Bloomberg News

San Francisco Bridge Delay May Put Contractor Bonuses at Risk

July 09, 2013

The reconstruction of the San Francisco-Oakland Bay Bridge, one of the largest U.S. public-works projects at $6.3 billion, fell further behind as officials delayed the opening of the new east span, a move that may put bonus payments to contractors at risk.

The Metropolitan Transportation Commission, based in Oakland, announced the setback in replacing the 2.2-mile (3.5 kilometer) eastern section yesterday as it released a report explaining the March failure of 32 seismic anchor rods.

Incentive bonuses of $20 million may be at risk for American Bridge Co. and Fluor Corp. (FLR:US), contractors handling the work. The project will make the structure carrying Interstate 80 over San Francisco Bay more resistant to earthquakes. The companies also face penalties of $100,000 a day after Nov. 30 if they aren’t done by then, up to a maximum of $125 million, according to a June 14 letter to local lawmakers from the Bay Area Toll Authority, a commission agency.

“No determination as to whether the contractor has earned any incentive payment will be made unless and until all specified work is done,” Steve Heminger, executive director of the toll authority, said in the June 14 letter. The penalties that may accrue after Nov. 30 are based on reaching “seismic safety opening” readiness, which may not coincide with allowing traffic on the bridge.

Contractual Requirement

“The $125 million has always been part of the SAS contract as the capped maximum amount of all disincentives and liquidated damages that Caltrans can apply,” if certain deadlines aren’t met, Keith Stephens, a Fluor spokesman, said yesterday by e-mail, referring to the state transportation department.

Construction began in 2002 on the eastern span between Yerba Buena Island and Oakland, with completion forecast in 2007. Delays ensued after contractor bids exceeded cost projections, lawmakers fought over how to cover the expense and steel parts arrived 18 months late. The discovery of defective welds and potentially phony inspections also slowed the work. The cost has meanwhile more than doubled.

The latest delay was announced as an oversight arm of the commission released a report on the 32 earthquake-safety bolts that broke and an examination of other fasteners used on the span. The review is expected to be done by Dec. 10, the Toll Bridge Program Oversight Committee said in a statement.

Corrosion Issue

The report shows that designers failed to take corrosion of the rods into account and to set specifications for fasteners to resist the effects of stress and the environment.

The oversight panel will pick a new opening date based on when the retrofit work is finished, weather conditions and the effect on traffic, according to the agency statement. The existing 8.4-mile (13.5 kilometer) west span will have to close four days to accommodate switching traffic to the new structure, the agency said.

The Bay Bridge carries about 270,000 vehicles a day, according to the transportation department. The double-decker George Washington Bridge connecting New York City to New Jersey over the Hudson River handled about 49.1 million vehicles on its eastbound crossing in 2012, or a daily average of about 135,000 in that direction, according to the operator, the Port Authority of New York & New Jersey.

Part of the Bay Bridge collapsed in the 1989 Loma Prieta earthquake that was centered about 60 miles (97 kilometers) south of San Francisco and registered 6.9 on the Richter scale.

Meeting Planned

The commission toll authority is financing the construction using fees collected on seven state-owned spans around San Francisco. The agency plans a special meeting on progress on the project tomorrow in Oakland.

The issue of contractor incentives probably will be discussed at the meeting, said John Goodwin, a spokesman for the commission.

Fluor fell about 1.4 percent yesterday to $57.75 in New York, the biggest decline in two weeks. Coraopolis, Pennsylvania-based American Bridge is closely held. Kadi Camardese, a company spokeswoman, didn’t respond to an e-mail seeking comment.

When completed, the span will be the world’s longest single-tower self-anchored suspension bridge, according to the toll authority.

To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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