Successful Dispute Resolution on a Tunnel Transit Project: A Case Study

1. Successful Dispute Resolution on a Tunnel Transit Project:  A Case Study 2014 OTEC Conference Scott Lowe, P.E., Principal Trauner Consulting Services, Inc.

2. The Project: Bergenline Avenue Station in Weehawken, NJ

3. Technically… • Design Unit N30 of the Hudson-Bergen Light Rail Transit System • The Weehawken Tunnel • Bergenline Avenue Station

4. Ground Level

5. The Platform

6. Before

7. After

8. The Other End

9. The Old Tunnel

10. The New Tunnel

11. The Dinosaurs

12. To Get from the Platform to the Ground Level

13. The Parties • Owner: New Jersey Transit (NJ TRANSIT) • DBOM Contractor: Twenty First Century Rail Corporation (TFCRC) • Washington Infrastructure Corporation • Japanese rolling stock builder Kinki Sharyo • Itochu Rail Car • Designer: Parsons Brinkerhoff (PB) • Washington Infrastructure Corporation subcontracted the construction to the JV of Frontier-Kemper Constructors Inc., J.F. Shea Construction, Beton und MonierbauGesellschaftM.b.H. (FKSB)

14. Organizational Chart NJ TRANSIT (Owner) PB (N-30 Designer) TFCRC (MOS-2 DBOM Contractor) S.M. Electric (MOS-2 Subcontractor) FKSB (MOS-2 Subcontractor) Railroad Construction Company (FKSB Sub) J. Fletcher Creamer (FKSB Sub) Industrial Construction Services, Inc. (FKSB Sub) A&A Industrial Piping, Inc. (FKSB Sub)

15. The Contract • CO No. 5 added the MOS-2 segment to TFCRC’s contract. • CO No. 5 included the N30 Weehawken Tunnel Project in TFCRC’s scope. • CO No. 5 required TFCRC to provide “project management” and “construction management” services for the N30 Project. • IAW CO No. 5, NJ TRANSIT bore responsibility for “correcting defects in the work arising out of errors and omissions in the sealed specifications, plans and drawings provided by NJ TRANSIT.”

16. History Construction of the existing Weehawken Tunnel, approximately 1,269m long, was started in 1881 using drill blast methods and completed in 1883 for the owner, New York West Shore and Buffalo Railroad. The tunnel provided the first train access through the Palisades to the Hudson River. However, the cost of the tunnel resulted in the bankruptcy of the railroad.

17. History The bankrupt railroad was purchased by Penn Central and renamed the West Shore Railroad. In addition to use as a freight hauling route, it also became a commuter line promoting suburban development along its route. New Jersey farmland was transformed into middleclass housing developments. However, ridership declined following the opening of the George Washington Bridge in 1931. Then in 1937, the Lincoln Tunnel provided a second automobile route. Finally, the construction of the Tappan Zee Bridge and New York Thruway in the 1950’s spelled the doom of passenger service on the line.

18. History Until 2001, Conrail’s River Line used the West Shore right of way, including the tunnel, to carry most of the rail freight to and from New York Harbor through New England, upstate New York, and Canada. This service shifted west to the Conrail Northern Branch Line to allow for construction of the current Hudson-Bergen Light Rail passenger service that now follows the West Shore alignment through the rehabilitated Weehawken Tunnel north into Bergen County.

19. Geology The tunnel is located in a mountain range commonly known as the Palisades that extends along the west shore of the Hudson River from Newark, New Jersey area to Rockland County, New York. The Palisades Sill is made up of a two-layer intrusive mass that is up to 305m thick. Along the contact margins, the sandstones have metamorphosed to quartzite and the shales to hornfels. The bedrock of the Palisades is fine to medium-grained, diabase composed primarily of pyroxene and plagioclase feldspar. The majority of the tunnel excavation is in this formation. The rock is extremely hard and difficult to drill and blast.

20. The Construction The Weehawken Tunnel is divided into two running tunnel sections separated by the Bergenline Cavern Station. The running tunnel east is about 636m long and the running tunnel west is about 228m long. The existing tunnel is approximately 8.2m wide and 6.7m high. The design required the running tunnel to be enlarged to about 10.4m wide and 7.3m high to facilitate placement of a final concrete lining and other structures for the light rail system.

21. The Construction Initial support was provided using number 9 grade 70 epoxy coated deformed bars and 100mm of shotcrete. Some portions of the running tunnel remained unlined. The rest of the tunnel was lined with precast sections.

22. The Bergenline Station Platform • At the station cavern area, the tunnel was enlarged up to about 19.8m wide and 10.4m high. • Station depth from top of rail to finish ground line at Bergenline Avenue is approximately 49m. • The connecting shaft excavation is 12.8m in diameter and about 30m deep.

23. Breakdown of Claim Costs Total Claim $116,791,196 TFCRC $29,437,720 FKSB $87,353,476

24. Total Claim $116,791,196 TFCRC $29,437,720 FKSB $87,353,476 Interest $12,501,694 Interest $9,771,665 TFC Interest $2,065,462 FKSB Interest $10,436,232

25. FKSB $87,353,476 Direct $52,962,967 Indirect / Consequential Damages $34,390,509

26. Basic Claim Attributes • “FKSB encountered 1062 days of compensable delay.” • “FKSB was able to reduce the delay by 388 days …” • “…net delay of 674 days…”

27. Basic Claim Attributes • Alleged delay to TFCRC Revenue Ready was 267 days. • Alleged delay to field work was 121 days. • Total delay is allegedly 388 days

28. Delay Analyses • There are two contractor delay analyses. • One applied to FKSB’s work only. • The second related to TFCRC’s work.

