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LePatner: Keep public projects on budget

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Barry B. LePatner is founder of LePatner & Associates, a New York City-based construction law firm, and author of "Too Big to Fall: America's Failing Infrastructure and the Way Forward" and "Broken Buildings, Busted Budgets: How to Fix America's Trillion-Dollar Construction Industry."


The $15-billion infrastructure initiative announced in Gov. Andrew M. Cuomo's State of the State speech earlier this month and discussed in this week's budget address would stimulate economic development and create thousands of jobs in recession-wracked New York State.

The program aims to improve or replace 100 bridges and repair 2,000 miles of roads statewide, and advance the long-overdue construction of a new Tappan Zee Bridge.

But while such investments are wise, taxpayers must be protected from the cost overruns that are the rule, rather than the exception, with infrastructure projects worldwide.

New York State is no exception to this troubling and expensive syndrome. For instance, The Journal News recently reported that reconstruction costs for Interstate 287 in Westchester County had risen to $621.5 million, more than $78 million over budget.

Taxpayers don't have a single extra dollar to squander on avoidable cost overruns. Yet both public and private construction projects often come in 20 percent or more over budget.

The state can and must take specific actions to reel in these costs, thereby saving tens of millions of dollars. To do this, state planners must incorporate five time-tested cost-management measures into future infrastructure projects. These are the golden rules of construction management -- rules that would ensure the cost certainty of contracts while also avoiding delays.

The first golden rule? Demand complete drawings before starting a project. While this seems like a no-brainer, it is rarely done. Incomplete construction documents are the primary cause of cost overruns. Agency design teams and outside consultants should receive the necessary time and resources to produce a complete and coordinated set of construction documents before bidding on a project.

Second, from the start, the project should include the presence of an experienced project manager acting as an ombudsman, to oversee the completeness of project drawings, and to ensure that bidders certify that drawings are indeed complete and that they waive their right to make claims for additional payment unless the state broadens a project's scope. Currently, states only hire project managers to monitor construction after incomplete or unchecked design documents have already infected the process.

The third golden rule is to resist the allure of low bids, which often signal a contractor's intention to file unwarranted claims for extras.

The construction industry has long accepted a process through which the lowest bid offered by a contractor often wins a project. Under this system, construction managers -- typically working from incomplete drawings -- can reap their greatest profits by submitting costly claims and change orders after construction has begun. Unable to switch horses in midstream, both government and private developers are left with little recourse but to agree to the changes, with taxpayers and investors forced to absorb the added expense. Fixed-price contracts will protect New Yorkers from often-drastic price escalations.

Fourth, officials should demand on-time and on-budget project completion as part of the contract. This will attract a better caliber of bidder -- one with tighter control over needed efficiencies to complete the work. Contractors would earn a fair profit for doing so and would be more motivated to deliver a promised project if they assume a fair share of risk.

The fifth golden rule is for agencies to have independent cost estimates in hand before the bidding begins. This would ensure that the public knows the project price and would give each agency the ability to rate the bids they receive accordingly.

Taxpayers should applaud Gov. Cuomo's commitment to stronger and safer infrastructure for our state. But New York will enhance its infrastructure legacy and better protect taxpayers by controlling project costs. The tools required are readily available. Policy-makers only need to use them.


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