Cost increases at State Pier project blamed on delays
New London — The estimated cost to complete the reconstruction of State Pier will rise by a minimum of $6.8 million, and more likely end up being double that amount, the Connecticut Port Authority learned on Tuesday.
Most of the increase is being blamed on the delay to the start of the project and the need for expediency in finishing the pier in time to accommodate needs of joint venture partners Ørsted and Eversource. The partners will use the pier for the assembly and staging of offshore wind components needed for the construction of South Fork Wind, the first of three offshore wind projects State Pier is expected to serve. The land-based portion of construction of the 12-turbine South Fork began earlier this year and is expected to be completed by the end of 2023.
The new costs estimates, which are not yet finalized, were announced during a meeting of the Connecticut Port Authority on Tuesday. It was the same day as a rare tour of the construction site of what had been a $235.5 million project to redesign and reconstruct State Pier to meet the needs of the offshore wind industry.
Gov. Ned Lamont joined members of the news media on the tour, led by construction manager Kiewit, which is still in negotiations with the port authority on a final price for construction.
Lamont, already aware of the increased cost estimate though it had not yet been made public, reiterated his commitment to the project in the face of a request for more state funding.
“Look, this is an enormous project,” he said against the hum of machinery in the background at State Pier.
“Sometimes there’s some unforeseen things. Time is money and there were some delays that cost us. But you have to keep the perspective,” Lamont said. “This is transformative for our state and our region. I think it’s one of the most important investments this state has made in many a year. We’re not doing it ourselves. It’s a public–private partnership with tens of millions coming in from our partner.”
Ørsted and Eversource are contributing more than $70 million toward the project, with the state picking up the remainder along with any additional costs.
Lamont also alluded to the fact that though the newly reconstructed pier initially will be used by the offshore wind industry, it’s a facility that will continue to be owned and controlled by the state and an economic driver.
Connecticut Port Authority Board Chairman David Kooris has hinted over the past few months about potential costs increases associated with delays in permitting the project and challenges and appeals that followed.
At Tuesday’s board meeting, Kooris said a $6.8 million increase was directly associated with “the additional cost of labor associated with (Kiewit) being on site for longer than anticipated to complete the project.”
The increased cost will be the subject of a vote at an upcoming board meeting once a commitment of funding from the state is secured.
Additionally, Kooris said he anticipated an additional jump in costs to accelerate the speed of the project to meet the schedule with Ørsted and Eversource and avoid any penalties. He said the current schedule, because of delays, would bring a project completion date into April 2023. Kooris said a new target date would be March 1.
Kooris said he did not yet have an estimated cost to accelerate the project and bring in more workers or more shifts. "We want to shorten the construction schedule even with the delay because we want it ready for the first offshore wind project," he said. "Having the crew on site longer will be $6.8 million. I don't have the exact cost associated with acceleration, but expect it to be somewhere in that order of magnitude."
Kooris concluded that an additional $12 million to $15 million is at play, though that number will be "finalized over the coming month."
The previous $235 million cost estimate had included $193 million for construction, $11 million for contingency and $31 million for soft costs such as construction administrator fees, design and environmental mitigation. So far, with the project more than halfway completed, Kooris said the port authority has spent just under $2 million of $11 million in contingency funds.
The project started in 2019 with a cost estimate of $93 million.
Kooris said that figure was derived shortly after the partnership was formed with Ørsted and Eversource and only reflected “committed funding at that time.”
“It was not the all-in price tag anticipated for the project,” he said.
The price later rose to $157 million when designers shifted the heavy-lift areas used in the installation and delivery berths from one side of the pier to another in part to accommodate concerns about ferry traffic near Cross Sound Ferry operations. It was about one year ago that the number jumped to $235 million, the result of a completed design for the project and “estimates meeting reality,” Kooris said.
Kooris acknowledged critics of the process who say the authority shouldn't have started the work in early phases without full permits and that the costs of the delay could have been avoided if the authority had waited. He called the authority's decision a "strategic risk" and argued that it paid off.
"By purchasing the steel and executing contracts pre-inflation, we are confident that we saved well more than the $6.8 million associated with delay," Kooris said. "The steel alone, if we had waited to purchase it until after obtaining permits, was going to be $6 million higher than we got for it. While there is cost associated with delay, we think in the grand scheme of the project that it is still net favorable."
Kooris said the authority is working on a strategy to secure additional resources from the Lamont administration.
"We expect to be done in exactly a year," he said. "When we're done in a year's time, the turbines will come right away."
Ørsted and Eversource issued a statement Tuesday: “We believe in the strategic and economic importance of transforming State Pier into a state-of-the-art, heavy-lift terminal that supports a broad range of future port activities, including offshore wind,” it reads. “The current redevelopment activities have already created significant jobs, including for Connecticut’s building trades, and spurred local investment in New London. Once completed, the facility and the Port of New London will play a critical role in supporting the transition to a clean energy future as we utilize the facility for our offshore wind projects starting next year.”
State Sen. Paul Formica, R-East Lyme, said he was disappointed in the news of another cost increase for the project but was most concerned about the level of financial oversight by the state in the wake of the exit of Konstantinos "Kosta" Diamantis, the former deputy secretary of the Office of Policy and Management assigned to oversee the State Pier project on behalf of the state. The FBI has issued a subpoena to the state for documents related to Diamantis' handling of school construction projects and State Pier reconstruction.
With OPM already stretched thin, Formica said he thinks the state needs to ensure there are people with the right expertise devoted to oversight of the project.
With Diamantis gone, Lamont named Noel Petra, deputy secretary of the state Department of Administrative Services, to continue work on the State Pier project on behalf of the state. Petra, for the time being, also is taking over the role of oversight on the state’s school construction projects.
Kooris reiterated on Tuesday that the Connecticut Port Authority had not been issued a subpoena or contacted by the FBI about Diamantis.
Day Staff Writer Sten Spinella contributed to this report.