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Multi-modal project delayed by costs
Photo: Conceptual drawing courtesy of DTA
One of Duluth’s largest 2014 construction projects, which was scheduled to begin last fall, remains in limbo as the parties try to find common ground on its cost.
During the spring of 2013, the guaranteed maximum price (GMP) for the Duluth Transit Authority’s multi-modal center came in substantially higher than anticipated. The GMP calculated by Mortenson Construction hit about $32 million on a project that, at the time, was budgeted for $26 million. That delayed the start of construction as everyone went back to the drawing board.
This spring, a revised GMP remained about 8 percent high, DTA executives said at a series of recent board meetings. During the last week of April, a $1.3 million price difference was narrowed to $800,000. Representatives of the DTA and Mortenson planned to meet in several all-day sessions the week of May 5 in an effort to address the remaining funding gap. To accommodate those discussions, the DTA exercised a change order giving it 30 days to review construction contract details.
“They are committed to building this project and we are too,” DTA Director of Administration Jim Heilig told his board April 30. Nonetheless, he said, it would be imprudent to move forward until expenses are pared to meet available funds. A list of approximately 75 items will be individually reviewed by both parties to identify potential savings.
It was the third time in a month Heilig briefed DTA board members about the authority’s cost concerns. At a special meeting on April 23, he said the DTA’s construction budget isn’t large enough to cover an unanticipated problem, if one should arise. The authority’s contingency fund was spent up front on work such as site testing, and it’s virtually depleted.
“If a (significant problem) hits, we’re in a position of not knowing whether we can complete the project,” Heilig warned. With some elements of the plan already in motion, the DTA could be held responsible for their costs even if the multi-modal center isn’t completed. They include $650,000 to acquire a needed structure.
Proponents have been refining the concept for seven years. Their effort began in 2007 when then-Congressman Jim Oberstar asked local officials for a list of transportation priorities. At the time, Oberstar chaired the powerful House Transportation Committee.
“The mantra was to enhance connectivity in the downtown. We were looking at how rail (the proposed Northern Lights Express line) would come into downtown and how to get people around once they arrived at the rail station,” Bill Bennett, president of LHB, told BusinessNorth one year ago. LHB and Mortenson have partnered as the multimodal center’s design-build team.
The facility originally was viewed as being a $50 million project, given Oberstar’s Congressional clout and ability to secure federal funds. When he was defeated in 2010 by Chip Cravaack, it was scaled back because the new conservative lawmaker opposed Congressional earmarks. The final funding package included $20 million from the federal government, $7.5 million from the state and $1.4 million in private funds.
To be constructed on Michigan Street between Second and Third avenues west, the project includes reconstruction of the Northwest Passage, an elevated pedestrian walkway that connects downtown to the Duluth Entertainment Convention Center (DECC). Replacing the musty 38-year-old walkway is popular in some quarters but less so with DTA administrators.
“The 800-pound gorilla in the corner is the skywalk. It has kind-of driven the whole project. I wish we could have just built the terminal and forgotten the skywalk… but it’s the reality, and we’re committed to it,” said DTA General Manager Dennis Jensen.
Reconstruction of the Northwest Passage is scheduled to begin June 22, 2015. That date won’t be met, however, unless work on the multi-modal center begins this June 3rd. Both deadlines are fueling the need for the DTA and Mortenson to quickly address their financial differences, Jensen said.
DTA board members must endorse whatever solution arises, which is not guaranteed.
“If this comes in over $25 million, you’ll have to convince me that that is the way we should go,” said board member Tony Orman. “It just bothers me that Mortenson said they could do this for $25 million. We have cut many things out of this project that they knew we wanted for the $25 million. Just to be very clear, I think we might want to look at another company.”
Although rebidding the project remains an option, Heilig said negotiating with Mortenson remains a better choice.
“It we go out and re-bid this, we’ll lose 3 to 5 percent right off the bat,” he said. Given discussions that have already occurred on the 8 percent cost difference, “we think we’re close.”Previous BusinessNorth Exclusives Articles:
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