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Mitigating Problems of Third Party Coordination

Date: 2011

Project Name: Hudson-Bergen Light Rail Transit (HBLRT) Extension to 8th Street, Bayonne, NJ Hoboken Ferry Terminal Rehabilitation – Phase III, Hoboken, NJ

Abstract: This lesson looks at two projects undertaken by the New Jersey Transit Corporation (NJT) and the challenges of obtaining permit agency approvals prior to revenue operations. The focus is on permitting because of the major schedule, and resulting cost, impacts on a project that permit delays can have.

Project Phase(s): Final Design (Bid-Ready Documents) and Construction

Category: Schedule

Background

Transit infrastructure projects frequently involve coordination with outside entities not in a direct contractual relationship with the grantee, referred to as third parties. Examples of third parties include cities, counties and other jurisdictional districts; utility service providers; and permitting agencies, to name a few. If the third party holds permit or similar approval authority over a project or elements of a project, the entity can be a source of delay to advancing a project, including opening for revenue service (as is the case when occupancy permits are involved). Close coordination is required to ensure that third parties act in a timely manner and share the urgency of the grantee in completing a project as planned. However, close coordination may not be sufficient since many third parties have competing demands and might not offer a project the same level of priority as the grantee or simply be non-responsive. In the absence of a contract that would supposedly bind a third party to actions, such as meeting milestones according to a prescribed schedule, what other recourse might a grantee have to ensure third party responsiveness?

This lesson looks at two projects undertaken by the New Jersey Transit Corporation (NJT) and the challenges of obtaining permit agency approvals prior to revenue operations. The focus is on permitting because of the major schedule, and resulting cost, impacts on a project that permit delays can have.

Hoboken Ferry Terminal Rehabilitation – Phase III (Hoboken, New Jersey): The lesson learned for this project is specific to the construction phase. This project used design-bid-build as the project delivery method for the reconstruction of a 6-finger-pier ferry terminal for service across the Hudson River to Manhattan. The terminal is part of a multimodal center with NJT commuter rail and Port Authority Trans-Hudson heavy rail as well as bus service operating in and out of the complex. The ferry terminal structure had been out of operation for a number of years, with service continuing on a limited scale from a nearby temporary pier. Terminal rehabilitation involved multiple phases of construction, and Phase III included interior build-out supporting the planned start of revenue service in February 2011. However, revenue opening was 10 months late, in December 2011, due to a combination of factors: additional work required in restoring a historic structure; repair of damage caused by the remnants of Hurricane Irene (fall 2011), which flooded low-level offices and crew quarters in the terminal; and permitting delays.

The permitting delays could have been avoided. The delays resulted because, late in construction, inspections by the New Jersey Department of Community Affairs (DCA) required rework of certain installed components and some additional work by NJT’s general contractor. DCA is a state code enforcement agency with a mission to establish and enforce health, welfare and safety standards “for anything constructed or erected for use, occupancy or ornament on, above or below, the surface of the earth in New Jersey.” The DCA Division of Codes and Standards enforces building codes in partnership with the state’s municipalities, including plumbing, fire protection, electrical, and other codes. (Note that cities enforce building codes for improvements involving city property, for instance in city-owned buildings and rights-ofway.) Inspections by DCA typically occur throughout construction and, in fact, DCA also reviews construction documents and must approve them prior to commencing construction. Temporary “occupancy permits” are issued when certain trades subject to code compliance reviews are completed and deemed to satisfy applicable code requirements; an overall occupancy permit is issued when a project is substantially complete to the point of being safe and operationally ready for revenue service. Clearly, DCA approvals are critical to project construction completion and a grantee’s ability to begin revenue service. The DCA process can be involved but is well understood. NJT attempts to avoid permitting delays by engaging DCA as construction elements near completion. However, the coordination was not always effective on the Hoboken project.

Hudson-Bergen Light Rail Transit (HBLRT) Extension to 8th Street, Bayonne, New Jersey): The lesson learned on this project also applies to the construction phase. NJT employed design-build to procure an approximately $90 million, one-mile extension to the Hudson-Bergen line, a successful primarily surface light rail line that runs roughly parallel to the Hudson River. This extension to the south, from Jersey City into Bayonne, transitions from at-grade to aerial viaduct at its terminus, which includes a two-story passenger station. Construction involved the civil contractor and a systems contractor, the latter Twenty- First Century Rail Corporation, which was the design-build-operate-maintain contractor for the first two operable segments of construction and the eventual operator of service to 8th Street. The project was to be completed and revenue ready in mid-November 2010. Up until October 2010 the project was on schedule. However, the extension did not open until January 2011, largely because during test and start-up, power connections were found to be inadequate and occupancy permits from DCA took considerably longer than expected.

