Light rail audit: Met Council failed to enforce construction contracts, costing millions

The Metropolitan Council bungled oversight of the construction of the Southwest Light Rail by failing to enforce its agreements with its contractors, adding hundreds of millions of dollars to the project’s cost and causing further delays, according to a report by the Office of the Legislative Auditor released Wednesday.

The Southwest Light Rail line so far is a decade behind schedule and at least $1.5 billion over budget, with another analysis of further costs likely to come out in January. The new audit focused on the Met Council’s oversight of its contractors and was the third out of four legislative audits — the final one investigating the project’s financing will likely be released this fall.

The Southwest Light Rail line, also known as the Green Line extension, will connect downtown Minneapolis to Eden Prairie, Hopkins, Minnetonka and St. Louis Park, traveling 14.5 miles. The project is overseen by the Met Council — a regional government agency whose members are appointed by the governor — and construction on the expansion is about 75% complete. The line was originally scheduled to open in 2018, and then 2023. The extension is now scheduled to open in 2027 with a total estimated cost of $2.77 billion.

The critical audit will fuel continued momentum for an overhaul of the Met Council. The Legislature passed a bill this session creating a task force to study Met Council governance with a due date of February, giving lawmakers the entire legislative session to make changes that could include yanking appointment power from the governor and electing members of the council instead. 

A September audit already investigated how the SWLRT went over budget and past schedule; and a March audit analyzed how the Met Council made numerous errors in its oversight.

Wednesday’s audit primarily examined the relationship between the Met Council and two of its contractors: Lunda McCrossan Joint Venture and AECOM Technical Services.

At the beginning of the process, the Met Council and its contractors agreed on design specifications and plans. But during construction, unforeseen changes often caused the project to deviate from its original design, which is common on major construction projects. The Met Council requires the contractor to file “change orders,” which when approved often increase the cost and time needed to complete construction.

From March 2019 to October 2022, the Met Council issued 658 change orders, which increased the project’s cost by nearly $220 million, according to the audit.

Legislative Auditor Judy Randall said at a legislative hearing Wednesday the Met Council was unwilling to use its oversight powers to enforce the contracts.

“They were very reluctant to use the tools they had,” Randall said. “The tools (the Met Council) had were … withholding money or deducting funds, and they were very reluctant to do so in fear of potential litigation or the contractor walking away.”

The audit recommended the Met Council better enforce its contracts.

Lawmakers of both parties excoriated the Met Council and its oversight of the project, directing their criticisms to Met Council Chair Charles Zelle, who testified after a presentation on the auditor’s findings.

The lawmakers were especially exasperated at one of Zelle’s opening comments that the Green Line expansion “is costing more because it was always gonna cost more.”

“It was underbudgeted. It had a suppressed funding budget, and it’s simply not a $2 billion project. It’s much closer to what we’re projecting now,” Zelle said.

Sen. Mark Koran, R-North Branch, told Zelle that his comments were “extraordinary,” because he’s seen no evidence that the Legislature should trust the Met Council to complete the project responsibly.

“We’re supposed to trust your organization to deliver better and be accountable when we’ve seen none of that in this project,” Koran said.

Zelle told lawmakers at the hearing that the Met Council has made mistakes, but it’s open to recommendations for improving operations.

“We are not perfect. Can we improve our competency and procedure? Absolutely,” Zelle said. “I do not believe it is an issue of people being inept, nor corruption. The project should have been budgeted at the level more of what we recognize it is now.”

Sen. Scott Dibble, DFL-Minneapolis, said there is something wrong with the culture within the Met Council and cited the recent Taylor Swift concert in Minneapolis as an example.

Earlier this month, the Met Council said it could not commit extra trains to help the thousands of concert-goers get home late at night, citing staffing shortages. The Met Council eventually committed extra trains after a public backlash.

“There’s something about this agency that allows it to think it’s OK to say to the public ‘You’re on your own’ to tens of thousands of people,” Dibble said. “Something is wrong with a culture that allows for that.”

Dibble said like the concert debacle, the Green Line expansion project should “have never gotten to this point.”

“A lot of what we’re talking about here that’s woven throughout this (audit) has to do with a culture in which there’s a complete lack of sensitivity and responsiveness and attunement to the public responsibility, the public duties that it has,” Dibble said.

Dibble, chair of the Senate Transportation Committee, during the session proposed a bill reforming the Met Council to have its members be elected by the residents of the seven-county metro area, but it stalled, and the Legislature settled on the task force instead.