Oft-Delayed San Francisco Span May Cost $3 Billion a Mile

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Workers walk on the eastern span of the newly constructed San Francisco-Oakland Bay Bridge in Oakland, California, on July 12, 2013. Close

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Workers walk on the eastern span of the newly constructed San Francisco-Oakland Bay Bridge in Oakland, California, on July 12, 2013.

Eight years after a section of the San Francisco-Oakland Bay Bridge collapsed in the 1989 Loma Prieta earthquake, California officials said they’d spend $1.28 billion to replace the damaged eastern span by 2004.

Almost a decade later, the 2.2-mile (3.5-kilometer) structure isn’t ready, and cost estimates have swelled to about $6.4 billion -- or $2.9 billion a mile. That price is comparable to the second-most-expensive U.S. bridge replacement project, for a 1.4-mile floating span across Lake Washington to Seattle scheduled for completion late next year.

While the Washington project is forecast to come in at less than its $4.65 billion ceiling, the Bay Bridge’s cost continues to climb, most recently with an estimated $20 million repair announced July 10 after 32 steel rods failed in stress tests.

“This is so grossly over budget and has taken so much longer than originally forecast,” said state Senator Mark DeSaulnier, a Concord Democrat who leads the Transportation and Housing Committee. “By most reasonable definitions, it’s been a failure of management.”

Since 1997, when then-California Governor Pete Wilson, a Republican, chose to replace the eastern section of the bridge, the design has evolved from an unadorned skyway to the world’s longest self-anchored cable suspension bridge. Meanwhile, the cost of steel has risen mainly because of demand from China. Flat-rolled steel coil doubled to $772 a metric ton this year from $384 in 2002, according to data compiled by Bloomberg.

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The San Francisco-Oakland Bay Bridge continues to exceed cost estimates, most recently with an estimated $20 million repair announced July 10 after 32 steel bolts snapped during testing in March. Close

The San Francisco-Oakland Bay Bridge continues to exceed cost estimates, most recently... Read More

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Photographer: Justin Sullivan/Getty Images

The San Francisco-Oakland Bay Bridge continues to exceed cost estimates, most recently with an estimated $20 million repair announced July 10 after 32 steel bolts snapped during testing in March.

Busy Bridge

The bridge carries about 280,000 vehicles a day along Interstate 80 over San Francisco Bay. The eastern and western sections meet at Yerba Buena Island, site of the former Treasure Island U.S. Navy base. The new part will have two parallel spans, each with five traffic lanes, 10-foot shoulders and a bicycle path on the eastbound side.

From its inception, the project has been whipsawed by Bay Area politics, such as San Francisco’s boycotts of bridge-related meetings in 1999 because city leaders opposed the alignment of the east span, according to a 2004 report for the Joint Legislative Audit Committee by the California State Library. The Navy barred the state from testing soils on Yerba Buena because it opposed the proposed alignment, prompting a White House meeting in August 1999 to resolve the issue.

Rising Costs

Construction began in 2002. The state transportation department forecast completion in 2007, while the projected cost of the east span had doubled to $2.6 billion, according to a legislative analysis in 2005. That year, lawmakers passed a $1 toll increase to cover budget overruns. The department pledged to “pursue cost-saving measures aggressively” to hold the final price at $2.6 billion, according to an August 2002 report by State Auditor Elaine Howle.

Photographer: Ryan Anson/Bloomberg

A file photo from August 2011 shows cars traveling along the old San Francisco-Oakland Bay Bridge, right, in San Francisco, California. Close

A file photo from August 2011 shows cars traveling along the old San Francisco-Oakland... Read More

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Photographer: Ryan Anson/Bloomberg

A file photo from August 2011 shows cars traveling along the old San Francisco-Oakland Bay Bridge, right, in San Francisco, California.

By August 2004, bridge planners said the projected cost had risen to $5.1 billion, according to the 2005 bill analysis. State planners attributed the increases to higher steel prices, a four-year delay in completing the project, the more complex cable-suspension design, and unrealistically low initial estimates, the analysis shows. In 2004, U.S. steel prices had almost doubled to $759 a ton from 2002 levels, the data show.

