Project Management Institute

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INNOVATIVE FINANCING

img The US$130 million that was tied to the stimulus was a jumpstart to advance initial construction and final design.

—Alan Weinberg, New Jersey Transit, Newark, New Jersey, USA

A tunnel project finally breaks bedrock with a boost from stimulus funds.

Case by Case: Innovation in Action

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PHOTOS COURTESY OF THE TUNNEL PROJECT

More than 80 years ago, planners in New York, New York, USA drafted a proposal to construct a second tunnel to boost train capacity between the city and the neighboring state of New Jersey.

But in an ironic twist, it took a global economic crisis to save the stalled project.

Dubbed “the nation's largest new public transportation project,” the US$8.7 billion, eight-year initiative is expected to more than double rail capacity to 48 trains per hour. And some commuters will even shave time off their trips because they won't have to transfer trains. The 9-mile (l4.5-kilometer) -long project—including tunnel bores stretching 3.4 miles (5.5 kilometers) under New Jersey, the Hudson River and Manhattan—will require the removal of 2 million cubic yards (1.5 million cubic meters) of rock and soil—roughly a third as much as the Hoover Dam.

Despite obvious need, the project was mired in logistics and funding issues. To get it back on track, New Jersey Transit took a new tack, teaming up with the Port Authority of New York and New Jersey to prove the project's merit to the region—not just to one city or one stakeholder.

“We were able to demonstrate that the economies of both New Jersey and New York are linked in one regional economy versus functioning as two separate local economies,” says Arthur Silber, the New Jersey Transit tunnel project chief.

Every penny of the funds required for design, construction, management, real estate procurement, insurance and other costs will come from an innovative blend of state and federal government agencies.

2.5 million cubic yards (1.5 million cubic meters)
The amount of rock and soil that must be removed to build the tunnel
46 million

The annual number of passenger trips on New Jersey Transit, the third-largest transit system in the United States

The State of New Jersey has pledged US$2.7 billion, and the Federal Transit Administration (FTA) and Port Authority of New York and New Jersey have each committed US$3 billion.

FTA chief Peter M. Rogoff called the federal contribution to the project the largest ever by his agency. “These are the projects that transform people's lives,” he said at the launch ceremony, noting that it has been almost 100 years since a new rail tunnel was built under the Hudson River. “These are the bold projects that in the past were either debated to death or just ignored.”

But these days, big-ticket public works projects are right in line with U.S. President Barack Obama's stimulus package to boost the ailing economy.

Once under way, the tunnel project is expected to create 6,000 annual construction jobs, generate another 44,000 permanent non-construction jobs, take 22,000 vehicles off the road and reduce annual greenhouse gases by 66,000 tons. As an added boost, gross regional product could jump by US$10 billion.

While funding pledges flowed in between 2005 and 2009, the federal government formalized its commitment last May with a down payment courtesy of President Obama's recovery plan.

“The US$130 million that was tied to the stimulus was a jumpstart to advance initial construction and final design,” says Alan Weinberg, senior director of agency coordination at New Jersey Transit. “We can only take as much [of the stimulus money] as we can spend immediately. It was a great boost to get us moving forward quickly.”

Breathing Room

Since the mid-1980s, New Jersey's rail ridership has quadrupled and is expected to double again within the next 20 years. The existing century-old, two-track railroad line is swamped by 46 million annual passenger trips on New Jersey Transit, which now ranks as the third-largest transit system in the United States.

And there's widespread recognition that improving mobility for workers commuting to jobs in neighboring states is crucial for regional economic development.

New Jersey Transit estimates the new tunnel will boost ridership on its trains into Manhattan from the current 85,000 a day to 127,500.

But it's not just an influx of people commuting into the big city.

“New Jersey, over the last decade and a half, has transformed itself. Most customers are [commuting] peak direction into New York and out, but our reverse commutation is growing strongly,” says Mr. Silber.

With so many citizens eager to ride the rails, the project team has to contend with high expectations and ambitious deadlines.

“We can't add any new train capacity until we complete this tunnel,” says Mr. Weinberg. “We're under the microscope to construct the project as soon as possible.”

Scaling Up

To achieve construction of this scope on an aggressive timeline while prudently managing taxpayer money, the team had to build efficiency, accountability and momentum into the project at every level.

Originally established in 2006, the slim project team consisted of just three New Jersey Transit employees: Mr. Silber, Richard Gramlich, senior director of design and construction, and A.J. Nayee, program manager, contract management.

To maintain some control over what could turn into a beast, the team decided to do things differently. The first move was to bring in design and construction management firms early. CM Consortium, a New Jersey construction conglomerate, joined the project to independently validate the engineering team's cost estimates and risk management efforts.

“Usually, the construction management team starts at the bid, but we brought them onboard at the beginning of preliminary engineering to help ensure constructible design, realistic construction schedules and effective construction contract package plans,” Mr. Gramlich explains.

Team Tunnel

Even the team setup broke with tradition.

“We decided early on to form a project office independent of New Jersey Transit's organizational structure,” Mr. Gramlich says.

As the project picked up steam, additional team members joined the ranks, including 30 Port Authority and New Jersey Transit employees, more than 250 design and engineering employees, and approximately 30 construction management staffers. And they all share office space on a single floor of a Newark, New Jersey building.

“It facilitates the whole workflow process,” Mr. Gramlich says. “We tried to drop all of our agency titles. We call ourselves the ‘Tunnel Team,’ not New Jersey Transit, not Port Authority.”

Team members don't sit according to their organization affiliation, either. Instead, they work across those lines as part of 25 contract package teams, each representing a contract within the larger project.

In another twist on the traditional, each contract package operates with its own budget.

“We have an overall project reserve, which is an additional contingency in case we run into unknown unknowns,” Mr. Nayee says. “If there are cost savings within a contract package, we take that savings and put it into a reserve contingency fund.”

To keep the lines of communication open, Mr. Silber makes the rounds every day to ask people how their efforts are faring.

“We're able to—in most instances—give guidance and make decisions on a very, very rapid basis. They don't have to write a letter or get in line,” he says. “When you're talking about US$8.7 billion, every day is important. If I can cut a day off of a critical decision, I‘ve just saved close to a million dollars.”

Express Way

The team keeps the project pace quick by fusing steps in the construction process.

Take preliminary engineering, for example, which usually begins after the environmental impact study is completed. For the tunnel project, however, federal legislation allowed the two steps to happen concurrently— saving considerable time and money. That helped the team identify and address problems sooner than they otherwise would have been able to.

One prime example: “The rock profile of Manhattan was significantly lower than our environmental consultants originally thought,” Mr. Gramlich says.

Ancient steambeds had created anomalies in the rock and didn't leave sufficient cover for the new station cavern. That discovery meant the original tunnel depth and station connector plans had to be refined. So the team went back and specified a lower tunnel and expanded station carved into Manhattan's bedrock.

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During the preliminary engineering phase—which began in August 2006 and ended in February 2009— the team maintained an aggressive schedule and stayed under budget. All work was completed for US$117 million, 1.5 percent less than the expected project cost.

The team is clearly putting those stimulus dollars to work.

In May, a US$13.6 million contract was awarded to New Jersey-based Ferreira Construction Co. to build the first underpass slated for completion in 2012.

“We've been on this schedule since early 2006 when we projected construction would begin in 2009,” Mr. Silber says. “And here we are now already under construction.” —Maya Payne Smart

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

CASE BY CASE OCTOBER 2009 WWW.PMI.ORG

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