The Back Story — On BART Costs and Texts: I Would Do It Again
The Mercury News posted an article yesterday with a click-worthy title (“Liccardo, VTA hid soaring cost, texts reveal”), but unfortunately, a lot of facts got lost in the noise.
To protect taxpayer dollars, it was my duty as a public official to avoid publicly discussing competing estimates for increased BART construction costs while private contractors contemporaneously prepared bids on that same multi-billion dollar project. If I had disclosed that information publicly, it would have encouraged those private contractors to increase their bids, costing taxpayers hundreds of millions of dollars. I would do precisely the same thing if I were confronted with this issue today. Any other public official representing our taxpayers should do similarly.
There is a legally-mandated time to publicly disclose rising costs of a construction project: in advance of any vote by the agency to spend the public’s money on that project. That time is not while contractors are still preparing bids.
Here are the facts: The Mercury News published text exchanges that revealed that a Valley Transportation Authority (VTA) official urged me to avoid discussing any potential project budget increases because ‘we have 9 major construction teams shortlisted [to bid on the project, and] ‘they [are] listening to everything!’
The newspaper account seized on the fact that I subsequently texted VTA officials to encourage the Federal Transit Administration (FTA) to revise language about a $9.148 billion “expected” project cost in an FTA press release.
I did so for two reasons.
First, the FTA press release was misleading; $9.148 billion was not, and still is not, the expected cost of this project. The FTA’s own report (on p. 5–10) describes its cost risk model as using “factors as a multiplier of the cost of individual project elements to determine the cost for the worst plausible probable scenario cost, taken as the ‘upper bound’.” There’s a big difference between a project’s “expected cost,” and the “upper bound” or “worst plausible …scenario” for that cost. To this day, the officials heading the agency (VTA) responsible for constructing this BART to Silicon Valley project do not believe that it will cost $9.148 billion to build. To be sure–as I wrote in February — pandemic-era construction cost inflation and supply-chain challenges will increase the cost of the project substantially above the $6.9 billion estimate of several years ago. Yet based on communications that VTA has had with contractors and consultants, VTA officials continue to believe that the BART extension can be built for substantially less than the $9.148 billion figure. So putting that number in a press release is misleading if you don’t believe that it’s the best estimate of the actual cost, and it’s merely the FTA’s “upper bound” of cost estimates.
Second, doing so is also unhelpful– if you’re trying to save taxpayers’ money. As noted earlier, discussing estimates for expanded budgets publicly prior to bidding would compel contractors to boost their bids. That would effectively send hundreds of millions of taxpayer dollars into the pockets of private contractors. That’s why the VTA official cautioned me that the “construction teams” were “listening to everything.”
Finally–and what seems to be lost in all of this: state law ensures that the VTA board cannot move forward with any public construction project without public disclosure of the cost of that project. That cost is precisely known after the bids come in. Prior to that time, we only have estimates–and in this case, competing estimates. Disclosure of costs comes after the bidding on the project, and before the public vote — but not before the contractors have competitively bid.
Yesterday, I joined two colleagues on the VTA Board — Vice Mayor and VTA Chair Chappie Jones (D1) and Councilmember Raul Peralez (D3) — in releasing a memorandum, to which the article makes mention. Contrary to the implication of the article, the decision to consider yet another independent review of the tunnel alignment has little to do with the construction cost issue. Rather, it addresses concerns by some that design elements relevant to safe passenger access from Santa Clara Street, transit-oriented development, and rider transfers to other transit systems could improve with a dual-bore tunnel. Moreover, this memorandum does not constitute a “reversal,” because the single-bore design remains the Board-reviewed proposed project. Rather, the proposals reflect a continuation of the sentiment of the unanimous public vote of the San José City Council in December 2021, to encourage VTA to fully and publicly vet alternatives and options in project design prior to the final vote on the project.