Legislature(2007 - 2008)BUTROVICH 205
02/26/2008 01:00 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| Financial Overview of the Juneau Road Project | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE TRANSPORTATION STANDING COMMITTEE
February 26, 2008
1:03 p.m.
MEMBERS PRESENT
Senator Albert Kookesh, Chair
Senator John Cowdery, Vice Chair - via teleconference
Senator Bill Wielechowski
Senator Gary Wilken
Senator Elton
MEMBERS ABSENT
Senator Donald Olson
COMMITTEE CALENDAR
Financial Overview of the Juneau Road Project
PREVIOUS COMMITTEE ACTION
No previous action to consider
WITNESS REGISTER
MALCOLM MENZIES, Regional Director
Southeast Region
Department of Transportation and Public Facilities (DOTPF)
Juneau, AK,
POSITION STATEMENT: Presented an overview of the Juneau Road
Project.
JEFF OTTESEN, Director
Program Development and Statewide Planning
Department of Transportation and Public Facilities (DOTPF)
Juneau, AK
POSITION STATEMENT: Presented an overview of the Juneau Road
Project.
BOB DUGAN, Project Manager
Lynn Canal Highway Project
Golder Associates
Anchorage, AK
POSITION STATEMENT: Answered questions on the Juneau Road
Project.
MARK GABEL
Cost Risk Estimating and Management
Washington State Department of Transportation (WSDOT)
Olympia, WA
POSITION STATEMENT: Answered questions on the Juneau Road
Project.
CURT MENARD, Mayor
MatSu Borough
Palmer, AK
POSITION STATEMENT: Expressed concern about the drain on the
Alaska state highway budget of the Juneau Road Project.
AVES THOMPSON, Executive Director
Alaska Trucking Association (ATA)
Anchorage, AK
POSITION STATEMENT: Expressed concern about the drain on the
Alaska state highway budget of the Juneau Road Project.
ACTION NARRATIVE
CHAIR ALBERT KOOKESH called the Senate Transportation Standing
Committee meeting to order at 1:03:45 PM. Present at the call to
order were Senators Wielechowski, Wilken, Elton, Kookesh and
Cowdery via teleconference.
^FINANCIAL OVERVIEW OF THE JUNEAU ROAD PROJECT
CHAIR KOOKESH announced consideration of a financial overview of
the Juneau Road project.
1:06:01 PM
MALCOLM MENZIES, Regional Director, Southeast Region, Department
of Transportation and Public Facilities (DOTPF), Juneau, AK,
said the Juneau Road Project begins at the end of Glacier
Highway, 40 miles from Juneau. The road portion of the project
ends at mile 90 with 50 miles of road construction. At that
point, shuttle ferries would take passengers to Haines and
Skagway.
He explained when the original Environmental Impact Statement
(EIS) was begun DOTPF looked at projects going up Taku Valley
and the west side of Lynn Canal as well. It also tried to
connect the project with the Canadian and Alaska Highway System
and Interior Alaska. From a map, he demonstrated how the project
has been divided into construction zones. The total construction
cost including ferries was estimated in 2007 to be $350 million.
He said the road goes along the southern and eastern side of
Berners Bay up to two major bridge crossings. Each bridge would
be approximately a half-mile in length as would be the bridge
across the Katzehin River.
MR. MENZIES stated that this project was conceived in 1993; its
purpose and need has not changed since then. These are to
provide a transportation corridor, improve opportunities for
travel, to reduce travel time between communities and within the
state to the capitol and to reduce state and user costs for
transportation.
MR. MENZIES said the roadway would consist of two 11-foot travel
lanes and two 4-foot shoulders that would act as bike lanes, all
paved when completed. The initial construction would be a gravel
surface. The project was first approved by Governor Knowles and
was followed by Governor Murkowski. A permit from the U.S. Army
Corps of Engineers is expected in March 2008 after a two-year
process.
He reviewed that supportive resolutions have been adopted by the
City and Borough of Juneau and the Alaska State Legislature; the
project has already received $45 million from the 2006
legislature. The supplementary draft EIS received 1,600 comments
with 60 percent of respondents in favor of the project. He said
this type of construction has been criticized by many for being
too rugged, but another tough construction project was completed
in Southeast Alaska in 1975 - the building of the Klondike
Highway connecting Skagway with the National Highway System.
