Home NEWS Fired Denver airport contractors’ claims raise questions about oversight as massive project...

Fired Denver airport contractors’ claims raise questions about oversight as massive project restarts

30
0
fired-denver-airport-contractors’-claims-raise-questions-about-oversight-as-massive-project-restarts

Picking out toilet partitions, fixtures, sinks and mirrors for an airport bathroom apparently isn’t as simple as it might seem — it took Denver International Airport and the contractors on its massive terminal renovation more than 14 months to settle on the final restroom design.

Same with the walls throughout the terminal: After DIA officials opted early on to use laminate and another material for wall coverings, they decided in December 2018, as the design was being set, to change to acrylic “solid surface” panels for 200,000 square feet of walls. It then took more than four months to make the final choices, including whether the panels should be seamless.

When DIA and the city terminated Great Hall Partners’ public-private partnership contract in August, the airport blamed the contractors, saying budget-busting cost increases and delay projections on the $650 million project were out of proportion with requested changes and other disputes.

But a deep review by The Denver Post of expansive compensation claims filed by Great Hall in the weeks before the termination — documents released only after that decision was reached — paints a different picture. Ultimately, Great Hall projected overruns totaling $288 million and more than two years of delays past the November 2021 completion target.

Helen H. Richardson, The Denver Post

DIA CEO Kim Day, at podium, addresses the media regarding the airport’s termination of their contract with their construction partners Great Hall on Aug. 13, 2019.

In particular, a 248-page document, provided in partially redacted form, recounts a two-year struggle over change orders. It repeatedly lays out examples of senior DIA staff micromanaging the project’s designs and dithering on their decisions. Airport leader Kim Day, in particular, is depicted as a meddlesome CEO.

Airport officials’ recurring indecision resulted in changes to already-set designs and blown permit deadlines, Great Hall argued — a problem exacerbated by a too-small DIA oversight team without the authority to keep the project moving along.

The Post’s review of the change disputes and warring charges that sunk DIA’s relationship with Great Hall Partners raises lingering questions about the oversight exercised by some of the same airport officials who now are overseeing the stalled project’s reboot.

The city is preparing to ink design, construction and management-consulting contracts with a mostly new set of lead contractors. Work is set to resume in the terminal early next year and likely will last until sometime in 2024, officials say.

The differences between the portrayals by Great Hall and DIA leave plenty of room for interpretation. But the airport’s use of a “for convenience” termination clause — its decision to merely pay out the contractors instead of trying to prove they didn’t fulfill their side of the contract — lessens the likelihood of legal wrangling that might open up each side’s actions to more scrutiny, experts say.

Hyoung Chang, The Denver Post

Construction is ongoing in the Great Hall terminal at Denver International Airport on Oct. 09, 2019.

Latest project setback for DIA

While Day has overseen fast-growing passenger traffic and airline expansions during her 11-year tenure at DIA, she also has weathered other project setbacks. Those include the exit of famed Spanish architect Santiago Calatrava early in this decade’s hotel and transit center project. Ahead of its completion in 2015, that project ran over budget and faced intense scrutiny from the Denver auditor’s office, which questioned DIA’s project oversight and change order management, among other issues.

The terminal renovation includes the relocation of security screening areas from the main floor to the upper level, consolidation of airline check-in areas, and the revamping of most other spaces. Along with $1.5 billion in separate concourse expansion projects that are underway, the renovation is intended to accommodate millions more passengers each year. Those are part of a $3.5 billion airport capital program.

For their part, DIA officials have said the terminal project was intended from the start to have a semi-fluid design that required a nimble contracting team, and Great Hall didn’t fit the bill. As publicized in 2017, the city approved the deal with a $120 million contingency fund set aside to meet the whims not only of DIA officials but the airlines and the Transportation Security Administration, along with changing aviation regulations.

“I am not going to take the fall for the fact that they did not give us the information that we needed on which to make decisions,” Day said of Great Hall after announcing the termination.

Great Hall, on the other hand, blamed oversight failures on DIA’s side.

“Rather than having an independent construction manager or design team assisting the owner (DIA) through this change management process, the owner had a small team of in-house personnel with no additional resources and who had extremely limited authority to make binding decisions for the owner,” it wrote in its major claim.

