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May 3, 2007

State report issued on construction of The Pete

State Auditor General Jack Wagner issued a report last week on the costs associated with problems during Pitt’s Petersen Events Center construction, which has been plagued with allegations of cost overruns, flawed designs and shoddy workmanship.

The Wagner report, submitted to Gov. Edward G. Rendell, recommends “necessary corrections” in the operation of the Department of General Services (DGS), according to an April 27 summary letter to the governor.

“Most significantly we have concluded that the Department of General Services should not have taken overall responsibility for the construction of the facility,” which is owned and operated by Pitt, Wagner stated.

Following calls for an investigation by elected officials and the Pittsburgh Post-Gazette, Wagner commissioned the report in May 2006 “to determine the amounts authorized by the General Assembly for construction, the amounts approved by the Department of General Services and the final costs incurred for the project,” which was initiated in 1988 and spanned several governors’ administrations before its opening in 2002.

“Our report is not an audit, but it presents our analysis of information provided directly by DGS and the University of Pittsburgh to discuss the causes of the delays in the completion of this project and the reasons for the cost overruns,” the Wagner letter said.

Wagner’s office concluded that DGS incurred construction costs of $102.8 million, of which $33.8 million were cost overruns. In addition, the state funded $3.4 million in furnishings and equipment.

The commonwealth’s share of the $33.8 million overrun costs is more than $15 million and Pitt has absorbed the balance, much of which the University is suing to recover. Separate suits filed in 2004 against the building’s architects and roofers still are pending.

(See University Times Jan. 6, 2005.)

In June 2005, Pitt trustees authorized $5.6 million to repair The Pete’s leaky roof, monies that the University also is trying to recover in ongoing litigation.

(See University Times June 23, 2005.)

Wagner’s analysis also concluded:

• The commonwealth did not control the rising construction costs, following an initial state funding cap of $38 million. “As costs continued to arise, DGS kept increasing the project’s budget rather than controlling spending, resulting in continued appropriations from the General Assembly.”

• The use of 25 prime contractors created a construction nightmare. “Multiple contractors were hired to perform similar tasks. The use of hundreds of contract amendments and change orders disrupted the work flow and drove up the project costs. The use of fast-tracking without proper coordination of contractors caused additional project delays.”

• DGS ended the construction phase by accepting an unfinished building with a leaking roof. Rather than holding the contractors liable for roof repairs, DGS entered into settlement agreements with the contractors, then attempted to shift the remaining costs to the University, according to Wagner’s report.

Originally conceived in the 1980s as a 225,000-square-foot basketball arena to be built on the OC parking lot, the Petersen Events Center became a multi-purpose 430,000-square-foot edifice following a series of interlocking events: The city approved the building of new sports stadiums for the Pirates and Steelers, which allowed Pitt to “piggy-back” with the local pro footballers and share home games at Heinz Field. That presented Pitt with the option of razing the 75-year-old Pitt Stadium, already set for a major overhaul, and the ability to develop the 11 acres on that site for an events center that would include a 12,500-seat convocation arena and recreation and other facilities.

Initial estimates in the late-1980s for an OC lot arena were $35 million, with the state contributing $13 million. Eventually, the costs to build the redesigned and fast-tracked events center came in at more than $106 million, with the state’s share being $57 million, according to Wagner’s report.

Pitt officials periodically have responded to questions regarding the building’s costs, including in a report by Chancellor Mark Nordenberg to Senate Council in April 2004.

(See University Times, April 15, 2004.)

This week, Pitt spokesperson John Fedele told the University Times that Pitt had received a copy of the Wagner report, but still is reviewing it. He declined further comment.

—Peter Hart

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