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MGT279Assignment4.pdf
MGT279. Management of Major Programs
2015 University of Management and Technology 1
MGT 279. Management of Major Programs
Assignment 4
Boston’s Big Dig
In this assignment, you are to play the role of an expert on managing major
programs. Assume the following lengthy article that appeared in the Boston Globe
comprises a report you have received about the Big Dig project in Boston, one of the
costliest and most politically charged major programs in history. You should read the
report with a measure of skepticism – the writer is neither an expert in managing major
programs, nor a disinterested third party observer of events. Still, the “report” is filled
with interesting facts that certainly indicate that we are dealing here with a trouble-filled
program. When you are done reading the report, please address the following questions:
1. In summary, what does the report’s author blame for the problems encountered on the Big Dig project?
2. As an expert, to what extent do you think the author has got things right? Based on your knowledge of what it takes to manage major programs, how would you
summarize what went wrong with this project?
3. To what extent do you feel that if the Big Dig had followed the US Department of Defense approach to managing major programs it would have been more successful?
What problems might arise in trying to employ the US DoD approach?
4. What lessons can be derived from the Big Dig experience that can be shared with individuals and organizations that are about to begin work on a major program?
Your answer should be no longer than ten pages long, using single space and 12
point font. In reviewing your response, I will be looking for evidence that you can hold
original views that reflect a solid grasp of program management issues.
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Below is the Boston Globe report:
The Central Artery viaduct snakes within feet of the FleetCenter, which was left off early Big Dig
design plans (Globe Staff Photo / David L. Ryan)
PART ONE
Artery errors cost more than $1b
By Raphael Lewis and Sean P. Murphy, Globe Staff, 2/9/2003
t was spring 1997, only a few weeks after he took an engineering job with the Big
Dig's private-sector managers, Bechtel/Parsons Brinckerhoff, when David Beck realized
something was terribly amiss at the then-$10.8 billion project.
The FleetCenter was missing.
Not the actual FleetCenter, of course. The flashy facility had been grabbing headlines
since a groundbreaking ceremony on April 28, 1993.
It was the design drawings. Bechtel had failed to depict the 19,600-seat arena in its
preliminary designs, which were completed in October 1994, and instead showed an
obstacle-free area for contractors to lay utility lines. Bechtel then failed to fix the problem
before signing off on the final design drawings three years later.
"I sent out some e-mails, and made a couple of calls, saying, `Hey guys, we have a
problem here,' " Beck recalled.
Months passed, and construction work was under way before the designs reflected the
FleetCenter's existence, records show.
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"It fell through the cracks, if you will," William R. Mayer, a top Bechtel engineer,
recently acknowledged.
But even though Bechtel's gaffe cost taxpayers $991,000, the company never paid a
penny back for its mistake. And no one from the state or federal government ever asked.
A yearlong Globe investigation found hundreds of similar errors committed by the Big
Dig's management company, which is led by one of the world's largest engineering firms,
Bechtel Corp. of San Francisco, and includes another industry titan, Parsons Brinckerhoff
of New York. The Globe determined that at least $1.1 billion in construction cost
overruns, or two-thirds of the cost growth to date, are tied to Bechtel mistakes.
Yet, even as Bechtel's errors helped drive up the Big Dig's cost, the company never paid
for any of its mistakes. Instead, it profited. To date, Bechtel has received more than $264
million beyond what its original contracts called for, in part because Bechtel received
additional money to fix its errors, records show.
After years of inaction on cost overruns, the Big Dig late last month hired a retired judge
to determine whether Bechtel -- or any contractors -- owe refunds for mistakes in design,
construction, or management. But the state is unlikely to get repaid for as many as two-
thirds of the errors because the statute of limitations has passed.
The Globe investigation included scrutiny of 12,000 changes to more than 150
construction and design contracts, review of 20,000 pages of project documents, and
more than 100 interviews with current and former Big Dig officials, construction
specialists, and contractors. The chief findings:
• During the 17 years it has managed the Big Dig, Bechtel has neglected to perform basic
work called for in its contracts, such as conducting crucial field surveys of the elevated
Artery, and verifying the locations of utility lines and buildings such as the FleetCenter.
The failures contributed to more than $350 million in construction overruns, project
records show.
• Construction on virtually all of the Big Dig's major contracts began with incomplete and
error-filled designs, which led to nearly $750 million in other construction cost overruns,
records reveal. Bechtel created the basic design for the entire Big Dig, set the design
schedule, and signed off on all the final design drawings.
• Bechtel failed to heed warnings of problems in the design drawings, even from its own
engineers, records and interviews reveal. Those deficiencies were usually fixed only after
contractors discovered them, when it was far more expensive to make changes. In almost
all cases, Bechtel solved the design problems by recommending that the state approve
hundreds of millions of dollars in payments to contractors for additional work.
• Bechtel failed to detect or call attention to serious flaws in construction work, leading to
tens of millions of dollars in repair and delay costs.
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Bechtel's top Big Dig official, project manager C. Matthew Wiley, said the firm has done
its job as well, if not better, than any other engineering firm could.
"I believe the Bechtel/Parsons Brinckerhoff team has performed admirably, and to a
higher professional standard of care than required in our contract," he said.
Bechtel officials disputed that any part of the $1.6 billion in construction cost overruns to
date resulted from mismanagement or deficiencies in its designs. They attributed about
$1 billion in overruns to justifiable expenses that cropped up as they confronted
engineering challenges and community concerns.
The remaining $550 million in overruns, they said, was the cost of shortening the
project's schedule from late 2007 to mid-2005. By cutting time off the project, Bechtel's
so-called fast-track initiative created a net savings of about $1 billion, they said.
But if Bechtel -- and the state officials who relied upon the company -- expected overruns
due to a "fast-track" plan, they never told the public until after overruns busted the Big
Dig's budget.
In fact, no documentation of such a plan exists in the Big Dig's voluminous files, the
Globe found, calling into question the assertion that "fast-tracking" was an actual
initiative and not an after-the-fact justification for overruns.
What the Globe did find was that Bechtel had no financial incentive to minimize errors,
and that its officials routinely advised the state to pay overruns to smooth over problems
that were often of Bechtel's own making.
Bechtel was "like the fox guarding the chicken coop," said C. William Ibbs, a
construction management professor at the University of California at Berkeley and a
frequent consultant to both the Big Dig and Bechtel.
"We would like to think they are honest people and act with the highest integrity," Ibbs
said. "But they are profit driven."
Error by design: A case study
On July 15, 1997, state officials gathered to award a contract to build tunnels from
Haymarket Square to the North Station, where the elevated Artery loomed four stories
above street level.
The terrain demanded the most precise designs and complete research Bechtel could
offer; otherwise, a minefield of obstructions would send delays rippling throughout the
Artery work zone.
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First, the contractor had to build new steel legs to hold up the rusty old highway. Then,
the contractor had to tunnel through crumbling bedrock, old sewer mains, and wooden
piers from long-forgotten wharves.
And they had to do it all without interrupting traffic.
Bechtel estimated the job would cost about $260 million to complete, and Big Dig
officials hoped they were right. After all, they had pledged repeatedly to the public that
the project's cost would not rise above $10.8 billion.
As it turned out, the low bid came in at $218 million. Artery officials rejoiced.
But their joy was short-lived.
Today, the contract held by Jay M. Cashman Inc. has grown $128 million beyond the bid
submitted that July day, an increase of nearly 60 percent. In many ways, it stands as an
object lesson in Bechtel's problematic management.
Cashman and the other contractors had virtually no hope of cobbling together accurate
cost estimates, records show. The reason: Bechtel had poorly managed the contract's
design, and it was nowhere near complete.
