A steel-price spike coupled with an incredibly complex design and
a deal cut four years ago to preserve American jobs means the cost
of replacing the Bay Bridge will probably soar yet again.
After four delays in
15 months, Caltrans intends to open bids Wednesday on a contract
to build the self-anchored suspension segment, the architecturally
striking 525-foot tower and cables.
This contract will test
the taxpayers' wallets more than any of the other 16 contracts in
the $2.9 billion project, and it may not produce many California
The suspension span requires
67,000 tons of specially fabricated steel, the bulk of it in chunks
so large that the manufacturer must load completed pieces directly
Under federal law that
governs the use of highway dollars, Caltrans must hire a contractor
that will use U.S.-produced steel unless foreign competitors can
beat the price by at least 25 percent.
Former Gov. Gray Davis
in January 2000 mingled federal dollars in the bridge budget, triggering
the jobs provision after lobbying from unions.
While many support the
decision as a way to save American jobs and keep taxpayers' dollars
at home, the order forced Caltrans to redo complex bid documents
for a bridge that had been 75 percent designed with overseas fabricators
Overnight, Caltrans lost
unencumbered access to a worldwide steel market that has constructed
22 self-anchored suspension bridges, although none approach the
size of the new eastern span.
Instead, it found itself
with an inadequate domestic market that has never built a span of
this type and lacks facilities to fabricate the steel required for
its unique design.
Eight days before bids
open, only two domestic steel fabricators have completed the audit
necessary to bid on the tower. One firm did so for the deck bid.
Fewer bidders usually
means less competition and higher costs.
Contrary to Davis' argument
in 2000, the shift will produce few, if any, California jobs. Only
one of the steel fabricators on the bid list operates in California.
steel costs have shot up 70 percent in the past year largely due
to heavy worldwide demand, said steel analyst John Anton with Global
Insight, an industry forecast firm based in Washington, D.C.
He expects total project
costs for bridges to rise 20 percent to 50 percent over estimates
based on last year's prices.
Caltrans engineers estimated
in February 2003 that the self-anchored segment would cost $740
million, with half or more of that cost related to steel.
If Anton is right, the
suspension span contract could top $1 billion and bust open the
Don't blame steel prices
or "Buy America" for the cost of this bridge, argue Bay
Area steel industry representatives.
They estimate the added
cost to buy plate steel, which fabricators will use to build the
bridge components, at less than $30 million.
The bulk of the cost
overruns will stem from its complex design and insurance for the
high-risk project, said Dick Persons, a Moraga manufacturer's representative
who sells U.S. plate steel to fabricators.
"I've heard rumblings
that this bid will top $1 billion and that the fabricated steel
component could be as high as $250 million. That leaves a lot of
money in this bid unrelated to steel."
As for "Buy America,"
domestic steel costs roughly the same as foreign steel on today's
market, said Alfred Bottini, president of XKT Engineering, a Vallejo
firm planning to bid on the tower.
talks about Buy America, but it's not a factor in this bid. You
can't even buy steel plate overseas right now because the U.S. dollar
is so weak. Offshore firms have no reason to dump steel in the U.S."
Whatever the reason,
officials at the Bay Area toll Authority have grown worried enough
to discuss with lawmakers the takeover of the bridge construction
finances, which the state now manages.
"We have been able
to raise extra money for other bridge cost overruns, such as the
Benicia bridge, through innovative financing," said authority
spokesman Randy Rentschler. "If there's an overrun on the Bay
Bridge, we may be able to duplicate our success. But until Wednesday,
we don't even know if we have a problem or the size of the problem."
A chronic problem
Cost overruns for new,
repaired and replacement Bay Area bridges have made headlines for
But the new eastern span
is arguably the most critical earthquake safety project among the
During the 1989 Loma
Prieta earthquake, a piece of the upper deck shook loose and a woman
was killed. Every seismic engineer ever asked has said the bridge
will fail next time a similar-scale earthquake hits the structure.
After a political saga
that dragged out 13 years, Caltrans broke ground on a new span in
January 2002. The contractor has nearly reached the halfway mark
on the concrete skyway segment that will connect the suspension
span to Oakland.
While physical signs
of progress unfold in the Bay, Caltrans engineers struggled with
the signature element of this bridge, the self-anchored suspension
State leaders told them
to hurry and build it, but some of the same officials imposed new
rules that complicated the bidding.
"The governor (Davis)
was told that it would cost more (under Buy America), but no one
knew how much more," said one of the governor's then-advisers.
"He didn't seem to care about cost. The state had plenty of
Caltrans needed to know.
After Davis announced
the policy shift, the agency commissioned a study of the domestic
steel industry from a national transportation consulting firm.
The agency has refused
to release the report, saying its engineers used it to prepare cost
estimates for the pending contract.
Caltrans bridge engineer
Brian Maroney, who has worked on this span since its inception,
said the change required the design team to revamp portions of the
That's not uncommon.
Bid conditions change all the time, he said.
"Clearly, we had
to adjust who we were reaching out to," Maroney said. "Where
we once looked at a worldwide market, we now had to focus our attention
on the domestic market."
Keep money at
Until Davis' decision,
overseas firms supplied large amounts of steel used to build and
repair Bay Area bridges. Steel used to retrofit the western span
of the Bay Bridge came from Brazil, for example.
It was the new Carquinez
suspension span that drew the ire of state labor leaders.
The $187.8 million low
bid from FCI Constructors of the United States and Cleveland Bridge
Co. of the United Kingdom included steel deck from Japan; cable
wires and cable bands from England; and wrapping wire from Belgium.
dollars should pay for jobs at home," said Bob Balgenorth,
president of the State Building and Construction Trades Council
of California. "Sending our money overseas might save a few
bucks in the short-term, but what will it cost our economy and our
society? Where will our young people work if we have outsourced
all the jobs?"
