KIEWIT-TURNER A JOINT VENTURE
7200 S. Alton Way, Suite A-300
Englewood, CO 80112-2252
TEL: (303) 930-9000 FAX: (303) 930-9001
May 20, 2015
Dear Senator Bennet and Senator Gardner:
Thank you for your inquiry regarding the potential short and
long-term consequences if we are
forced to shut down the Denver VA Replacement Medical Center. As
we write this letter,
Congress and the Department of Veteran Affairs have yet to agree
on a plan to address the
spending authorization cap and increased funding for the
project. As you know, if an agreement
is not reached by the time Congress adjourns this Friday, the VA
will require us to suspend
construction operations and begin a safe, orderly process to
secure and demobilize from the site
next week. We understand that this is one of many issues
Congress must work through this week,
but it is crucial that, as you requested, your colleagues
understand the possible negative impacts
a shutdown even temporary would have on Veterans, taxpayers,
workers and subcontractors.
Based on some conservative assumptions and information from the
last shutdown, we suspect
that another shutdown could delay the potential opening of the
hospital well into 2018.
Furthermore, another shutdown could result in potential
increases in subcontract and other costs,
perhaps as much $125 million to $200 million. Additional
information on the latter is as
follows:
1. Demobilization and Remobilization Shutting down and then
resuming this complex project will be complicated, time consuming
and costly.
This more than 1-million-square-foot project is only 50%
complete. It includes 11 different structures that are at
various
stages of completion. Securing these structures, making them
safe
and protecting them from the elements would be a
considerable
effort.
Maintain and securing the site during shutdown would cost
approximately $2 million per month.
Expensive tools, equipment and materials would have to be
removed from site.
Most supplies and materials on the project are weather sensitive
and extended durations without adequate protection could result
in
damage and replacement.
Currently, 85 subcontractors, 700 workers and 200 staff work on
the project every day. All of these workers and staff will have
to
be compensated during the demobilization process.
Of course, if the project is funded and allowed to restart there
will also be analogous costs to bringing people, materials, tools
and
equipment back to the project and ramping up construction
again.
$50-$75 million
The Honorable Michael Bennet
U.S. Senator for Colorado
261 Russell Senate Building
Washington DC, 20510
The Honorable Cory Gardner
U.S. Senator for Colorado
B40B Senate Dirksen Building
Washington, DC 20510
Letter to Senators Bennet and Gardner
May 20, 2015
Page 2
2. Reprocurement of Subcontracts Considering the strength of the
current construction market in Denver, if another shutdown occurs,
we
believe many subcontractors may terminate their subcontracts and
instead
pursue other projects. They will not continue to gamble their
businesses
and the financial security of their workers on a project with an
uncertain
future. Losing even a few of our subcontractors could have a
tremendous
impact on the cost and schedule of the project for several
reasons,
including:
Assessing the partial work in place and developing bid packages
for new completion subcontracts will take months.
Obtaining bonding and determining warranty provisions for
replacement subcontractors to complete partial work started by
others is unprecedented for a project of this size. In some
cases,
work may have to be demolished and rebuilt.
Considering the above and the overall reputation of the project,
attracting new subcontractors to bid on this project will be
extremely challenging.
There is also potential for market escalation for the time it
would take to reprocure these subcontracts and restart the project.
Note:
From December 2013 to December 2014 construction costs
reportedly increased approximately 9% in the Denver market.
$75-$125 million
The employees of Kiewit-Turner and our subcontractors are
hopeful that that a shutdown can
still be averted. We know that you understand the impact a
shutdown would have on the project,
taxpayers and most importantly the Colorado-area Veterans it
will serve. We appreciate your
efforts to reform the substantial problems with VA construction
and for holding them
accountable for its many mistakes on this project. Please know
we respect your leadership and
are grateful for your consistent attention to this project. If
there is anything we can do to assist
you or your colleagues, please let us know.
Sincerely,
Scott Cassels
President
Kiewit Infrastructure Group
Peter J. Davoren
President and Chief Executive Officer
Turner Construction Company
cc:
The Honorable Mike Coffman
The Honorable Doug Lamborn
The Honorable Scott Tipton
The Honorable Ken Buck
The Honorable Diana DeGette
The Honorable Ed Perlmutter The Honorable Jared Polis