As a result, the cost of the job was artificially low because Cashman never had a chance
to submit bid prices for significant aspects of the work required.
The plans the contractor bid on were confusing, hastily assembled, and sometimes
contradictory, records show. In the eight weeks before the bid opening, the engineering
firm hired to finish Bechtel's preliminary designs for the Cashman job redrew them nine
times, the Globe found. Bidders received the last packet of drawings just five days before
the contract was awarded.
But that was hardly the end of the design process. On 16 occasions between July 1997
and October 2002, Bechtel sent Cashman new design packets that included as many as
400 new drawings. The packets addressed 1,800 written requests for clarification from
Cashman on discrepancies between the designs and the actual conditions workers
confronted.
One major problem appeared almost immediately after Cashman got the go-ahead to
begin work. Crews found that Bechtel's complicated scheme to support the Artery while
excavation work proceeded below was not viable, records show. The discovery set off an
eight-month odyssey of reengineering, overtime, and extra shifts to correct the designs.
Project records and interviews with officials involved with the contract indicate that
Bechtel violated standard industry practice by neglecting to survey and measure the
elevated roadway before construction began. Instead, Bechtel relied on aerial photos
taken in 1987 and 1988 and 1950s-era architectural drawings. Measurements would have
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determined exactly where structural elements such as support footings rested and not
where planners a half-century earlier had said they would be.
Anthony Lancellotti, Bechtel's engineering manager, acknowledged that the Artery was
not properly surveyed, saying the company took a calculated risk that the combination of
aerial photos and old "as-built" drawings would be sufficient.
"Each contract is exposed to certain risks," Lancellotti said.
That risk turned out to be quite costly. The failure to survey the Artery cost at least $16
million to correct and about $10 million more in overtime and extra shifts to avoid
schedule delays, according to contract records and interviews with contractors.
Other costly problems wrought havoc, too. Cashman found a 9-foot-wide sewer main and
other obstructions not mentioned on the designs in places where the firm was to supposed
to build tunnel walls, records show.
When Cashman drilled down to bedrock, which determined the height of the tunnel
walls, it sat about five feet higher than designs showed, requiring new plans for more
than a mile of tunnel walls.
And Cashman encountered a subterranean pocket of tidal muck that caused repeated
tunnel wall cave-ins, in part because Bechtel did not allow the company to try a different
construction method for several months, records show. The cost: $1.2 million.
A little more than a year after Cashman took on the Artery contract, the company's
managers were fed up. In April 1999, Jamie Doyle, Cashman's project director, fired off a
letter to Bechtel engineers calling the contract "unconstructible." He blamed the problem
on unfinished designs.
"With even a summary understanding of the history of the issues dealt with, it becomes
clearly evident that the plans, at bid time, were at best, no more than 65 percent plans,"
Doyle wrote. "The prudent bidder has a legal as well as moral right to expect that he is
bidding on 100 percent plans."
Bechtel officials insist the designs in the Cashman contract were adequate, and that
contractors routinely complain to make extra money.
Still, Cashman was expected to finish in February 2001, but the job dragged on an extra
22 months. The delay cost Bechtel nothing. In fact, as with all the other overruns, it only
added to the company's profit. While taxpayers covered the $128 million in overruns,
Bechtel took home an additional $3.7 million for its extra time.
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Forget and forgive
Even when an outside agency pointed out problems in
Bechtel's preliminary designs, Bechtel failed to heed the
warnings.
On Dec. 22, 1994, MBTA officials met with Bechtel to
discuss the firm's plans to raze a ramp near the FleetCenter.
The T's representatives told Bechtel that it would cause the
Green Line and the ramp to collapse, according to project
records.
But Bechtel did not change the plans. Three years later, after
the project discovered that T officials were right all along,
Bechtel ordered the contractors to install an elaborate support
system. Cashman received an additional $250,000 for the
new work, records show.
Bechtel officials insist they were forced to make frequent changes to designs in that area
because the MBTA's plans and schedule changed frequently. They said they did their best
to minimize costs and conflicts.
"They were a moving target," Bechtel's Lancellotti said of the MBTA.
But Beck, the former resident engineer, recalls meeting resistance from his Bechtel
bosses upon finding errors or problems. When he told a senior Bechtel manager about the
Green Line problem, the manager told Beck, "No, we do not have errors on our
drawings," according to Beck.
Beck did not last much longer on the project. In 1998, a North End resident complained
about construction noise, and Beck dismissed the complaint as exaggerated. Bechtel fired
him, at the insistence of state officials.
Beck acknowledged his role in the incident but says he was fired primarily for his
criticisms of the Big Dig and its management.
"It's too bad because we were doing great, important work," Beck said. "It's just that it
could have been done so much better."
State officials, the ultimate overseers of the project, took little notice of what Beck or any
other critic said and simply paid for Bechtel's mistakes.
"I've always taken the position that, if you make a mistake . . . the last thing in the world
you want to do is hit somebody over the head," said James J. Kerasiotes, the state's top
official overseeing the Big Dig for the first decade of its construction.
Bechtel has neglected
to perform basic work
called for in its
contract, such as
conducting field
surveys and verifying
the location of large
utilities and buildings
like the FleetCenter.
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Fast track to overruns
The problems that dogged the Cashman contract, and the tens of millions of dollars
needed to fix them, were pervasive throughout the Big Dig, records show.
On more than 3,200 occasions since 1991, the state paid extra money to contractors to
compensate for design flaws, some big, some small.
For example, the drawings for the Ted Williams Tunnel left a 4-foot gap between tunnel
sections, which was discovered by perplexed workers only after the massive tunnel tubes
were eased into position, records show. The problem caused at least $307,000 in new
work.
Another set of designs, which detailed specifications for a trucking route through South
Boston, instructed contractors to connect an electrical line to a certain manhole. "The
manhole does not exist," project officials later acknowledged, as they authorized a
$63,000 overrun payment.
Drawings for the Big Dig's Operations Control Center called for 12-foot-wide openings
in the walls for ventilation. But "a 20-foot opening was required," a project memorandum
states. The state paid $11,000 to make the vent system fit.
And another design called for laying 12 inches of gravel beneath a road section in East
Boston. As it turned out, the required amount was actually 15 feet. The cost: about
$560,000.
All these small errors helped add up to something very large: $1.6 billion in unplanned
construction costs. About $1.1 billion of that can be traced back to deficiencies in the
designs, records show: $357 million because contractors found different conditions than
appeared on the designs, and $737 million for labor and materials costs associated with
incomplete designs.
The rest, about $500 million, Bechtel filed under the category "Other." The innocuous-
sounding category covered all manner of extra expenses, from extra street sweeping to
additional police details to new shipments of concrete -- most of it necessary because of
design-related delays.
When the Globe first questioned the completeness of Big Dig designs, Michael P. Lewis,
the state's Big Dig project director, said the designs were "100 percent" finished when put
out to competitive bidding. State law requires as much, to ensure that taxpayers get the
lowest price possible for every aspect of work involved.
A few weeks later, however, Bechtel's Lancellotti, as well as Lewis, pulled back slightly,
saying "virtually all" designs were "98 percent complete" when construction activity
commenced. The designs left only minor items out at bid time, they said.
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Shortly thereafter, they acknowledged three major construction contracts went out to bid
while designs were still "substantially incomplete." The designs were not ready in time to
meet federal funding deadlines, they said. Those three contracts -- two on the Ted
Williams Tunnel and one near South Station -- have increased by more than $250
million, records show.
Finally, Bechtel officials said they had intended to begin most contracts with some design
elements unfinished, to save time. About $550 million in overruns were necessary to fill
in some of the gaps caused by such "fast tracking," they said.