29. Delay Analyses • FKSB’s Analysis is described as “the most accurate and fair to both owners and contractors.” • TFCRC employed a different approach, which it labeled a “contemporaneous schedule period analysis methodology.”

30. Delay Analysis The DBOM contract with NJT contained several provisions governing scheduling and time. The contractors were required to prove that the delays were on the critical path and delayed the project beyond contract milestones.

31. Delay Analysis Both FKSB’s and TFCRC’s analyses reached the conclusion that all delays to the project were excusable and compensable. Neither party took responsibility for any delay.

32. Acceleration • FKSB’s analysis alleged that FKSB accelerated the project in each period of the analysis, saving 388 days. • FKSB’s analysis concluded that many, if not all, of these accelerations were directed, not constructive.

33. Modified Total Cost Claim FKSB filed a modified total cost claim, with adjustments made to account for errors in bid, under-run items, and added labor/equipment costs that were Contractor-caused. TFCRC’s claim was not a total cost claim.

34. FKSB’s Consultant Costs • Damage Claim was prepared by a consultant accounting firm • Fees -- $661,000 • Schedule Delay Analysis was prepared by a claims consulting firm • Fees -- $2.4 Million • Legal Counsel • Fees -- $1.5 Million

35. FKSB’s Consultant Costs Total Fees: Almost $5M, just to prepare and issue the claim.

36. Summary of Claimed Items/Damages: $17M $36M $14M $8M $5M $11M $23M Extended Daily Costs Labor/Equipment Efficiency Claim Sub-Subcontractor & Other Claims Home Office (TFCRC & FKSB) Claim Preparation Profit (21st Century & FKSB) Interest (TFCRC & FKSB)

37. FKSB Claim Summary Direct $52,962,967 Extended Daily Costs $17,049,805 Labor $32,706,993 Equipment and Material $3,206,169 General Conditions $14,873,757 Labor & Equip Inefficiency $29,468,020 Additional Material $2,139,283 Additional Equip. $1,066,886 Rental Equip. $1,452,828 Labor Overtime $2,616,879 Owned & Related Party Equip. $723,220 Labor Escalation $622,094

38. FKSB Claim Summary Indirect / Consequential Damages $34,390,509 Additional Sub Costs $638,539 Sub Claims $6,193,331 Home Office $3,922,541 Interest $9,771,665 Profit 10% $6,371,738 Bond .42% $324,481 REA Prep $6,726,928 G&A on REA Prep $441,286

39. FKSB Claim Summary Extended Costs $17,049,805 General Conditions (Field Overhead) $14,873,757 Rental Equip. $1,452,828 Owned and Related Party Rental Equip. $723,220

40. FKSB Claim Summary Labor $32,706,993 Labor & Equipment Inefficiency $29,468,020 Labor Overtime Premium $2,616,879 Labor Escalation $622,094

41. FKSB’s Subcontractor Claims Pass Through Sub Claims $6,193,331 Railroad Construction Company $484,512 J. Fletcher Creamer $3,982,383 A&A Industrial Piping, Inc. $550,097 Industrial Construction Services, Inc. $1,176,339

42. TFCRC $29,437,720 Direct $8,659,501 Indirect/Consequential Damages $18,899,364 S.M. Electric $1,878,855 Subcontractor Profit $4,461,617 Interest $12,501,694 Claim Prep Costs $1,936,053 TFC Interest $2,065,462 FKSB Interest $10,436,232

43. TFCRC Claim Summary Direct $8,659,501 N-30 Tunnel Support $3,678,784 N-30 Systems Support $450,429 Home Office $4,530,288

44. TFC Claim Summary Indirect/Consequential Damages $18,899,364 Subcontractor Profit $4,461,617 Interest $12,501,694 Claim Prep Costs $1,936,053 TFC Interest $2,065,462 FKSB Interest $10,436,232

45. The Mediation The Parties (> 50 attendees) • NJ TRANSIT, with attorney and three consultants • TFCRC with attorney and one consultant • FKSB with attorney and two consultants • FKSB’s subcontractors with attorneys • PB with attorney and one consultant • The mediator

46. The Process – 3 days • Initial Presentation by FKSB and TFCRC (Attorney and both consultants) • Response by NJ TRANSIT (Attorney and all three consultants) • Response by PB (Attorney and consultant) • Rebuttal by FKSB (Attorney, FKSB senior manager, and both consultants) • Breakout sessions • Mediation adjourned without settlement

47. The Process (continued) • Discovery began • Document production began • Electronic document production began • Negotiations continued

48. The Conclusion Ultimately, NJ TRANSIT was able to negotiate a settlement with TFCRC and FKSB. The lawsuit between FKSB and PB continued and has since been resolved.

49. For More Information Please contact Scott Lowe at: scott.lowe@traunerconsulting.com 0r call Scott at: (215) 814-6400