Contract Approved to Start Construction of California High-Speed Rail

Thursday, Jun 6, 2013  |  Updated 3:24 PM PDT
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$1B Approved to Build Bullet Train

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The board that oversees California's High-Speed Rail Authority on Thursday unanimously approved a nearly $1 billion contract to start construction on the first leg of the $68 billion bullet train in the Central Valley, clearing the way for work to start as soon as this summer on what officials have said will be a tight construction timeline.

The bid from a California-based joint venture was the cheapest out of five received by the state to begin work on the first 30-mile section from Madera to Fresno. But it also had the lowest technical rating for safety and design, drawing public scrutiny and prompting more than an hour of questions to the high-speed rail authority staff from board members.

The board ultimately voted 6-0 to approve the $985.1 million bid.

High-speed rail opponents raised questions at the meeting about the potential for cost overruns and the financial health of the lead company, Sylmar-based Tutor Perini Corp.

The company is embroiled in a legal dispute over the 26-story Harmon Hotel in Las Vegas, a gleaming glass property built by Tutor Perini but never opened. Its owner, MGM Resorts and subsidiary CitiCenter Land LLC, want the structure torn down even before a jury hears a nearly $500 million construction defect lawsuit next January, arguing that the building is not structurally sound and could collapse in a strong earthquake.

Tutor Perini argued before the Nevada Supreme Court this week that tearing down the building would destroy evidence of good work and leave the impression in jurors' minds that the builder was at fault.

Separately, a group called Californians Advocating Responsible Rail Design submitted a letter to the board Thursday saying that Tutor Perini has had three "material changes" to its financial status that would disqualify it from being selected. They include a downgraded rating from Moody's in September 2012 based on the company's "weaker than expected operating earnings and debt levels."

The company's chief executive officer, Ron Tutor, dismissed the criticism as "all nonsense" fanned by the media "to create controversy that doesn't exist." He said his company's net worth exceeds $1 billion.

"Like most of the uneducated opinions you hear where we can't rebut them, they're not based on anything factual or real," Tutor told reporters. "We've built more large civil works programs in this state than anyone else, virtually all of them successfully and without the cost overruns they all allude to."

Most of the board's questions appeared intended to enshrine their scrutiny in the public record, though none was overly critical.

"The questions really boil down to, can the successful bidder do the job, and will they do it within the confines of the contract as contemplated by the authority," said board member Jim Hartnett. "The questions that I had were answered to my satisfaction."

The contract calls for clearing land and buildings from the proposed bullet train path, creating grade separations and tunnels and diverting some waterways. Contractors will create the foundation for a train track without actually laying any track.

Board Chairman Dan Richard did not vote or participate in the conversation because he had previously worked with one of the firms involved in the bid, Parsons Corp.

The bidding process also was criticized after it was revealed that the authority changed its rules after the process was first made public, allowing the cheapest bid to be selected even though it had the lowest technical rating for safety and design quality. The bid came in below the authority's estimated cost of $1.2 billion to $1.4 billion.

Under the new criteria, all the bids that met the technical criteria were considered, leaving the door open for the proposal from Tutor Perini-Zachry-Parsons.

The total cost of each bid was kept in sealed envelopes while the other criteria were weighed, including a three-step technical review to ensure the bids met all the qualifications, the authority's chief counsel, Tom Fellenz, said Thursday. The technical criteria were based on safety measures, engineering, scheduling, design quality, project approach and solutions to possible construction problems.

Fellenz told the board "the integrity of the process was pristine."

The competing firms will also receive a payout of $2 million each and the rail authority will get to keep the engineering and design work they submitted in their proposals.

Lawmakers approved the first phase of the planned 800-mile line last summer, allowing the state to begin selling $2.6 billion in bonds for construction and tap $3.2 billion from the federal government. The money is contingent upon completing the first phase of the project by 2017, requiring what officials say is an unprecedented construction pace.

But the authority intends to first begin spending federal funds as it awaits the outcome of a lawsuit filed by Kings County officials and landowners seeking to stop the state from spending the proceeds of $10 billion in bonds approved by voters for the project in 2008.

They argue that plans for the high-speed rail line have changed so dramatically since California voters approved Proposition 1A that they no longer comply with what voters were promised.

The case is pending before a Sacramento County Superior Court judge.

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