Oregon Highway 20 Improvement Project Suspended

Putting the contract on hold will allow ODOT and YRC to jointly explore and pursue new and less expensive mitigation plans for the YRC-identified landslide areas.

The Highway 20 Pioneer Mountain-Eddyville improvement project started in 2006. Photo courtesy: ODOT

(NEWPORT, Ore. ) - Following months of discussion, the Oregon Department of Transportation and Yaquina River Constructors, the prime contractor for the U.S. Highway 20 Pioneer Mountain-Eddyville improvement project, have agreed to enter into a “negotiated suspension” of the contract work on the 7-mile, eight-bridge initiative to straighten the Coast Range route between Corvallis and Newport.

Putting the contract on hold will allow ODOT and YRC to jointly explore and pursue new and less expensive mitigation plans for the YRC-identified landslide areas.

The contractor’s parent company, Granite Construction, requested in late March that ODOT terminate the contract following the discovery of what the company contended were several ancient landslides within the project boundary.

Throughout discussions, ODOT officials have had one primary goal: Complete the project and open it to traffic as soon as possible at the lowest cost to taxpayers.

Temporarily suspending the contract and exploring other landslide mitigation alternatives will meet this goal, and presents the best option when it comes to protecting Oregon taxpayers.

During the suspension, Granite has agreed to dramatically reduce its overhead costs by moving personnel and equipment to other non-ODOT projects.

As part of the negotiated suspension, ODOT and Granite will share equally the overhead costs while landslide mitigation alternatives are explored and agreed upon by both parties and the necessary regulatory agencies.

Granite officials originally estimated the mitigation measures necessary to stabilize 11 significant landslide areas within the project would cost approximately $61 million, of which about $27.5 million was estimated for overhead during a two-year delay.

Rather than facing overhead costs exceeding more than $1 million per month during the possible two-year suspension, it is probable that these costs can be reduced to $100,000 to $200,000 per month.

As part of the suspension, ODOT and YRC agree to share equally these reduced overhead costs. These overhead costs are subject to audits to protect public funds.

The temporary suspension will take effect on or around Sept. 1, 2007. Contract work will resume no earlier than June 1, 2008.

Over the next year, ODOT and Granite will explore and pursue changes to existing contract restrictions and requirements and develop new, better and less expensive mitigation plans for the landslide areas.

Once ODOT and Granite decide on the best landslide mitigation options and construction work resumes, all components of the original contract (including pricing) will remain in place with the exception of those agreed-upon landslide mitigation changes.

Landslide-related changes and pricing will be negotiated between ODOT and Granite.

The new pricing will be used to determine any adjustment in contract price that results from the new landslide mitigation designs.

Any disagreements between ODOT and Granite regarding pricing adjustments related to landslide mitigation will be settled by a three-person Dispute Review Board.

Keeping Granite on the job and tied to the existing contract, saves money and time for Oregon taxpayers.

If ODOT had agreed to YRC’s request to terminate the contract, it could have taken as long as two years for ODOT to complete the design and award new contracts

ODOT believes that any new contract issued as a result of termination with YRC would have resulted in a significant cost escalation to reflect the increased risks of taking over the project site remaining after YRC left, including existing erosion control problems, known heavy rainfall and the short earthwork season.

The large amount of negative publicity hanging over this project is another risk factor that would influence cost escalation.

Had ODOT agreed to YRC’s request to terminate the contract, any YRC-provided buyout funds would have been overshadowed by the remaining risk factors.

These include ODOT having to guarantee engineering plans designed and stamped by a Granite subcontractor.

Under the existing contract, Granite and its engineer work together to solve design problems as they crop up.

In late March, when the contractor first requested termination, ODOT estimated the landslide issue could result in a two-year delay of the project.

By entering into a collaborative process with the contractor, ODOT believes that better and less expensive solutions to the landslide issues can be found.

ODOT and YRC are hopeful that construction can resume after a one-year delay and begin again in mid-2008.

That represents the best-case scenario. Worst case is the two year delay originally predicted.

Key facts:

1. ODOT signed the contract with YRC in the summer of 2005 for $129.9 million. The total project budget is approximately $150 million, which included the design-build procurement and contract administration, completion of the Environmental Impact Statement, development of concept plans and right-of-way acquisition.
2. The project will replace a 10-mile segment of the highway where 90 percent of the section is marked “No Passing.”
3. The new, 7-mile section will be 3 miles shorter with wider shoulders and multiple passing lanes. The project includes the construction of eight new bridges and the replacement of one bridge.
4. Approximately 3.5 million cubic yards of soil and rock will be moved
5. More than 20 waterways are in the project area (including tributaries) must be protected.
6. This project is one of very few recent ODOT projects to be built on entirely new alignment well away from the existing road.