GAO HEARING

QUESTION 12

The GAO has noted that the Authority's schedule for beginning of service on the various system phases does not allow for "any time for delays due to lawsuits, strikes, and adverse weather". Please describe how this has been changed in the Authority's current startup estimates.

The Authority has consistently been of the opinion that provision
It is to the communities'

for unforeseen delays is counter-productive.

best interest that all involved in the Metro construction feel the urgency of completing the program as soon as possible. Deliberately stre

out the program will cause costs to increase due to escalation

over which the Authority has no control.

-

a force

Provision for 18 months delay

has been recognized in the $4,650 million estimate for the E, F and K

Routes. Also, the 15 percent or $467 million unfunded contingency should be adequate to provide for increased cost from any scurce.

QUESTION 13 GAO HEARINGS

In the May 9th Report to Senator Byrd the CAO discussed (on page 20 to 21) several specific contract cost overruns. Were these reflected in the $139.9 million increase noted in the August 1975 Office of Program Control Report.

Yes, these items were included in cur August Report. A breakout of the specific items follows:

GAO HEARING

QUESTION 14

Are there now any delays or cost overruns which the staff foresees but which have not been publicly reported? If so, please submit a description of these for the record.

The Authority's staff anticipates that the cost of construction inspection may exceed the amount programmed for this task, however there is no basis for quantifying this increase until a definite trend is firmly established. The staff also foresees an increase in the cost of insurance and possibly in the amounts of contract modifications. These potential cost increases will be closely monitored and the Congress will be advised of their impact when they can be quantified.

The attached Table I to House D.C. Subcommittee Staff Analysis of
GAO Report was passed by House staff to the press during the testimony
of Mr. Gutmann of GAO before House Committee members on November 18.
The table shows a total Metro cost estimate of $6.125 billion. Meanwhile
Mr. Gutmann in his testimony was supporting a cost estimate of $4.8
billion, about 3 percent over the Authority estimate of $4.65 billion.

Following our testimony, Mr. Gutmann and I were asked by press for comment on the $6.125 billion estimate, which of course we had not previously seen. Mr. Gutmann's qualified reply to "Well, could the cost go to $6.1 billion?" permitted the Post writer to associate GAO with the House figure.

Herewith are brief comments on the main components of the House staff figures:

、

WMATA November 1974 estimate.

The GAO May 8, 1975 report to Senator Byrd projected
a cost increase of between $46 million and $414 million
for construction contingency. Staff used upper limit.

The GAO-Byrd report stated "route alignments currently
being considered could increase costs by as much as
$273 million." Maryland DOT has earmarked at least
$62 million from interstate highway funds for this

route.

The GAO-Byrd report concluded that WMATA escalation
"was estimated using reasonable procedures, data and
judgment," but that, "different judgments could be
substituted." They forecast cost due to escalation
could decrease $169 million or increase $489 million.
Again, staff used upper limit.

Source of this figure is unknown to WHATA. The GAO-
Byrd report states projected cost overruns on current
contracts may exceed allotted amounts by $19.6 million.

Current Hearings before House D.C. Subcommittees

.312 This figure is from the July 7, 1975 GAO report which
had a different purpose than the Byrd recort. The
staff included $149 million of "couble-counting" from
the $4,453 million above, as weli as betterments,
add-ons and handicapped facilities separately funded.
It also includes some estimates which GAO recently
agreed were excessive. The staff has thus overstated
this line item by 75-80 percent.

The GAO-Byrd report recognized that recipients of the report would likely add all of the high projections and therefore cautioned:

We believe it is reasonable to assume that some of
the contingencies that will adversely affect costs
will occur. It is also reasonable to expect that
not all will occur and, for this reason, the indi-
vidual items of potential cost growth should not
all be added to the current estimate to arrive at
a completion cost."

Attachment

as

Jackson Graham
General Manager