But there is no documentary evidence that such a plan existed, the Globe found, and if
Bechtel truly intended to forge ahead while expecting to fill in the gaps with overruns, the
firm did not publicly state that. Asked under the state's public record law to provide any
reports, memos, or correspondence that detailed, or even mentioned, such a plan, Bechtel
and state officials said there were none.
They did provide a copy of the management plan Bechtel submitted to the state in
February 1985. In it, the company proposed going ahead with relocation of utility lines
even as engineers were still developing the conceptual design of the project. They called
it "fast tracking." The plan was limited only to the earliest stages of the project, before
anything was awarded to contractors.
By the mid-'90s, however, Bechtel was moving ahead with far more than just utility lines
before the final drawings were complete. One of Bechtel's top engineers protested the
company's practice of putting out incomplete designs and then filling them in later,
according to a legal complaint filed in federal court in Boston.
Bruce Newman, who designed the Big Dig's massive electronic security system, says he
was fired after complaining that Bechtel was engaging in "major violations of accepted
practice" and breaking state laws. He sued Bechtel in federal court, and the two parties
reached a confidential settlement in 2000.
Bechtel, in court papers, said Newman was let go as part of wider layoffs. But the
company did not dispute that Newman was told to sign off on drawings that he called
"extremely simplistic."
Project records confirm much of what Newman alleged -- that the design process had
fallen further and further behind schedule as construction pressed forward. State officials
refused to delay construction to give engineers time to work out serious omissions in the
designs, records show.
As a result, almost all Big Dig construction contracts were awarded amid a last-minute
flurry of design revisions, just as the Cashman contract was. Thousands of new drawings
poured in just days before bids were due, records show, making inaccuracies in the bids a
virtual certainty.
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Once construction began, Bechtel and the design firms it managed fired out hundreds of
"design update" packages to contractors already in the field, often with new information
that conflicted with other designs. Some of those updates arrived years into construction,
records show.
To Ibbs, the construction specialist, Bechtel's willingness to provide contractors with
incomplete designs was irresponsible. And the more difficult the project, he said, the
more crucial it is to make designs precise.
"You have to take care up front," in the design process, Ibbs said. "If I am doing a one-of-
a-kind project in Boston, that demands even more care."
Construction criticism
In December 1998, more than a year after Cashman won its contract, federal inspectors
paid a routine visit to the job site, interviewing laborers, scribbling notes, observing
workers pour concrete and install steel beams.
They found some troubling lapses, according to a Federal Highway Administration
inspection report.
Topping the list of concerns: Workers had installed at least one massive steel beam that
was made of a weaker grade of steel than project regulations allowed, the inspectors said.
The inspectors rated the quality of work "unsatisfactory." State officials promised better
oversight. Cashman disputed most of the charges.
But the inspectors raised a crucial question: Why didn't Bechtel spot the problems first?
After all, Bechtel not only managed the entire design process, it was responsible for
enforcing the project's construction guidelines.
In fact, on several occasions, Bechtel failed to watch contractors closely or test their work
until after it was too late, the Globe found.
For example, when the federal inspectors returned to the Cashman work site two years
after documenting lapses in Bechtel's oversight, they reported that Bechtel's "inspection
of the structural steel fabrication continues to be an issue."
The problem, the federal inspectors said in their June 2000 report, was a projectwide
"weakness" in Bechtel's oversight.
Bechtel officials, in interviews with the inspectors, blamed state-mandated caps on their
staffing levels, which they said hampered their ability to observe all steel being installed
on the project.
But steel quality was not the only problem to elude their gaze.
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Bechtel failed to test the Ted Williams Tunnel ventilation system until a year after the
roadway opened to the public in December 1995. As it turned out, mistakes by a
contractor had left gaps in the ventilation system, leaving it unable to draw smoke out of
the parts of the tunnel in the event of a fire.
Bechtel and project officials insisted that the system was adequate all along, and that at
no time were drivers put in harm's way.
It took Bechtel until September 2000, nearly four years after the problems were detected,
to get the system fixed. It cost taxpayers $5 million.
A flood of trouble
Bechtel's failure to order timely repairs at the
contractor's expense was not limited to the Ted
Williams Tunnel. The Globe found examples from the
northern edge of the project, where roadside barriers
were too short for federal safety guidelines, to the
South End, where paving surfaces prematurely cracked
because they were applied incorrectly.
But in the Fort Point Channel tunnel crossing, the
consequences of Bechtel's mismanagement were
disastrous.
In November 1999 Drew King, a Bechtel field
engineer, noted in a report that a steel dam built to
keep water out of the tunnel area was not sealed. Steel
sheets that were supposed to be tightly interlocked
were instead overlapped.
"No interlock between Phase 1 & 2 at corner," King
entered into his Nov. 13, 1999, report. In all, King
found seven gaps in the dam, ranging from 3 to 18
inches wide.
But Bechtel never informed state managers of King's
findings, two Artery officials said. Nor did Bechtel
direct the contractor, Modern Continental Construction
Co., to make the needed repairs, records show.
Two years later, on Sept. 22, 2001, a massive leak erupted beneath the tunnel tubes,
gushing 70,000 gallons a minute into the site, submerging heavy machinery, and bringing
key Big Dig contracts to a halt for several weeks. It was the largest construction setback
on the Big Dig in recent years and the main reason for the delayed opening of the Mass.
Pike connector to Logan Airport.
In the Fort Point Channel
tunnels, the site of a major
flood in 2001, independent
engineers warned Bechtel
that the design was
"unreasonable," but Bechtel
pressed forward, anyway.
Above, workers finish plugging the Fort Point Channel leak late in 2001. (Globe
File Photo / John Bohn)
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Big Dig officials say the flood cost at least $41 million.
The gaps may not have been the only cause of the leaks, the Globe found. A state inquiry
into the flood concluded in 2002 that Bechtel had relied on an "unreasonable" design in
the first place, a confidential report by the law firm Kirkpatrick & Lockhart says.
Bechtel had heard as much before. In October 1997 an independent group of engineers,
who were invited to review the designs before construction began, called them
"unrealistic," the report says. But Bechtel disagreed with that assessment and pressed
forward. The company never informed Modern Continental that serious doubts had been
raised about the design, the report says. Modern Continental officials declined to
comment.
When the firm conducting the state inquiry presented information critical of Bechtel's
oversight, the state never went after Bechtel for money. Instead, the state pursued Modern
Continental for the cost of the leaks and relied on Bechtel as its legal ally. Bechtel
officials declined to comment on the Fort Point Channel flood.
Carolyn Kain, the Turnpike Authority's former deputy general counsel, told the agency's
chairman that the state had a strong case for a refund from Bechtel. In a confidential e-
mail, Kain wrote that the evidence "points directly" at Bechtel. If Bechtel refused to pay
immediately, she said, "It is my recommendation that litigation be commenced
forthwith."
A few weeks later Matthew Amorello, the Turnpike Authority's chairman, fired Kain,
who had clashed with the authority's leaders on a number of matters. A spokesman for
Amorello said Kain's dismissal was not connected to her legal conclusions on Bechtel.
The Turnpike Authority has yet to take any legal action against Bechtel for the leaks.
Instead, the authority's board recently voted to give Bechtel a new contract. The state and
Bechtel were joined together anew, and the state also offered Bechtel at least 7 percent
profits on top of its wages.
The state guaranteed those profits -- even on work required to correct Bechtel's mistakes.
Thomas C. Palmer Jr. of the Globe staff contributed to this report. Raphael Lewis can be
reached by e-mail at [email protected]; Sean P. Murphy can be reached at
This story ran on page A1 of the Boston Globe on 2/9/2003.
© Copyright 2003 Globe Newspaper Company.