1:12:21 PM
JEFF OTTESEN, Director, Program Development and Statewide
Planning, Department of Transportation and Public Facilities
(DOTPF) said he would give a planning and financial perspective
on this project. He first wanted to point out a key difference -
that unlike any other project substantial individual user
benefits would accrue in the form of savings in reduced time,
travel expenses and numbers of accidents. Because these benefits
don't flow to the state directly, that fact is sometimes lost
when talking about costs and savings.
He said the Lynn Canal Highway Environmental Impact Statement
(EIS) shows that this project along with a couple of other small
improvements leads to the ability to reduce the ferry fleet by
two mainline ferries. The two least expensive mainline ferry in
Southeast Alaska cost $19 million to operate last year.
Replacement cost for a ferry is about $250 million per ferry.
This easily dwarfs the cost of this one highway project. "This
is truly a self-financing project if you look at it in that
light."
MR. OTTESEN said he wanted to talk next about DOTPF's purpose
and why people are "so hard over" about building roads and want
to know the answer to why have a land road when there is a
marine highway. The answer is that the purpose of DOTPF,
established in statute almost at the beginning of statehood, is
to build a network of highways that link cities and communities
together throughout the state that aid in the extraction and
utilization of the state's resources. This means that building a
road that may benefit a mine is a positive, not a negative. He
elaborated:
It is what our founding fathers wanted us to do. And
it remains on the books today. This is also consistent
with our constitution which talks about - in Article 8
in Sections 1, 2 and 5 - it talks about using our
natural resources, using our lands for settlement and
building the public facilities necessary to make that
happen.
MR. OTTESEN said this has been one of the most planned projects
in the state's history. For the past four administrations
transportation plans have been identified as one of the ways to
meet the demands in this corridor in a more cost-effective way.
The 1994 EIS for this project began under the Hickel
administration and continued through the Knowles and Murkowski
administrations.
He said fiscal constraint has been a concern over the last few
decades and the five-year project was adjusted to a twelve-year
project in order to reduce the fiscal impact. He honestly
thought that was the wrong decision because the benefits of the
project can't be achieved until it is built. Those benefits are
significant and will continue in perpetuity. However, for the
time being, in order to minimize impacts on the rest of the
state he is proposing to slow the pace of the work to a little
more than $20 million a year over 12 years. The total of $350
million includes 4 percent inflation. This proposed amount for
one project in the Southeast region is well within historic
norms and it represents about 7 percent of the Statewide
Transportation Improvement Program (STIP).
MR. OTTESEN showed a slide comparing the cost of maintaining the
ferry system and the cost of maintaining the highway system.
Excluding capital, he said, the state now spends more money to
operate the ferry system than to operate the highway system. Yet
at the same time the highway system delivers 99.5 percent of
total travel in the state, measured in vehicle miles of travel,
and the entire ferry system delivers only .5 percent of vehicle
miles of travel. This means it costs the state an average of 2
cents per mile to maintain roads to allow vehicles to use the
system versus $4.50 per mile to transport a vehicle on a ferry.
This is the fundamental cost difference between ferries and
roads and it's what drives them to say that a more cost
effective system can be achieved by shortening the ferry links
and lengthening the road links. He also suggested that a cost
effective system is best for the region because it's
sustainable, not only in rich years, but in the lean years. He
strongly urged them to keep those numbers in mind.
MR. OTTESEN showed another slide indicating that the ferry
system has gone from about two-thirds of its costs being covered
by state revenues to about one-third and this has all happened
in the last three or four years. He said it's instructive that
high costs have occurred just in the recent past because the
Juneau access EIS was prepared before those high costs came into
the picture. Any analysis they did then doesn't really reflect
these new high costs. So the EIS was positive in terms of the
road's economics then, but these figures suggest it would be
even more positive today.
He said a hard look at the numbers over the next 12 years, which
is how long it will take to build this road, indicates that the
Lynn Canal Highway System will require about $350 million
adjusted for inflation. The Marine Highway System (MHS) will
require over $2 billion, albeit for its whole system.
1:21:19 PM
MR. OTTESEN said no other project in the state offers meaningful
cost reduction to the MHS. That $2 billion over the next 12
years is equivalent to building six Juneau access projects or 66
percent of the urban highway needs in both Anchorage and
Fairbanks or 33 percent of all the strategic highway needs
statewide. "It's a significant number and it deserves to be
brought forward, because if we can manage it, if we can reduce
it, and at the same time offer people actually a better travel
option, I think we've made the right choice, Mr. Chairman."
