HILO — Riding a wave of new construction, charges added to county contracts to correct errors, account for unforeseen circumstances and expand the scope of work without going back out to bid nearly doubled in the past two years compared to the two years before.
A West Hawaii Today analysis of 96 biweekly change order reports between Jan. 1, 2013, and Dec. 31, 2016 — former Mayor Billy Kenoi’s second term — found that 119 change orders totaling more than $17.9 million were added to county projects after they had already been awarded by competitive bidding.
Kenoi’s six-year capital improvement budget unveiled in 2013 listed 85 projects worth $231.9 million.
It wasn’t possible to compare Kenoi’s change order track record with that of former and current Mayor Harry Kim, because the County Council did not require the reports until 2011. Kenoi could not be reached for comment by press time Monday.
Some of the extra costs came from contractors rushing projects to meet deadlines. Some were due to unforeseen conditions or events, such as termites, lava tubes, lava flows, archaeological sites and the like. And some were simple errors.
In one case, $30,000 was added to a tree removal contract because the banyan in question wasn’t measured correctly when the contract was signed. In another, the contract didn’t specify that the old roof needed to be removed prior to a new roof installed at the old Kohala courthouse.
Kenoi had sparred with Kim during the 2012 election over who gets credit for projects that often span two mayoral terms. Winning his second term, he vowed to complete projects during his administration.
As Kenoi entered his final two years in office, the pace quickened. Overtime was approved for at least two projects, and contractors began adding terms such as, “acceleration of installation due to project time-frame considerations,” and “additional work required to meet the county’s deadline for the facility,” as they asked for more money.
Contract overages from change orders over the past four years varied from less than 1 percent of the original contract price to an astounding 120 percent on one project.
Two independent experts consulted in September said there’s no set percentage dictated by industry standards. A 2013 report “Auditing construction contract change orders,” by Tony Ollmann, director of Chicago-based accounting and advisory firm Baker Tilly Virchow Krause LLP, calls it a “red flag” when change orders exceed 10 percent.
Change orders are certainly not unusual on large construction projects, said James Bolin, senior executive consultant for Denver-based Long International, a project management consulting company.
“There’s no such thing as a perfect contract or a perfect design,” Bolin said in a telephone interview.
County Public Works Director Frank DeMarco, who took office last month, accepts the 10 percent figure, barring unusual circumstances.
“Ten percent is kind of the rule of thumb,” DeMarco said Monday.
But he cautioned that rushing the design phase of the project can cause more overages down the road.
“My personal view is, let’s take the time to get a good design up front,” DeMarco said. “Make sure the contractors take into consideration the design as well as the site conditions, as well as us.”
Some of the problematic projects over the past four years:
• More than $1.2 million has been added so far to the $17 million upgrade to the Hilo Municipal Golf Course project. That’s 7.2 percent of the original contract cost. Overtime accounted for an unknown amount of $260,375 added to the project Oct. 4 after overtime was authorized for contractor Jacobsen Construction Co. Inc.
• Overtime was also authorized for the Ka‘u gym and emergency shelter as the project lagged after several missteps. The $17 million project is currently under a $100,000 review by a consultant hired by the Kim administration after questions surfaced about whether it’s hardened enough for a shelter. So far, the construction of the facility has garnered $693,031 in construction overruns for contractor Summit Construction Inc., about 4.1 percent of the total.
• Improvements to the Honokaa rodeo arena also ran into problems. Rushing to meet the county’s deadline added $304,466 to $2 million in design and architectural costs, or 14.9 percent over the contract amounts. Construction contractor Goodfellow Bros., however, was able to build the project with a scant $5,451 over its $1.3 million construction bid.
• Improvements to the Mauna Kea park were about complete when Kenoi celebrated its grand opening as one his last public events before he left office in early December. Change orders to the $416,990 contract for a new comfort station accounted for 8.9 percent of the contract price for contractor White Sands Construction. A $418,000 playground built by Site Engineering Inc. came in over 4.9 percent of the bid price.
• A $3.4 million contract for improvements to the Hilo Lagoon office space shared by Corporation Counsel and the Liquor Control Office underwent 13 change orders adding $496,422, or 14.5 percent to the original 2012 contract before it was completed in 2015. The floor space was increased mid-project, resulting in unanticipated costs for additional plumbing, electrical work and materials.
• Unanticipated geological conditions wreaked havoc with the rehabilitation of Reeds Island Bridge. Five design, engineering and construction contractors worked on the project between 2013 and 2016, totaling $7.3 million. Change orders ran rampant, with two consultants’ change orders increasing their part of the project cost by 120 percent each, and two others by about 50 percent. Construction contractor Isemoto’s costs, however, ended up less than 1 percent over.
• A 2014 lava emergency caused extra costs to accrue on the planned expansion of Pahoa Park. Nan Inc.’s demobilization and remobilization because of the lava threat added $812,918 to the $22.3 million project. In all, there were $1.9 million in change orders, or 8.5 percent of the project, as of Dec. 31.