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Report: Tunnel Bidder has History of Overruns, Lawsuits

Politics   December 13, 2010 at 12:00 pm Erica C. Barnett

This post has been updated with comments from state viaduct program coordinator Ron Paananen.

According to a 1,600-word report in the Lower Hudson Journal News this weekend, the Perini Corp. and Tutor-Saliba, the two companies that make up Tutor-Perini, one of the partners that won a state contract to build the deep-bore tunnel last week, has a long history of litigation and cost overruns, including allegations of fraud and racketeering.

Some salient bullet points from the story:

• In February of this year, Tutor-Saliba and Perini agreed to pay $19 million to settle racketeering and fraud charges in a San Francisco airport project. That lawsuit alleged the companies had deliberately lowballed their bid to build a new airport terminal with the intention of later billing the airport for additional costs. That lawsuit also alleged that the companies had used phony minority-owned companies to meet public-works project requirements.

• In 2004, Perini agreed to pay the federal government $998,500 to settle fraud claims, plus damages and penalties, in the construction of an embassy building in Venezuela. The company initially sought more than $8 million from the government, claiming delays.

• The two companies have been battling the Los Angeles Transportation Authority in court for 11 years over a Los Angeles subway job. The companies claimed the MTA failed to pay it for $16 million in costs; the city countersued, claiming the companies falsely inflated costs. The MTA won but the case was overturned on appeal; the MTA is now suing the companies for fraud.

The Washington State Department of Transportation’s viaduct project manager, Ron Paananen, said this afternoon that he wasn’t familiar with the allegations in the story, but that WSDOT had “looked very carefully at the capacity of these teams to do this project, their ability to get bonding and insurance, and their management structures” before narrowing the list of qualifying teams down to four. Paananen said the type of contract the state plans to use—a design-build contract, in which the same contracting team agrees to pay a set price to design and build the project—is less immune to overruns than a traditional low-bid contract, in which the team that proposes the lowest bid automatically gets the contract.




  • http://www.twitter.com/joeszi Joe Szilagyi

    Ha ha ha ha ha.

  • Matt Hays

    Were these design-build projects? The issues you bring up sound more like low-bid, which the tunnel isn’t.

    With low bid, the contractor prices exactly what’s in the drawings and specifications. Some contractors get way too nitpicky and lawyerly, making rediculous arguments about design instructions being vague when they’re really not. Then they win the bid, and argue point by point, generally getting some and not getting others. This is a big problem with the low-bid approach.

    I don’t know much about the tunnel process or contract, but design-build puts way more of the onus on the contractor to fix their own problems if they’re related to the design. If the design isn’t clear, it’s their design, so it’s their problem. Design-build isn’t a panacea but it’s much better in this regard.

  • Anonymous

    Lower Hudson Journal News? I just checked it out, the headline for today is “Dog bites man: That scarf and hood makes you look like a stranger”.

  • gloomy gus

    Well-Googled!

  • Tcurro

    I’ve been an investor in the shares for a long time. Tutor may be brash, but he is honest.

  • Jakers

    Can anyone name any large construction company that has been involved in tons of lawsuits?

  • Johns

    thinking you meant has *not* there Jakers :)

  • fount

    is there any sort of bad news about the tunnel you couldn’t find a way to not believe?

    is there literally any fact at all that could surface that would make you rethink your position?

    is anything said in this article untrue, or do you just find attacking the messenger the best method of responding to allegations?

  • Gomez

    Sounds like somebody’s scarf and hood makes HIM look like a stranger!

  • Anonymous

    Rediculous is spelled ridiculous, as in ridicule; argument supporting Seattle’s deep bore tunnel is ridiculous.

  • Anc

    “Lower Hudson…. Perini Corp…. fraud and racketeering…”

    NO!

  • Dbmacdonal

    Well, it certainly is nice to see what the marriage of ignorance and stereotyping can yield in a comment. The Perinis don’t own the company today. They’re not in MY/NJ. And the are first class people with an interesting and distinguished family history. I can report that on the basis of personal knowledge and a considerable volume of business done with the firm when it was owned by the Perinis.
    So knock off the defamatory BS.

  • http://manywordsforrain.blogspot.com/ Mr Baker

    I see the propaganda machine is at full speed.

  • http://manywordsforrain.blogspot.com/ Mr Baker

    I see the propaganda machine is at full speed.

