Hitachi Rail Honolulu JV (HRH), principal DBOM (design-build-operate-maintain) contractor for the Skyline automated rapid transit project, has sued the Honolulu Authority for Rapid Transportation (HART) for approximately $325 million over project delays and numerous other alleged problems, among them, “broken promises.”
The formal complaint lodged by HRH in the First Circuit Court, State of Hawaii, Ithat claims HART’s “mismanagement of the Skyline rail project has led to countless delays and other errors resulting in significantly increased costs for HRH in performing its design-build work and operations and maintenance services for the project.” Additionally, the complaint states that HART allowed track to be installed by another contractor “that was incompatible with the approved passenger vehicle wheel specifications that HART provided to HRH.” Subsequently, HRH says, it had to repair the problem without compensation. HRH is demanding a jury trial. The full complaint can be downloaded below.
From the complaint:
Plaintiff, HITACHI RAIL HONOLULU JV (“Plaintiff” or “HRH”), by its undersigned counsel, McCorriston Miller Mukai Mackinnon LLP and DLA Piper LLP (US), sues Honolulu Authority for Rapid Transportation (“HART”) and the City and County of Honolulu (the “City”) for breach of contract and unjust enrichment for an amount of no less than $324,169,130, plus interest. Defendants’ mismanagement of the Skyline rail project has led to countless delays and other errors resulting in significantly increased costs for HRH in performing its design-build work and operations and maintenance services for the project. Defendants’ mismanagement even included allowing track to be installed by another of HART’s contractors that was incompatible with the approved passenger vehicle wheel specifications that HART provided to HRH, which HART required HRH to resolve without compensation. Additionally, Defendants directed HRH to commence a costly 18-month operations and maintenance workforce mobilization effort at the same time HART knew or should have known that HRH’s mobilized workforce would not be needed for a substantial period. HART’s request that HRH prematurely mobilize cost HRH more than $92,000,000. Defendants have delayed any good faith efforts to resolve HRH’s claims, no doubt to delay further public criticism of its Skyline project mismanagement. As a result, HRH has effectively been required to fund a large part of the project itself. HRH has worked tirelessly and at great expense to resolve this dispute short of litigation, but further delay is no longer sustainable.
Stating further for its Complaint against the above-named Defendants, HRH alleges as follows:
In 2011, the City, through the semi-autonomous agency it formed, HART, commenced the development of the first fully automated, driverless, fixed-guideway light rail system in the United States (the “Project”). The Project, also known as the “Skyline,” is the largest public works project in the history of the State of Hawaii and is planned to run from East Kapolei to Ala Moana Center, a span of 20.1 miles, with twenty-one stations.
Instead of hiring a single design-build contractor to design and build the entire Skyline system, supply the passenger vehicles, and operate and maintain the system as is common in the rail industry, HART elected to distribute the design and construction of the Project among numerous contractors, with each performing discreet design and construction services. As one would expect, a complex project such as the Skyline, with numerous contractors performing independent design and construction services, requires competent and effective owner coordination.
HART retained HRH to design and supply the Project’s passenger vehicles, train control systems, track electrification system, communication system, supervisory control and data acquisition (“SCADA”) system, and platform screen gate system, and upon its completion, operate and maintain the Skyline. HART retained other Project contractors to design and build the Project’s elevated guideways and stations and to supply the track and special trackwork for the three segments that comprised the Project (referred to as “Fixed Facilities Contractors”).
As a result, for HRH to perform its work, substantial work first needed to be completed by the Fixed Facilities Contractors. HRH’s ability to timely perform its design-build work was and remains dependent on the timely performance of HART’s other contractors.
To deal with HRH’s need to access completed Project facilities to perform its work, HART contractually agreed to provide HRH with access to specific facilities by specific dates. HART, however, was not up to the task of coordinating the numerous contractors involved – a task vital to the project delivery system HART chose. HART’s failures in leadership and coordination resulted in extraordinary delays and cost overruns. By 2019, the Project was five years behind schedule.
In 2019, due to the extraordinary delays, HRH and HART amended their contract with a change order that extended the dates by which HRH would complete each of the Project’s three segments by more than five years. This Change Order 52 also added dozens of new milestone dates by which HART was required to provide HRH access to Project facilities to perform HRH’s work and increased HRH’s contract price by $160,000,000 because of the delay. A significant part of the $160,000,000 has not yet been paid to HRH..
Almost immediately after signing Change Order 52, however, HART resumed its practice of failing to provide HRH with access to the Project facilities by the requisite dates, and in fact, did not even come close to complying with the new milestone dates.
HRH has been at the mercy of HART’s failures to coordinate and advance the work required to provide HRH timely (and repeatedly promised) access to the Project facilities. As a result of HART’s and its contractors’ failures to perform timely and effective work, HRH has been significantly delayed, and the Project is now delayed three years (and counting) beyond even the five-year extension provided by Change Order 52.
Project delays require a contractor to, among other things, staff a project for the extended period and incur labor and material inflation. For a Project as large as this, delays impose a tremendous hardship on the contractors that have mobilized hundreds of design and construction workers, and dozens of subcontractors and suppliers.
HART has refused to accept responsibility for its failures to provide HRH access to facilities as promised and has consistently denied HRH’s requests for reimbursement for the substantial additional costs incurred, and to be incurred, as a result of HART-caused delays along with the other damages that HRH has suffered.
