Highway Robbery
Amid the questions surrounding this month's fatal Big Dig collapse, there is at least one stark and immediate fact: $14.6 billion didn't buy Boston the gleaming perfection it had hoped for. Where, exactly, did all that Big Dig money go?
PLUS: Phil Primack's 2000 story, “The Blame Game,” profiling key players in the Big Dig budget debacle.
When traffic is flowing and water is not, the drive through this
part of the new I-93 tunnel is smooth and easy. Except for the exits,
there is little to indicate that the city is running at full tilt four
stories above this nondescript, short stretch of underground roadway
from State Street to North Street. But more than five years and nearly
$176 million went into constructing just this single 950-foot section
of the Big Dig, about 1.2 percent of the project's
we-really-mean-it-this-time estimated $14.625 billion cost.
Such a number is almost impossible to grasp. Paying nine bucks for a
movie may be infuriating, but at least that's a figure that can be
understood. The soaring Zakim Bridge, the tunnels, and other complex
pieces of the city's nearly completed megaproject had to cost big bucks
— but nearly 15 billion of them? Where — exactly where — did all that money go?
Take this less-than-two-tenths-of-a-mile stretch. Somewhere in here
is $358,650 worth of 12-inch, cement-lined water pipe. “Vibrating Wire
Piezometer [to monitor water pressure], Two per Hole” cost $230,222.
Even the sign panels on barricades sucked up a hefty $65,160 (though it
took a comparatively reasonable $169 to “Remove & Reset” them).
These are among 330 separate entries in Contract C17A2, under which
Obayashi and Modern Continental — the company that brought you the most
infamous of the tunnel leaks — built this one small section of the new
I-93. To look into such contracts is to see how dollars have flown far
past hardhats and cement suppliers.
Lawyers and mediators have collected big Big Dig bucks. Insurers
have done quite nicely, too, thank you. So have real estate appraisers,
computer vendors, landscaping firms, public relations companies,
artists, graphic designers, advocacy groups for women and minority
workers, travel agents, the U.S. Postal Service, and more. Your
neighbors down the street may complain about the project's costs, but
they probably know someone who has directly or indirectly gained from
it. Especially if they know any Boston cops. Or state cops. Or Massport
or MBTA cops. Or even North Andover cops. Collectively, these public
servants in blue have reaped a staggering $66.4 million in special
detail pay on the Big Dig, and counting. This translates into a lot of
doughnuts to go with all that hard time sitting in the cruiser.
Less than two-thirds of all Big Dig spending, or about $9.6 billion,
is going to actual construction, to the wages of thousands in the
building trades and other workers, and to the machinery and concrete,
steel, wire, culvert, and other materials they used. The next biggest
component of the cost has been project management, weighing in at $2.15
billion, of which $1.92 billion has gone to Bechtel/Parsons
Brinckerhoff, the behemoth that manages the project for the state, and
its subconsultants. That's about one dollar in every seven, or 15
percent, of the money budgeted for the Big Dig — “not that far out of
whack for a project of this scope or size,” contends Matthew Amorello,
chairman of the turnpike authority. This despite the fact that
management costs for other multibillion-dollar public construction jobs
have been less, sometimes much less.
Bechtel's Big Dig program manager, Keith Sibley, points out that the
company also was responsible for the project's preliminary design,
without which management costs fall to about 12 percent of the total.
Some $146.6 million, or exactly 1 percent of the Big Dig budget, has
gone to fees — essentially profit to Bechtel and its subconsultants —
according to the company. The rest of the taxpayers' $2.15 billion tab?
About $668 million paid the salaries of Bechtel employees, of which
there are still 260 on the payroll even with work winding down, and
subconsultants. Benefits and other employee costs added nearly $709
million, and about $401 million is going to “direct expenses.”
That has a wide and varied meaning. Bechtel has run up more than $90
million in direct expenses under its current contract alone, which
began in 2001, including at least $1.4 million for travel. One $33,358
item is for “Conf/Seminar” for construction personnel. “Several of the
project's individuals must maintain their certification in their area
of expertise and this certification does require off-project travel,”
the company explains in a statement. So presumably well-paid engineers
and others — Bechtel won't release salary information — are getting
their certification on the taxpayers' nickel. (Then again, state
highway department employees themselves are headed toward charging at
least $123,277 in business travel to the Big Dig during the same
period.)
The project's largesse has also extended to insurance companies and
law firms including Sheppard Riley Coughlin, a High Street insurer
expected to take in nearly $1.8 million over five years. Even artists
have scored. One is being paid $30,000, another $53,000, and another
$135,000 to provide or install public art. Another is getting $131,467
for graphic design. Itemized expenses like these go on for 13
single-spaced pages.
Few projects match the Big Dig in scale and complexity, but 15
percent for project management is on the high side. “It's hard to set a
target at the outset of a project, but the industry standard on large —
which means anything that starts with a billion — is in the
8-to-12-percent range,” says Richard Fox, president of Cambridge-based
Camp Dresser & McKee, which specializes in global consulting,
engineering, and construction.
