Deep-Bore Tunnel Bids, Arriving for Halloween, Get Early Treats from WSDOT

The Viaduct will outlive us all.

You know that phrase, "money quote"? This time it's literal:

"Both teams, and maybe the two teams that dropped out, expressed concern the [state's cost target] is too low. They couldn't figure out how to bid the project at that amount or lower," Dick Page told the Seattle Times, explaining WSDOT's decision to spend down its $415 million cash reserve by $230 million in concessions to the two bidding teams.

(Page is district leader for HNTB, the engineering part of Seattle Tunnel Partners, which also includes Dragados-USA; the Seattle Tunneling Group is a consortium of S A Healy and FCC Construccion, SA, with design by Parsons Transportation Group and Halcrow.)

Keep in mind that, as TunnelTalk reports, "Specifications within the bid documents are minimal. Much of the means, methods and risk mitigation measures are left to the expertise and preferences of the pre-qualified design-build bidding teams."

Projected tunnel costs have already increased by $60 million, so with this latest news, WSDOT's Cost Estimate Valuation Process has been on the low side by around $300 million on a $2.1 billion project.

Yes, the contingency and risk fund was included in the original estimate, but what we're seeing is that contingency and risk have eaten up half that fund a year before a single clod of earth has been moved. That's not a good sign; what's also not a good sign is that you can't seem to find a single tunnel proponent who is bothered by it.

They should be, because the merits of the project aside, the deep-bore tunnel could see a funding death by a thousand cuts. The state has resolutely capped its contribution to the entire $4.24-billion project at $2.8 billion (leading to a contentious debate over whether Seattle is responsible for any overages). Tolling will be needed to make up part of the funding gap (a tricky prospect, since the higher the tolls are set, the fewer people will use the tunnel).

And the state may have already bitten off more than it can chew. In February, the state's gas tax revenue was down $168 million for the 2009-2011 biennium. The state's Office of Financial Management has updated that number, and the decline has continued. Some $1.8 billion of tunnel funding is supposed to come from gas tax increases passed in 2003 and 2005, but over the entire 16-year forecast horizon for gas tax revenues, the forecast for September 2010 is down almost one percent ($180 million) from the June 2010 forecast. All transportation revenues are off almost $1 billion over that period.

Essentially, the needle on the gas tax gauge keeps dropping before we've gone anywhere--and gas tax "collateral" is critical for backing the debt the state wants to incur for all mega projects coming up.

Still to come: The two teams will submit their bids on October 28, but only the technical proposals will be considered first; the financial side will wait until December 23. (Really, the design for Halloween and the bill for Christmas?) The reason for the lag is that the teams will get "credits" for cost-savings and other innovations in their design proposal that can be subtracted from what they have determined the final cost will be.

Then from January until August 2011, the winner of the bid process will get a head-start on "project neutral" work, since the Environmental Impact Statement won't be approved (or not) until then.