Subway City

Mass Transit Construction Zooming in NYC

New York City is seeing an unprecedented amount of activity in mass transit construction, akin to the age when the growing metropolis started adding landmark bridges and new subway lines to meet the demands of an exploding population. With the city's population expected to grow by 1 million in the next 20 years, the time is ripe.

An entire new $16.8 billion line along the 2nd Ave. in Manhattan, by the Metropolitan Transportation Authority, will run from 125th St. to the Financial District in Manhattan, with 16 new stations, by 2014. The $13 billion East Side Access project, by the MTA and the Long Island Rail Road, will connect LIRR's Main and Port Washington Lines in Queens to a new terminal below Grand Central Terminal in Manhattan, to add to LIRR's terminal at Penn Station.  When the project is completed in 2013, it is expected to bring 160,000 riders to the east side of Manhattan. Finally, the $2 billion extension of the No. 7 line, by the MTA, will extend the IRT Flushing Line all the way to 11th Ave., and is expected to spur redevelopment of the far west side, in addition to providing access for the planned expansion of the new Jacob K. Javits Center. The MTA awarded a $1.14 billion contract in October to S3 Tunnel Construction, a joint venture of Skanska USA Civil of Whitestone, N.Y.; J.F. Shea Constructors of Walnut, Calif.; and Schiavone Construction of Secaucus, N.J. While a proposed station at 10th Ave. was dropped in October due to funding shortages, the city has until this summer to act on a $450 million option for a shell to be built as part of the initial contract.

“The whole landscape is going to change,” says Mysore Nagaraja, president of capital construction at the Metropolitan Transportation Authority.

At peak construction on all of these projects, a total of four tunnel boring machines (TBMs) will be grinding through the Manhattan bedrock at the same time: two on East Side Access already in operation, and, later this year, one on the No. 7 extension and one on the 2nd Ave. Subway.

The four TBMs may not seem particularly remarkable when compared to Shanghai, China, with a population approaching 30 million people (“they have 50 TBMs running at the same time,” says Nagaraja) but it’s unprecedented in the city’s history. Another TBM will most likely be used for the construction of the $7.2 billion Trans-Hudson Express (THE) Tunnel, expected to start construction next year. The two-track tunnel and the new underground six-track station below 34th St. will meet the projected doubling in rush-hour commuters from New Jersey to Midtown, an estimated 100,000 passengers by 2015. The Federal Transit Administration approved the Draft Environmental Impact Statement for the project in January, and the Port Authority of New York/New Jersey will conduct public hearings this year. Last year, CM Consortium, a joint venture of Tishman Corp., Parsons Corp., and ARUP, has been selected by New Jersey Transit to manage construction on the tunnel, expected to take at least sever years.

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All this construction is happening while the rest of the nation's construction industry is feeling the pain of sub-prime mortgage debt defaults and the world's largest financial companies are posting billions of dollars in losses in that particular lending market segment. While New York's construction industry has for some time not gone in step with the rest of the country, its had its own set of pressing problems: the escalating price of materials has contractors doing business in entirely new ways, while the shortage of skilled labor and management is driving the industry's associations straight to the city's high schools to lure away potential engineers and construction managers from the glow of Wall Street.

“The greatest challenge right now is that the construction industry is so saturated and so much work is going on not only in New York City, but all over the country and all over the world,” says Nagaraja. “The resources and the contractors [we need to get] have been a challenge, and the prices are much higher that we expected them to be.”

In addition to putting a strain on management and consulting firms in terms of the sheer amount of work, the number of projects running concurrently limits the skilled labor available to do the job. “The good contractors always depend on the best skilled labor in the industry the A-teams,” says Nagaraja. “If you don't get A teams, you get B and C [teams], and you have productivity issues. If you do that and translate that to money and time, you will get more cost and schedule delays.”

The competitive environment under which the public owners now operate leaves many firms completely out of the running there just aren't that many players in the industry that can take on something of this scale single-handedly.

“The MTA, PANYNJ, and the Department of Environmental Protection want to break down some of these contracts into smaller projects to get them down [in scope] and get more bidders,” says Jay Badame, executive vice president of Tishman Construction, New York. “On any project over $1 billion, you are left with 1 or 2 bidders. It's not as competitive, and the agencies are looking into that.”

“The context of this [infrastructure] work is very large, and the transportation component is at an all time high,” says Richard Anderson, president of the Building Congress. “At the same time, we don't have a lot of firms that are qualified and experienced and have the capability to do large scale work. It means these firms will have to gear up, or other people will have to come in to pick up some of the slack - like Tishman, Dragados, from Spain, and maybe other foreign firms.”

