the cost estimate services
provided by AECOM Technical Services ("ATS") for the Southwest Light Rail Transit ("SWLRT")
Project. Recognizing the SWLRT Project's need for cost estimates to proceed, ATS will adopt
the following procedure for cost estimates until we resolve the issues raised in my May 27 letter:
1. ATS will prepare cost estimates using the process set forth in Design Task
Protocol 13, with certain prices, rates, factors, and assumptions received from
the Met Council. ATS will upload this cost estimate with supporting materials to
eBuilder in the "ICE Backup" field. The cost estimate will note that it incorporates
prices, rates, factors, and assumptions received from the Met Council.
2. ATS will prepare a pivot table adding costs to the cost estimate as directed by
Met Council in the December 21, 2020 memorandum. ATS will upload this pivot
table to the following shared folder on the Met Council server:
. ATS will note the pivot table
includes prices, rates, factors, and assumptions received from the Met Council.
3. ATS will then pass the workflow to the Met Council construction team, which will
be responsible for completing "ICE" and "ICE Amount" fields in eBuilder.
Please let me know if you have any questions.
Sincerely,
Richard Wolsfeld, Jr.
Executive Vice President
AECOM
CC: Travis Boone, Executive Vice President, Regional Chief Executive, West
Dan Manojlovski, Senior Vice President, Regional Business Line Leader, Transportation
Matthew Crane, Senior Vice President, Regional Chief Operating Officer, West
Page 1 of 3
Suite 1100
800 LaSalle Avenue
Minneapolis, MN 55415
www.aecom.com
July 1, 2021
Jim Alexander
Metro Transit
SWLRT Project Director
Southwest Project Office
6465 Wayzata Blvd, Suite 500
St. Louis Park, MN 55426
Dear Jim:
I write concerning cost estimates and the contingency for the SWLRT Project. I raised
some of these issues in my letters to you dated May 24, 2021, May 27, 2021, and June
8, 2021 We hope to receive a response to those letters from the Met Council soon.
Given the current state of the budget and contingency, AECOM recommends that Met Council
make major course corrections with the LMJV. The SWLRT Project will exhaust the contingency
soon, given the current path of cost and schedule negotiations. AECOM believes construction
contract administration changes are needed, and recommends:
• Change the Met Council negotiation team to include more expertise in heavy
highway construction claims (including history with Tutor Perini, Lunda
Construction, and C.S. McCrossan in this market). We recommend that Met
Council request assistance from the MnDOT Claims Unit, which has this required
experience. We have discussed how "tough/skilled" Tutor Perini is at
negotiations; Met Council needs someone equally skilled.
• As we have discussed previously, AECOM believes that Met Council is being
significantly overcharged by LMJV for contract changes, in both cost and
schedule. We have requested that Met Council track actuals versus contract
change requests and use this information to push back on LMJV estimates
during change order negotiations. AECOM recommends that Met Council
immediately begin this tracking and analysis on selected items.
• As Met Council is aware, LMJV is moving forward with changes in construction in
the field without change orders first being executed. At a minimum, such changes
should be issued as a Part 1 Change Order and need to be tracked for time and
materials payment.
Jim Alexander
July 1, 2021
Page 2 of 3
• Per the Civil Contract General Conditions 00700, Article 10, Change of Contract
Price can be determined in one of three ways:
When large discrepancies exist between the cost estimates prepared by AECOM
and LMJV, we recommend proceeding under 10.3(iii), by adjusting the contract
price based upon the LMJV's actual cost of work performed.
• Per the Civil Contract General Conditions 00700, Article 11, Change of Contract
Time, LMJV is obligated to mitigate changes on the schedule:
Accordingly, contract time should only be awarded when it can be shown that the
work is affecting the critical path. Given the ongoing challenge in reaching
agreement on a baseline schedule, this proves extremely difficult to track.
However, the Met Council should be pushing LMJV to work harder to mitigate
schedule challenges.
• In addition, quality remains a concern for AECOM, due to the number of NCRs
and CNCRs outstanding for issues including low strength concrete, work
constructed incorrectly, and incorrect pile layouts. The LMJV has consistently
asked AECOM to "use as is" when quality issues arise, which requires
engineering review and sometimes redesign to accommodate. AECOM's
structures team, which has seen the highest number of NCRs and CNCRs, has
been tracking time spent on these issues since April 2020. To date, AECOM and
multiple subs have spent approximately $250,000.00 on these requests. The
LMJV quality program has not proven robust enough for the work being
performed, and the LMJV appears to be using potential schedule delays as
leverage in seeking approval to use subpar work as is. AECOM strongly
encourages the Met Council to prioritize quality over schedule, and to take
monetary deductions or push for removal and replacement for all items the LMJV
does not construct in accordance with the plans and specifications.