  • alexjon
  • alexjon

    Tutor-Perini

  • alexjon

    Tutor-Perini

  • alexjon

    Yup, “we have no idea what you mean about any lawsuits, we selected them on merit alone!”

  • alexjon

    It would be terrible if people could use an internet program to actively find archived information related to the above mentioned topic that fits in with the report. Even worse if they could give this service a catchy verb-worthy name like Zing or Noodle?

  • http://spifflines.blogspot.com/ John Bailo

    Can this juggernaut be ever more tragic?

  • “there will be no overruns”!

    the issue isn’t design build, it’s whether there is a fixed price. what risks are not assumed by the contractor?

    here we have a state law capping the state payment amount. Laws trump contracts. Therefore, the state law cap is in effect in the contract. So, the state will be well positioned to argue that anything over that amount does not have to be paid, period. while this appears to protect us, it does not, as the contractor will then argue it doesn’t have to finish the project. what’s the protesttion against that?

    You think the contractor is signing on to guarantee the risks of something going wrong down there?

    Read the contract, I guarantee you no contractor will bet the firm that way and btw these little ad hoc entities set up just for this project do not have the balance sheet needed to cover all risks.

    and throwing out the term design biuld doesn’t really deal with all these issues. you can have a fixed price contract that’s build only, and one that’s design build, or a build contract that’s time and materials or a design build contradt that’s time and materials. until you closely review the contract and read and relate to us the provisions dealing with wha risks are defined and assumed by each party….we don’t know at all how much risk the contractor is taking. You gotta read the contract — duh!!!!!

  • Chris

    Is the contract public (assume so)…anyone have a link?

  • Jakers

    Oops, thanks, that I what I meant.

  • Anonymous

    “is less immune to overruns than a traditional low-bid contract” I think you mean more immune. Though I’d use a word less strongh than “immune” (it’s like saying “less pregnant”). Try: less prone to.

  • Verd1n

    How about any of the firms in the two consortia who decided to NOT bid?

    Then, to answer your question in a different way, there is the Donald Drake Company of Portland, the first builder of the old Domed Stadium who walked away from that project when their “erected steel re-bar” collapsed in a heap. They also saw problems with the upper tension ring, it seems. So, they walked. Their bonding company finished the job. Something the DBT guys cannot do since their bid bond does not cover the full construction cost bid.

  • gloomy gus

    All WSDOT announced was who they decided to sign a contract with. They’ve probably sent the company a starting draft of a contract, so probably pretty far from being in shape for anyone to sign yet.

  • SeattleDad

    The contract terms are found within the RFP documents, which are available on the WSDOT website. They wouldn’t have submitted a binding bid if they hadn’t known what they were getting into.

  • SeattleDad

    I’d be less worried about Tutor-Perini and more concerned about Dragados.

    I’d strongly suggest the author dig a bit there.

  • http://www.twitter.com/joeszi Joe Szilagyi

    Agreed. This is the sort of story that if it explodes right has the possibility to derail a massive train. Josh, Erica… go get ‘em. Don’t end this narrative here.

  • http://www.twitter.com/joeszi Joe Szilagyi

    Agreed. This is the sort of story that if it explodes right has the possibility to derail a massive train. Josh, Erica… go get ‘em. Don’t end this narrative here.

  • nicrozzo

    there is a 99.999999817625% chance that there will be massive cost overruns on this project. knowing that the contractors are crooks who have been shown in court to resort to fraud and racketeering only make it more likely that it will be many millions over cost. tunneling under a city with incredibly bad soils conditions is pretty much a recipe for disaster and having a minute contingency for unforeseen conditions when the design is essentially at a schematic level is laughably stupid. this project is being driven by hubris and hope, not need or careful use of taxpayer money. this is going to be the biggest catastrophe in seattle history bar nothing.

  • Anc

    Oh hush up Nancy, it was a joke.

  • KCW

    “this is going to be the biggest catastrophe in seattle history bar nothing.”

    Nah, McGimp’s election already happened.

  • Eric Franklin

    The story omits that lawsuits and settlements are a fact of life for all large contractors engaged in civil construction. Tutor-Saliba and Perini are part of Seattle Tunnel Partners, but Frank Coluccio Construction and Mowat Construction are as well and they are well regarded area companies. The truth is that for those that oppose the tunnel selected facts serve selected purposes.

  • alexjon

    This is the state that insists another provision of similar gravity is toothless.

  • alexjon

    Oh, delicious irony.

  • alexjon

    Taking cues from the Dino Rossi school of sore loserdom, I see