SENATOR WILKEN asked if "after revenue" is what is known as the
$100 million per year subsidy.
MR. OTTESEN replied yes; the department took the annualized cost
of the ferry system, subtracted revenue from that and came up
with a subsidy of $2 billion over the next 12 years.
SENATOR WILKEN clarified that the $2 billion isn't only
Juneau/Lynn Canal, but the total Marine Highway System.
MR. OTTESEN agreed.
SENATOR ELTON asked if he had broken out the Lynn Canal
component from the whole Marine Highway System and compared it
to the Lynn Canal road project.
MR. OTTESEN replied no, but that had been done in the EIS. The
only thing that has changed is that the cost is rising for
everything the Marine Highway System does just like the cost of
construction for the highway; they are rising at about the rate.
He emphasized, though, that the Juneau Access Road Project is
supposed to reduce the need for two mainline ferries. Simple
math indicates that those ferries will cost far more than the
Lynn Canal Highway.
SENATOR ELTON said it seems unfair to compare the cost of the
Lynn Canal Highway to the budget of the whole Marine Highway
System. A better comparison would be what the cost is to run
ferries in Lynn Canal.
MR. OTTESEN replied that number could be provided. He said he
wasn't trying to suggest the Lynn Canal Highway changes that
picture, but he was trying to point out that costs have risen
dramatically for the MHS and only one project across the entire
state can make a difference. "So if we're going to attack those
costs, and I think to attain sustainability, that would be the
goal. This is one project that can begin to reduce those costs."
It would be affordable to the state in the lean years as well as
the rich years.
1:25:01 PM
SENATOR ELTON said he'd like to see a copy of the comparison.
CHAIR KOOKESH said he agreed that comparing the cost of the
whole MHS to the Juneau access project was unfair.
MR. OTTESEN elaborated that he wanted to draw attention to the
fact that the state has a system that for a variety of reasons
has become expensive.
We're at the cusp. We're at that decision point in the
road. Do we continue and do it again for the next 50
years or do we make a difference and we begin to go to
the day boat concept that has been identified in so
many of our planning products and actually achieve the
day boat concept?
CHAIR KOOKESH reasoned that he wanted people to see the whole
picture.
MR. OTTESEN said another question is what happens if the cost of
the Lynn Canal Highway goes above the $350 million estimate. He
said the department had already spent $24 million on the EIS and
permitting. Construction costs have gone up dramatically, but so
have the costs for the Marine Highway System - and these costs
are driven by the same fundamental factors in the economy - the
cost of energy and steel. But only the Lynn Canal Highway can
offer a means of structurally reducing some part of the AMHS
costs and only the highway can offer to finance itself because
its savings actually come back to the state budget.
MR. OTTESEN said he has heard that congress is going to attach
global warming mandates to the next federal highway bill.
Contrary to conventional wisdom, the ferry system is more energy
intensive than the highway. Conventional ferries burn more fuel
and carry far less traffic. He also informed them that if
construction of the Lynn Canal Highway is delayed the state may
end up paying a carbon tax, as well.
1:28:57 PM
He said this project offers an opportunity for a higher level of
service in terms of capacity, travel time and better frequency.
It reduces, in perpetuity, state costs in this corridor and it
greatly reduces the travel cost to the traveling public, makes
travel affordable to low-income groups and helps connect
communities, resources and economic activity - factors that are
all consistent with both the department's statutory purpose and
the Alaska Constitution. Also, he said, reducing the MHS costs
makes it more sustainable and frees up state money to be spent
elsewhere. He elaborated:
But if you delay the Lynn Canal Highway, all the
inverse of those things happen. This is like if I had
come to you and said we don't want to build the
highway; we really think we ought to stick with the
ferry and here's why - I think you'd almost laugh me
out of the room. If we're going to perpetuate a lower
level of service with less capacity, longer travel
time, reduced frequency, we're going to lock in high
state cost in the corridor, we're going to perpetuate
high travel costs for the public and we're going to
result in travel being unaffordable to the lowest
income groups - leaving our communities less connected
and now cementing our reliance on a high carbon
footprint option. That's essentially the fork in the
road we face. We can pick one of those two futures.
