Department of Transportation headquarters in Olympia.

OLYMPIA, Jan. 19.—A new report from the state auditor’s office rips the state Department of Transportation for an astounding cost overrun approaching $30 million on a project to widen state Highway 18, seven years after it happened.

            Seemingly every possible project-management mistake was made within a short 3.5-mile stretch of blacktop. They ranged from surveys that didn’t examine the lay of the land to big accounting problems and violations of state environmental rules and prevailing-wage regulations. The parade of multi-million-dollar goofs appear to have added at least 50 percent to the cost of the project.

            That includes an extra $22.9 million for the contractor, plus sales tax on that amount, as well as substantial extra engineering costs that were borne by the state and big environmental fines. The project, bid at $55.9 million, was eventually finished at a cost of $98.5 million. And it forced DOT to conduct an extensive soul-searching exercise back in 2004 to determine what went wrong.

            The agency says it disclosed the trouble to the Legislature at the time, but the affair escaped public notice until this week, when the state auditor’s office issued a report calling it “a gross waste of public funds.”

            The disclosure comes at an unfortunate time for the agency, which is under attack from an anti-freeway faction in Seattle for a proposed tunnel under the downtown area. Under a bill that passed the Legislature in 2009, Seattle residents will have to pick up the full tab for any cost overruns that may occur. State-government officials insist DOT can bring it in on budget.

            Bristles at Criticism

            DOT says the episode wasn’t all its fault. The agency says it was ensnared by new state wetlands regulations that came into force while the project was being developed. And officials point out they took steps at the time to make sure a whopper like that one never happened again.

             “To characterize it as gross mismanagement – we take great exception to that,” said Steve Pierce, communications director for the agency. “We are an agency that is very proud of its on-time and on-budget record.”

            Agency officials say the episode forced them to conduct their own internal review, and the report notes that “appropriate disciplinary action” was taken against responsible officials. According to Jeff Carpenter, state construction engineer, the first project engineer was reassigned when problems became apparent and a more seasoned crew was brought in.

            But he said, “I take exception to laying the blame at any one individual.”

            Problems Started at the Drawing Board

            The road project was part of the major rebuilding of the well-traveled state highway, most of which now is a four-lane divided highway. The mountainous route connects Federal Way to North Bend, linking Interstate 5 to I-90, and is the major corridor between Eastern Washington and South Puget Sound. Work began in 1994 after lawmakers approved a gas-tax increase that earmarked money for Highway 18 and other high-priority highway projects.

            Big trouble came on the 3.5 mile stretch between Maple Valley and Hobart Road, and it appears to have started in the design phase.

            The state relied on aerial surveys to create a three-dimensional map of the area. That was used to calculate slopes, determine the scope of cuts and fills, and estimate the size of retaining walls. The problem, the audit report says, is that the method “cannot generate accurate readings or data using this method when working with a densely forested area, which was the case for this project.”

            What it meant was that the engineering work was severely underestimated. And while the trouble was caught early in the project, the state’s specifications apparently were not changed before the bid went out. The audit report quotes an email from a department employee that says, “Reality is that the contract plans were not at 100 percent, they were not even at 90 percent.” But it went on to say that the department didn’t want to delay the bid opening on June 17, 2003.

By the time the project was completed, DOT had issued 156 change orders at a cost of $16.4 million. About $6.3 million was due to design mistakes.

Ensuring the accuracy of the specs is the responsibility of the project engineer, the report notes, as well as obtaining environmental permits and approvals.

            Huge Environmental Troubles

            Turned out there were two big environmental problems with the project. DOT underestimated the area it would need to store woody waste and other debris from the project, and while staff  “repeatedly commented” on the problem, the issue was never resolved as construction moved forward. The department’s internal investigation concluded, “There were pressures to meet the project advertisement date, so these questions carried over into the construction.”

            The contract also called called for retention ponds to collect stormwater for treatment before it was released into state waters, but it didn’t incorporate some of the costly items that were being required by the state Department of Ecology, like a $1.3 million filtration system.

            All told, the environmental problems “added millions of dollars to the cost of the project,” the audit report said. Evnvironmental change orders added $4.5 million. And then there were the $200,000 in fines DOT had to pay the Department of Ecology, the U.S. Army Corps of Engineers and King County.

            Other Big Problems

            The report notes that a subcontractor apparently violated prevailing-wage rules by not paying newly hired truck drivers as much as required by federal law. The prime contractor is supposed to keep tabs on the issue. But the report chides DOT for not taking immediate action when the complaints reached the department level. The Department should have resolved payroll issues monthly and withheld payment to ensure compliance, it says. Eventually an agreement was reached and money paid out to employees, though the auditor’s office said it decided it would be too costly to review five years of payroll records to make sure everything had been done properly.

            The report also cites numerous accounting discrepancies in the project, including small items that apparently were paid for twice. DOT also was supposed to get a share of the timber sales from the project, but there is no documentation that it got any money at all.

            Lessons Learned

            The huge problems on the project forced the department to conduct its own review in May 2004. Among other things, the department issued new rules for project surveying and compliance with environmental regulation.

            Department officials say they informed the Legislature about the problems with the project as they complied with routine reporting requirements. And they say there are no similar screwups on the Highway-18 scale awaiting disclosure.

            Carpenter said the agency hasn’t estimated how much the project should have cost, if everything had been done right.

            But he said the agency has learned from the experience.

            “We’ve taken our lumps,” he said.

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