Big Dig
May 1st, 2007
BY: Marybeth Kennealy, Phil Mattingly and Eva Zadeh
Long before the first shovel broke ground on Boston’s Central Artery/Tunnel project, the largest public works project in U.S. history had money problems. Burying seven-and-a-half miles of highway under the city clearly would entail unprecedented costs, and officials were fearful of releasing a budget figure that was too high. Their number: $2.7 billion.
“The original estimate was fiction. It was political fiction,” said Massachusetts Senator Robert Havern, who served as the chairman of the Senate’s Joint Committee on Transportation during the Big Dig’s infancy, in an interview at his State House office. “I honestly don’t think anybody ever thought it was going to be $2.7 billion. I don’t think if it was estimated to be much higher that anybody would have done it.”
The project born out of a lie quickly spun out of control. The Big Dig was initially scheduled to be finished in seven years, but sixteen years later, it is still a work in progress. The final cost has been publicly estimated at $14.6 billion since 2003. However, according to multiple sources from the Massachusetts Turnpike Authority and other state government officials involved in the project, officials knew more than a decade earlier that the budget would surpass $14 billion but did not tell the public. Now, after numerous accidents, the budget may climb even higher. With an exhausted contingency fund and a cost-recovery effort that could take years, taxpayers will likely bear the burden for any further cost increases and for the project’s maintenance in years to come.
“Do you know the movie, The Perfect Storm?” asked Jordan Levy, the former vice chairman of the Massachusetts Turnpike Authority’s board of directors, in an interview. “This was the perfect plan for disaster. [The Big Dig] has been fraught with inability to control its cost. None of us really knows what the end number is going to be. This will be litigated for years to come.”
Even before construction began in 1991, the Big Dig faced major opposition. In 1990, the Boston and Cambridge city councils could not agree on the final design of the project. Environmental and transit groups also filed complaints, but with fear of the project losing momentum, Congressman Thomas “Tip” O’Neill pushed forward the design, which was approved by the Federal Highway Administration within the year.
The initial controversy involving the two city councils was minor compared to the opposition the project would face as the years and costs continued to mount. Following the go-ahead for the project in 1990, Congress allocated $775 million to the Big Dig, and plans moved forward. Immediately, however, the price tag began to grow. Each year that passed brought substantial cost overruns to the Big Dig.
Havern, who now serves on the Senate Committee on Post Audit and Oversight, said that when the project entered the design phase, the $2.7 billion budget instantly doubled because of the “design/build” construction style, which overlaps the design phase of a project with its construction phase. Havern said this process of designing and building as the project moved along contributed to its continual cost increases.
“The traditional way to do this was to have all the plans done first, but you couldn’t design the whole thing up front. It wouldn’t have worked that way,” Havern said. The city, he explained, would not have been able to function unless the construction, which essentially set out to overhaul some of the key thoroughfares of the city, was a gradual process that would not close all major roads at the same time.
“If you want to keep the city of Boston open during construction, it’s obviously going to impact the cost,” he said. “The concept of design and build is laden with change orders,” or amendments to the construction process.
The majority of the budget increases, he said, were directly associated with carrying out the construction, which took much longer than expected because of the nature of the design/build process.
“During the height of the construction,” said Havern, “the cost of delay, for every day late, was $1 million a day. So it was $365 million a year for just the cost of delay. That’s because you had to keep a huge infrastructure in place. You had to keep engineers, contractors, inspectors—everybody on this job. It was like a war. It was like pushing an army forward all the time. It was more a military exercise than it was a construction exercise.”
Human error also placed a significant role in the mounting cost overruns. In 1997, officials discovered that the design plans, as impossible as it seems, had omitted an existing major structure—the Fleet Center—and would have to be reconfigured. The Fleet Center blunder added an estimated $991,000 to the Big Dig budget, according to the MTA’s July 1998 cost status report. This monumental mishap pushed the new budget estimate up to $10.8 billion, $8.1 billion more than the original estimate of $2.7 billion.In 2001, a review by the Massachusetts Inspector General revealed that the true cost of the Big Dig had been covered up for years.
