While state officials insisted the project was on time, on budget, and tightly managed, a two-month Boston Globe Spotlight investigation found little of that was true.
The Globe's investigation revealed the project has been hemorrhaging money since early 1998 and that its work schedule has slipped so badly it will take as much as a year longer to complete than publicly acknowledged.
Its management has failed to hold contractors to their bids, or to penalize them for mistakes, resulting in massive cost increases that are still growing. At the same time, managers have been dropping expenses and adding dubious credits to artificially balance the books.
Until recently, voters, investors, and taxpayers had been assured that the most expensive roadwork in US history was cruising along smoothly. But officials - led by James J. Kerasiotes, the project's top man - have persistently withheld evidence, turning the Big Dig's budget into a numerical charade.
When Kerasiotes was told costs were increasing, starting about two years ago, a source said the Turnpike chairman's response became a churlish chant. "He'd say: `Why are you telling me this?' He never wanted to acknowledge the bad news. He'd stand there and scream at us. `The number is ten-eight [$10.8 billion]. It's ten-eight.'''
Big Dig documents show that project officials shifted $400 million in project and related costs to other state agencies, primarily the MBTA. And they deducted that amount from their bottom line, which propped up the $10.8 billion budget figure they had vowed not to breach.
Managers stopped tracking and publicly acknowledging steadily escalating costs ranging from real estate takings to construction contract overruns. They delayed budgeting for contracts worth $260 million to Bechtel/Parsons Brinckerhoff, the joint venture hired to run the project for the state, because they had no way to offset that huge increase.
And they have exhausted an $826 million insurance credit to offset expenses nearly two decades before the money would be available. Over time, they produced monthly management reports that were virtual fiction, giving the false impression that the project budget was balanced.
"We didn't manipulate anything,'' he said. "Those aren't budget manipulations, and we did not manipulate the budget.''
The cost of designing the project ballooned 82 percent over bid prices, or more than a third of a billion dollars. Contributing to this additional cost, according to a senior engineer who worked on the project, were sketchy preliminary designs prepared by Bechtel/Parsons and its failure to listen to the designers from other firms they hired to do the final designs.
"I've never seen a company so arrogant,'' said the manager of one prominent design effort, who asked not to be named. He echoed what almost every engineer who worked under Bechtel Corp.'s supervision said: "They had an attitude right from the beginning of this project. They were God, and everybody was going to kowtow to them.''
Matthew Wiley, the top Bechtel official in Boston, said recently that the Big Dig is as challenging as any project his company has undertaken. And "I'd like to think it's a lot better managed,'' he said.
Kerasiotes called Bechtel/Parsons one of the world's best management consulting firms. "I believe they have worked for us responsibly, professionally at all times,'' he said.
Cost estimates continue to rise
Federal officials are preparing to release a blistering audit this week that is expected to call the project "bankrupt'' and show the project's total cost could reach $13.6 billion - a $2.8 billion spike from projections just six months ago and half a billion more than the project acknowledges.
The audit will also call for Cellucci to replace the project's management team and will suggest federal officials explore barring those managers from any federal projects, sources said. Kerasiotes's lawyer, James A. Aloisi Jr. of Hill & Barlow, said yesterday he has written to the Federal Highway Administration, saying "such a drastic remedy would be completely inappropriate and legally inapplicable to the facts.''
The Globe's review of the Big Dig revealed a portrait of ineffective cost containment and iron-fisted secrecy. By every account, it was Kerasiotes, the Massachusetts Turnpike Authority chairman, who set the project's clandestine ethos. He demanded that costs be controlled by any means, even as the project's burgeoning expenses were kept a tightly held secret among current and former Bechtel/Parsons employees and state officials.
Contrary to Kerasiotes's public bravado about his aggressive efforts to tame Big Dig budget-busters, records show that the project's contractors, not its managers, were winning the battle of the budget. The history of the project can be seen in the profusion of contractor change orders.
Kerasiotes pledged to pursue Bechtel/Parsons for costs resulting from mistakes in the Fort Point Channel - the troubled portion of the project that links the Turnpike to the Ted Williams Tunnel. But no costs were recovered.
Asked how much the project's formal "cost recovery'' procedures had reclaimed from contractors who made costly mistakes or exceeded their bids, a project official conceded it was only in the "hundreds of thousands'' of dollars - virtual pocket change in a $13 billion project.