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Crews working in the section of the tunnel between Haymarket Square and North Station found
hundreds discrepancies between the design drawings and the actual site conditions. (Globe Staff
Photo / David L. Ryan)
PART TWO
State's cost-recovery efforts have been nearly a lost
cause
By Sean P. Murphy and Raphael Lewis Globe Staff, 2/10/2003
n Jan. 26, 2000, state officials convened a high-level meeting to consider whether the
Big Dig's managers owed taxpayers a refund for mistakes.
The project's budget had ballooned by $1.4 billion, despite public assertions to the
contrary. And the managers, Bechtel/Parsons Brinckerhoff, a private, for-profit company,
had contributed to the budget crisis through a series of mistakes and misjudgments.
Yet when it came time for the Cost Recovery Committee to decide, the officials agreed:
No refund.
They had never demanded a refund from Bechtel.
Created in 1994 to pinpoint design and management mistakes, the Cost Recovery
Committee routinely overlooked or excused Bechtel's errors, according to a Globe
examination of project records.
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What made the January meeting really unusual, however, was that it had taken place at
all. Until then, the Cost Recovery Committee had not met or taken a single official action
since Feb. 2, 1998 -- two years earlier -- records show.
Cost recovery "was admittedly never the front-burner issue for me," said Michael P.
Lewis, who served as the Cost Recovery Committee chairman as well as the project's
state design director. "Perfection was not the standard." he added.
Lewis's very involvement in the committee raises questions. As the state's Big Dig design
director, Lewis had overseen Bechtel's management of the design phase. To review
Bechtel's work meant passing judgment on his own supervision of Bechtel. Lewis now
serves as the state's Big Dig project director.
Bechtel, too, had a conflict of interest in cost recovery, the Globe found. State procedures
called for Bechtel "to identify issues of potential cost recovery," which meant the state
relied on Bechtel to point out flaws in its own designs and management.
Now, with the federal government unwilling to pay new cost increases in the Big Dig,
state officials say they are prepared to pursue Bechtel for the company's mistakes. In
2001, they eliminated the Cost Recovery Committee. It had returned only a single
payment of $35,707 in eight years -- and in that case, not from Bechtel but from a smaller
design firm supervised by Bechtel. The committee's responsibilities were turned over to
state lawyers.
But they failed to get back any money after 15 months on the job. So late last month, the
Turnpike Authority, which oversees the Big Dig, made another change, handing cost
recovery responsibilities to a retired family court judge. Turnpike officials cited a need
for an independent review when they hired Edward M. Ginsburg.
But the clock is ticking. The statute of limitations prohibits the state from pursuing cases
that date back more than three or six years, depending on whether the case is for breach
of contract or negligent performance. That means much of the work that went into the
Big Dig, including the entire Ted Williams Tunnel, is now almost certainly off-limits to
Ginsburg and his staff.
What's more, Bechtel spurned a state request in January 2002 to waive the legal
limitation on review of all of its work. The company said it would only waive the limit on
individual cases.
To recover anything at all, Ginsburg must overcome the state's poor record-keeping. No
neat summary of design and management problems exists. And the state never kept a
running account on Bechtel's performance, either. In 1997, the state decided to evaluate
Bechtel every six months, but quickly dropped that initiative, the Globe found.
So Ginsburg must start from scratch -- plowing ahead with little experience in
construction law and no knowledge of the Big Dig's long and complicated history.
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Peter Pendergast, the former Turnpike Authority general counsel who arrived at the
agency in the wake of the 2000 cost overrun scandal, said he was startled by the project's
flimsy records and the conflict of interest of those involved in cost recovery.
"Cost recovery was a process that appeared as though it was designed to fail," Pendergast
said.
"The numbers speak volumes about the effectiveness of the program," he said, noting the
committee's record of only $35,707 in refunds.
After a year of interviewing Big Dig officials and scrutinizing tens of thousands of pages
of documents, the Globe found major lapses in the state's oversight of the Big Dig:
The state's contract with Bechtel was fundamentally flawed, effectively rewarding the
engineering behemoth for delays and overruns. Because the state pays Bechtel on an
hourly basis, rather than setting specific prices for various jobs, Bechtel will receive more
than $2 billion by the time the project is completed, including about $180 million in
profit. Before all of the delays and cost overruns, Bechtel was projected to receive a
much more modest $350 million in gross receipts and roughly $38 million in profit.
Faced with thousands of cost overruns potentially tied to its own work, Bechtel referred
just three to the Cost Recovery Committee for further investigation, according to records.
On 12 other occasions, the state or the federal government initiated cost-recovery cases
against Bechtel. Meanwhile, the state approved thousands of cost overruns to make up for
mistakes or omissions related, either directly or indirectly, to Bechtel's design or
management, records show.
The Cost Recovery Committee exonerated Bechtel in all 15 cases it considered against
the company.
On at least two occasions state officials rejected evidence presented to them by an
independent specialist that Bechtel mismanagement was at the heart of costly delays. In
one instance, a state-hired engineer cited Bechtel for being "remiss" in its management of
the design of the Fort Point Channel tunnels in 1992, which fell behind schedule for eight
months. But state officials met with the engineer to discuss revising his report. In his final
report, Bechtel's management was not faulted at all. In the second instance, the engineer
found that Bechtel had failed to make sure that designs for a huge concrete wall were
sound. The wall had to be torn down and rebuilt, at a cost of an extra $31 million.
Bechtel paid none of it.
'Trust and confidence'
When Bechtel/Parsons arrived in Boston, trumpeting almost 200 years of construction
experience, it cut a unique agreement with the state. In December 1985 the state signed
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the first of 16 contracts granting the massive engineering firm the power to act as a
virtual extension of government.
Where standard government contracts keep companies such as Bechtel at a distance, even
hiring specialists to oversee their work, state officials envisioned a different approach in
Massachusetts. Theirs would be a "very special owner/management consultant
relationship of trust and confidence," according to the contractual terms agreed upon by
the two sides.
But while the state pledged its trust in Bechtel, the giant engineering firm left nothing to
chance when it came to making a profit on the Big Dig.
According to the company's contracts, the state pays Bechtel's 500 or so employees by
the hour, on a "pay as you go" basis. That means that whenever a delay or mistake
occurs, Bechtel gets paid for more work, rather than being forced to swallow some of the
costs of its errors. Sometimes, the state pays Bechtel engineers at overtime rates to
correct its own mistakes, according to project records. Roughly 10 percent of Bechtel's
work in its current contract has qualified as overtime.
And the state pays some Bechtel employees far more generously than its own workers.
Bechtel's project manager, C. Matthew Wiley, makes $290,000 a year, records show,
nearly twice the salary of the state's project director, Lewis, to whom Wiley reports.
Another 84 Bechtel employees are paid more than $100,000 a year, records show.
The state also guarantees Bechtel a minimum 7 percent profit, no matter if the project
runs late or over budget. Until February 2001, the guaranteed profit reached 11 percent
and even 20 percent for select construction work.
The contracts built a firewall around Bechtel's profits. No matter how much money
Bechtel's errors and poor decisions cost taxpayers, the contracts capped Bechtel's liability
at $100 million. That's less than 5 percent of all the money Bechtel will charge the state
for its work. And it's $80 million less than what Bechtel will make in profit.
In an interview, Wiley said that Bechtel "performed admirably" to a higher professional
standard "than required in our contract." Concerning issues with the quality of Bechtel's
work, Wiley said: "We've said a number of times we are willing to comply with the
contract. If there are issues, we are willing to discuss them."
'Their fingerprints are all over the design'
In defending Bechtel, Wiley said his company's role as project manager has been
"frequently misunderstood" by critics and the public.
