RTD pays $25 million to settle cost overrun dispute.

Critics argue deal was premature and too expensive

The Southern California Rapid Transit District approved one of its biggest civil settlements in recent years by paying a construction company $25.7 million for cost overruns at a downtown Los Angeles Metro Rail station, officials confirmed last week.

The Dec. 27 mediated settlement with San Francisco-based Guy F. Atkinson Construction Co. ended months of complex negotiations but opened a bureaucratic schism between the RTD and the Los Angeles County Transportation Commission. Some LACTC officials said they believe the RTD settled the matter prematurely and at too high a cost.

The LACTC, which took control of the giant Metro Rail subway project from the RTD in late 1989, nevertheless refunded the district for the $25.7 million two weeks ago in a closed meeting.

The settlement brings the cost of the Metro Rail station at the corner of Fifth and Hill streets to $69.5 million. Atkinson's original bid to construct the terminal's shell, which is now intact, was $38.7 million. But the unexpected discovery of toxic materials, abandoned fuel tanks, boulders and utility lines raised the price.

"You sign a contract and get the plans and everybody thinks they know what's out there," said Keith Eastin, a senior vice president at Atkinson. "But when you stick a shovel in the ground it's different."

The settlement was mediated by former California Supreme Court Justice David Eagleson. The station is part of Metro Rail Segment One, a 4.4-mile subway leg that will stretch from Union Station in downtown Los Angeles to Mid-Wilshire by September 1993. At $3.9 billion, the entire 17.4-mile subway is $473 million over budget, according to state figures.

LACTC sources said the RTD, which runs the Southland's bus service, acted "cavalierly" by agreeing to settle prematurely.

"I regret to advise you that the district and the commission have missed an opportunity to potentially reduce the expense of the Atkinson settlement," LACTC board member Ray Grabinski wrote in an internal memo dated Dec. 30. "The district (RTD) received no authorization to fund the settlement."

After first demanding $41 million in additional construction charges, Atkinson agreed to the $25.7 million figure if the RTD board approved the settlement by Dec. 27, which it did. The LACTC tried to renegotiate a lower settlement through third-party intermediaries but failed because RTD had already made the payment, according to the Grabinski memo.

"I don't think the LACTC knew the amount of effort we put in" to the agreement, RTD board member Carl Raggio, chairman of the district's legal and personnel committee said last week. "They implied they could have cut a better deal. If we had gone to court, this could have cost us a great deal more."

Though frequent inter-agency rivals, the LACTC and RTD will merge next year to form the nation's second biggest transit authority, responsible for a 30-year, $150 billion spending plan to build local mass transportation systems.