Corps To Provide Updated Kentucky Lock Timeline, CostsView Source
Corps To Provide Updated Kentucky Lock Timeline, Costs
MAY 6, 2022 BY SHELLEY BYRNE
The Corps of Engineers expects to have a new estimate within the next week or two on both a projected timeline for completion and cost estimate for the Kentucky Lock Addition Project.
In a presentation to the Inland Waterways Users Board on April 20, Stephanie Hall, deputy district engineer for the Nashville Engineer District, explained a cost increase and expected schedule extensions. The Corps is completing an updated cost and schedule risk analysis that will help quantify those amounts. The analysis is typically done every two years and was last completed in 2020. It is expected to be complete in mid-May.
Part of the work will include an expanded value engineering study in which the Corps will look to see if there are design alternatives that would create efficiencies, reducing the price of the overall project, and recommend opportunities to decrease the construction duration.
“I will not have answers to the outcome of that until mid-May,” Hall said.
The schedule risk analyses performed in 2018 and 2020 had shown an 80 percent confidence level that the project could be completed in August 2029. The earliest possible completion date had been in 2025.
However, when the Corps awarded the contract for the downstream lock monoliths on September 30, 2021, the expected time to complete that single contract grew. Estimated in 2020 to take 48 months to complete, the projected “period of performance” grew at first to 54 months and then, by the time the contract was awarded, to 67 months, Hall said.
The Corps determined how long would be needed for the contract through industry research and discussions with contractors, with the 67-month timeframe developing between July and September last year. That information was considered procurement-sensitive and not publicly released until the contract was awarded September 30. Upon the award of the contract, the Corps understood the $465 million to complete the project would be insufficient, Hall said.
“We should have acknowledged at that time that we knew our older estimate was no longer valid, and we will work to ensure in the future that we understand the sensitivity better,” Hall said. “I think we are always transparent, but we can be more timely in providing transparent information.”
At the time the $465 million was included in the Infrastructure Investment and Jobs Act (IIJA), federal partners, using information that was by then outdated, had announced it would be enough to fund completion of the project.
Following the completion of the downstream lock monolith contract, follow-on contracts will include those for approach walls and electrical and mechanical utilities along with lock operations buildings and bridges.
If no time savings can be realized, the extended duration for the completion of the downstream lock monolith contract could push the total project completion to 2029 or 2030, Hall said.
“If we didn’t change anything at all, that’s probably where we would end up,” she said, but stressed again, “We are looking at how to mitigate costs and improve any opportunities for the schedule.”
Causes For Delays
When asked about the reasons contractors said it would take longer to complete the downstream lock monolith project, Hall said it was “market conditions.”
“What I would say has happened in Kentucky is market conditions have changed our ability to execute in the time originally estimated,” she said.
Those conditions include challenges both in the labor force and in the supply chain, she said.
“The feedback we’re getting from contractors is that there is a high demand for skilled labor,” Hall said.
At the same time, she said, raw materials, from concrete to steel, are also in high demand, leading to price increases.
Contractors are also telling the Corps that the period for which subcontractors will hold their prices is significantly shorter than previously experienced, Hall said.
None of these parameters is unique to the Kentucky project. Instead, she said, these same market conditions are affecting construction projects across the nation.
Some local industry partners and stakeholders learned about the updated projections during an April 11 videoconference meeting with the Corps’ operations division.
While the project received $465 million in IIJA funding originally intended to fund the Kentucky Lock Addition Project to completion, that amount is no longer enough, Hall said.
The base contract for the downstream lock monolith contract and all eight options awarded September 30 was $380 million, which was $158 million above the fiscal year 2020 estimate.
The remainder of the IIJA funding is expected to cover the award of the base contract on the approach wall—the next contract to be awarded in the project—so more money should not be needed in fiscal year 2023, Hall said.
Hall told the IWUB that as a whole, the Kentucky Lock Addition Project could need anywhere from $235 million to $355 million in additional funds, with a narrower estimate expected this month, and that the funding would likely be needed beginning in fiscal year 2024, IWUB member Martin Hettel said.
The April 20 IWUB board meeting was the first meeting since a memo from the incoming secretary of defense January 30, 2021, ordered 40 federal advisory boards to cease operations while a review was carried out.
“We weren’t appraised of any of it until we heard it at the user board,” Hettel said of the delays and additional costs at the Kentucky project.
He added that the reason the board was given for the changes was “too aggressive prior scheduling.”
“There has been some high water,” he said. “There have been some COVID implications, just a myriad of things that have added up to the additional delay in completion.”
Many ongoing projects appear to still be on schedule and on budget, including those at Chickamauga and the Lower Monongahela, Hettel said.
“The ongoing projects other than Kentucky I feel comfortable with,” he said. “It’s these new projects.”
Hettel said he would not be surprised at all to learn that labor shortages and construction material cost increases may have caused delays in construction new starts.
“Until they get the preconstruction engineering and design phase completed and put the contract out to bid, they really don’t know how much it’s going to cost or how long it will take,” he said.
Paying For It
As for how to pay for the increased costs, Hettel pointed out that there is still $113 million unobligated by the Corps from the IIJA.
In her presentation to the IWUB, Hall said the IIJA money is not expected to be enough to award the contract for options on the approach wall, electrical and mechanical features, lock operations buildings and bridges and site operations.
One option for the additional funding would be using Inland Waterway Trust Fund dollars, Hettel said. The additional project costs in Kentucky would obligate a year of that funding, he said.
Hettel said he hopes that the need for additional funding for the Kentucky project does not jeopardize the timely awarding of funding for potential upcoming projects, including the Brazos River Floodgates.
Hall noted that at the Nashville district level, the Corps only has two options for obtaining additional funding. Those are to request funds in future presidential budgets or in future Corps work plans.
As the Kentucky Lock Addition Project moves forward, additional cost and schedule analyses will continue to be completed every two years. While Hall acknowledged a major change in estimated funding and schedule length between 2020 an 2022, she said that is historically uncommon and hoped for more stable estimates between 2022 and 2024.
“What I can confidently tell you is we prepare a thorough cost estimate and do schedule analysis and risk analysis that is very thorough and looks forward, but because we know the world isn’t static, we update it every two years,” Hall said.
Moving forward, Hall said, the Corps of Engineers is working to communicate any anticipated alterations of costs or scheduling as quickly as possible.
“We know we are going to need additional funding for Kentucky Lock outside what IIJA has allocated,” Hall said. “It’s important for us to remain transparent and open with our industry partners and the public who have supported this effort from the beginning of the project, so we’re going to work hard to communicate consistently in the future and timely and acknowledge how market conditions impact the work we do and as we move forward just ensure that everybody’s aware of what we’re seeing and experiencing.”