That role, as it relates to cost overruns, is fairly straightforward. When problems arise on
construction sites, it's the project manager's job to figure out what went wrong, get the
problem solved, and assign blame. Bechtel has acted as the traffic cop at the busy
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intersection of more than 50 design contracts and nearly 110 construction contracts doing
almost $15 billion in work.
But because the state also hired Bechtel as the chief designer of the entire Central
Artery/Tunnel project, it relied on Bechtel to pass judgment on its own design work. And
design permeates every aspect of the Big Dig, from devising traffic plans to choosing the
path of tunnels to picking the color of roadside barriers. All bids for construction are
based on the designs, which provide step-by-step instructions for building each piece of
the project. Thus, almost all construction claims for overruns are based on design
problems, usually because contractors claim that their jobs required more work than was
set out in the original plans.
Bechtel did not do all of the project design itself. The company set the design process in
motion with preliminary drawings that comprised about 30 percent of what was needed to
build the project. Then, Bechtel turned to smaller firms for design completion, which
answered to Bechtel. Bechtel reserved for itself all fundamental design decisions -- the
what, where, and how of the project. Bechtel remained involved throughout the process
by conducting regular reviews.
When construction companies complained of design errors or omissions, Bechtel had a
contractual responsibility in its other role as project manager to discover the underlying
reason behind them -- a designer's mistake, perhaps, or a flawed work zone survey,
according to project officials.
It was Bechtel's job to figure out who was at fault for the problem. Indeed, the Cost
Recovery Committee's procedures relied on Bechtel "to identify issues of potential cost
recovery . . . involving a design professional's performance."
During the eight years of the Cost Recovery Committee's operation, more than 10,000
overruns were approved, totaling $1.4 billion, records show. Bechtel reviewed and
recommended that the state pay all the overruns. And yet hundreds, perhaps thousands, of
the overruns were rooted in missing or incorrect information in the designs process
supervised by Bechtel.
But Bechtel almost never assigned blame. Despite its contractual obligations, the
company only three times flagged a cost overrun that prompted the Cost Recovery
Committee to scrutinize Bechtel -- for a potential total of $48,911, records show.
In those three cases, the committee voted against asking Bechtel to pay up.
As for the work of the smaller design firms, Bechtel referred alleged mistakes by those
companies to the committee only 17 times, records show.
Of those cases, just one firm, Lin Associates, agreed to reimburse the state for work that
had to be done over. According to project records, Lin's faulty design of a temporary road
in South Boston cost the state an extra $339,198. Lin settled that claim in 1996 by
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refunding the state for about 10 percent of the actual cost of repaving the road -- $35,707,
records show.
That payment represents the total financial accomplishment of Bechtel and the Cost
Recovery Committee in finding fault for engineering mistakes. Meanwhile, the design
firms have received just under $1 billion in fees, roughly double what Bechtel had
estimated at the project's outset. Bechtel itself received $341 million for its design efforts.
The company declined to provide a breakdown of that sum to show what portion of its
design receipts came as a result of cost overruns.
In an interview, lawyer David J. Hatem, who represents both Bechtel and the other design
firms on the Big Dig, acknowledged a conflict of interest in Bechtel's judgment of the
design firms it oversees.
"Their fingerprints are all over the design, all over the review process," Hatem said of
Bechtel. "It's rare that you find a design issue that" doesn't in some way trace back to
Bechtel.
Hatem said that, because the state's cost-recovery efforts to date have been so limited, he
has rarely had to defend Bechtel or the other design firms. "Cost recovery has not
consumed much of my time," he said.
But Hatem said he is girding for a "flurry of activity" as project construction comes to an
end and the state shifts its attention to conducting a "lookback."
As for the state losing the legal opportunity to pursue cost recovery because of the statute
of limitations, Hatem said the state faces a "tricky act" in trying to preserve its rights. "It's
something" the state "has to keep its eye on."
'Bechtel is going to protect its interests'
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On at least one occasion, a design firm seemed to
exploit Bechtel's dual role to avoid paying for alleged
mistakes.
When threatened with losing a portion of its fee for an
alleged design error, the firm Jacobs Sverdrup sent a
June 21, 2000, letter to Bechtel saying that if Jacobs
Sverdrup had to pay, it may be "necessary to seek
recovery of the fee from other potential culpable
parties, which is certainly not in the interest of the
project."
The other "potential culpable parties" would include,
most prominently, Bechtel itself.
The case against Jacobs Sverdrup is still pending. A
spokeman for the firm declined comment.
Kurt Dettman, the Big Dig's chief counsel, said the
state must overcome Bechtel's conflict of interest if it
ever hopes to recover any money.
Since Bechtel employees staff most of the project jobs,
"They are the ones who know most of the facts on the
project, the ones who made most of the decisions on
the project," he said. To pursue a case against Bechtel
means calling Bechtel employees to give testimony
against Bechtel, he said.
"When your prime witness is going to be the party you are going after, that's an issue," he
said.
"Bechtel is going to protect its corporate interests," he added. "We are going to protect
the taxpayer interests. The two aren't always the same."
'It was not designed to be punitive'
In the early days of the project, the state and Bechtel acted as though their interests were
quite similar, if not exactly the same. There was no formal procedure to oversee Bechtel's
performance at all until 1994 -- when the federal government insisted that the state create
one.
Under the threat of losing federal funding, project officials assembled the Cost Recovery
Committee. The group -- made up of Lewis, state construction manager Joseph J.
Allegro, and Federal Highway Administration project engineer Alex Almeida -- was to
(Globe Staff Photo / David L. Ryan)
'Cost recovery "was
admittedly never the front
burner issue for me," said
Michael P. Lewis (above),
who server as committee
chairman. "Perfection was
not the standards."'
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meet at lease monthly to scrutinize construction overruns and determine if the public
deserved a refund for any errors or omissions, according to committee rules.
Lewis now says the chief purpose of the committee was "to assure quality." Recovering
costs, despite the committee's name, was not its primary objective, he said.
"It was not designed to be punitive," he said.
'They're all on the same team'
While the state approved thousands of construction cost increases, the committee
considered only 15 cases challenging the quality of Bechtel's management of the project,
almost always as a "co-target" with one of the smaller design firms Bechtel supervised; in
69 cases, smaller design firms alone were targeted.
In the 15 cases involving Bechtel, the committee exonerated the firm each time. Due to
its conflicting roles, Bechtel had provided much of the documentary evidence the
committee relied upon to make its decisions, records show.
From 1994 to the spring of 1997, the group met regularly at the project's South Station
headquarters, keeping a record of its actions and cases.
But records show that by Feb. 2, 1998, after roughly three years and some 45 meetings,
the committee had stopped convening.
The period during which the committee failed to meet coincided with some of the
project's sharpest cost growth -- $1.4 billion in construction overruns, project records
show.
None received more than the most routine scrutiny by the state.
Lewis, who headed the Cost Recovery Committee, insisted that the group continued to
meet after Feb. 2, 1998, but that no records of the committee's actions were kept. He
asserted that meetings took place irregularly, informally, with no minutes taken -- and
with no actions taken.
But the records of Cost Recovery Committee meetings kept by Almeida, the Federal
Highway Administration engineer, call Lewis's account into question. Those records
show regular committee activity between the group's founding in 1994 and Feb. 2, 1998,
including hand-written notes on the margins of meeting agendas describing the
committee's actions on specific cases. After Feb. 2, 1998, no cost-recovery
documentation exists until the Jan. 26, 2000, meeting.
Almeida said in an interview that he recalled informal cost-recovery discussions at the
conclusion of meetings on other project business. He acknowledged, however, that
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recovering costs was secondary to the construction work, and as a result, finding fault for
cost overruns suffered from a lack of attention.
"I would say we probably were not the most timely that I think we could have been,"
Almeida said.