The power supply to the 8th Street Station had to be reinstalled and the utility provider, Public Service Electric and Gas, was initially not fully responsive. DCA occupancy permits were also delayed for the station (which included an elevator subject to a separate permit) because of the power supply problems and also because final inspections and permit approvals were drawn out. In fact, permit approval of the traction power substation was not obtained until at least six months after revenue opening. (NJT was able to open the extension by drawing on power from an existing substation.)

Fortunately the permitting delays for the extension did not disrupt revenue service on the main line. But the extended time to complete the project was part of a contractor claim that took four years to settle.

The Lesson

There are several parts to the lesson from these two projects.

  • Third party involvement in a project, particularly when it involves inspections, permits and/or approvals, needs to be monitored closely. The grantee needs to clearly define with the permitting entity what project elements are subject to inspections and/or permits.
  • Restoration projects in particular raise complicated issues about what improvements are subject to inspections/approvals and the extent of renovation needed to bring facilities up to code. Do unimproved project elements all need to be brought up to the latest codes? Design reviews and bid package preparation should bring these items to light, but sometimes they do not. The permitting entity needs to be involved in design reviews where these issues can be discussed.
  • Coordination with third parties needs to be carefully planned and coordination activities incorporated into the project schedule. Early involvement is key and one way to do this is have third parties review, if not help to establish, the important milestones that affect them. The grantee must make sure each party is aware of pending dates. Inspection and permit milestones should be identified early. Too often the start-up and commissioning modules of a project schedule are not developed in detail until the project is well underway. Schedule updates should be sent to third parties responsible for inspections, permits, and approvals.
  • Grantees should consider conducting a mini-risk assessment during project design focused on the involvement of third parties. Ways to mitigate risks to the schedule should be explored assuming some reasonable likelihood that third party involvement will not proceed as planned. On major projects, repeat the exercise upon start of construction, at minimum, and when project construction is well underway but several weeks before major permitting activity is proposed. Such follow-up will help to ensure that third parties are aware of project status and new issues that could affect their involvement. Mini-risk assessments can be part of a construction progress meeting and need not be time consuming.
  • Some ways to mitigate third party risks include:
    • Execute memoranda of understanding or similar agreements that identify who is to be involved, where and when. Put dates into the agreements and ensure that any agreements with third party entities are understood by the staff that will be acting on their behalf. Dates in an agreement should be included in the project implementation schedule. Although it can be difficult, if not next to impossible, for one public agency to execute a binding agreement that imposes penalties or financial liability on another public agency, agreements can at minimum commit the entities to work together closely to achieve certain ends.
    • Compensate third parties for their time or provide other incentives to encourage responsiveness. NJT must compensate Amtrak, for example, for force account participation (design reviews, flagging, construction monitoring) on projects. An agreement should make compensation contingent upon the third party meeting its obligations.
    • Assign an individual on the grantee’s project management team to lead third party coordination. There must be a responsible person(s) who is accountable for such coordination or at least expected to be fully knowledgeable of the status of third party actions. One challenge here is that the grantee’s contractor may be contractually assigned the responsibility for inspections, permits and approvals. But it is disingenuous to believe that the grantee does not also share this responsibility. In order to avoid project delays and extra costs, the grantee should take a leadership role and, at minimum, partner with the contractor on third party coordination.

Applicability

The problems and potential solutions discussed here have broad applicability. On almost any significant capital improvement project, sponsoring agencies should aggressively manage the involvement of third parties. Grantees need certainty about the role of third parties: that they will follow through in a timely manner in performing their responsibilities. This is particularly the case with permit and approval agencies. Third parties should be committed participants to project success and act quickly when decisions are in their hands. Grantees can better ensure this occurs by involving third parties as project partners and by providing clear direction as to when their involvement is necessary. Incentives, including compensation, may be appropriate in obtaining third party cooperation, not just to help them recover their costs.

References/Contact Person/Info

Jeff Allen, AICP
1300 Clay Street, Suite 325
Oakland, CA 94612
510-366-3321

Charles Thorn, P.E.
30 Broad Street, 22nd Floor
New York, NY 10004
646-255-1122

Updated: Tuesday, May 24, 2016
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