The proposal to call for a state audit of the Honolulu fixed-rail project is a no-brainer, or it should be.
Taxpayers should feel alarmed that, absent such a study, there would be insufficient scrutiny of Hawaii’s largest-ever public works project and what it’s costing.
That sense of alarm is especially justifiable now, with the controlling agency, the Honolulu Authority for Rapid Transportation, seeking an extension of the general excise tax surcharge that provides most of the revenue for the work.
Lawmakers are positioned to approve a limited extension of the tax, as they should do, given the need to complete the project and to cope with some massive cost overruns — likely pushing the project past the $6 billion mark.
But they also have the duty of due diligence as they proceed to that approval, to ensure that the additional public funds are spent wisely.
The inclusion of the audit request in separate resolutions — as well as in Senate Bill 19, the tax-extension measure — is a prudent move to lock it in.
On Wednesday the House Transportation Committee advanced House Concurrent Resolution 181 to a floor vote. Whichever legislative vehicle makes it across the finish line, the state auditor would be asked to study:
» HART’s financial and management policies, practices and processes associated with rail plans, design, bidding and construction.
» Its financial plan and accounting and internal controls.
» Spending on project contracts, including payments to contractors, subcontractors and consultants.
» Factors contributing to the project’s cost increases, including delays, change orders and bidding procedures.
» Actions taken to mitigate cost increases.
Other resolutions in the hopper — including measures to probe why tax revenues for the rail have fallen and pressing for an operations-and-maintenance financial plan — also illustrate the level of statewide concern about the city’s project.
DAN Grabauskas, HART’s executive director, has said the agency, which keeps comprehensive records on contractors, will "fully cooperate" with the audit.
That ought to mean the authority will put its weight behind the auditor’s push for details at the subcontractor level.
HART officials have repeatedly underscored that they have neither the legal requirement nor the authority to track the subcontractors comprehensively.
It does get a partial picture, based on voluntary reporting from prime contractors, as well as records of subcontractors participating in a government "disadvantaged business enterprise" program. The list of 191 subcontractors working on the project through Jan. 16 included dollar values for only 107, totaling nearly $78 million.
Grabauskas asserts that this protocol is "absolutely within the norm."
Regardless of norms, or the lack of legal mandates, under the dire fiscal circumstances that have come to light currently, the auditor will need to drill down for as much detail as possible.
In the past several months, HART discovered its construction contracts for the first nine rail stations coming in 63 percent higher than projected. Those were scrapped and the contracting was restructured to lower risk and cut costs.
Although costs are still running well ahead of budget, that effort did produce savings.
However, the devil is in the details, and the stripped-down version of the project lacks some important ones, including escalators at some stations. Contractors propose such steps as a means to lowering the bottom-line total.
But without more cost information from the suppliers of such amenities — the subcontractors — the taxpayers and users of the system can’t know whether they got their money’s worth.
THE distressing observation from the past several months is that HART — which had been painting a rosy picture and last fall approved a raise and new contract for Grabauskas — seemed to be taken by surprise when the red ink started to flow.
This would not be the first state to tighten the reins on a transit project. Just to name one: In 2010 and again in 2012 the California state auditor harshly criticized the agency in charge of its high-speed rail project for weak oversight.
The disconcerting aspect of Honolulu’s situation is that problems are mounting during what is the less challenging half of the project. As construction moves into population and business centers, the costs and complexities could rise exponentially.
Accounting protocols that are "within the norm" might be acceptable if the rail project was going swimmingly, but that’s no longer the case. The rail project is critical to the rational transportation and development planning of Oahu’s increasingly dense urban communities, but the public purse is not bottomless.
The public needs some reassurance that costs are knowable and controllable, and an audit is one vehicle to deliver it.
