L.A. City Council Approves $200M Contingency Addition for LAX People Mover Project to Handle Contractor Claims

L.A. City Council Approves $200M Contingency Addition for LAX People Mover Project to Handle Contractor Claims
Rendering: A design for the people mover project at LAX.

This article has been revised and corrected from the original version.

The Los Angeles City Council on June 5 approved the addition of $200 million in contingency funds to the budget of the people mover project at Los Angeles International Airport to handle additional claims from the five-company prime contractor consortium building the line, bringing the total project cost to nearly $2.95 billion.

The contingency funds were approved even as negotiations continue between Los Angeles World Airports, the city agency that runs LAX, and the contractor consortium, known as LAX Integrated Express Solutions, to resolve a series of disputes. Those disputes have helped push back the completion date by more than a year, to late next year.

The council action ratifies a decision made in May by the city’s Board of Airport Commissioners. At that time, John Ackerman, the new chief executive for Los Angeles World Airports, was quoted as saying progress was being made toward a “global settlement” with the contractor consortium.

No additional details have been released on the status of the negotiations or how much money a future settlement would involve.

The additional $200 million allocated by the City Council will not go immediately to the contractor consortium.

Instead, the consortium must present change orders to Los Angeles World Airport administrators, with a cap of $200 million on the change orders. For those change orders under $40 million, either Ackerman Chief Executive John Ackerman or the board of commissioners can sign off; for change orders more than $40 million, only the board can approve.

The people mover is the centerpiece of the $5.5 billion makeover of ground access routes to LAX. It is intended to whisk passengers along a 2.25-mile route from the central terminal area, first to a now-completed intermodal parking facility, then to a station connecting to the Metro K (Crenshaw-LAX) light rail line and finally to a $1 billion consolidated car rental facility now nearing completion.

In 2018, a consortium of seven infrastructure company contractors won the bid to build the rail line. Due to subsequent mergers and acquisitions among these companies, the consortium now stands at five infrastructure firms: Fluor Corp. (based in Irving, Texas); Balfour Beatty (London); Grupo ACS (Madrid); Flatiron Construction Corp. (Broomfield, Colo.); and Alstom SA (Saint-Ouen-sur-Seine, France).

When the contract was issued, the targeted completion date was 2023.

Through the years, construction has been slowed by wet winters, the Covid-19 pandemic and supply chain issues, in addition to the disputes with the contractor consortium. Many of the disputes were resolved earlier on, though not before adding to the delays.

According to a Fitch Rating Service bond rating document issued in January, work on the project was at that time 96% complete. Much of the remaining work involves testing both the train cars and the line’s electrical systems.

That January document lowered the rating for the $1.2 billion in bonds that have already been issued for the project to BB+ from BBB-, with a negative future outlook.

The rating service said its downgrade was due to recurring construction delays and the aforementioned disputes between the construction consortium and Los Angeles World Airports.

Fitch analysts said some of the delays centered around information technology access that the contractor team needs to conduct systems testing and reaching agreement on a change order to finish work on one of the pedestrian walkways.

There is one silver lining to this series of delays. With the people mover project not expected to open before late 2025, the Los Angeles County Metropolitan Transportation Authority, or L.A. Metro, now has additional time to complete the nearly $900 million station connecting the people mover line with its K Line, thereby linking the airport to the region’s rail network for the first time ever.

That completion date was itself pushed back from last year to late this year.

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