San Francisco International Airpork

In the fall of 1997, a year after construction had started on a new international terminal at San Francisco International Airport, airport officials decided they had to change plans. Highly complex architectural drawings would need to be rethought and redrawn. Engineers would have to reroute electrical, ventilation, and plumbing systems, some of which had already been installed. Contractors would be required to remove walls and reconstruct steel framing, as they struggled to adapt a design reached through years of painfully precise planning to accommodate a new priority.

United Airlines wanted a lounge for its first-class passengers.

Through last year, airport contractors scrambled to keep up with a seemingly constant stream of lounge-related requests from United. The logistical havoc that resulted has delayed completion of the international terminal and added more than $2 million to its costs.

In the realm of SFO construction projects, however, a $2 million overrun is pocket change lost in the couch cushions.

Although SFO officials have repeatedly painted rosy pictures when discussing a massive airport construction program that includes the new international terminal, government documents show that the project — known, in SFO-speak, as "the master plan" — is $1 billion over budget and years behind schedule. The cost overruns and delays have been caused by a variety of factors, some unavoidable.

But a review of airport budgets, contracts, audits, and other internal documents shows that much of the delay and overspending is attributable to what can only be described as bad management. Large sections of the terminal were redesigned — and even rebuilt — after work had begun. Construction contract after construction contract was gradually increased, through change orders, until the cost of the international terminal building leaped from $495 million to $805 million. And the management structure for the SFO project appears to be teeming with conflicts of interest, as construction managers supervise themselves and set policy for a project where the bill for construction management — not construction itself, but the overseeing of construction contractors — has grown by more than 150 percent, and now tops $196 million.

During the last year, when news media have scrutinized the SFO construction program, they have focused almost entirely on an FBI investigation of apparent irregularities in the minority components of airport construction contracts. Depending on the outcome of the federal probe, these seeming irregularities, which involve firms whose owners have been associates of Mayor Willie Brown, could have serious legal and political ramifications. But SFO's piece of the city's affirmative action contracting scandal (such as it is) centers on two relatively small contractors, and a few million dollars in contracts.

The total bill for the airport master plan, on the other hand, is heading toward $3 billion, up from an original budget of $1.9 billion. Even with $1 billion in cost overruns, the new international terminal complex will not be fully operational for its announced opening bash this fall -- an opening that has been delayed by more than a year -- in part because the concrete aprons that let airplanes dock at the terminal's new gates will not be ready.

And yes, another VIP passenger lounge -- a lounge not foreseen in the original terminal plans -- is also in the works.

In 1991, Jason Yuen retired, after working as a city architect at SFO for 31 years. Flying through the revolving door, he immediately returned to SFO as a consultant. He now works out of an airport office building that is cubbyholed with the offices of private consultants and city engineers.

Yuen is no publicity-seeker. In a recent interview, he mentioned, in a joking way, that as a member of the Kiwanis Club, every time his name appears in print he has to pay the club $100. Still, an airport public relations officer says the relatively unknown Yuen is the "genius" behind the SFO master plan, and it is clear he has had remarkable influence over its conception and progress. And he certainly seems to enjoy building airport terminals. He's the man who is generally credited with building SFO's current international terminal, which opened in 1983 and is now obsolete. And yet another international terminal will be needed in about 10 years, says Yuen, as the Bay Area outgrows the new one now being built.

Yuen chairs the Master Plan Advisory Board, a 10-member group appointed by airport Executive Director John Martin. Besides Yuen, the board includes five of Martin's deputy directors, an official from the Airline Liaison Office, which advocates for the collective interests of 68 airlines, and representatives of two of the construction management firms hired to oversee the master plan construction. The board's official role is to advise Martin and the Airport Commission.

As far as the master plan goes, however, the advisory board acts as a kind of shadow Airport Commission. The advisors make both broad policy suggestions and nuts-and-bolts recommendations to the commission. The commission has never disagreed with a major advisory board recommendation, Yuen says.

But under the San Francisco city charter, the five citizens serving on the Airport Commission, who are appointed by the mayor and approved by the Board of Supervisors, control the airport's $350 million annual operating budget and billions of dollars more in capital improvement construction. In policy terms, then, the Airport Commission is ultimately responsible for whatever goes on at SFO.

And whatever goes up.

According to the airport's internal cost report for November 1999, the total budget forecast for the airport master plan, which started out at $1.9 billion, now approaches $2.8 billion. Public records show that the budget could soon reach the $3 billion mark. Additional financing costs, largely attributable to construction delays, bring the total estimated cost of the plan to about $3.3 billion, much of which passengers will pay off through concession purchases and a ticket tax the airport appears ready to institute.

These astonishing cost increases happened gradually, and came largely in the form of change orders.

When construction contractors bid for public works jobs, they represent, generally, that they can complete a specific project for a particular amount of money. When unforeseen events, or mistakes, or changes in design increase or decrease the cost of a construction project, that difference in cost is typically documented through an alteration of the original contract that is known as a "change order." These orders are negotiated among representatives of the "owner" of the project -- in this case the city government -- and the contractor working on the project. Experts say that change orders on a public works job typically run between 10 and 20 percent. The SFO master plan's growing bill for architecture, construction, and consulting, however, is now about 50 percent above original contract amounts.

Yuen says the endless rains of El Niño in 1998 and the decision to extend BART rail service to the airport added to the cost of the master plan. But airport records show that the damage caused by unexpected El Niño storms amounted to $30 million and 40 workdays lost. Bringing BART into the new terminal added about $113 million to the master plan's costs, public documents show. That leaves about $730 million in cost escalation that cannot be attributed to God or BART.

Airport records show the overruns are the result of change orders that have both increased construction costs and delayed completion of the project; in an expensive Catch-22, the delays have exacted additional costs related to financing.

The master plan is being funded by revenue bonds. The bonds will be paid off over 30 years with rent from concessionaires, such as restaurants, bookstores, and car rental companies. Every time construction costs rise, so does the amount the airport must borrow. To pay off the additional debt, the airport has decided to include more revenue-generating concession space in the new international terminal. The extra space costs money, which means more borrowing ... on and on, in a spiral of cost escalation. As delays keep pushing the opening date into the future, the airport has been forced to borrow money to meet interest payments due before any revenue is made.

And delay has afflicted the project from its beginning.

In September 1995, Dillingham Construction N.A. Inc. of Pleasanton bid $20 million to gain a contract to drive the piles that anchor the foundation of the international terminal building. Because the airport sits on top of bay fill, which is prone to liquefy in an earthquake, it is necessary to pound concrete piles hundreds of feet into the ground, until they strike bedrock or penetrate deeply enough to support thousands of tons of weight. Bundles of driven piles are capped with concrete rafts. Steel beams are laid across the caps to support the floor of the building.