Pendergast, the Turnpike Authority's former general counsel, attributed the lack of cost
recovery to the sense of loyalty that state project officials had for Bechtel after working
so closely for so many years.
"The state, Bechtel -- you couldn't differentiate," Pendergast said. "It was like a regional
high school. The kids are from different towns, but they're all on the same team. It's very
human, but . . . the citizens of the commonwealth were not well represented."
'They didn't want to spend the money'
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In four of the 15 cases against Bechtel, state officials
hired an independent specialist to help judge the
company's performance. Each time, they turned to a
consultant named Philip Helmes, an experienced
engineer. But although officials turned to Helmes for
guidance, they did not always follow his advice.
In 1994 the Cost Recovery Committee assigned
Helmes to determine fault for a $31 million overrun
linked to the redesigning of a 600-foot wall built as
part of the Ted Williams Tunnel near Logan Airport.
During construction, the wall shifted 8 inches,
signaling the potential for a deadly collapse. It had to
be torn down and rebuilt.
Helmes concluded that the design firm that planned the
wall had relied upon incorrect calculations, and that
Bechtel had neglected to show the design drawings to
its geotechnical specialists. Had the specialists seen the
designs, Helmes found, the wall could have been
properly built -- and $31 million could have been
saved.
But the state did not pursue Bechtel. Instead, officials
chose to file a claim with the state's insurance carrier,
thus avoiding a confrontation with Bechtel.
But Bechtel failed to properly manage the insurance
claim failed, according to the finding of an arbitrator.
Bechtel, in charge of filing insurance claims on behalf
of the state, missed the deadline, the arbitrator ruled.
The late filing meant the insurance company's adjusters
lost the opportunity to investigate the construction site, the insurance company
contended.
The insurance company paid the state nothing.
Bechtel officials declined to comment on the missed deadline or the wall movement.
There are no plans to reopen the case.
The state also assigned Helmes in 1994 to determine the cause of a delay in the design of
the tunnel running under the Fort Point Channel. Bechtel and the firm completing its
preliminary drawings, Maguire/Harris, had clashed over the viability of Bechtel's design.
And according to Helmes's report, Bechtel, as design manager, failed to take steps to
resolve the dispute. Finally, when state officials heard of the dispute, they brokered a deal
By appointing Bechtel as
both the project manager
and chief designer, the state
allowed Bechtel to judge its
own work, an inherent
conflict of interest.
Above, work continues on and beneath the Central Artery, which has partitioned the city from its waterfront for decades.
(Globe Staff Photo / David L. Ryan)
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to end the impasse. But eight months of delay had occurred -- on a project in which each
day of delay can cost hundreds of thousands of dollars.
In his first report, Helmes concluded that Bechtel had not managed the situation well,
"which impaired project productivity." He cited Bechtel, along with Maguire, as
"remiss."
But project officials did not accept Helmes's conclusions, Helmes said. After a first draft
of his findings circulated among project executives, Lewis met with Helmes. Although
current and former project officials were tight-lipped about what transpired, Lewis
acknowledged "working with" Helmes to help the consultant "look at the facts."
What is clear is that eventually Helmes concluded "that all parties" -- Bechtel and
Maguire/Harris -- "performed with a reasonable standard of care" on "this very
complicated and unique design challenge." Where the report once said that design "was
not well managed by Bechtel," it now read: "Solutions could have been developed
earlier."
Lewis said of Helmes: "I'm quite confident he didn't do anything he wasn't comfortable
with."
Helmes agreed that he did not feel pressured to change the report. He said he dropped his
conclusion that Bechtel was remiss because the state would not agree to his request for
more time to investigate further and nail down his preliminary finding.
"It was stopped," he said, of his review of Bechtel. "Apparently, they didn't want to spend
the money."
'Records get lost, memories fade'
If the state has any hope of recovering money from Bechtel and the other design firms, it
will need accurate, detailed records. But the records compiled by the state are in disarray,
the Globe found.
Project officials cannot even agree on the status of 13 of the 84 cost-recovery cases the
Cost Recovery Committee initiated. State records show the cases as open. Federal records
show them as closed, with the usual results: No findings against either Bechtel or the
design firms it managed.
It's not a small matter whether the cases are open or closed: Those 13 cases alone are
worth at least $14.5 million in potential refunds to the state, records show.
The cost-recovery files constitute a hodgepodge of memos, tracking forms, letters to and
from Bechtel, and financial assessments. Fewer than half a dozen files contain anything
resembling a coherent assessment of the facts behind a cost overrun.
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Many are handwritten, some almost illegibly. The files contain official documents
incompletely filled out, others undated. Several files were actually lost and "re-created"
by officials in the late 1990s, officials said.
Lewis and Dettman said they can't find any documents created by the Cost Recovery
Committee to keep track of its cases from 1994 to 1997, and in 2000. Yet copies of those
records are on file with the Federal Highway Administration in Cambridge.
Dettman, the top lawyer at the Big Dig, helped draft the cost-recovery procedures in
1994. He now says he was dismayed by the committee's poor record. But while Dettman
says he complained to the last three Big Dig project directors of the committee's flagging
efforts, he acknowledged his internal warnings changed nothing.
"We are playing the cards we have been dealt," Dettman said of state efforts to get
refunds. "We are going to take it as far as we can. Records get lost, memories fade,
people die. There will be defenses available to the other side."
The state's heavy reliance on Bechtel to recover money was made clear on Jan. 14, 2000,
when Joseph Allegro, the state construction manager, made an eleventh-hour stab at
recouping costs, three weeks before officials disclosed the $1.4 billion cost overrun.
In a brief e-mail, Allegro ordered eight engineers to scour their files for evidence of past
mistakes by Bechtel or the smaller design firms under Bechtel's supervision. Three of the
eight engineers addressed by Allegro worked for the state, but the other five belonged to
Bechtel.
"Don't spend a tremendous amount of time," Allegro wrote. "This is not to second-guess
anyone's judgment, but to simply ensure nothing fell through the cracks."
Allegro got the results he might have expected: No new cases against Bechtel.
'We're playing a massive game of catch-up'
Now, as the Big Dig drags to completion, with more than two years to go, the state is
showing greater interest in recovering money from Bechtel, even though the statute of
limitations may cut off refunds on overruns dating back to the project's first 11 years.
Still, Lewis suggested the state could get around the statute in some cases by claiming it
should not apply to contracts that are still open, no matter how long ago the individual
overrun occurred. "I do feel very strongly we need to do an assessment of Bechtel,"
Lewis said. "I think we can still assess the whole record."
But Dettman, who led cost-recovery efforts until Ginsburg's appointment, said the
difficulty of overcoming the statute of limitations makes review of some Bechtel errors
pointless.
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"We're not going to spend a whole bunch of time" on old cases, he said.
The Cost Recovery Committee, which met only three times in 2000, had its last official
meeting on Feb. 26, 2001, records show.
Some 250 cost-recovery cases have opened since November 2000, the vast majority of
them involving potential claims against the smaller design firms that completed Bechtel's
drawings. Still, Dettman insists that Bechtel is a target in every one of them.
"We're going to treat Bechtel like any other contractor," he said recently, before cost-
recovery responsibilities moved to Ginsburg.
Bechtel is hanging tough. The company refused to sign an agreement to stop the statute
of limitations clock from ticking down on its work, except in three cases. Instead, it has
forced the state to quickly compile detailed cases involving allegations of Bechtel errors
or mismanagement.
"We're playing a massive game of catch-up," Dettman said.
To help the state, Dettman hired consultants to sift through what remains of the evidence.
Their primary job, he said, was to find cost overruns that have yet to expire. After that,
they were supposed to figure out if the state has a strong enough case to warrant pursuing
Bechtel.