So, in conclusion, we think that this decision to
continue will represent a reasonable commitment of
federal highway funds, because it serves the express
purpose and need of the corridor. It offers the only
identified means of structurally reducing the rising
cost of marine highways, it offers the best solution
for green house gas mandates that we think are coming
and coming quickly and, finally, I think by reducing
Marine Highway System costs, we achieve two quick
benefits. One, we make that system more sustainable
and I believe sustainability is its best interest, is
in the region's best interest. Secondly, any avoided
costs then become available for investment elsewhere
in our state. And those avoided costs would be avoided
costs that are being churned off year after year after
year because we're making savings in perpetuity.
1:31:05 PM
SENATOR ELTON asked him to describe Phase I and Phase II of the
project and about the funding for them both.
MR. OTTESEN replied that Zone 1 is a five-mile segment of Phase
1. It is a deliberately chosen small segment because of the
possibility of litigation and an injunction. If the department
put out a larger construction contract, the contractor would
have his bond capacity potentially tied up for months, if not
years.
SENATOR ELTON asked how much money that component of the project
costs.
MR. MENZIES replied the estimate is between $7 and $10 million.
SENATOR ELTON asked how much the department has on hand.
MR. OTTESEN replied the department has about $88 million.
SENATOR ELTON asked if that money is composed of X number of
millions left over from the 2006 appropriation.
MR. OTTESEN replied that money also comes from federal
authorization using what is known as Advanced Construction (AC).
It is done with a lot of projects and it is essentially the
authority to spend state dollars and get reimbursed with federal
dollars at a later date. Because this project is essentially
"going to hang fire" until the legal process is completed, the
department is using AC because it doesn't tie up any real
dollars. The federal dollars are like a promise, rather like a
credit card.
SENATOR ELTON asked if federal AC funds can be used on any
project.
MR. OTTESEN replied there is federal authority for the Juneau
Access Project; the department processes the paperwork with its
federal partners and that allows them to begin this project. The
department uses AC on projects throughout the state for a wide
range of reasons.
SENATOR WILKEN asked him to refresh his memory about the west
and Taku River routes that would hook up the highway that is off
of his map.
MR. MENZIES responded the Taku route was studied through the EIS
process. It is longer than the Juneau access route on both the
west and the east side; it is subjected to possible flooding in
the whole Taku Valley. The state would also have to get
permission from the Canadians to build it and that was not
forthcoming.
MR. MENZIES said the original west Lynn Canal route was started
in 1963; he knows because he was the original author of the
first study. At that time, it was called the Juneau-Haines
Highway for capitol access. The ferry alternative wasn't well
thought out at that time except there would be a general ferry
in St. James Bay, William Henry Bay or one other bay in the
area. The problem with the ferry crossings they realized would
be the heavy cross winds it would be running through all the
time - especially in the winter. The east side had similar
design and construction challenges with avalanche areas
requiring snow sheds. The engineering item that made the east
side more attractive is it is the side that can "hard-link" to
Skagway, the Klondike Highway and the Canadian-Alaskan Highway
to the north. This could never be done on the west side because
of a ferry crossing.
CHAIR KOOKESH asked him to elaborate on the hard-link. He said
his understanding was that the highway would end a long ways
south of a hard-link.
MR. MENZIES replied that was true. He explained that the EIS
included many different options, one of which was going all the
way to Skagway and connecting to the Klondike Highway. That was
and is a long term Alaska planning goal of this project. It was
one of the options when Skagway and the National Park Service
thought there might be an invasion of their view shed of the
Klondike National Park in Skagway.
1:38:12 PM
He said Skagway and the National Park Service objected to the
project under a section of the Transportation Act; so the
project was shortened at this time to the Katzehin River, which
always was going to have a ferry terminal in the many different
options since this project was always going to have access to
Haines. As a result, the department stepped back almost two
years ago and picked a second option in the EIS which would end
this project at the Katzehin River requiring two shuttle ferries
to Haines and Skagway. A long term goal more than 12 years from
now would be a second project that would go all the way to
Skagway and connect to the National Highway System.
CHAIR KOOKESH asked if the $350 million includes the hard-link.
MR. MENZIES replied no.
CHAIR KOOKESH asked if the $350 estimate includes the shuttle
ferries.
MR. MENZIES replied yes.
CHAIR KOOKESH asked how good the estimates are and reflected
that the Whittier Tunnel might be the only comparable project.
He asked how close the estimates were on that project.
MR. OTTESEN replied he would get that information, but the
Whittier Tunnel was very different.
CHAIR KOOKESH responded he was just interested in learning how
close the department's estimates are in general.