HART also failed to provide meaningful and timely updates on the delays and anticipated revised schedules of the other contractors, regularly kept HRH in the dark about the challenges HART was undoubtedly aware of from its other contractors, and frequently failed to provide meaningful responses to HRH requests for status and field progress updates.
HART’s breaches extend beyond the Project delays. HART has even gone so far as to take affirmative acts that have caused HRH to incur substantial additional costs. By way of example (but without limitation), in February 2019, HART directed HRH to mobilize its Project operations and maintenance workforce and vendors in anticipation of HRH initiating its operation and maintenance duties for Segment 1. At that time, however, HART knew, or certainly should have known, that Segment 1 was not going to be complete for several years. HRH, which was not privy to HART’s master Project schedules and the other contractors’ schedules because HART would not share them, complied with HART’s direction and spent 18 months hiring and training operations and maintenance personnel and entering into contracts with vendors for the operation and maintenance of Segment 1–all of which could not be utilized for their intended purpose for years because of the delays to Segment 1. Needless to say, this premature mobilization (as directed by HART) caused HRH to incur extraordinary unnecessary costs.
As another example, HART has required HRH to provide costly and significant revisions to HRH’s original contract obligations – including changes to the system’s Wi-Fi infrastructure, and the passenger vehicle wheel design after HRH had supplied the wheels as directed by HART—without compensating HRH for that additional work.
HART also has failed to comply with the contract in numerous other respects, such as failing to compensate HRH for force majeure costs incurred by HRH from COVID-19 and the war in Ukraine and continuing to withhold 10% retention from payments made to HRH after HART agreed to not withhold such retention after HRH provided a retention bond.
As a result of Project delays and impacts for which HART was and remains responsible and other HART contract breaches, HRH has incurred and continues to incur financial damages that exceed $300 million.
Notwithstanding the many delays for which HART is responsible and HART’s many other failures to keep its promises to HRH, HRH has stayed the course and continued its work at great loss to HRH. HRH has completed and now operates Segment 1 of the Project, which is viewed by HART as a resounding success. Segment 1 has achieved an unheard of level of schedule adherence of approximately 99%. Indeed, HART’s Executive Director has expressly recognized HRH’s achievement by stating that “Hitachi has been phenomenal in maintaining that 99.6% serviceability week after week. It’s incredible.” HRH has continued its work on Segment 2 of the Project. But HRH has only been able to do so by effectively self-funding the Project, including borrowing significant sums (with substantial interest payments) to pay its staff and subcontractors, in lieu of being paid what it is due by HART. That is now unsustainable.
Indeed, Hill International, Inc. (“Hill”), an independent oversight consultant hired by the United States Federal Transportation Agency (“FTA”) to monitor and oversee the Project, contemporaneously identified in its reports to the FTA several of the same HART impacts and issues raised by HRH in this Complaint as causing delays to the completion of Segments 1 and 2.
Moreover, in a 2019 report entitled “Audit of the Honolulu Authority for Rapid Transportation [‘HART’]: Report 1,” the Office of the Auditor for the State of Hawaii attributed the Project’s drastic cost increase and significant delay to: (1) the City’s premature entry into contracts under an artificial timeline and a fragile financial plan; and (2) HART’s inaccurate reporting of project costs and completion schedule, which undermined Board oversight and eroded public confidence.
The state auditors also concluded that from the beginning, unrealistic deadlines and revenue projections resulted from a desire to demonstrate that the Project was progressing satisfactorily and to minimize public criticism, which could have eroded support for the Project. The auditors themselves reported numerous difficulties in obtaining cooperation and information from HART during the course of their work. The auditors never received some documents they had requested from HART, notwithstanding numerous follow-up requests. HRH has experienced, and has been damaged by, the same transgressions and the lack of transparency and cooperation from HART.
HRH had been trying to reach a resolution of these issues with HART for years, to no avail. HRH can no longer continue to cover HART’s missteps and fund the Project without being fairly and reasonably compensated for its work.
HRH has submitted numerous claims to HART over the years, regarding the same issues detailed in this Complaint, as those claims arose. HART, either through its CEO, Contracting Officer, and/or the Officer-in-Charge (all the same person for the HRH design-build work) have ignored those claims. In March 2023 and in December 2023, HRH submitted 8 comprehensive, detailed summaries of its claims to HART. Although HART submitted a reply to HRH’s March 2023 submission, and has since requested more information, which HRH has provided, HRH has not received any decisions from the Contracting Officer/Officer-in-Charge as required by the parties’ contract for those claims.
For many months now, HRH (with the assistance of a claims consultant) has provided additional information and supporting documentation requested by HART to further substantiate and explain HRH’s claims—to no avail.
As the culmination of that effort, HRH requested and participated in a three-day mediation required by the parties’ contract from October 28 – 30, 2024. HRH flew in several of its senior project, legal, engineering, and claims consultant team members from around the world in a concerted and determined (and costly) effort to try to resolve this dispute, and to provide, in real-time, any information that HART may request. That effort also failed.
HRH’s prolonged and substantial investment and efforts to try to resolve this dispute short of litigation have failed. HART’s conduct demonstrates a strategy to avoid paying HRH for as long as possible, while forcing HRH to continue to substantially self-fund the work. Any further attempts at resolution, short of litigation, would be futile. Accordingly, HRH filed this lawsuit seeking compensation for the damages caused by HART’s broken promises.