Early in the civil construction project, AECOM provided these recommendations to Met Council
based upon its prior experience with Lunda and McCrossan. Met Council expressed that it
wanted to avoid any claims being filed by LMJV because contractor claims could have
negatively impacted receipt of the FFGA, which has now been received. While AECOM
Jim Alexander
July 1, 2021
Page 3 of 3
maintains that these recommendations should have been adopted at the start of the project, the
current state of the contingency requires Met Council to make immediate changes to how
negotiations are handled with LMJV.
Last, the AECOM Team is now completing cost estimates using the process outlined in my June
8, 2021 letter, and Met Council personnel are now currently entering AECOM's cost estimate
information into the "ICE" and "ICE Amount" fields in e-Builder. As you know, AECOM's cost
estimates were prepared using rates, prices, and factors as directed by Met Council. AECOM
expects Met Council to be transparent with all interested parties regarding the source of the cost
estimate data and ICE Amount entered in e-Builder. Again, AECOM requests the Met Council
provide the representations, warranties, and indemnifications outlined in my May 27, 2021 letter.
We all want this project to be successful and this letter is presented in that spirit.
I will call you to discuss further.
Sincerely,
Richard Wolsfeld, Jr.
Executive Vice President
AECOM
CC: Michelle Julius

A service of the Metropolitan Council
www.swlrt.org
6465 Wayzata Boulevard, Suite 500 • St. Louis Park, MN 55426 • Main: 612-373-3800 • Fax: 612-373-3899
July 14, 2021
Via Email
Richard Wolsfeld, Jr. (richard.wolsfeld@aecom.com)
Executive Vice President
AECOM
800 LaSalle Avenue, Suite 1100
Minneapolis, MN 55415
RE: Southwest LRT
Dear Richard:
I am in receipt of your letter dated July 1, 2021. The Council strongly disagrees with the assertions and
innuendoes in your letter.
Given AECOM's substantial involvement with the Project, you should be aware that the Council has
retained outside expertise to support the cost and schedule re-baselining efforts currently underway with
the Civil Contractor (LMJV) and the Systems Contractor (APJV). The Council is supported by a team of
seasoned professionals: (1) Metropolitan Council Chair, Charlie Zelle, the former Commissioner of the
Minnesota Department of Transportation; and (2) the same scheduling and legal support team engaged by
the Minnesota Department of Transportation on its most recent complex claim resolution process, Trauner
Consulting and Venable's Construction Law Group.
The Council has full knowledge of its contract options regarding pricing and schedule issues with each
contractor and the status of the Project's contingency. The Project has incurred major changes,
specifically the corridor protection wall and work around the Kenilworth tunnel site.
Given AECOM's involvement in the Project, you should already know that the Council is in constant
communication with key stakeholders discussing schedule and cost options, amongst other items
(including certain issues noted in your letter).
Should you or anyone at AECOM have any concerns regarding the Project I can be reached directly at
612-373-3880.
Sincerely,
Jim Alexander, P.E.
SWLRT Project Director
cc: Joan Hollick
SPODMC
Page 1
Via Email
August 25, 2021
Richard Wolsfeld, Jr.
Executive Vice President
AECOM Technical Services ("ATS")
Suite 1100
800 LaSalle Avenue
Minneapolis, MN 55415
Re: Independent Cost Estimates
Metropolitan Council Procurement #14P125
Dear Mr. Wolsfeld:

This correspondence acknowledges letters from AECOM dated May 24, 2021, May 27, 2021, and June 8,
2021. As explained below, AECOM's assertion that Independent Cost Estimates (ICE) are independent of
input from the Council is incorrect. AECOM ignores that a cost estimate is independent because it is
performed independently from the Contractor's proposal not because it is independent from the
owner's input.
Further, the Council's input is often required because independent estimates generated by ATS
estimators frequently lack cost assumptions regarding constructability and site constraints that impact
the final cost of negotiated change orders. Such input in no way undermines the integrity or
independence of the estimate. The Council provides some examples below in an effort to further this
discussion and work collaboratively to continue to improve the accuracy of cost estimates performed by
ATS.