In the 1980s, Fox was director of program management for another
megaproject, the Massachusetts Water Resources Authority's
multibillion-dollar cleanup of Boston Harbor. Management costs for that
project, which also involved tricky tunneling and complex construction,
came to 10 percent, not including preliminary designs. Adding that
design work brought the harbor cleanup's management costs closer to 13
percent. That's still two percentage points less than the Big Dig,
which may not sound like much until you consider it equates to about
$146 million per percentage point.
A more striking contrast to the Central Artery job is the
decades-long project to bore a 60-mile water tunnel at an average depth
of 600 feet under New York City. Stage One of Tunnel 3 took nearly 20
years and $1 billion. Management costs, including design? Less than 3
percent, says New York's Department of Environmental Protection, which
runs the project.
More than costs, differences in management structures separate the
Big Dig from other projects. In New York, for example, it made sense
for the state to build up its own in-house staff of designers,
engineers, and others, since the pipeline will take more than 50 years
to complete. The Big Dig was initially supposed to take only 10 years,
and since no state agency had the expertise to oversee the job, it made
little sense to create the costly in-house capacity to do so for such a
short time.
“It's clear the state needed to have someone with [Bechtel's]
expertise,” says David Luberoff, director of Harvard's John F. Kennedy
School of Government's Rappaport Institute for Greater Boston, who has
studied the Big Dig. But he adds, “The state could have done a better
job of managing the managers. You have to have a small, highly skilled,
highly respected group of people who could look over [Bechtel's]
shoulders.” The state needed, in short, a fox to watch the foxes, just
as Dick Fox led an MWRA team that kept an eye on ICF Kaiser Engineers,
the construction management firm for the harbor cleanup. “We had a
50-person project management team within the [MWRA] of highly paid,
very experienced people,” says former MWRA director Paul Levy. “Because
the state did not have that cadre of people [for the Big Dig], they
were more reliant on Bechtel. Right after I hired Dick Fox, I remember
[Big Dig architect and former Secretary of Transportation] Fred
Salvucci calling to congratulate me, saying he wished he could do that
but it was not possible under the state personnel system.”
Back in 1982, when Salvucci first outlined what would become the Big
Dig, the price tag was $2.6 billion. How did it reach $14.6 billion?
The project chalks up more than half the $12 billion difference to
inflation. Though that seems itself inflated based on traditional
consumer cost-of-living calculations, it's in accord with standard
measures of inflation on construction projects. Other major price hikes
were due to changes in the scope of the project itself. Another $3
billion was rung up for “environmental compliance and mitigation,” a
category that includes such big-ticket items as $1 billion for the
redesigned Charles River crossing and $400 million to dump debris on
Spectacle Island rather than in Boston Harbor.
When they examined Bechtel's analysis of the price explosion, the
National Academy of Engineering and the National Research Council noted
in a 2003 report that political expediency was to blame for many of the
added costs, such as routing construction around residential areas.
“There is by no means any universal agreement, however, that the money
is always spent well or in the service of stated goals,” the report
said.
As for state officials, Salvucci notes that they were perfectly
wiling to accept price-ratcheting add-ons since initially 90 percent of
the project's cost was covered by federal dollars. “But then Congress
changes the funding formula in 2001, and the burden is shifted so that
every doodad you add is directly costing the commonwealth,” he says. “I
would have expected Bechtel to say, 'Hey, you have to pay for this,'
but Bechtel's skills are engineering, not finance. It was my job and
that of my successors to watch out for the commonwealth's interests,
and not to continue to act like the feds were still paying 90 cents on
the dollar.”
Nor did Bechtel have any real incentive to warn about costs, or
worry about keeping them down. “The fundamental project management
structure was wrong from the start,” says Massachusetts Convention
Center Authority director Jim Rooney, who was the Big Dig's assistant
project director from late 1994 to early 1996. “You cannot assign the
role of owner, which is essentially what the state did.” By the time
relatively minor financial incentives and penalties proposed by Rooney
to pressure Bechtel were adopted, the management setup was well in
place and the project fully under way, leaving the state with little
leverage. By comparison, the convention center authority oversaw the
$600 million construction of the new convention center itself — and
management costs were less than 6 percent, Rooney says.
That's half what Bechtel gets. Yet when the tunnel began to leak,
the project management company was quick to note that Modern
Continental, not Bechtel, was responsible. Modern did mess up the job,
but as state auditor Joe DeNucci and Inspector General Gregory Sullivan
wrote Amorello, “Records clearly show that [Bechtel] knew about and
approved the shoddy construction that has led to the leaks. . . . The
leak problem would not have occurred if [Bechtel] had simply made the
construction contractors perform according to the specification in
their contracts.”
It's amazing how billions of dollars just doesn't buy that much anymore.