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State Audit Criticizes U.S. 550 Builder

By Colleen Heild
Journal Investigative Reporter
    SANTA FE— Flaws in design or construction appear to have caused heaving and cracking problems on the newly widened U.S. 550. And taxpayers shouldn't have to foot the repair bill.
    That was the assessment of the state Department of Transportation and an audit by the Legislative Finance Committee staff released Monday.
    In other findings, the audit criticized state highway managers for not moving fast enough to address problems with the road and concluded that the economic expansion predicted to follow the road reconstruction hasn't materialized.
    The administration of then-Gov. Gary Johnson defended spending $323 million to widen the former N.M. 44 from two to four lanes for safety reasons and to enhance economic development in the Four Corners area.
    Traffic data for the first two years since the road was completed in 2001 isn't sufficient to determine whether safety has improved, said the LFC audit.
    Auditors found that growth in areas of Sandoval and San Juan counties served by the road had continued at a steady pace but "cannot be directly attributable to the highway project."
    Rhonda Faught, secretary of the Department of Transportation, told an LFC subcommittee that it is too early to tell the economic benefits of the project.
    On the issue of the road repairs, Faught said her agency will file a claim by Nov. 21 with Mesa PDC, the private contractor that developed and oversaw construction of the 118-mile corridor in northwest New Mexico.
    Mesa PDC was created by Koch Industries, which was the sole bidder for the project in 1997.
    Nov. 21 is the deadline by which the state can invoke a three-year professional services warranty alleging design and construction problems on road.
    If the state misses that deadline, repairs on the road would be assessed against a separate $62 million performance warranty the state bought from Mesa PDC.
    That warranty is supposed to last 20 years but could expire earlier if repairs on the road exceed a liability cap of $114 million.
    Faught told legislators Monday that geotechnical testing supports her agency's position that design or construction flaws are causing the unusual and unexpected road problems, which are occurring primarily between Cuba and San Ysidro.
    "We just don't want to draw down on our performance warranty," she said.
    The LFC audit states that problems appear to stem from lime added during construction to stabilize the base for the pavement.
    "Since the mid-1980s, western engineers have been aware of heaving occurrences when gypsum and lime combine with water," the audit states. Mesa officials acknowledged in a Sept. 23 meeting with the DOT that, during the design phase, they were aware of gypsum in the soil, the audit said.
    The audit states that the DOT warranty engineer is monitoring the project closely but that "concerns which he brought to the attention of management should have been dealt with more timely. ... Management is now pressed by the expiration of (the professional services warranty) to resolve highway deficiencies and financial issues with Mesa."
    Faught said her administration had needed time to document the cause of the problems and had not dragged its feet.
    Rep. Luciano "Lucky" Varela, D-Santa Fe, had stern words for officials from Kansas-based Koch Performance Roads, who appeared at the meeting.
    He urged Koch to make "a good faith effort" to settle the claims so the state doesn't have to go to the expense of a court action.
    Faught said recent negotiations with Koch have helped resolve other issues related to the warranty. For instance, Koch has agreed to monthly inspections of the new roadway. The contract required only annual inspections.
    Faught said the 20-year warranty signed by her predecessors in the agency can't be undone.
    "This is a marriage and we have to find a way we can see eye to eye on this. At the same time, we have to look after the public's interest."