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Wednesday, July 20, 2011

Carmageddon Becomes a Boon to Kiewit Infrastructure

"An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation." — John Marshall

The predictions were for an apocalyptical event when it was announced that the 405 freeway would be shut down for 53 hours while the Sepulveda Pass Bridge was being demolished. The 405 freeway is the most heavily traveled freeway in the United States with an average daily traffic count of 276,000 at the Sepulveda Pass Bridge. It is the main artery connecting Orange County with northwestern Los Angeles County and a nightmare to drive.

But for Kiewit Infrastructure (formally Peter J. Kiewit) it was an opportunity based upon risk. Kiewit Infrastructure, the construction company that built the bridge back in 1964, took this contract by accepting a penalty of $6,000 per every 10 minutes they were behind schedule on both the north and south bound roadways— that’s $72,000 per hour per roadway. Conversely Kiewit was offered a bonus for each minute they came in ahead of schedule.

Kiewit and the workers had 'skin' in the game — capitalism at work. I read in countless articles about the penalties that would be incurred for every 10 minutes over deadline but only once did I hear of the $300,000 bonus to be paid for opening the freeway early or being on time.

Every worker did everything needed. There were no required union breaks, lunches or special permission to do a task outside of one's job description. If a nail needed to be driven, it was driven. No waiting for an employee whose 'contract' permitted him to drive it or waiting until the guys came back from lunch or mandatory breaks. This allowed them to work as a team (like football) because they were not compartmentalized by union rules and regulations. Plus, the people were selected for their skill and expertise, not because of seniority or diversity.

No doubt most of Kiewit’s workers were members of the Operating Engineers Union, Local 12 and I am sure they consisted of skilled heavy equipment operators and labors. I am also sure, having worked with these folks on numerous projects; they were gung ho to get the job done right, on time and collect their bonus. And I also doubt that there were more the 50 contractor’s personnel working on the project. Click here for a time lapse video of the project.

These aren't all the reasons but what it does prove is — when things come down to 'push and shove' even the union elected officials and unions themselves know where to turn for true performance — the private sector.

Sunday morning found L.A.'s Mayor Villaraigosa on the airwaves touting the early reopening of the 405 freeway. He thanked all the motorists (in English and Spanish) for their cooperation and for staying home with their families and neighbors, stating it as if this had changed their priorities and living habits. He also attributed the success, in large part, to the use of public buses and trains. (Really? Then why did the 10 minute flight from Burbank to Long Beach, offered by Jet Blue, sell out so fast?)

It wasn't CALTRANS, the Mayor, public transportation or the wonderful people of L.A. It was the nonunion, private sector, 'capitalism incarnate' construction company that saved the day. Yet they were not mentioned. But that's okay because they weren't in it for fame, just the fortune.

In 1994, the Northridge earthquake in Southern California damaged four bridges on the Santa Monica Freeway in Los Angeles. C.C. Myers, Inc. won the contract to replace them. The contract specified that the work had to be completed in 140 days, and the State of California, understanding the loss to the LA economy that was caused by the freeway being down, offered a $200,000 per day bonus for each day prior to the 140 days that the bridge opened. With the cooperation and extra effort from Caltrans, the City of Los Angeles, the workers, and even the citizens of LA, the company completed the job in 66 days, a full 74 days ahead of schedule. The $14.8M bonus is the largest early completion bonus paid by Caltrans. The closure of the freeway was estimated to cost the economy of the area as much as $1M per day. I know this very well as my firm supplied all of the surveying for this project and I personally had been involved with the original construction of the La Cienega Bridge in 1963. C.C. Myers pushed his crews and subcontractors 24/7 to get the bridge rebuilt and the roadway opened.

These are just two examples of what happens when you get the bureaucrats and politicians out of the way and allow the private sector to get the job done, for a profit.

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