The Maryland Port Authority failed to review hundreds of millions of dollars in subcontractor costs related to the Howard Street Tunnel project, a state audit noted today.

“Our audit disclosed MPA did not ensure that amounts paid for a railway tunnel expansion capital project were proper and in accordance with the related contracts,” Legislative Auditor Brian S. Tanen wrote in a report to the Maryland legislature.

The $566 million project – heavily subsidized by the State of Maryland – increased the vertical clearance of CSX track through the Howard Street tunnel and beneath several city streets.

The improvements will allow double-stack container trains to operate from the Port of Baltimore south to Florida and across the northeast once some scattered bridge restrictions outside of the city are removed.

Ending the freight bottleneck is expected to be a boon to the port of Baltimore, making it more competitive with the ports of Norfolk, Va., and Savannah, Georgia, and increasing container traffic by an estimated 160,000 units a year.

A Promise to do Better

Tasked with overseeing the project, MPA acknowledged that it relied on the contractor to review subcontractor invoices and did not independently verify that the amounts charged were accurate.

Tanen’s team reviewed seven invoices totaling $49 million and tested one $5.6 million charge in detail. The review determined that the subcontractor charges were “properly supported,” but that $600,000 in labor charges could not be verified because the labor rates were not specified.

What’s more, MPA could not “explain the reasonableness or document the calculations” for $1.4 million in overhead rates that were paid out to private parties.

MPA blamed the “unique” and “complex” cost-sharing arrangement between CSX and the state and federal governments as a reason why its “well-established invoice review and approval process” failed.

In a response signed by Transportation Secretary Kathryn Thomson, the agency said it is “enhancing its review and documentation procedures to ensure overhead charges and pay rates are defined, reasonable and properly supported” in the future.

It also stated that although “not all federal cost-sharing projects require labor and overhead rates, in situations where cost-sharing details are required before an agreement is executed, MPA will ensure labor and overhead rates are included in the cost-sharing agreements and reviewed for reasonableness.”