Labor successfully shepherded
a bill through the Legislature that mandated the use of domestic
suppliers on all state-funded work. Davis called it too broad and
But he cut a deal with
the unions: Allow the Carquinez bid to stand unchallenged and he
would guarantee U.S. primacy in three remaining bridge projects,
including the new Benicia and eastern spans, and the retrofit of
the Richmond-San Rafael bridge.
"I told the governor
at one point that if people thought their toll money was going to
Japan, I didn't think people would support it," said international
and California ironworker executive Dick Zampa. The state would
later name the new Carquinez span after Zampa's legendary iron worker
father, Alfred Zampa.
Davis takes action
Davis delivered on his
promise through "Buy America," a 1982 law that mandates
the use of U.S.-produced steel and other components in highway projects
funded even partially with federal dollars.
To trigger the provision,
Davis ordered the mingling of federal dollars in the state's toll
bridge earthquake safety program.
In addition to the new
eastern span and retrofit of the western half of the Bay Bridge,
the program includes earthquake retrofitting of the Benicia, Carquinez,
Richmond-San Rafael and San Mateo bridges.
The contractor may use
foreign steel but only if the price beats the domestic bid by 25
Federal officials may
also issue waivers to Buy America. Caltrans has obtained five such
exemptions for specialty products such as the high-strength steel
wire for the cables and a large steel saddle that will hold the
cables at the top of the tower.
"Use of federal
funds will ensure that the greatest number of jobs remain in California,"
the Davis administration said in a Jan. 28, 2000, press release
about the Carquinez bridge contract.
Until that point, the
bridge work relied solely on local tolls and state gas tax proceeds.
In other words, Caltrans
didn't need a federal cash infusion at the time. That changed as
cost overruns mounted.
The current $642 million
federal contribution of dollars the state routinely receives for
bridge repairs now represents 13 percent of the $5.1 billion toll
bridge replacement and repair budget.
Despite claims to the
contrary, the shift may not generate any steel jobs in California
although it potentially produces work in other states.
Four years ago, Cleveland
Bridge Co. proposed building two California steel fabrication plants
in anticipation of the new Bay Bridge, including one in Contra Costa
County. The plants never materialized.
No steel fabricator in
the state has the facilities or port access needed to manufacture
and ship the steel deck, and only a couple could construct the tower.
Of the potential tower
fabricators, only XKT Engineering of Vallejo had secured permission
to bid as of Wednesday.
It employs about 100
people and would hire an additional 50 to 75 if it prevails on the
tower bid, its spokesman said. The firm has fabricated steel for
the Richmond-San Rafael and Golden Gate bridge retrofits and the
new skyway segment of the Bay Bridge.
The nearest West Coast
fabricators capable of building and shipping the 86-foot-wide deck
sections operate along the Columbia River between Oregon and Washington.
A consortium there called
Bay Bridge Fabricators recently unveiled plans to invest $33 million
into plant upgrades at the Port of Vancouver if it wins the bid
to build the steel decks. Its members include Oregon Iron Works,
Thomas Metal Fab, Universal Structural, and Fought & Company.
Other U.S. firms that
had applied as of Wednesday for Caltrans' mandatory pre-approval
to bid on steel components include Kiewit Offshore Services of Texas
and Wirerope Works of Pennsylvania.
But come Wednesday afternoon
at 2 p.m. in a basement conference room in Sacramento, this bid
could become the opening heard around the world.
Plenty of foreign companies
sought permission to bid, including Mitsubishi, IHI and Nippon Steel
of Japan, Samsung of South Korea, and the China Railway Turnout
Overseas firms face a
steep competitive disadvantage. To prevail, they must shave a quarter
off the price tag, or $185 million, based on Caltrans' cost estimate.
Caltrans' Toll Bridge
Program chief Dan McElhinney expects at least two, possibly three,
general contractors to submit bid packages, which will include quotes
based on both foreign and domestic fabricators.
More would have been
better, although he refused to speculate whether "Buy America"
If the low bid substantially
surpasses the estimate, Caltrans will have a serious financial problem
and few options.
The agency would probably
not save money if it abandoned the self-anchored suspension span
and built a utilitarian connector, as some have suggested.
An analysis shows that
the state would lose at least two years on the schedule while it
designed a replacement piece and conducted environmental reviews,
said Bay Area Toll Authority engineer Rod McMillan. The state would
also lose millions of dollars it has spent on design and the foundation
construction under way on Yerba Buena Island.
But where Caltrans will
find the money to finish this bridge is an open question.
The agency has burned
through most of the $448 million in its emergency bridge cash account.
It has enough cash to award this bid, but may not have the funds
to finish the remaining work on the bridge, including the segments
that link the span to Yerba Buena Island and Oakland.
The state highway account
is broke. Bay Area voters have already hiked tolls to $3, which
will go into effect July 1.
Technically, the mess
will end up in the Legislature's lap.
In September 2001, lawmakers
reluctantly passed a law that awarded Caltrans more money for Bay
Area bridges and ordered the agency to report all overruns to the
Former Caltrans Director
Jeff Morales repeatedly assured legislators at the time that he
would not be back to ask for more cash. Morales, a Davis appointee,
resigned earlier this year after Schwarzenegger took office.
"I don't have any
good answers at this point," said Sen. Tom Torlakson, D-Antioch,
who helped cut the 2001 financing deal. "Caltrans told us they
were going to take care of it. If that's no longer the case, we'll
have to try again."
Reach Lisa Vorderbrueggen at 925-945-4773 or [email protected].