Metropolitan Council's audit reveals flaws in Southwest Light Rail contractor's change order process

The Minnesota Legislative Audit Commission spotlighted significant financial discrepancies in the Southwest Light Rail project during its recent meeting. The audit revealed that the Metropolitan Council's oversight of the construction activities, managed by civil contractor Linda McCrossan, has led to a staggering increase in costs.

Originally contracted for approximately $8 million, the project ballooned to over $1 billion due to 630 change orders, totaling around $228 million as of March 31, 2023. Additionally, a settlement agreement could add up to $285 million more, bringing the total potential payout to Linda McCrossan and its subcontractors to over $1.3 billion.

The audit, covering the period from January 1, 2019, to March 31, 2023, aimed to assess compliance with various requirements and the adequacy of the Council's internal controls. However, it uncovered multiple instances of non-compliance, particularly in managing change orders, disadvantaged business enterprises, and contaminated soil disposal.

One critical finding highlighted the Council's inconsistent approach to evaluating change order costs. The audit noted that the Council did not apply a consistent variance threshold when comparing its cost estimates to those provided by Linda McCrossan. For example, in one case, the Council's initial estimate of $37 million was revised to match McCrossan's estimate of $83 million, raising concerns about the fairness and reasonableness of the cost assessments.

The Commission recommended that the Metropolitan Council establish clear guidelines for evaluating change order costs to prevent further financial mismanagement. As the project continues, the implications of these findings could lead to increased scrutiny and calls for reform in how public contracts are managed in Minnesota.