Dragados USA is the New York City-based unit of Madrid-based Grupo Dragados S.A. The firm won a $423 million project for the East Side Access project in a joint venture with Queens-based Judlau Contracting. In addition, Dragados is in the process of acquiring Schiavone Construction Co. of Secaucus, N.J.

“Owners have problems with escalation, but we think that's mellowing with the sub-prime market,” says Badame. “We still see a lot of work going through 2012.”

Tishman is unique in that it is one of the city's few firms that do both high-rise commercial and heavy infrastructure work. Starting in the late 1980s, when the commercial market slowed down, Tishman decided to expand its scope, starting with work at the John F. Kennedy International Airport for the Port Authority. Tishman is now one of the three firms selected in the joint venture for the THE Tunnel.

“The availability of labor is going to be a problem for all of us in the next 5 years, as well as the available talent to manage it,” Badame says.  “We hired 125 people over the past 18 months, and will hire 150 more in the next 18 months in New York, Atlantic City, and Las Vegas.”

“As work goes on, we need to increase the talent pool,” he adds. “We are really trying to fast forward the industry, and we are actually trying to go to high school because right now everyone's enamored with Wall Street.”

The billions of dollars going into the mass transit projects may lead one to believe that they alone can drive up prices. However, the scope of New York's new construction is such that all of MTA's projects, for example the 2nd Ave. Subway, East Side Access, and the No. 7 extension amount to a mere 15 % of all work in the city, according to Nagaraja. “It's not this work that's driving the prices.”

The scope of these projects is forcing the public owners to look for more money. In December, the MTA has voted to increase fares next month on its unlimited and multi-ride metro cards.

The PANYNJ, faced with $29.5 billion in capital investments over the next 10 years, has increased fares for the first time in seven years in January. The PATH fare has been raised from $1.50 to $1.75, while tolls on the Port Authority's two tunnels and four bridges went up $2 to $3 dollars. The increases are meant to allow for $3 billion for the THE tunnel, $3.3 billion for system modernization and overhaul, $4 billion for bridge and tunnel maintenance and repair, $8.4 billion for the reconstruction of the World Trade Center site, and $3.1 billion in security enhancements at the JFK and LaGuardia airports.

Meanwhile, in addition to the financial concerns, building in New York has for decades meant a logistical quagmire not seen in many other U.S. cities. “New York City is 100% developed - both under ground and above ground,” says Nagaraja. “[Under ground], you have a lot of utilities that go back almost 100 years: many of them you know, but many of them you don't know. Above ground, we have to make sure we have minimal disruption: to people, businesses, and traffic - we have to plan it so the impact if minimized. That's quite a challenge, and you can't make everyone happy.”

In addition, the amount of government approvals necessary for each phase of these projects is tremendous.

“One of the greatest challenges is the overall public management and review process,” says Anderson. “The government is putting in so many procedural requirements for large infrastructure projects that they take a great deal of time and money. When we started the subway system more than 100 years ago, the approval process was absolutely minimal compared to what it is today. The approval process is important, but it takes a lot of time and money.”

The long approval process is again due in part to the saturation of the city itself. While the No. 7 extension goes through swatch of industrial land, work on the 2nd Ave. Subway goes straight through some of the busiest residential and commercial swaths in the city. Affected residents and businesses participate in the process through their community boards, and a special 2nd Ave. Task Force was set up to deal with the public. “We have been very transparent,” says Nagaraja. “And we need to be.”

“Once we have the launch box [for 2nd Ave. Subway] between 92nd and 96th Sts., once the TBM is lowered, the TBM will be doing work underneath,” he explains. “[But] the second part of the contract is building four stations, and each of these will have an impact on the community.”

Ultimately, it will be the status of New York as a city that rewards talent that will see these projects through the financial, logistical, and managerial obstacles.

“The market is the biggest determinant of heavy capacity to the industry,” says Anderson. “When things are very busy, prices rise and firms and individuals are attracted and that's happening. The people are being attracted to New York and coming from all over the world. You're finding that people are coming here because they're paid well. The market is largely taking care of it - there are programs to add capacity in certain areas, but the most reliable response is the market response.”

These large-scale projects are also affecting the way everyone, from government agencies to the subcontractors, does business. From the sophistication of the new 21st-century TBMs, to the coordination efforts requiring joint venture teams to work with multiple city agencies to ensure New York's economic life goes on aboveground, the education derived from this process is unprecedented.

“We have not done these kinds of projects in a long time,” says Nagaraja. “We have done rehabs of existing systems, but no new projects in a long time. There are a lot of things that you learn on a daily basis: not only construction techniques, but contracting issues, project management issues. We are coming up with new ways, in terms of bonding, insurance, even terms and conditions. We are learning a lot.”