The consultants hired by Dettman have cost taxpayers more than $6 million so far --
without returning a penny.
But no review undertaken at this late date will turn back the clock on the thousands of
overruns from the project's earliest years, Dettman acknowledged.
Asked how many cases against Bechtel may have been missed through the years,
Dettman replied: "I don't know. I don't think anyone knows."
Globe reporter Thomas C. Palmer Jr. contributed to this story. Sean P. Murphy can be
reached by e-mail at [email protected]. Raphael Lewis can be reached at
This story ran on page A1 of the Boston Globe on 2/10/2003.
© Copyright 2003 Globe Newspaper Company.
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PART THREE
Lobbying translates into clout
By Raphael Lewis and Sean P. Murphy, Globe Staff, 2/11/2003
hen inspectors found cancer-causing asbestos dust swirling around a Big Dig work
site in 1996, the project's private-sector manager faced a possible trial and millions
of dollars in fines for flouting clean air laws.
But the company, Bechtel/Parsons Brinckerhoff, turned to the people who had always
helped it. They were Bechtel's supervisors, the same state transportation officials
assigned to make sure the company was doing its job.
The transportation officials played down Bechtel's failure to track asbestos dumping, and
even joined the company in complaining that state environmental inspectors were too
aggressive in their oversight, project records show. Finally, in 1998, the transportation
officials hired a lawyer to broker an unusual settlement quietly. Bechtel emerged with its
reputation intact and paid just $131,000.
But taxpayers paid more than $3 million to clean up the asbestos mess.
The asbestos case is but one example of how Bechtel has not only engineered the Big
Dig, but has built a fortress around company profits with the help of its state overseers,
often at the public's expense.
With a cadre of lobbyists and lawyers on Beacon Hill and Capitol Hill, Bechtel has
cemented bonds with policymakers to protect its profits, renew its contracts, and deflect
questions about the quality of its management.
A yearlong Globe investigation that scrutinized a decade's worth of campaign
contributions, contracts, and other records found that Bechtel, politicians, and state
administrators closed ranks on many occasions to block scrutiny of the Big Dig by
outsiders and internal critics alike.
Among the Globe's findings:
Confidential project documents from 1995 reveal that Bechtel willingly hid costs to
present a more favorable view of the Big Dig's financial picture at the behest of top state
officials seeking a more publicly acceptable bottom line.
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Bechtel, its subcontractors, and its lobbyists have pumped at least $225,000 into the
campaign coffers of the Massachusetts congressional delegation and the state's top
elected officeholders since Big Dig construction began. Some of those elected officials
intervened at crucial junctures in ways that helped the company avoid scrutiny.
Bechtel has retained several well-connected lawyers and lobbyists who, at the same
time, worked for some of the state's top elected officials, including two former state
governors and various legislative leaders. Doing so gave Bechtel access to lawmakers
and powerbrokers.
Bechtel's Big Dig project manager, C. Matthew Wiley, and Morris Levy, Parsons
Brinckerhoff's senior vice president, defended their companies' use of lobbyists and
political contributions. It made the company "visible" in a complicated political
environment far from the companies' headquarters, Levy said.
"We are not political, but we are not apolitical, either," said Levy, who has donated at
least $10,000 to Massachusetts politicians in recent years. "It's to be visible, but not to
influence."
But Larry Noble, executive director of the Center for Responsive Politics in Washington,
a nonpartisan think tank, said Bechtel gives campaign contributions and hires lobbyists
because it helps cement ties with lawmakers, quickly solves problems, and protects the
company's profit base.
"Companies like Bechtel do this because it works," Noble said. "They are bottom-line
oriented. It pays to do this, to hire people, to contribute to campaigns. It makes good
business sense."
State and Bechtel: Strange bedfellows
When state officials chose the team of Bechtel and Parsons Brinckerhoff to manage the
Big Dig in December 1985, they cited the companies' innovative proposal, and their
reputations as industry titans. Separately, the companies had built some of the world's
signature projects. Bechtel had helped build the Hoover Dam, the Alaska oil pipeline, the
English Channel Tunnel, and an entire city in Saudi Arabia. Parsons had a role in dozens
of major American transportation projects, including the building of New York City's
subway system. For the Big Dig, they formed a joint company with Bechtel in charge.
Frederick P. Salvucci, then the state transportation secretary, said he selected Bechtel
primarily for its demonstrated ability to use a difficult tunneling method.
But Bechtel had more than technical expertise. It had stellar Republican credentials, a
handy tool when trying to persuade President Ronald Reagan, a California Republican, to
give liberal Massachusetts the nation's most expensive public works project.
Not only was San Francisco-based Bechtel a major GOP campaign contributor, but
Reagan had plucked two of his Cabinet members, George P. Shultz and Caspar
MGT279. Management of Major Programs
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Weinberger, from Bechtel's boardroom. That connection continues today: Shultz's
daughter, Margaret, works as Bechtel's Big Dig human resources manager.
Salvucci dismissed the notion that political considerations colored his decision to award
Bechtel the Artery management job, which was worth hundreds of millions, at a
minimum, to the company he selected. Still, Salvucci said he hoped the company would
be an asset in appealing to the Reagan administration.
"We stuck to the procurement procedures, but I certainly hoped that the fact that they had
Republican ties would help us," Salvucci said. "It would have been a tragedy if we picked
them for that reason, but it wasn't."
Ultimately, in 1987, Reagan vetoed start-up funding for the Artery project. But the
Massachusetts congressional delegation gathered the votes to override Reagan's veto.
Thereafter, Bechtel turned its political attention to Massachusetts.
Weld and Bechtel: A meeting of minds
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Just as construction began on the Big Dig in 1991,
William F. Weld, a Republican with strong business
support, became Massachusetts' governor, ushering in
an era of GOP control of the corner office that
continues today.
The Weld victory also began an era of considerable
access for Bechtel.
Weld did not return calls seeking comment for this
series. But campaign reports show how much Bechtel
meant to the former governor -- especially when he ran
for reelection in 1994 and unsuccessfully for US
Senate against Democrat John F. Kerry two years later.
Between 1991 and 1996, Weld reaped nearly $25,000
from Bechtel and Parsons executives, including several
of the maximum $1,000 annual donations from George
Shultz, who worked as a Bechtel consultant after his
stint in the Reagan White House; Bechtel patriarch
Stephen D. Bechtel Jr. and his wife, Elizabeth; Bechtel
chief operating officer Adrian Zaccaria; and Levy of
Parsons Brinckerhoff.
The support came as Weld and Bechtel each expended
considerable energy drumming up support for
California Governor Pete Wilson's failed bid for the
1996 GOP presidential nomination.
That included more than $1.4 million raised by Weld's
chief fund-raiser, Peter Berlandi.
For the first half of the 1990s, Berlandi worked
simultaneously as Weld's fund-raiser and as Bechtel's
"liaison" with the administration. But his dual role
became a major campaign issue in 1994, as Weld's
opponents accused Berlandi of shaking down Big Dig
contractors for campaign contributions, a claim that
was never substantiated. Still, Berlandi severed his Bechtel contract after Weld's re-
election, which freed him up to work for Wilson.
Berlandi, in an interview, said that he never discussed Bechtel with Weld, and that his
work for the Wilson campaign had nothing to do with California-based Bechtel Corp.
Memo hints at hiding costs
(Globe Staff Photo / David L. Ryan)
A confidential 1995 memo
written by William H.
Edwards (above, right),
Bechtel's budget manager,
said the state's top three Big
Dig officials directed him to
"sanitize" a report to hide
the Big Dig's true cost.
Michael P. Lewis (above,
left), now the state's Big Dig
project director, was one of
the officials Edwards named,
along with then-project
director Peter M. Zuk and
transportation secretary
James J. Kerasiotes. The
photo was taken in
December 2002.
