Clash between Metro Washington authority and US Sectrans LaHood over tolls versus US $s for Dulles Rail

October 12, 2012

2012-10-11: A major clash has erupted between the Dulles Toll Road operator Metropolitan Washington Airports Authority (MWAA) and US Secretary of Transportation Ray LaHood. Writing on letterhead of the full board of directors of MWAA, one director Robert Clarke Brown accuses of LaHood of intervening illegally in the affairs of MWAA, vilifying it unfairly and distracting attention from the problems of financing $2.5 billion of the Dulles Rail construction with Toll Road debt.

Brown says USDOT under Secretary Ray LaHood has "ignored Congress' clear directive" in its founding statute that it be an independent authority.

"For the past year (US)DOT has overreached in its efforts to correct perceived deficiencies in MWAA governance, significantly undermining MWAA's independence. While it is true, as you assert in your July 31 letter, that (US)DOT has some responsibility for "protecting the Federal interests in the airports . . .", the authority which you have claimed for yourself to oversee - and even to direct - the Authority's operations and decision?making goes far beyond anything which can be found in Title 49 of the United States Code or in the Federal Lease it authorizes.

"Not only have your repeated encroachments on MWAA's independence been of questionable lawfulness, they have also gone far beyond the traditional role of U.S. DOT in local project development and execution. The level of hands?on Secretarial involvement in the Silver (Dulles) Line project during your Administration is highly unusual, perhaps unprecedented. You have injected yourself into decisions about project scope, project management, Authority personnel, and local legislation to a degree seldom - if ever - seen in the execution of U.S. transportation projects."

No legal basis for USDOT's accountability officer

Brown attacks Secretary LaHood's appointment of an 'accountability officer' to MWAA saying there is no legal basis for DOT's assertion of what he calls "coercive federal oversight."

"There is no ongoing legal requirement that the Authority provide a USDOT official with blanket access to personnel and records. Nor is there any basis upon which USDOT can claim a right, superior to all other MWAA partners, to conduct detailed 'accountability' oversight of MWAA."

If all four governments represented in MWAA appointed an accountability officer Brown says "the resulting dysfunction would make the Airports Authority's present alleged 'dysfunction' look like Plato's Republic."

"Fundamentally flawed financing plan"

Brown says the financing plan for Dulles Rail and its heavy reliance on toll revenue borrowing is "fundamentally flawed." This he attributes to insufficient state and federal "support" - grant money.  He complains that federal grants are only a billion dollars (a sixth of the total) and Virginia state subsidies only $150m.

Secretary LaHood has so far not responded publicly but he could well comment at this point that the financing plan of using tolls to underwrite the train line that Brown calls "fundamentally flawed" was drawn up by MWAA, championed by MWAA, and is being used by MWAA to sell bonds in the bond markets.

Brown accuses USDOT under Secretary LaHood of having been immersed in political squabbles "which have served only to distract the public and the project partners from the Silver Line project's real need: a plan of finance with substantially more grant funding."

Steep toll increases needed

He says toll rates will have to rise strongly to support the train line and the secretary's "politics of diversion and distraction" will no longer be able to hide the problems:

"The steady climb in toll rates, begun slowly with the last ratemaking three years ago, will now accelerate. The ratemaking will lay bare the truth about the plan of finance, and the burden it imposes on Virginia motorists."

Clark calls for extra federal handouts to MWAA saying "only additional grant funding can forestall exorbitantly high tolls."

"Doomed to failure" without more US$s & VA$s

The project he says is  "is doomed to failure if all remaining project costs are funded with additional debt."

And he asks LaHood to use his "strong working relationship" with Governor McDonnell of Virginia to get extra state money.

Criticisms of what he calls "governance deficiencies" were "not without merit" but they were addressed months ago Brown says.

Letter on contracting malpractice at MWAA surfaces

An old letter has surfaced from William Coleman a DC lawyer detailing sloppy procurement practice at MWAA and comparing it unfavorably with the regional transit agency WMATA (MetroRail). On the letterhead of the Washington DC law firm O'Melveny & Myers to the Fairfax County board of supervisors, Coleman writes that the MWAA design-build contract with Bechtel and Washington Group for Dulles train line construction "is full of non-standard provisions" that were bound to lead to large cost over-runs.

The Phase One contract for $2.65 billion was never competed - merely negotiated with the chosen team.

Coleman hits MWAA's contract:

- inappropriate secrecy provisions

- award of the construction contract before final design approval, without right to bid competitively the approved final design without penalty

- a supposed "fixed-price" portion of the contract which is not a "fixed price," instead by its written terms adjusting automatically to price changes of major construction items, e.g.--steel and concrete

- uncompetitive procurement procedures for future sub-contractor "allowance" work

- award of utility relocation work under a separate contract and without a fixed-price

- loose conditions to control "differing site condition" costs

- "concurrent non-project activities" which are expected to be designed and built as part of the Project but have an unclear relationship to the proposed contract

- provisions allowing the contract to cause the conditions for its own Change Orders and Delays Claims that would increase cost to the taxpayer.

Similarities to Big Dig contract seen in Dulles dealing

MWAA replicated many of the terms of the Massachusetts Turnpike Authority's Big Dig contract, Coleman writes, in which Bechtel was also heavily involved.

Provisions of the contract were called "fixed price" that turn out on examination to be anything but. The contract allowed subcontractors to "work both sides" on both fixed price portions and on "allowances for unspecified work.

Coleman said the contract invited the contractor to "game" the system to maximize his take from allowances and using that work to make fixed price claims.

The contract allowed work to be added as "concurrent non-project activities" that were undefined.

The letter said that the Bacon Davis provisions of the MWAA contract said gave labor unions to dictate job classifications, work rules and minimum pay rates and generated huge costs in compliance paperwork. In a right-to-work state it also deterred local subcontractors unused to dealign with union dominated work practices.

Union official in key position on MWAA board - no recusal for conflict of interest

Democrat governor Tim Kaine put an active union official Dennis Matire on the board of directors of MWAA and he was actively involved in shaping the procurement. The present governor Nob McDonnell has tried to remove Matire and there was litigation, which was settled recently in an agreement Matire would retire from the board by the end of the year.

The Coleman letter dated June 2007 surfaced recently via the Reston Citizens Association. Terry Maynard an association director and economist says that there are no assurances MWAA's procurement has improved since Coleman wrote.

We called Coleman. He said it was "an old letter" and he did not wish to discuss it.

MWAA is using Dulles Toll Road revenues to issue over $2 billion in debt for the new metro-rail line which is being built for much of its length in the median of the Dulles Toll Road, and if a second stage proceeds, in the median of the Dulles Greenway on its western end.

TOLLROADSnews 2012-10-11

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