Meanwhile, contractors reinforced the western span of the bridge between San Francisco and Yerba Buena by adding steel plates and replacing about 500,000 rivets with almost 1 million high-strength bolts, according to the transportation department project website. More than 7,700 tons of steel were added.

Under Budget

Costs on the western structure, including a new freeway approach into San Francisco, came to about $754 million by May 31, below the $772 million budget, according to a June 2013 report from the Toll Bridge Program Oversight Committee.

In December 2004, then-Governor Arnold Schwarzenegger proposed scrapping the east span’s suspension design in favor of a simpler concrete structure to save as much as $500 million. A Howle audit that month faulted the transportation department, referred to as Caltrans, for its oversight and said it was difficult to pinpoint reasons for cost increases because of trade secrets claimed by contractors.

“Managing a program of this size, complexity, and cost requires a consistently high level of diligence in applying accepted project-management practices,” the auditors said in the report. “However, Caltrans has not fully incorporated generally accepted standards for project management.”

The then-head of Caltrans, Sunne Wright McPeak, responded by saying that some project oversight changes were being made. She also said the more complex suspension architecture was largely responsible for rising costs.

‘Very Difficult’

“The challenge of building large and complex bridges in locations that have high seismic risk is very difficult and multifaceted,” McPeak said in a written response. “Replacement of the east span, in particular, has been and continues to be one of the most complex engineering projects ever undertaken and, as indicated in your report, has been adversely affected by factors both within and beyond the control of Caltrans.”

Schwarzenegger signed the 2005 toll-increase bill that kept the suspension design and covered most of the additional costs with bonds pledged against the extra revenue. Drivers now pay $6 during peak periods to cross into San Francisco; there is no eastbound fee.

The bill also devoted more money to the project by drawing from other parts of the state budget and from refinancing debt of the Bay Area Toll Authority, part of the area’s Metropolitan Transportation Commission. The law set up the three-member oversight panel to monitor costs and settle disputes.

Turning Point

Since the overseers began their work in 2005, the project has mostly stayed within budget, said Amy Rein Worth, chairwoman of the Oakland-based regional commission, which will operate the new bridge. Between July 2005 and May 2013, the projected cost rose to $6.4 billion from $5.5 billion, or about 16 percent, according to the committee’s June report.

“The original estimate probably was not realistic given the scope of the project,” Worth, the mayor of Orinda, northeast of Oakland, said in an interview. “What’s important to recognize is that the cost was pretty much set in 2005 and that’s where we’ve been since then. It has moved very deliberatively on target and on schedule since 2005.”

The most recent escalation, included in the $6.4 billion estimate, covers the replacement of massive support bolts that snapped during stress tests in March due to hydrogen exposure. That $20 million expense will be covered by the project’s contingency fund, said Andrew Gordon, a commission spokesman.

Opening Delayed

Last week, the commission and Caltrans announced a delay in the opening of the east span, planned for September, because of the failure of the 32 rods that were supposed to stabilize the span during an earthquake. The agencies pushed back the timetable to sometime after a fix is completed in December.

The latest delay intensified criticism of project managers.

“It was completely the wrong choice on the type of material they used” for the rods, Charles McMahon, a professor emeritus of materials science and engineering at the University of Pennsylvania, said by telephone. “Lack of knowledge is exactly what’s going on here.”

During a July 10 commission hearing, Executive Director Steve Heminger said designers didn’t consider the unique challenges of the heavily traveled bridge in a saltwater environment in developing specifications for the rods, nor did they try to maneuver around state contracting restrictions that limited them to a single type of rod. Heminger said none of the other rods supporting the structure appears to be vulnerable.

Defending Management

Heminger defended the management of the east span project in speaking to reporters after the meeting. He said that political considerations and unspecified “phantom problems” delayed the work and pushed up costs.

“If this bridge were just about engineering,” he said, “we’d probably have been done a decade ago.”

Tax-exempt toll authority revenue bonds maturing in April 2028 traded July 8 for the first time since May, with a yield of 3.84 percent, the most since the debt was sold in September, data compiled by Bloomberg show. Top-rated munis had an average yield that was about 1.31 percentage points lower that day, close to the widest spread since the 2012 sale, the data show.

To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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