In February, the office of State Auditor Joseph A. DeNucci "conservatively'' estimated that footdragging in 1994 and 1995 by Bechtel/Parsons cost the project at least $19 million in increased construction and design costs on the Fort Point Channel portion. A Big Dig consultant hired to review Bechtel/Parsons' performance cited unnecessary delays resulting from the consultant's refusal to abandon its flawed preliminary plans but found no gross negligence. The upshot was it cost the project most of a $50,000 consultant fee to recover nothing from Bechtel/Parsons.
As construction costs soared overall, project managers worked to maintain the appearance of fiscal vigilance.
When federal officials nixed one tactic project leaders had used to help cover the shortfall - $255 million in projected income from future sale of air rights over the new artery - the project substituted another.
Under pressure to support their now-abandoned $10.8 billion estimate, documents show that in April 1998, officials deducted $300 million in costs to be paid by other agencies from the Big Dig's official bottom line. By June 1999, the amount not counted had grown to more than $400 million. Yet, the project was still managing work on all those elements, and the cost was still being borne by Massachusetts residents. It was just coming from other agencies, including the MBTA, Massport, the Turnpike Authority, and the Massachusetts Highway Department.
Public denials contradict documents
Kerasiotes and other project officials insist that those third-party costs were not part of their $10.8 billion budget, although their own documents show otherwise month after month.
"There are costs that are legitimately borne by the other agencies that have responsibility [for them]. To suggest that a Turnpike expense, or a Highway Department expense, or an MBTA expense should be charged to the artery project, that's inappropriate,'' Kerasiotes said.
However, up until April 1998, those finances had been included in the project total, along with notice that they were being paid by "third parties.'' But from April on, although they were still listed on the project's monthly management reports - as "MBTA and other betterments'' - they were not added into the total.
Among the items covered by other agencies are the MBTA South Boston Piers Transitway and new Blue Line stations, maintenance facilities for the new highway system, toll booths, and viaducts that carry city streets across the project.
Officials resorted to these tactics as they began to run out of places to cut the actual work.
From the beginning, managers have sliced more than $1 billion from the cost by eliminating ramps, avoiding demolition of buildings, scaling back aesthetic features, and cutting budgets for arts and landscaping. But they were repeatedly faulted by outside agencies - including the McCormack Institute for Public Policy at the University of Massachusetts, the state inspector general, and the project's own private consultant - for failing to be as aggressive as they could in reducing costs. Bechtel/Parsons also developed a reputation for being unreceptive to cost-cutting suggestions from contractors.
One engineer whose firm worked on the project says his colleagues made at least a half-dozen suggestions for ways to cut costs about five years ago, but they were ignored.
"They were improvements to what Bechtel had proposed, but no one listened,'' the engineer said. "Maybe it was because it was savings in the future. There was an attitude of `Who cares about down the road?'''
Michael Lewis, the project deputy director, said many proposed cuts were rejected not out of stubbornness, but because they would have jeopardized the safety or progress of the project.
Whatever the reason, by mid-1998 officials were running out of real reductions, and began resorting to cost-shifting. The project's curtain of secrecy allowed the financial shell game to go on for a year and a half, shielding managers from the public consequences of the reality they faced.
Monthly management reports, produced starting in 1996 as an internal guide on cost and schedule trends, ceased to be honest accountings of the project's estimated final cost, according to former project employees. In private, managers relied on more realistic and candid "up-down'' charts, known internally as "Armageddon charts.''
Over the past four years, the project promised, but refused to release, documents showing the true cost numbers, delivering them only in the last two weeks. Project employees and contractors, as a condition of employment, were required to sign a document that kept them quiet. Meanwhile, Kerasiotes and his boss, Governor Cellucci, assured the public during the 1998 gubernatorial campaign that, "We're keeping it on time. We're keeping it on budget.''
While officials massaged the budget, the schedule of work also began to slip. The project's most recent finance plan shows for the first time that despite long-held insistence to the contrary, the Big Dig is so far behind schedule in some places that the lost time cannot be made up.
The northbound Central Artery lanes will open six months late at a minimum - in January 2003, rather than the summer of 2002, as promised. Work has been so difficult and gone so slowly that the opening of those lanes is currently running a full year behind.
Management problems have slowed work pace
Big Dig bulldozers and cranes first roared to life in 1992 on eight miles of highway, in tunnels, on the surface, and on bridges, to provide new access from downtown to Logan Airport and to bury Interstate 93. The four-lane Ted Williams Tunnel opened in December 1995, and the entire underground Central Artery, though running behind, is officially scheduled to be completed by the end of 2004.
