LaVida SoCal: The Money Pit
LAX officials were spending so fast the paperwork couldn’t keep up
By Tony Peyser
Having now read the official 86-page audit by Los Angeles City Controller Ron Galperin as to how the remodeling of LAX’s Tom Bradley International Terminal went $415 million over its initial $621 million budget, I’m astonished that the final tab was only $1.3 billion.
Using all the contacts I’ve made over years as a journalist, I called in a few favors and was able to covertly get my hands on a copy of this elusive document. (Full disclosure: I didn’t have to call anybody and it isn’t confidential — it’s online at controller.lacity.org for anyone who cares to look.)
The audit isn’t easy reading, but it is informative. However, I wouldn’t glance at it while driving a car or operating heavy machinery. This report is frequently so sleep-inducing that it could give Ambien a run for its money.
The bottom line is everything comes down to two words: change order. This common business term refers to the arrangement between a client and builder that the conditions of a project may change down the road and affect the completion date as well as, of course, the cost.
Putting up large-scale public projects is not my area of expertise but I imagine that few builders have ever told a client, “Jeez, it turns out our estimate was way high and this building is going to cost you a whole lot less than we’d agreed upon.” Yeah, five will get you ten that change orders are going to mean the client coughing up more bucks 99% of the time. Call it a builder’s version of a mulligan and put it in a folder marked STUFF HAPPENS.
Change orders are a common part of the back-and-forth between project owners, contractors, engineers and architects. When the work is on something like a major city airport terminal, budgets can go sky-high — not for a lack of rules regarding change orders, but because there’s so much wriggle room as to how these rules are followed.
The audit confirms, as I wrote on Oct. 8, that the Bradley Terminal from the get-go was always on an accelerated completion schedule. This costly emphasis on speed was accompanied by a pervasive carelessness in execution. According to one helpful chart describing the activities of Los Angeles World Airports (the agency that oversees LAX), there were so many change order forms that it was excessive and confusing. The audit also faults an insufficient focus on change order negotiations as well as a failure to consult with independent experts to estimate costs.
Even more troubling was the overall lack of attention to keeping change order records. This made it easy for contractors to receive money for change orders but hard to figure out precisely what that money was for. If that isn’t a perfect recipe for financial waste, I don’t know what is.
Don’t worry about the folks at LAWA, though. They came out all right.
Gina Marie Lindsay, executive director of LAWA from 2007 until retiring in June of this year, was in 2010 the highest-paid city department head in Los Angeles, earning $355,000 that year — $20,000 more than LAPD Chief Charlie Beck.
I called Lindsay’s old number at LAX and the helpful gal who answered said she’d pass along my phone number and email to Gina. I sure hope so, because I’d like to ask whether Lindsay knew standard procedures for change orders weren’t being followed and when she realized this project was costing a fortune.
If Lindsay elects not to comment — and who could blame her? — then I hope current executive director Deborah Ale Flint, who just took over this year, will weigh in that LAWA is going to be more careful as LAX modernizations continue over the next few years.
Near the end of the city controller’s report is a section whose title is quite a mouthful: Performance Audit of the City’s Construction Change Order Management Practices.
In it, I found one thing fairly astonishing about the 2012 demolition of the Low Bay Hangar that had been operated by American Airlines. (Weirdly enough, there is fast-motion footage of the demo on YouTube. Thanks, Internet.)
The term Change Order Type in the audit indicates various reasons why additional funds are being requested, i.e. Unforeseen Conditions, Errors & Omissions, Change in Scope, Regulatory Requirement, Owner Betterment, Field Condition and Document Corrections. Perhaps LAWA accountants have a Magic 8-Ball that spits out these terms.
The Change Order Type box for the Low Bay Hangar reads “unknown.” The only other box checked off is Value Of Change Order Sampled. That says $123,655.
I’m thinking this means that LAWA paid out a six-figure amount for no known specific reason.
To be fair, I’m not entirely sure. So, I emailed a guy listed in the audit: Farid Saffar, director of auditing for the Office of the City Controller. If he ever gets back to me, I’ll let you know what he says.
Until then, enjoy the new terminal. It didn’t come cheap.