In a March 20, 2001 letter to State Treasurer Shannon O’Brien, Inspector General Robert A. Cerasoli disclosed “many troubling factors about Big Dig finances.” Cerasoli said that after Bechtel/Parsons Brinckerhoff “presented its $14 billion estimate in 1994, state managers directed state and B/PB staff to undertake a cooperative effort to maintain the fiction of an ‘on-time’ and ‘on-budget’ $8 billion project.”
In addition to the overall budget cover up, Cerasoli’s 2001 report also included a “List of 218 Items that Local FHWA Officials Knew Were Excluded from the 1995 Total Big Dig Cost Estimate.” One of the first items on the list was “Change order contingency carried at 7 percent while actual rate running more than 20 percent.”
Originally, the Massachusetts Turnpike Authority didn’t establish a contingency fund for the project’s total cost, said Neil H. Cohen, deputy inspector general of Massachusetts, in an interview. Cohen said each Big Dig contract was assigned its own separate contingency fund ranging from zero to seven percent of the contract’s cost in order “to lowball the global cost.” But as Cerasoli’s report noted, the percentage of emergency funds actually used for most contracts ran higher than 20 percent, much more than the zero to seven percent rate initially factored into the individual contracts.
These “lowball” contingency rates were completely unrealistic, according to Cohen, because of the inevitability of problems and delays in construction.
“You can’t have a contract with a zero percent contingency,” said Cohen, “A budget is calculated on an estimation. You always need a security valve.”
Cerasoli’s findings led the MTA to increase the percentage of emergency funds. Officials added a 20 percent contingency to the project’s total budget to cover unforeseen costs. Applying the 20 percent contingency rate to the project as a whole meant that some contracts could be allocated more emergency funds if other contracts did not require the full 20 percent contingency.
“If, for example, one contract used 15 percent of the contingency,” Cohen said. “Then the 5 percent remaining is put into the global pool.”
A major accident in 2002 forced the MTA to tap into the contingency fund. On September 24, 2001, a massive leak under the tunnel tubes forced a $41 million repair, according to the November 2002 CA/T Project Management Monthly Report. The leak gushed an estimated 70,000 gallons of water a minute into the Interstate 93 tunnel. More evidence of poor construction appeared on September 15, 2004, when another major leak sprang in the north tunnels from Storrow Drive to Leverett Circle, which provide access to I-93 North and the Tobin Bridge.
In January 2005, the Massachusetts Turnpike Authority hired Deloitte Financial Advisory Services to determine the costs associated with the leaky I-93 tunnels and to assess the impact of the water problems on the project’s finance plan. The Deloitte report showed that the sources of water intrusion included unfinished construction and defects in the slurry wall panels, among other factors. Deloitte reported that the bulk of costs related to the water intrusion had already been incurred and were covered by the contingency fund. Deloitte stated it was unlikely that any pending costs related to the tunnel leaks would impact the $14.6 billion project budget.
On January 18, 2006, the MTA issued a press release stating that the Big Dig had reached substantial completion. All of the project’s “tunnels and bridges and their connections and ramps to surface roads were open to general traffic,” the release said. A report released by Massachusetts state Auditor Joseph DeNucci on May 17, 2006 reiterated that the end was near, stating that the Big Dig was “98% complete as of December 2005.” With the exception of surface restoration and general amendments to the final project, the massive 16-year project had come to an end.
Then a deadly accident on July 10, 2006 created new problems.
On a mid-summer Monday night, a 3-ton section of concrete ceiling panels detached from bolts in the I-90 connector, a tunnel joining Interstate 90 and Logan Airport. The panels fell, crushing a 38-year-old woman, Milena Del Valle, who was riding in a car with her husband. The incident was not only a tragic safety issue, but it inconvenienced thousands of travelers by forcing the closure of the tunnel, a key point of entry to Logan Airport. The deadly accident also raised questions about additional costs for the project.
The day after Del Valle died in the tunnel accident, Governor Mitt Romney announced his intention to fire Massachusetts Turnpike Authority Chairman and Chief Executive Officer Matthew Amorello. Though Amorello did not resign his post until August, Romney effectively took over responsibility for the Big Dig in July. On July 13, 2006, Romney announced he was filing legislation to give him oversight over “the failed ceiling system in the I-90 Connector tunnel,” according to a press release. That same day, the Massachusetts Legislature granted Romney’s request for $20 million in emergency funds to carry out a “stem to stern” safety audit of the entire tunnel system.