MR. MENZIES stated that the department doesn't currently have a
project that large. Other projects in the neighborhood of $30
million to $50 million have been within 5 percent of their
estimates. These projects have included large rock and heavy
hauling projects like the Ketchikan International Airport.
SENATOR WILKEN asked if the University of Alaska is doing a
study for the state regarding this project or any state
transportation priorities.
MR. MENZIES replied yes and said about nine months ago the
department constructed a submerged reef in Lynn Canal south of
Berners Bay because of a request from environmental groups. The
department has also conducted other studies with federal
agencies on goats, wolves, and moose in the project area to
determine what the population standard is for these animals now
and what it would be after construction.
1:41:59 PM
SENATOR ELTON asked how much the Golder geotechnical
investigations informed the department's cost estimates.
MR. MENZIES replied that Golder was not retained by the
department to do any part of the cost estimates. They were
retained by DOTPF as a consulting firm to study the geology of
the project. The department used its own geologists in Zones 1,
2 and 3. Golder was used in Zone 4. Its initial geological
review recommended several alignment changes in areas of
stability studies. The department's designers have looked at
these areas and made adjustments to the plan. The department's
pre-construction engineer conducted the estimate for the 2007
financial plan based on recent work throughout the state. The
estimate went from $270 million up to $350 million between 2004
and 2007.
SENATOR ELTON asked about the Golder report and quoted:
Based on the observed fragment size of the talus,
there does not appear to be practical methods of
retaining the talus without resorting to structural
methods such as retaining walls. Therefore cut heights
in talus must be minimized by either putting the road
in prism or removing the talus from the cut slope.
SENATOR ELTON said retaining walls are additional costs.
Removing talus above the road is an additional cost. He asked if
those costs and reports were internalized as DOTPF made cost
estimates on construction.
1:46:22 PM
MR. MENZIES replied yes. He said about $15 million had been
added for retaining walls as a result of the Golder report. The
department has also moved the road upwards and outwards in some
areas away from talused areas. He said Golder's next step will
be some subsurface exploration in a year or two. Because the
project has been changed to a 12-year plan the department chose
not to spend the money now.
SENATOR ELTON asked for confirmation that there was a Phase I
study by Golder and asked if there will be a Phase II study in
the future.
MR. MENZIES replied yes, but it had not yet been authorized.
1:47:28 PM
BOB DUGAN, Project Manager, Lynn Canal Highway Project, Golder
Associates, Anchorage, AK, said the Golder study was strictly to
map the geology and identify the geologic hazards along Zone 4
which is a 22-mile section from Independence Creek to the
Katzehin River.
MR. DUGAN said Golder worked with DOTPF after the issuance of
that report to optimize the alignment, but Golder's
participation was terminated a year ago and they have not worked
on it since.
SENATOR ELTON asked if Golder had completed its work when its
services were terminated.
MR. DUGAN replied yes, it had completed the preliminary
authorized work.
SENATOR ELTON asked if it was Golder's expectation to begin
Phase II.
MR. DUGAN replied yes.
SENATOR ELTON asked if Golder was given a reason why the second
step didn't follow the first.
MR. DUGAN replied it was understood that it was no longer a
priority, presumably because it was no longer the priority of
the governor. He said it's a very difficult terrain with unusual
alignment and some of the conditions will require special
measures. He said he thought the cost was still a work-in-
progress because there are segments of the alignment that have
not been finalized as far as he knew, having been gone from the
project for a year.
CHAIR KOOKESH asked for confirmation that Golder only worked on
one segment.
MR. DUGAN replied that is not quite true. He said Golder also
conducted investigations at the bridge sites in Zones 1, 2 and 3
drilling bore holes. They also carried out liquefaction studies.
He said he had briefly seen all the bridge crossings on a
reconnaissance level.
1:51:48 PM
SENATOR ELTON asked if Golder was optimistic about the cost of
the project or, since the budget is a work in progress, did Mr.
Dugan expect it to change.
MR. DUGAN replied it will depend on how the alignment gets
through the most difficult places which may require tunnels.
There are places that have large cuts, large talus and the pre-
design alignments Golder worked with weren't feasible. The
situation may also vary when the sites are actually
investigated. To say that the $350 million is a hard number is
difficult because not enough work has been done on the
alignment.
SENATOR ELTON asked if the state should begin spending money on
a road to Katzhin given the questions regarding the alignment
issues.
MR. DUGAN replied it is out of his area of expertise to answer
that. He said more money would have to be spent on engineering
before cost could be determined. Golder was not charged with
that task.
