Port Authority of New York and New Jersey

Contract for Temporary PATH Station

The Port Authority of New York and New Jersey provides passenger rail service in the Port District through the Port Authority Trans-Hudson (PATH) railroad. The events surrounding the terrorist attack on the Trade Center on September 11, 2001 caused significant damage to the facilities providing PATH rail service between the Trade Center site in lower Manhattan and Jersey City, New Jersey. Early in 2002, the Authority awarded a $300 million construction contract that would result in restored PATH service between the two locations. In July 2003, the contract was revised and its value was increased to $455 million. We audited the Authority’s oversight of the contract to determine whether the increase in contract cost from $300 million to $455 million was legitimate, and whether Authority management followed proper procedures in awarding and monitoring the contract.

We found that the increase in contract cost was legitimate. The contract amount of $300 million was based on incomplete information, as complete information could not be obtained due to the initial difficulty of assessing the full extent of damage at the work site. The subsequent $155 million increase in costs was commensurate with the additional work that was identified when a thorough assessment of the work site could be performed. The increase in costs was also commensurate with the increase in risk that was accepted by the contractor (under the revised contract, all cost overruns must be funded by the contractor). The cost increase was also supported by Authority documentation, including cost estimates developed by Authority engineers. We also found that the Authority complied, for the most part, with its procurement procedures in awarding the contract, and its lack of full compliance was attributable to the large scale and tight time frames of the project. We further found that the Authority conducted appropriate ongoing monitoring of contract work. In addition, we noted that PATH service between the Trade Center site and Jersey City was restored ahead of schedule.

For a complete copy of Report 2004-S-44 click here.