2 remaining bid teams are offered $230M in tunnel sweeteners

As a bid deadline nears and pressure mounts, Washington state has sweetened its Highway 99 tunnel contract by offering a pair of bid teams $230 million in concessions.

The changes reflect a view by construction executives that the real costs are higher on this world-record project than the state projected several months ago.

The money can be shifted out of a large pool of risk and contingency funds, so the overall tunnel budget remains $1.96 billion, said Ron Paananen, state program administrator.

A pair of construction teams — two others dropped out earlier — appear committed to filing proposals by 1 p.m. Oct. 28.

"The best thing to me about all this is there are two very serious teams," said Dick Page, district leader for HNTB, the engineering managers for Seattle Tunnel Partners, one of the bidders.

The other team, Seattle Tunneling Group, is "very excited to submit our proposal next week," and too busy Tuesday for questions, said an e-mail response from Rick Chapman, representative for team member Parsons Transportation Group.

If completed, the 55-foot- diameter tunnel will carry four lanes of traffic from the stadiums to South Lake Union, replacing the old Alaskan Way Viaduct six years from now.

To keep both teams in play, the state offered three allowances in a series of contracting updates issued last week:

• The state will pay the winning tunnel team $110 million to cover inflation.

• The state will reimburse the team an additional $100 million for bonds and insurance, an indication of the risky nature of boring such a large tunnel beneath downtown Seattle, in soils that are watery or abrasive in spots. Teams must obtain a surety bond to guarantee a half-billion-dollar restart if the cylindrical drill gets stuck mid-project, or if a new contractor must step in.

• And a $20 million "deformation allowance" would fix buildings that are damaged, if the tunnel drilling causes soil to settle. The DOT identified five structures that require reinforcement, such as steel or concrete beams, and 34 that require concrete grouting to reinforce the earth. Also, the tunnel passes below the old Viaduct foundations.

Paananen said managers expected all along to make these or similar kinds of adjustments before the bids came in.

They're designed to reduce the companies' risk, so bids are more likely to meet the target price of $1.1 billion, published many months ago.

"Both teams, and maybe the two teams that dropped out, expressed concern the [state's cost target] is too low. They couldn't figure out how to bid the project at that amount or lower," Page said.

On the upside, Paananen said, the state will recoup $50 million from the city of Seattle for utility relocations in parts of the 1.7-mile tunnel corridor, a figure that wasn't budgeted earlier.

After all the changes, state DOT's original $415 million cash reserve stands at about $235 million — to cover potential cost overruns. Paananen said the figure is still above the 10 percent a DOT expert panel suggested.

In final talks Wednesday morning, he might offer three more enticements: a reimbursement because DOT moved the south tunnel entry 600 feet, an allowance if the tunnel machine doesn't require costly repairs in the ground, and an incentive payment to finish the job before November 2016.

Bidders already have submitted several design variations, a sign their engineers are brainstorming to perhaps save time or money. Team leaders wouldn't discuss their ideas Tuesday, but the state hopes they'll solve certain problems — such as how to provide more than the required 8 feet of roadway shoulders, or fit ventilation shafts into busy neighborhoods.

The City Council's risk consultant, John Newby, said Tuesday that he hasn't had a chance to review the latest changes yet, but if the DOT truly does enter construction with $240 million reserves on hand, that would be a fairly healthy amount.

Tunnel backer Bob Donegan, president of Ivar's, said the state "is probably thinking about this in a more informed way," based on negotiations. "I'm not surprised, and no, it doesn't change my confidence in what the project looks like in any way."

But Cary Moon, co-founder of the People's Waterfront Coalition, said that "given how likely megaprojects are to go over budget, despite everyone's best intentions," the project is in danger of insufficient contingency funds. She called on the City Council and Mayor Mike McGinn to show how they're protecting Seattle taxpayers against the risks.

Mike Lindblom: 206-515-5631 or mlindblom@seattletimes.com