As DIA prepares for the project’s relaunch — with a final budget and completion date to be announced early next year — DIA’s in-house and contracted project oversight team is growing, from 25 people to more than 50.

But DIA brass says that decision is not meant as an acknowledgment of prior shortcomings.

Michael Sheehan, DIA’s senior vice president of special projects, says the increase in oversight is due to the change from the private partnership model, which delegated much of the schedule management to Great Hall, to a more traditional contracting model. Staff from the proposed program manager, Jacobs Engineering, will serve as his “right hand” in managing the project and its several main contractors, Sheehan said.

The renovation was part of a larger, now-jettisoned $1.8 billion deal in which Great Hall, led by Madrid-based Ferrovial Airports, would have overseen new retail and food outlets in the terminal for three decades. DIA and Great Hall are still negotiating its termination payment, which DIA recently estimated at $170 million to $210 million, and a dispute resolution panel is still weighing parts of Great Hall’s claims.

DIA, which operates off its own dedicated revenue streams, says it can absorb those breakup costs.

Helen H. Richardson, The Denver Post

Travelers make their way around walls and construction inside Denver International Airport’s Great Hall as they come out of the trains from the concourses at DIA on Aug. 13, 2019.

Change disputes make up bulk of claims

Great Hall has sought $288.1 million in extra costs and compensation, with $166.7 million of that attributable to the fallout from the airport’s more than two dozen change directives. The rest stemmed from delays and project modifications caused by weaker-than-expected original concrete in the main level’s flooring, a discovery that stalled structural work for six months.

The original 2021 completion date was threatened with delays that at one point stretched to as late as 2025. The contractors’ July claims settled on 28 months, meaning completion in early 2024, with nearly half of that attributed to the change orders.

Change disputes that dragged on for months involved items as seemingly small as the bathroom fixtures and as consequential as changes to the placement of airline check-in kiosks that affected electrical and data cabling plans.

Great Hall said it expected changes during the project, but not so many and not so often.

“Had the owner put more foresight into the design it ultimately wanted or if the owner had been actively engaged in the change process, the impacts from the change directives may have been different,” said the contracting team’s claim, signed by Great Hall Partners CEO Ignacio Castejon.

Helen H. Richardson, The Denver Post

DIA CFO Gisela Shanahan addresses the media wiht an update on construction at the airport on Aug. 13, 2019. At right is Kim Day, CEO. Day said Denver International Airport had moved to terminate the $1.8 billion contract with Great Hall construction partners for its problem-plagued terminal renovation project.

“They thought they were done getting input”

Great Hall handed over control of the walled-off construction zones to DIA on Tuesday. While showing a reporter those spaces last month, Sheehan disagreed with the former contractors’ characterizations.

“My humble position is that when they signed the development agreement (in 2017), they thought they were done getting input from us,” he said, adding: “They just wanted us to leave them alone and they’d go build the project. That’s not us as an owner, especially with all the stakeholders and airlines and evolving technology and requirements. It wouldn’t be fair and reasonable.”

A Great Hall spokeswoman declined to comment for this story, citing the ongoing negotiations.

Whichever side is to blame for the disputes, a construction consultant who spent much of his career working on large public projects for a construction company said design changes are one of the hardest challenges to navigate.

“If things turn sour from a contracting standpoint, I think you can always make ties back to poor communication,” said Chad Olivier, who teaches construction management at Colorado State University. “Communication protocols get more difficult the bigger the entities are. So you’ve got two big entities who are trying to work together — trying to sort out problems, make decisions and hold together a budget — but sometimes a lack of empowerment to make decisions, at a certain level, is paralyzing.”

As DIA regroups, Sheehan expressed confidence in the new contractors it’s bringing on, all of which have DIA project experience. The Denver City Council is set to consider $136 million in new contracts Monday night, while another large contract is expected in January for Hensel Phelps, the new lead construction contractor that DIA selected to finish the project’s first phase. Airport officials are still working to reduce the costs and scope to keep the project’s cost under $770 million.

But while presenting the contracts, Sheehan has faced questions from council members about what went wrong and how his team will avoid a similar breakdown.

“Building the right team — a high-performing team — we will deliver this,” he assured a committee Nov. 6. “And we really feel we have something to prove. With these partners, I’m confident we will do it.”

LEAVE A REPLY

Please enter your comment!
Please enter your name here