1:55:03 PM
SENATOR WIELECHOWSKI joined the meeting.
SENATOR ELTON said, using the analogy of building a house, it
seemed to him that not enough may be known about the foundation
to commit to the project.
MR. DUGAN said he did not think there was enough known at this
point.
SENATOR WILKEN asked Mr. Dugan what other projects he had worked
on that would be akin to this project.
MR. DUGAN replied he has spent his whole career working in
Alaska beginning in 1974 on the Trans Alaska Pipeline(TAPS). He
has worked on several linear projects throughout the state
including transmission lines between Tyee Lake and Petersburg
and a 90-mile transmission line from Healy to Fairbanks. He has
worked on highway upgrades in Sitka and Haines and bridges in
Unalaska.
SENATOR WILKEN asked if this is his first job on rough steep
terrain.
MR. DUGAN replied that this project is his most extensive
section of new highway on virgin ground since he began working
in Alaska.
SENATOR WILKEN, following up with Senator Elton's analogy,
compared the current circumstance to an unworkable situation in
need of improvements with the choice of either repairing or
building anew. He said the state is in the position of having to
improve transportation to and from Juneau and all of Southeast
Alaska. This is not an access issue or a rough terrain issue.
This is a financial decision. Whether it's $350 million or twice
that over time, he's not sure it makes much difference.
1:59:20 PM
MARK GABEL, Cost Risk Estimating and Management, Washington
State Department of Transportation (WSDOT), said he currently
leads the department's cost risk estimating management unit and
has spoken about risk-based estimating to many project teams in
the Lower 48. He said that the committee aide had sent him four
questions to address before the committee.
The first question was, "Given that Alaska DOT has in several
instances greatly underestimated road building costs, what are
the benefits in Washington and other states to coming up with
cost ranges?" He said a lot of states are struggling with this
challenge right now. The short answer is it's better to be
approximately right versus precisely wrong. In other words, an
early estimate, in particular, is more accurately expressed as a
range rather than a single number. It's false precision to say a
project is going to cost an exact amount. People in this
industry know that two questions are always going to be asked -
how long the project will take and how much it will cost. And
the obvious follow-up question is, "Why?" He said the risk-based
estimating process makes it possible to respond to those
questions in terms of ranges and provides explanations as well.
MR. GABEL said he documents and identifies the risks in terms of
probability. Early in the design more things might happen than
actually will happen and it is best to identify the
uncertainties. When the term "risk" is used in his risk
estimating practice, it can be viewed as either negative or
positive. A positive consequence presents an opportunity while a
negative consequence poses a threat to a project's objective.
Any project will have both, especially early-on. Risk opens new
avenues of thinking and this can be a benefit.
Question 2 was, "How has our cost estimation validation process
for our state's more expensive projects helped Washington
determine its transportation priorities or has it?" The answer
is yes, he said. Although he does quantitative analysis, the use
of the results by the decision-makers is more of a qualitative
use of that information. Decision makers need to know how much
risk they are willing to tolerate.
MR. GABEL said the third question was, "To the extent you have
reviewed information of Juneau road projects, can you give us
some guidance on how numerous hazards on road alignment might
affect costs?" He said his knowledge of the project came from
skimming through the Golder report and viewing a DVD about the
project and he concluded that he couldn't really add any value
and that Alaska's experts would be much more familiar with the
project. He offered, however, that to properly ascertain the
risks and hazards, a risk workshop would be appropriate and
should include experts in risk, cost, and subject matter experts
who are external to the project. That is the hallmark of WSDOT's
validation process. The need is for a few people who have no dog
in the fight.
That team should work collaboratively with the project team in a
workshop setting to identify and characterize the risks. A
quantitative analysis could be performed that would reveal a
range and probability of cost and schedule for that project. He
emphasized, again, the further out the project is, the more
uncertainties it is exposed to simply because of so many
unknowns. Those unknowns become revealed over time through
engineering, investigation and project development.
The final question was, "How does Washington State incorporate
cost ranges into the STIP process?" He realized that people
building budgets have to plug in a number and WSDOT uses this
cost estimate validation process workshop for all projects over
$100 million. They have done a couple of dozen different
projects ranging from $100 million to several billion. The
default figure they have established for the development of a
th
probability range is the 90 percentile. However, they realized
this figure can be too conservative; so project managers are
allowed to propose a different percentile if they think it is
more appropriate for budgeting.
