Poor Contract Management Led to Billions in High-Speed Rail Cost Overruns, Audit Finds

The California High Speed Rail Authority’s (HSRA) poor decision-making and contract management led to escalating prices and cost overruns totaling billions of dollars, the state auditor reported.

HSRA began construction in the Central Valley in October 2013 despite knowing the risks of not acquiring enough land for building, not determining how to relocate utility systems and not obtaining agreements with other stakeholders.

These risks added $600 million in cost overruns in the three Central Valley projects, with another $1.6 billion in additional costs needed to complete the project, the auditor found.

The state also is at risk of having to repay $3.5 billion in federal loans unless the Central Valley construction is completed by December 2022. To reach that goal, construction would have to progress at twice the current pace.

Additionally, the auditor found the HSRA has offset cost overruns by using a “blended system,” which means the high-speed train will use established tracks currently in use for public or freight transport. The trains would have to share tracks with other operators and adhere to speed limits set on those tracks.

To date, the total construction of the project is estimated at $77.3 billion, more than $44 billion above the original price estimate described to voters in 2008.

The Assembly Transportation Committee held a hearing on the audit, after which the committee chair, Assembly Member Jim Frazier, asked for the resignation of HSRA Chair Dan Richard.

“After being assured multiple times that these ongoing issues were being addressed, it is apparent to me that the authority has been less than forthcoming,” Frazier said. “They have continually lied to us about performance.”

Richard said in an emailed statement to the Los Angeles Times that rail authority officials are “open to constructive advice, but have no need to respond to errant and uninformed attacks.”

The 2018 business plan by the authority warned costs could reach $97 billion, but outside critics expect a cost well above $100 billion.

“There is significant risk that the cost of this project is going to continue to accelerate more than it has to date,” State Auditor Elaine Howle said.

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