The governor presented the initial results of that audit on November 17, 2006. He said the audit found that the tunnel system, “meets a standard of safety that people can feel good about, but there’s work to be done.” He did not, however, discuss the potential cost of any repairs or whether the audit’s results would push the $14.6 billion project over budget.
Representatives in the governor’s press office would not comment on the ongoing audit and referred all questions to John Carlisle, press secretary for the Executive Office of Transportation. Carlisle said in a phone interview that no one knows how the results of the governor’s audit will affect the overall Big Dig budget.
“Any talk of budget increases is speculative at this point,” he said. “We don’t know what the findings of the stem to stern audit will yield. What kinds of repairs are needed, based on the stem to stern audit, are not clear yet. Obviously, the cost of the stem to stern audit itself will not increase the cost because that was money set aside separately by the Legislature.”
The Legislature allocated the $20 million for the review outside of the $14.6 billion budget “because we’re going to want that back,” said Havern. “We don’t want the Turnpike spending that. The function of that [allocation] was to keep it separate so we could sue [Big Dig contractors] for it.”
Directly following the fatal ceiling collapse in July 2006, the MTA released a memo, “How will the Financial Obligations of the I-90 Connector Accident be Met?” which revealed that the MTA had at least $800 million in insurance coverage. The memo stated that the agency had $550 million allocated for tunnel damage coverage, $50 million for liability coverage and another $200 million in liability insurance for the Central Artery Project as a whole.
Havern said that the MTA had accumulated a surplus in insurance funds because, prior to the Del Valle accident, damages had been kept to a minimum.
“We did so well with regard to very few injuries that we had an insurance contingency that was way high, said Havern. “In the end we’re not going to have to pay that much out in insurance claims. There’s $800 million left, so we’re probably going to put that back into the project, but that’ll flatten out with regard to wrap-up costs.”
It is not clear, however, if these “wrap-up costs” will indeed be covered by the $14.6 billion budget. Despite its initial practice of releasing monthly reports, the MTA has not released a Big Dig finance plan since August 2006. Deputy Inspector General Cohen said, “There are rumors that the cost of the budget will increase again. That could be the reason why they are not [releasing] the information.”
Budget increases, he said, are likely because the project’s contingency funds have been used to cover the latest accidents and overruns.
“We do know the contingency has pretty much run out,” Cohen said. As such, “nobody knows yet what the [final] figures will be.”
The MTA did not return phone calls seeking comment on the status of the contingency fund or the total budget.
Regardless of the Big Dig’s final total bill, Massachusetts officials are hoping to reclaim funds from contractors who engaged in faulty work that led to major cost increases. In February 2005, Massachusetts Attorney General Thomas Reilly assumed responsibility for the cost-recovery effort. Reilly took over the initiative from retired state Judge Edward M. Ginsburg, who had been working with lawyers and engineers for two years to uncover construction mistakes that had led to cost overruns.
On April 22, 2005, Reily testified before the U.S. House Committee on Government Reform to announce his takeover and noted that there were errors made in the Big Dig’s design and construction. “The public should not pay for those errors,” he said.
Reilly testified that the cost-recovery team was reviewing 134 issues. The effort, he said, would mainly target chief Big Dig contractor Bechtel/Parsons Brinckerhoff, which he claimed was ultimately responsible for the leaks in September 2001 and September 2004.
“Our focus is squarely on Bechtel,” Reilly said.
Reilly, however, did not indicate an estimated amount of money he hoped to retrieve from Bechtel through litigation.
“A lot of numbers have been discussed as possible recoveries,” he said. “We will not speculate. We will not suggest an amount to be recovered unless we are sure that we can prove that amount in court.”
At a news conference on November 27, 2006, Reilly announced that he planned to file suit the following day against firms involved in the design and construction of the I-90 connector tunnel, the site of the accident that killed Milena Del Valle. His suit, he said, would accuse 15 firms of negligence and Bechtel/Parsons Brinckerhoff of gross negligence.
Representatives from Bechtel declined to comment when reached by phone.
