A risk assessment commissioned by the Federal Transit Administration indicates that the World Trade Center PATH Hub could likely be finished with the $3.48 billion in funds currently available for the over budget project, but that there are still significant risks that could drive the price even higher.
The findings of the report appear to finally peg what it will cost to build the complex transit station, whose budget has grown on several occasions in the past and has attracted criticism for being exorbitant.
Yet the report couldn’t quantify the impact of a disagreement between the site’s two primary stakeholders, the Port Authority, which owns the land under the World Trade Center and is handling the development of a number of projects there, and the development firm Silverstein Properties, which leased the site just weeks before it was destroyed in the attacks of 9/11 and is planning to construct three office towers.
The two parties were recently ordered by an arbitration panel to reenter negotiations in order to map out a revised construction plan and schedule and resolve issues that have threatened to significantly stall the site’s rebuilding, including the hub.
Silverstein Properties, which is already developing an office tower on the site, wants to build two more, a pair of behemoth buildings known as Tower 2 and Tower 3, but can’t undertake the work because of a dearth of financing for speculative real estate ventures.
Last summer, the firm, known as SPI, tried to persuade the Port Authority to provide guarantees on a construction mortgage it would take for at least one of the buildings, a risk the authority rebuffed, creating an impasse over how the site would be rebuilt and uncertainty whether it could be finished according to current schedules.
One of the critical issues for the station project is that critical systems for its operation, such as large ventilation, heating and air conditioning units, are to be housed in the base of the two buildings. The foundations of the two buildings also provide critical structural support for the hub.
The Port Authority has proposed building those lower sections to serve the immediate needs of the transit station and then using them later as pedestals SPI could construct its towers on top of when demand for office space and the credit markets recover.
If SPI refuses such an arrangement – as it has in the past – and the differences can’t be vetted through the ongoing arbitration, the Port Authority could be forced to redesign the hub to function independently from the towers, something the risk assessment stated it did not assess in the recent report and warned could drive the project’s cost higher.
“The full cost and schedule impacts of the alternate design are unknown at the time of this analysis and thus were not included in the assessment,” the report states. “It is likely that the cost of the project will increase and the completion of the project will be delayed by at least the amount of time required to complete the revised design if the construction of Towers 2 and 3 does not proceed as originally planned.”
To make risk calculations in the recent report, the consultancy that drafted the report, David Evans & Associates, noted that “uncertainties associated with Towers 2 and 3… assumed that SPI would follow the MDA (master development agreement).”
As it is, the WTC PATH Hub has grown nearly a billion dollars beyond its original estimate and, according to the report, is probably a year behind the official timetable for the project, which the Port Authority released as part of a revised set of deadlines and costs for the site in September 2008.
Even assuming SPI and the Port Authority can come to an agreement that will allow the hub to built according to its existing specifications, the report said the FTA’s target date for the project is May 15, 2015, almost a year beyond the Port Authority’s public deadline of June 30, 2014.
The report said, barring the risks posed by the arbitration, there was a 10 percent chance the project’s price tag could grow to $3.71 billion and that its completion could be delayed until September 2015.
The report noted that one of the prime techniques the Port Authority has touted it is using to trim the hub project’s cost has potentially made little difference. Last year, the Port Authority said it would break up the hub’s construction from a handful of big contracts into 50 smaller jobs that would allow more contractors to bid for the work and foster competition and lower offers.
“Under the current favorable market conditions, smaller trade packages may result in lower bids due to increased competition,” the report stated. “However, multiple trade packages will require more procurement time and effort and may introduce inefficiencies in the construction coordination among numerous contractors, all of which could further impact the current project schedule and lead to change orders with attendant cost risks.”