Port Authority officials remain hopeful about their ability to afford the $393 million North Shore Connector despite high bids for the initial contract covering construction of twin tunnels under the Allegheny River.

"The Federal Transit Administration is optimistic, as we are, about being able to complete the project," authority engineering-construction manager Henry Nutbrown said yesterday in the first board meeting since bids were opened Feb. 2.

The project "still delivers a good, cost-effective user benefit," he said of the proposed 1.5-mile light-rail extension from a new Gateway Center station to link Downtown to the developing North Shore.

After the first round of bids was rejected six months ago, and the contract restructured, an apparent low bid of $156.5 million for the key work was 10 percent over budget and 16 percent higher than engineering estimates.

With $31 million set aside for contingencies, the Port Authority has enough money to cover the $21.5 million cost overrun.

What worries the staff is how inflation may affect the remaining 15 contracts. They are smaller, and most of the major civil construction will be under just two of the remaining pacts.

Estimates in an application to have the Federal Transit Administration pay 80 percent of project costs were based on a 3 percent annual increase in inflation.

But soaring energy prices, worldwide demand for steel and cement, and two major hurricanes in the United States last fall precipitated a 7.8 percent increase in heavy construction costs in the first half and a double-digit increase in the second half of 2005, Mr. Nutbrown said.

That's why the authority deferred another piece of the project -- a spur to the David L. Lawrence Convention Center and a station there. By also dropping the planned purchase of four light-rail vehicles, it was able to shift $84.9 million to cover the escalating North Shore Connector estimates.

The higher-than-expected bids are symptomatic of other Federal Transit Administration-funded projects across the country.

Asked whether Allegheny County's project is at risk of cancellation, Port Authority acting Chief Executive Officer Dennis Veraldi said: "I wouldn't characterize it that way. Does it require more discussion? Yes."

Some of that discussion is to take place this week in a private meeting between Port Authority officials and Allegheny County Chief Executive Dan Onorato and his staff. The county's 3.3 percent matching share of the project amounts to nearly $13 million. The state's share is 16.7 percent.

Mr. Nutbrown said the $156.5 million contract would cover the twin tunnels, 1,200 feet of "cut-and-cover" to bring the light-rail line to ground level west of PNC Park and to build the PNC Park/North Shore station shell.

He said the work represents about half of all construction, finish, mechanical and communications contracts. Smaller contracts will cover the elevated section along General Robinson Street and the shell of the new Gateway station.

Mr. Nutbrown and consultants are reviewing the design and still looking for cuts. He said not many more cuts can be made without sacrificing facilities and functions that will draw riders.

"It becomes increasingly more difficult to take things out," he said. "You can scale back only so far."

The authority has no other expansion projects in even the earliest study stages. It began pursuing the North Shore Connector in the 1980s, as part of a proposed "spine line" to Oakland, before a former Allegheny County Board of Commissioners ordered a stop.

The North Shore extension was revived in 1999 at the request of the city of Pittsburgh as part of long-range development plans.

"It's still a worthwhile project," Mr. Nutbrown said. "There will never be a time when it will cost less."