Hanauma project
over budget

The city is covering the extra $1.2 million
by taking funds from other projects, records show

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By Gordon Y.K. Pang
gpang@starbulletin.com

The administration of Honolulu Mayor Jeremy Harris has gone over budget on the Hanauma Bay Nature Preserve improvement project by more than $1 million, city records show.

Instead of going back to the City Council for additional funding, however, the administration is shifting funding from other park projects to cover the added costs, which it is allowed to do.

The Council approved $14 million for the project -- $13 million for construction and $1 million for planning and design.

All told, three contracts now total $15.2 million, substantially more than the $14 million approved by the Council:

>> On the construction side, the city has already approved 14 change orders, tacking $2.1 million onto the initial $10.6 million contract with T. Iida Contracting. The total is $12.7 million.

>> Research by the Star-Bulletin shows the administration also approved five amendments to a consultant planning and design contract with Group 70 International, more than quadrupling that contract to $2.05 million from the $450,000 originally signed.

>> The administration further is paying $435,000 to INK Architects, which designed improvements to the lower bay while Group 70 developed the upper park plans. INK has not received additional funding.

To help deal with funding, the administration transferred $1.046 million from the construction account to the planning and design ledger, said Rae Loui, city director of design and construction.

Doing that, however, has caused the administration to raise the contingency amount of the construction contract to nearly $3 million, or 28 percent of the cost of the original contract with T. Iida Contracting.

Contingency funds are established for both government and private construction projects to cover additional costs from unforeseen extra work deemed incidental but necessary to complete the original contract.

A memorandum dated Dec. 17, 2001, from Loui to Managing Director Ben Lee requested increasing the contingency to $2,986,000 from $1,358,650.

The new contingency raises the project cost and available funds for construction to $13,581,650.

Additional funds, the memorandum said, could come from two other areas: $128,000 in a Koko Head Regional Park improvement account and $1.5 million in a landscape improvements account for various parks.

The Council allocated $3.075 million for the Koko Head project in the 2001-2002 capital improvements budget to "plan, design and construct (the) master plan improvements to include but not limited to Goeas Field, skateboard/in-line skating rinks, water tank removal and rifle range safety improvements, and related equipment."

The landscape improvements project for 2001-2002 was allocated $3 million to "design and construct landscaping and related park master planned improvements at various parks."

The additional funding "is required to complete the construction of the site landscaping and rockwork" at Hanauma, the memorandum said.

Loui, in the memorandum, does not mention the transfer of funds to cover the additional costs from the Group 70 contract.

But in response to written questions from the Star-Bulletin last week, Loui said the transfers were done "for additional planning and design fees required when the community requested that the education center be relocated to its present location."

Loui, in her written response, also said the two other accounts would not be affected by the loss of funding and that the transfers were "legitimate use of these funds."

It is the second time the administration has upped the Hanauma Bay project contingency since the contract was first issued in December 1999.

The original $1,059,500 contingency amount of the Hanauma Bay project represented 10 percent of the contract, the standard for the building industry and the policy for the city.

On Dec. 20, 1999, six days after T. Iida Contracting Co. was awarded the contract and 10 days before the contract was signed, Lee approved increasing the contingency amount to $1,358,650.

"The increase is necessary because of the uniqueness of design, high profile and the urgency to complete this project as soon as possible to minimize the inconvenience to the general public," wrote Randy Fujiki, then-city director of design and construction, in requesting the higher contingency.

Council Budget Chairman Steve Holmes concurred that the administration is within its right to move funds between sources, which is referred to as a phase transfer.

However, he said "the numbers on this project are so large," the administration should have informed the Council about the transfers.

"I think as a courtesy that it would have been nice to let us know in advance that they were going to do that," he said.

East Honolulu Councilman John Henry Felix is outraged by both the transfers and the increased contingency.

"They're playing a shell game," Felix said. "It's disingenuous because it doesn't give us a true cost to a particular project."

Not only do the practices make a mockery of the bidding process, Felix said, it renders the purpose of having a contingency account meaningless and attempts to bypass the Council's authority to set policy.

A report done for Felix by the Office of Council Services, the research arm of the Council, concluded that the administration may use funds from other accounts for the Hanauma project.

"Clearly, they've found ways and means to circumvent the intent of the law," Felix said, noting that warrants an independent audit of city contract policies.

Felix and others have questioned the manner in which the Harris administration has handled contract change orders and contingency accounts.

An ordinance enacted by the Council in 1997 requires the administration to report change orders on $500,000-plus construction contracts within 30 days of obtaining approval.

But notice of the first five change orders, all approved Sept. 10, were not submitted to the city clerk's office until Jan. 3.

Loui, in her response to the Star-Bulletin, said, "Quarterly reports are provided to the City Council on change orders exceeding 5 percent."

Holmes and Felix said the administration is not following what was prescribed in the ordinance.

The administration is not required to notify the Council of amendments made to consulting contracts.

Construction projects such as that obtained by Iida are bid competitively on a low-bid process, while consultant contracts are not.

Loui, in response to criticisms about the Iida change orders, said none of the additions are cosmetic. She noted that the contractor "did not increase its construction bid price even though it took over 15 months" for the state to issue a conservation district use permit for the project.