However, even after this most recent announcement, Reilly is still not saying how much money he hopes to retrieve from contractors.
Erika Gully-Santiago, Reilly’s press assistant, would not comment on the ongoing cost-recovery efforts and would only cite Reilly’s press releases, which do not address cost.
Former Turnpike Chairman Levy, however, believes the cost-recovery effort “varies anywhere from $50 million to $200 million. It’s a moving number.”
“The Commonwealth position, at least I hope,” said Levy, in an interview, “will be to go after Bechtel. There should be no cost to any of this. Whether of not that culpability can be proven is the question.”
Havern believes it can be.
“We’ll get back the money we had to spend on repairs,” he said. “Anything that happens so quickly after construction is either going to be a design defect or a construction defect. The biggest problem we have is that at one point there was a liability contract with Bechtel that said they would be liable for up to $150 million, but that’s absent negligence.”
If Bechtel, therefore, could prove they were not negligent in their work on the I-90 connector tunnel, they would not be liable. Havern does not think they have a strong case.
“I think a Massachusetts judge is going to find negligence,” he said. “I think any judge in the world is going to say ‘you got paid how many billion? Well guess what? You’re on the hook for $300 million.’”
Any funds retrieved through the cost recovery, Havern said, will be used for fixing the problems caused by the shoddy workmanship.
“The cost recovery effort is going to be for the repair work that we have to do from now on,” Havern said. He noted that he believes the effort will allow the Big Dig budget to remain near the $14.6 billion figure.
“I think we’re going to come in pretty close [to budget].”
If Havern is wrong, and any additional costs do arise, Massachusetts cannot look to the federal government for any further financial help. Congress initially allocated $775 million to the Big Dig in 1990, but after a decade of watching massive budget increases and leadership debacles, the U.S. government made it clear that Massachusetts would have to pay for its own mistakes. On June 16, 2000, Andrew S. Natsios, who was then chairman of the Massachusetts Turnpike Authority, signed an agreement with the Federal Highway Administration to cap the federal government’s contribution at $8.549 billion.
Not only is there a funding cap, but the federal government has not paid off all of its budgeted contributions. State Treasurer Timothy P. Cahill addressed this gap in federal funds in a letter to Governor Mitt Romney on August 7, 2006, the month after the ceiling collapse. Cahill wrote of “the Turnpike’s continued inability to pay for this project, given its new challenges” and cited “serious cash flow insufficiencies,” including a “$133 million cash flow disruption that will require a bridging mechanism to keep construction on schedule.” These cash flow problems resulted from the Federal Highway Administration’s failure to approve the Big Dig’s 2004 finance plan before the end of the 2005 fiscal year. Cahill wrote, “It is my understanding that the Federal Government has noted that they will withhold federal dollars to support the project until our state demonstrates we have a credible plan.”
With the state’s focus on cost recovery and project completion, any ideas for a new financial plan for the federal government have been pushed to the back burner.
Havern said the Big Dig “was always going to be massive. If you looked at the plans, you’d say ‘oh man, how are they going to do this?’ But they kept the city open. Some of this stuff came out well. In ten years, kids who are now 10 years old are going to say ‘well, they had some problems, but it’s a great thing: You can go right through the city.’”
However, as those kids reach adulthood and begin paying state taxes, their excitement about the Big Dig may wane. David Luberoff, executive director of the Rappaport Institute for Greater Boston at the Kennedy School of Government, has studied the Big Dig extensively and co-authored the book, “Mega-Projects: The Changing Politics of Urban Public Investment.” He believes there is only one obvious source for any additions to the current $14.6 billion budget.
“The money has to come from taxpayers,” Luberoff said when interviewed by email.
Levy agrees and maintains that the problems of the Big Dig will haunt future generations for years to come.
“The biggest problem,” he said, “is, because of the shoddy workmanship, maintenance will be substantially higher than a normal project.” While Havern says the insurance revenue and cost-recovery funds will pay for repairs, Levy says there will be other costs moving forward.
“There’s nothing predicated in this budget or future budget to talk about how we’re going to do ongoing maintenance,” he says. “Where a normal tunnel or normal bridge takes a 5% annual setback for normal maintenance, this will be 10%-15%. That has to be paid for by someone. It will be paid for by us.”
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