He explained when a risk-based workshop for any project is
conducted, the first range of figures coming out of the workshop
will be an unmitigated estimate range or a risk register of
identified risks characterized in terms of probabilities and
impacts. Those would be put through a statistical model and
ranked in terms of significance. He likes project managers to
identify the top 7-10 risks and create an aggressive risk
mitigation response plan and he again reminded them that these
risks can be turned into opportunities to be taken advantage of.
The analysis could then be run again to see quantitatively what
the effect the mitigation response plan provides.
2:10:43 PM
SENATOR ELTON asked if he looked ahead 12 years at a major
project (like this one), what kind of inflation factor he would
use. The Alaska DOT has used 4 percent.
MR. GABEL replied when WSDOT first began the [indisc.] process
in 2002, it used a flat rate of around 3 - 3.5 percent that
reflected the construction cost index table that they purchased
from Global Insights, an economic forecasting company. The
program managers still use this program. They allowed some
uncertainty to be assigned around that inflation rate of minus 1
percent or plus 4 percent, but the analysis of that model found
inconsistent applications. It was difficult to explain why one
inflation rate was used for one project and not for another. So,
Washington now uses the standard construction cost index tables
which were purchased from Global Insights. However, he said,
Washington allowed two mega-projects to do something very
different and they used an inflation range of 4 percent plus or
minus 2 percent. For Alaska's specific situation, he recommended
turning to local economic forecasters, the University perhaps.
He suggested identifying whatever standard inflation rate the
state uses for transportation projects and run the model again
using that same rate plus 1 percent. That would reveal the
sensitivity of inflation to the projected-year expenditure
costs.
2:14:34 PM
CURT MENARD, Mayor, MatSu Borough, said MatSu is one of the
fastest growing areas in the state and has a lot of road
projects. Another fatality had just happened on the
Palmer/Wasilla Highway, which happens to be listed as one of the
three most dangerous roads in the state. He said he's not
opposed to this project, but he is concerned about how many
dollars will come out of the capital budget to fund it and what
will be left over for the rest of the state. Also, since its
spread over a 12-year period, the costs could go up. He
supported the project because of the projected savings over the
ferry system.
2:17:10 PM
AVES THOMPSON, Executive Director, Alaska Trucking Association
(ATA), Anchorage, AK, said freight movement represents a large
chunk of the state's economy and impacts everyone every day.
"The simple truth is if you got it, a truck brought it."
Referring to the "Overview of the Alaska Trucking Industry" in
the bill packet, he said the association's main priority is the
gas line.
He said the slide of the National Highway System shows it as the
backbone of the freight network and that infrastructure needs to
continue being improved. One of the improvements needed is the
elimination of the weight restrictions on the Parks Highway that
were put in place by the DOTPF during the spring freeze and thaw
period when the highways are most susceptible to damage. Weight
limits are reduced by approximately 15 percent and since it's
not possible to reduce the weight of the truck, the weight of
the payload is reduced. This is a cost to everyone - consumers
and shippers. He said some years ago, about 90 miles of road
needed to be repaired and that has been whittled down to 50
miles. A project in the General Obligation (GO) Bond package
would cover another 20 miles. The association supports funding
the remaining 30 miles which would eliminate the weight
restriction.
MR. THOMPSON said fixing the road would also create safer
driving conditions and maintenance is the key to safe and
productive highways. A low level of maintenance can mean the
difference between life and death. The association advocates
expanding the DOTPF state general capital projects program
especially in the wake of the decreases in federal highway
dollars. It supports SB 189 providing for bridge repair and
replacement, but he said it's not enough to address the needs of
the state. Other issues the association is concerned about are
congestion like that in MatSu, mentioned by Mayor Menard, in
Denali Park and on the Seward Highway, especially Windy Corner.
2:24:10 PM
MR. THOMPSON said the association is also concerned about truck
route access in the cities, highway safety, fuel prices and
availability, and clean air. It supports a highway system that
encourages development.
Regarding the Juneau road project, Mr. Thompson said, the ATA
supports new roads. In this historic time of Alaska's extreme
wealth, some of that wealth could be used to fund the Juneau
road project and still leave funds to support highway projects
in other parts of the state. However, it is not among the
highest priorities for ATA.
CHAIR KOOKESH said he was receptive to another hearing on the
Juneau road project. There being no further business to come
before the committee, he adjourned the meeting at 2:26:52 PM.
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