The Big Dig, formally the Central Artery/Ted Williams Tunnel project, is the largest urban transportation project in US history and the biggest ongoing public works project in North America. It has been remarkably safe and has won plaudits for keeping the city functioning during extensive construction.
From the project's inception, however, management and engineering problems have slowed the pace of work and inflated the price tag. Because of overhead costs, every day of delay on the project adds an estimated $800,000. At the current official cost of $13.1 billion, the new roadways are costing taxpayers $1.6 billion per mile, making it the world's most expensive stretch of highway.
The joint venture of Bechtel Corp. and Parsons Brinckerhoff Quade & Douglas, two powerhouse construction and design firms, was selected in 1985 from among five competitors to manage the design of the massive road-and-tunnel work. From the start there were questions about Bechtel/Parsons' role, in particular whether there was an inherent conflict of interest in its dual task of preliminary design and overall management and whether the state had ceded too much control.
Bechtel/Parsons' reluctance to respond to problems with its designs led to delays and design-stage price increases in several major components, according to engineers familiar with its oversight.
While construction projects on the Big Dig have climbed 17 percent over original bids, the design contracts on the massive work have soared 82 percent. Of the 38 design contracts, nine have more than doubled in price. Two of them have more than tripled.
The design costs for carrying the Turnpike extension under the Fort Point Channel leapt from $24 million to $102 million, in part because Bechtel/Parsons resisted criticism of its own unworkable initial design.
In the Dewey Square Tunnel, the consultant ignored an MBTA request to delay the design until plans for the South Boston Transitway could be laid. As a result, a complete redesign was required. At both the South Boston and East Boston approaches to the Ted Williams Tunnel, Bechtel/Parsons ordered work to proceed despite engineers' questions about whether soil conditions would support the planned excavation methods. The result: fixes that cost tens of millions of dollars.
On the northernmost tunnel section of the Central Artery, sources involved in the contract say the project is facing huge construction cost increases because of no fewer than 14 design modifications to the specifications that the contractor bid on before work began in 1997. The contractor, Cashman/Kiewit/Atkinson, and Bechtel/Parsons have not even agreed on a figure for the fifth design change. The contract, which has already grown from $219 million to $251 million, is expected to expand by millions more.
Some costs ignored till bills became due
There were other ingredients that caused the project to skyrocket to more than double what it was when a seemingly reasonable $5.8 billion price tag was hung on it in 1991.
Engineers familiar with the project, one of the transportation industry's most complex, say that a variety of factors in Massachusetts drove costs higher. The project labor agreement required relatively expensive union wages and rules to be followed. Hundreds of millions of dollars were poured into "mitigation,'' the cost of keeping Boston open and functioning while a wide strip of it was being taken apart and put back together.
But some significant costs that should have been known up front were ignored until the bills were due. For example, the state's prevailing wage law in trucking requires that independent truck owners be paid the same wages and benefits that union employees are paid.
However, four years after the project began, a scandal erupted when a small group of renegade truck owners revealed that contractors had underpaid owner-drivers. Millions of dollars in extra costs to taxpayers have been added to construction contracts as a result, costs that should have been included in the original bids.
That said, even critics acknowledge project officials have accomplished some remarkable engineering feats, placing 12 precast tubes end to end under the harbor to form the new tunnel, pouring concrete perimeter walls for the new Central Artery the length of downtown, guiding a 50,000-ton concrete box tunnel section from its berth into the Fort Point Channel and setting it down within a half-inch of perfection.
The project has captured the attention of the engineering world. And Kerasiotes, a tough-talker who considers himself a can-do manager, still views it as his legacy.
As the cost overrun tumbled into public view this year, Kerasiotes has angrily denied press reports that suggested his budget was out of control. He often dismissed criticism of the project as the work of mischief-making political enemies.
Even public agencies like the US Department of Transportation's Inspector General's office were stonewalled and denied truthful information. And the top Federal Highway Administration official in Boston was reassigned after he confessed to being caught flat-footed by the Feb. 1 announcement of a sudden $1.4 billion increase in cost.
A project spokesman now says that the $10.8 billion was "a net figure'' and was not intended to reflect all the project's costs. But project managers had long argued that they would keep costs down by working more efficiently and by lopping off unnecessary pieces.
After years of touting monthly management reports that the public was told accurately tracked project costs, the Big Dig's chief of staff, Jeremy Crockford, said early this year for the first time that the documents "did not contain everything.''
Asked in an interview why portions of the cost were clipped from Big Dig financial reports and hidden, Crockford did not mince words.
"Because,'' he explained, "we were attempting to meet a budget.''
