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Summary

This report presents the results of our third audit of the Tren Urbano Rail Transit Project (Tren Urbano) in San Juan, Puerto Rico. We are providing our findings and recommendations to the Federal Transit Administration (FTA), so it may resolve the issues identified in this report before making further Federal funding decisions concerning Tren Urbano.



Tren Urbano is being constructed by the Puerto Rico Highway and Transportation Authority (PRHTA). It is a 10.7-mile (17.2 km) fixed-guideway rail transit system that will serve existing and projected development within San Juan’s metropolitan area.



In May 2003, PRHTA applied for an amendment to its full funding grant agreement (FFGA) to increase the project cost estimate from $1.65 billion to $2.25 billion, add $120 million in Federal highway flex and FTA formula funds to help finance the cost increase, and extend the project completion date to June 2004. As of June 30, 2004, PRHTA had incurred $2.1 billion of the $2.25 billion in estimated project costs, of which FTA has paid $599.4 million. In addition, in a letter dated June 24, 2004, PRHTA requested that the June 2004 completion date proposed in the FFGA amendment application be extended to December 31, 2004.



In our March 2002 audit, we recommended that FTA neither amend the project’s FFGA nor accept the updated Finance Plan until PRHTA submits a realistic project schedule, cost estimate, and timetable to resolve significant construction quality problems. Because some of these issues are still outstanding, FTA has not accepted PRHTA’s Finance Plan or approved its application for amending the FFGA.



Tren Urbano has been plagued with rising costs, schedule slippages, and construction quality problems since construction began in 1996. These problems continue to prevent the system from opening for passenger service. Tren Urbano was originally estimated to open in July 2001, at a cost of $1.25 billion. However, the completion date has been extended over 3 years to December 2004, and the price tag has almost doubled to $2.25 billion. According to FTA, 40 percent of the cost growth is due to scope changes, such as the addition of rail vehicles and two stations, and other refinements. The remaining 60 percent is due to rising costs, schedule slippages, and construction quality problems. The reliability of the current cost estimate is questionable, however, given the likelihood of future claims and additional costs that may be incurred to resolve outstanding safety and performance issues.