Case Study: Delay Due to Contractor Bankruptcy on New Jersey Tunnel Expansion (New Jersey, 2015)

Project Overview
• Name: Holland Tunnel Expansion
• Location: New Jersey
• Year: 2015
• Project Size: $1.2 billion
• Scope: Expansion and modernization of vehicular tunnel infrastructure
• Lead Agencies/Contractors: Port Authority of New York and New Jersey /

Category of the Issue, Problem, or Challenge
• Contractor Failure
• Project Delay

Summary of the Issue, Problem, or Challenge
Midway through construction, the prime contractor declared bankruptcy, halting work and requiring a costly rebid process.

Root Cause Analysis

• Financial instability of contractor not adequately assessed.
• Insufficient bonding and performance guarantees.
• Lack of contingency plans for contractor failure.
• Contract terms inadequately protecting project continuity.

Impacts Due to the Issue, Problem, or Challenge

• Construction stoppage for 5 months.
• Increased costs due to contractor replacement and remobilization.
• Schedule slippage impacting connected infrastructure projects.

Corrective Actions Taken

1. Strengthened prequalification and financial review of contractors.
2. Enhanced contract provisions for performance bonds and insurance.
3. Developed rapid response plans for contractor replacement.
4. Improved oversight and risk management during project execution.

Lessons Learned

• Rigorous financial vetting of contractors is essential.
• Performance security mitigates risks of contractor failure.
• Contingency plans ensure quicker recovery from disruptions.

Audit & Prevention: Project Control Questions to Ask on Future Projects to Help Control the Situation

• Are contractors financially stable and qualified?
• Are bonds and insurance adequate to cover failure risks?
• Is there a clear plan to respond to contractor issues?