Historical Pricing Information
Agreed-upon rates and production factors gleaned from construction observations and change order
negotiations for executed change orders are critical parts of the historical pricing information and cost
data that may be used as part of an ICE. This is supported by the FTA's Best Practices Procurement &
Procurement Manual (BPPM) which provides a list of sources for building the sponsor's ICE: "The ICE can
range from a simple budgetary estimate to a complex estimate based on inspection of the product itself
and review of such items as drawings, specifications, and prior data, such as cost data from prior
procurements.1" As noted by the FTA, "The requirement is that you [the Council] determine the
negotiated price to be fair and reasonable, considering all the information [presented] at negotiations,
including such things as complexity of the work, risks associated with performance, the amount of
competition or the lack thereof, etc.2" The use of historical pricing information, when applicable, gives
1
Best Practices Procurement & Procurement Manual, Section 4.6.1. - Independent Cost Estimates
2 https://www.transit.dot.gov/funding/procurement/third-party-procurement/independent-cost-estimate
Page 2
the Council "the best estimate of what the work 'should cost"3. ATS has an obligation to consider actual
conditions and the risks associated with performing the work. It is the Council's right to point out to ATS
when its estimate fails to consider actual site conditions, access constraints, and other issues related to
the performance of construction work on a tight urban site adjacent to operating freight rail lines.
The Independent Government Cost Estimate
The cost estimate is independent because it is performed independently from the Contractor's proposal
and has the purpose of validating or analyzing the Contractor's estimate to determine whether it is
accurate or reasonable, not because or if it is performed by a consultant without government input.
According to the FTA's BPPM, "Before issuing a solicitation, recipients [the Council] must develop an
independent cost estimate or ICE of the proper price and cost levels for the products or services to be
purchased. . . The ICE is essentially the recipient's [Council's] estimate of what the item or service
'should cost.4
' The FTA notes here twice that it is the recipient's (the Council's) responsibility to produce
the ICE. Regarding this excerpt from the BPPM, the FTA notes in its Frequency Asked Questions, the
word 'independent' does not imply that it is performed by someone other than the grantee. This could
be the case, however, if the grantee does not have the expertise for a large complex procurement.5"
Utilizing a consultant for larger and more complex estimates is the Council's decision and does not
prevent the Council from providing input on historical cost data or constructability.
Based on the FTA guidance noted above, the Council is within its right to incorporate appropriate cost
data into its ICEs. The Council expects that ATS warrant the accuracy and completeness of its work. Such
obligation is not voided by the Council's valid input on ATS's estimate. There is no contractual basis for
ATS asserting that the Council has no right to review and comment on ATS's estimate, especially when
ATS's estimate is demonstrably incorrect. If ATS questions the accuracy of the Council's input, ATS has
both the right and obligation to investigate the accuracy of that input on its own.
Constructability Errors and/or Omissions
The Council has documented numerous incidents where ATS cost estimating data contained incorrect
assumptions which contributed to large differences between the ICE and the contractor's proposal. ATS
has repeatedly failed to factor into its data the Project's many risk factors: working with the potential for
unforeseen conditions; low productivity due to site constraint restrictions; down time due to train
delays; and down time due to noise and vibration mitigation. The Council provides examples below to
further the discussion and work collaboratively to continue to improve the accuracy of ICEs performed
by ATS.
ATS failed to identify many constructability elements and constraints that were either missing or found
to be incorrect through the cost analysis process. The Council's review found consistently missed scope
or underrepresented costs for factors including, but not limited to, site access, site maintenance, site
3 https://www.transit.dot.gov/funding/procurement/third-party-procurement/independent-cost-estimate 4
Best Practices Procurement & Procurement Manual, Section 4.6.1. - Independent Cost Estimates
5 https://www.transit.dot.gov/funding/procurement/third-party-procurement/independent-cost-estimate
Page 3
supervision, re-mobilization, trucking, off-site staging due to constrained corridors, over-estimation of
efficiencies, SOE, drilling, slurry removal, walls (rebar coupling work, method shaft, etc.) and stray
current. For example, within CHG 90, the Council identified nearly $8M in reasonable costs from LMJV's
proposal that were missing or incorrectly assumed in the ICE, such as crane mats, excavation,
maintenance of the BNSF access road, subballast for the Northstar Track, and structural backfill at
retaining walls E403, E405 and E407. Similarly, within CHG 591, the Council identified over $45M in costs
that were missing or incorrectly assumed in the ICE for re-mobilization, wall panels, gang forms, drilled
shaft rebar, storm sewer pipe jacking, survey and water truck support.
Since then, the Council has worked with AECOM on ICE process changes, in particular the Means and
Methods Checklist, to help ATS improve its understanding of the field conditions that affect change
order cost pricing. This effort has successfully brought Council ICEs more in line with market and field
conditions. We expect to continue to work collaboratively with AECOM in all aspects of AECOM's work.
Please let me know if you have any questions.
Sincerely,
Jim Alexander, P.E.
Project Director
Southwest LRT Project
CC: Joan Hollick, Deputy Project Director, Southwest LRT Project
SPO DMC