MTA Chairman Janno Lieber is fond of periodically talking about how major capital projects for either New York City Transit, Long Island or Metro North Railroad come in ahead of schedule and below budget. This is a perfect example of double speak. There is always an agreed upon baseline construction schedule between the MTA and the construction contractor. When a capital improvement project reaches beneficial use or substantial completion and goes into transit service to the benefit of riders, it is usually 98% complete. The 2% remaining work usually does not impact the ability of the MTA in placing this investment into transit service. There may also be outstanding receipt of maintenance manuals for any project component worth $5,000 dollars or more. (This is a legal requirement for any capital improvement project funded by a Federal Transit Administration grant.)
There needs to be a complete inspection and acceptance known as a punch list of all project components. Depending upon the complexity of the project, there could be hundreds to several thousand of individual project components. This is to ensure that they were built to the project’s design and engineering specifications. Contractors may submit requests for reimbursement for change orders which were not part of the original contract or delay claims against the MTA for inadequate track outages or insufficient MTA Force Account (MTA employee support) necessary for completion of work according to the agreed upon master project construction schedule. The MTA may file claims for financial credits against a contractor for not supplying sufficient workers to complete a project, based upon the agreed upon master construction schedule or a reduction in project scope of work.
All of this has to be negotiated between the MTA and contractor before final resolution is reached. After all the above is completed, the MTA will release contract retainage. This is the final payment to the contractor, which represents 100% completion of any project. Depending upon the complexity of any capital project, the time line between 98% beneficial use or substantial completion and actual 100% completion can average from six months to a year or more.
The MTA will periodically claim a project has come in below the original forecasted budget. What they neglect to tell you, is that this is the cost accounted for on the capital side of the agency budget ledger. The cost of debt service payments, which can last years, if not decades, is hidden on the operating side of the agency budget ledger. If you are honest and above board, you must add both the capital expenditure and long-term annual debt service payments on the operating side of the financial ledger. This is the only way you can determine the real final cost of any capital improvement project. Transparency on how the MTA finances the capital program needs to be above board and not hidden. Commuters, taxpayers, transit advocates, funding agencies such as the city, state and federal transit administration, MTA board members, city and state comptrollers, MTA, and FTA Office of Inspector General, along with elected officials deserve nothing less.
Larry Penner
Great Neck
Larry Penner is a transportation advocate, historian and writer who previously served as a former Director for the Federal Transit Administration Region 2 New York Office of Operations and Program Management.