Despite concerns about potential cost overruns and a lack of local firms hired to work on the Central Subway project, Muni officials Tuesday approved an $840 million contract for the $1.6 billion transit-extension plan.
The contract — awarded to Tutor Perini, a large contractor based in Southern California — covers the construction and installation of three stations, 1.5 miles of tracks and a new train-control system.
The contractor’s low bid of $840 million was between $90 million to $120 million more than Muni projected for the work. As a result, the contingency budget for the Central Subway plan has shrunk from $200 million to about $65 million, a drop that has alarmed consultants with the Federal Transit Administration, which supplied nearly 60 percent of the funding for the project.
At this point in the project, the federal agency had set minimum contingency goals of $160 million. The project schedule currently only includes 4.7 months of buffer time, also below the agency’s minimum standard of 10 months.
Ed Reiskin, transportation director of Muni, acknowledged the concerns of the Federal Transit Administration at the agency’s board of directors meeting Tuesday, but said he’s confident the project will remain under budget and on schedule to begin service in early 2019.
“The concerns are real and valid, but we believe we can manage the risk,” Reiskin said. “This contract is the last unknown. In a year or two we will be caught up to where they want us to be.”
The budget and timing of the project weren’t the only issues raised at the board. Several business groups asked the agency’s directors to reject the contract and put it out to bid again because of the lack of local subcontractors included in the Tutor Perini offer. Only $56 million of the $840 million pact was awarded locally. Those funds went to three San Francisco businesses, none of which are minority-owned.
“This is very disappointing to our organization and our constituents,” said Juliana Choy Sommer, president of the Asian American Contractors Association. “We were involved in discussions about this contract for years. But it turns out that wasn’t outreach, it was a dog-and-pony show.”
Tutor Perini President Ron Tutor said that more local firms were not hired due to the complexity of the underground excavation project.
Reiskin said the federal funding for the project prohibits the agency from establishing local-hire clauses. He noted that the contractor’s bid surpassed federal small-business requirements, with 25 percent of the work going to smaller firms.