Big Contractors, Port Authority Part Ways on New Trade Center PATH Hub (Updated)

The troubled Santiago Calatrava–designed PATH station at the World Trade Center is facing a new obstacle. After years of what multiple executives and officials described as a rocky relationship and headaches over a tremendously complicated project, the Port Authority on Thursday broke off its relationship with Phoenix Constructors, a conglomerate of some of the city’s top construction firms that was managing the building of the $3 billion station.

The Port Authority, which owns the World Trade Center site, now will manage construction itself, bidding out pieces of the project to individual contractors.

The agency and Phoenix released a joint statement:

To take advantage of favorable market conditions, the Port Authority and Phoenix Constructors have jointly agreed to modify their existing contract.  The contract modification will allow the agency to competitively bid future work on the World Trade Center Transportation Hub, while ensuring that Phoenix Constructors continues to work on and complete their existing work awarded to date, providing a smooth transition between contractors.  This modification will also help ensure the World Trade Center Transportation Hub remains on the budget and schedule the Port Authority released in October.

Phoenix, a joint venture of the mega-firms Skanska, Fluor, Granite and Bovis Lend Lease, had been managing the construction itself, bidding out pieces of the work to subcontractors with Port Authority oversight.

The job has proved far more expensive than initially imagined. Once budgeted at $2.1 billion, the cost rose to an estimated $3 billion after a review of the project was done by the Port Authority last summer—a number that came after months of cost-cutting.

Phoenix will continue its current work that has already been awarded, which will take it through 2010 (though some residual work will continue after that). After that, Phoenix’s members can individually bid on contracts for the PATH station, as can other firms.

A Port Authority spokesman said he does not believe work on the hub will be slowed by the agency’s decision, a point echoed by Denise Richardson, who leads the General Contractors Association, an industry trade group.

“I do think it’s a good change,” Ms. Richardson said. “I think the Port Authority realized that they can get the project done if they work directly with the general contractors that are building the project, rather than having this construction management team in place and this very complicated subcontractor setup.”


Update 4:07 p.m.:

Taking a look at the Port Authority’s reevaluation of the World Trade Center construction from last October, it seems officials felt confident enough in their relationship with Phoenix at the time to report it as a “resolved issue.” The reevaluation report said there had been uncertainty in the contract with Phoenix about whether the team should finish work on the PATH hub.

“This uncertainty arose from the fact that in the urgency to rebuild, the Port Authority established a less-than-ideal Construction Management/General Contractor contract with Phoenix,” the report said.

To address this, the Port Authority said in the report that it would “reform” the contract with Phoenix to allow for fixed prices and streamline bureaucratic oversight, along with other incentives.

“In the interest of bringing greater certainty to the rebuilding effort and reducing cost, schedule and constructability risk, we have decided to retain the Phoenix Joint Venture under a modified relationship that provides the right incentives to control schedule, cost and risk,” the report said.

Apparently not.

Another of the 15 issues that were trumpeted as “resolved” in October hit trouble in mid-March. The Port Authority announced a deal to buy needed land from the St. Nicholas Greek Orthodox Church last summer, only to see its agreement fall apart in later negotiations.

Big Contractors, Port Authority Part Ways on New Trade Center PATH Hub (Updated)