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But he acknowledged speaking to Weld when, in September 1994, just two months
before that year's gubernatorial election, a rift developed between James J. Kerasiotes, the
state's top Big Dig official, and Theodore G. "Tad" Weigle Jr., Bechtel's project manager.
At a business-leader breakfast, Kerasiotes promised the project would cost no more than
$7.7 billion. But when a Globe reporter asked Weigle, he refused to guarantee that
number. Kerasiotes was outraged with the contradiction, and now acknowledges that he
demanded that Bechtel remove Weigle from the Big Dig. Weld backed Kerasiotes in
seeking to remove Weigle, Kerasiotes said.
Berlandi helped arrange a meeting between Weld and Gary Bechtel, then Bechtel's
president. Bechtel and another senior executive flew to Boston on Dec. 1, 1994, and held
two meetings with Weld at the Boston Harbor Hotel, one in the morning, and one in the
afternoon.
Only Weld and Gary Bechtel took part in the morning meeting, Kerasiotes said.
Kerasiotes described the get-together as a "courtesy" to Gary Bechtel.
Weld told Kerasiotes afterward that he and Bechtel did not spend much time talking
about the Big Dig in their private meeting, Kerasiotes said. Instead, they discussed the
Wilson campaign.
A Wilson victory would have certainly helped both Weld and Bechtel. For Weld, who
made no secret of his ambitions for higher office, a Wilson presidency could have meant
a high-level appointment, the customary reward for such ardent and early campaign
support. And for Bechtel, a Wilson win would have put in the White House another
president with a close relationship with the company.
At the afternoon meeting, Weld and Bechtel discussed the Weigle matter and the project's
ballooning cost, according to two people who were familiar with the discussions. A
month after the meeting, Bechtel removed Weigle, and Weld flew to San Francisco to
raise more than $300,000 for Wilson's campaign.
Later, when Weld ran for the Senate, his San Francisco connections paid handsome
dividends, as contributions from the Bay Area topped $400,000. Among those were
Bechtel's top executives and their spouses.
Alan Altshuler, a professor of urban policy at Harvard University and author of a
forthcoming book on the Big Dig, said the episode demonstrates how Bechtel manages its
political relationships in order to bank support for possible future disputes.
"This was a case where [Bechtel executives] were obviously being very responsive to the
politics in Massachusetts," Altshuler said, adding that he views Bechtel's use of political
contributions and lobbyists to be antithetical to the public interest.
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"You would have wanted a legislative oversight committee or someone to say, 'Hey,
that's wrong. These guys should not be active in Massachusetts politics. They are
powerful enough,' " he said.
"Sanitized" numbers
Three months after Weld's meeting with Gary Bechtel,
on March 15, 1995, a top Bechtel manager on the Big
Dig wrote a memorandum marked "Confidential" and
placed it in a file cabinet in the project's downtown
headquarters.
Bechtel's Big Dig budget manager, William H.
Edwards, authored the memo, which told an explosive
story.
It detailed a discussion Edwards had with top state
officials on the Big Dig. The officials were scrambling
to trim the Big Dig's reported costs only hours before a
key meeting with federal regulators. Their goal,
Edwards wrote, was to reduce the bottom line by $400
million.
Michael P. Lewis, then the deputy project director,
"directed" Edwards to, in Lewis's words, "sanitize" the
package he was preparing for the federal officials,
some of whom were coming in from Washington for
the meeting, the memo said. Edwards noted that Lewis
was following the orders of his bosses, including then-
project director Peter M. Zuk and transportation
secretary Kerasiotes.
"Assemble a 'sanitized' review package that shows
summary information only," Edwards wrote, quoting
the orders he says he received from Lewis. "Most
notable: Do not include the cost exclusion
information."
Edwards went on to list in detail $332 million in Big
Dig costs that he subtracted from the accounting
breakdown that was going to be presented to the
regulators. The reductions brought the project's overall price to $8.069 billion, close to
the just-under-$8 billion figure Kerasiotes had said he wanted.
The memo, addressed to "File," was copied to three top Bechtel officials, and included
minutes of the meeting with federal officials that followed. The minutes show that
(Globe Staff Photo / David L. Ryan)
Massachusetts Turnpike
Authority chairman
Matthew Amorello
(standing) and Bechtel's Big
Dig project manager, C.
Matthew Wiley, at the Big
Dig's headquarters in
November. Wiley says
Bechtel's use of lobbysist
keeps the company "visible."
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Kerasiotes, with Edwards seated beside him, told the Federal Highway Administration
that the project's cost was $8.069 billion.
Left out from federal review were $135 million in known costs attributable to inflation;
$82 million in costs associated with a legally binding agreement with the Metropolitan
District Commission for park-building; and $115 million subtracted from estimates of
construction cost increases.
According to the memo, on the following day, Zuk and Lewis returned to Edwards,
requesting further cuts "to hit a cost value of $7.997" billion.
Kerasiotes said the efforts to cut costs were legitimate, regardless of how Bechtel
portrayed them in internal memos. He said Bechtel was chafing because the cost cuts
would mean less money for the company.
Zuk, who left the project in December 1998, said the term sanitize "may have been a poor
choice of words" on the part of Lewis and himself, who meant it innocuously, as in to
clean up, and not to conceal.
"The direction was to simplify the presentation made to [the federal government] because
it was too complicated," said Zuk.
He defended the subtractions as justified and proper, even if some of them would be
added back into the project's cost in later years.
Edwards, who remains Bechtel's Big Dig budget chief, said he was advised by his
attorney not to comment.
Lewis is now the Big Dig's project director, the highest state official on the Big Dig. He
would not comment on the memo, but said through a spokeswoman that federal officials
became aware of the Big Dig's accounting procedures within a few days of the meeting.
Yet federal officials disputed that notion on April 1, 2000, when a congressionally
appointed task force assembled to probe the rising cost of the Big Dig concluded that
project management "deliberately failed to inform" federal authorities "of the magnitude
of the potential overrun."
The task force demanded written testimony from Bechtel officials explaining their role in
"the decision to withhold material from" the Federal Highway Administration.
Bechtel's response revealed just how close the company and the state had grown. The
company said in a certified letter that its responsibility was to give all pertinent financial
information to the state. But the company had no such obligation to the federal
government: It served only the state.
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"All decisions on how to use this information, and whether or how to share it with [the
Federal Highway Administration], rested exclusively with the MTA," wrote Bechtel's
Wiley, referring to the Massachusetts Turnpike Authority.
Payback time
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Just as Bechtel backed up the state in its financial
presentations to the federal government, top state
leaders assisted Bechtel when the company came under
fire for its mistakes.
In the summer of 2001, the Big Dig's estimated cost
soared by $300 million in just three weeks, prompting
an angry outcry from the Turnpike Authority's board.
Bechtel's errors, they said, were at the root of the
budget problem, and the company owed the state a
refund. If the company didn't oblige, they said, the
authority could terminate its contract.
The Turnpike Authority's lawyers set up two sessions
to negotiate a possible refund with Bechtel on Oct. 9,
2001, one to take place at 9 a.m., the other at 3 p.m.
The lawyers were demanding tens of millions of
dollars, enough to put off toll hikes needed to pay
down Big Dig debts.
CORRECTION: Because of a reporting error, the third part of the Globe's series on problems with the Big Dig incorrectly stated that representatives of the project's managers, Bechtel/ Parsons Brinckerhoff, failed to appear at an Oct. 9, 2001, negotiating session with the Turnpike Authority regarding reimbursement for management mistakes. Company representatives did show up for a short bargaining session.
Top Bechtel executives flew in with a surprising offer:
The company would give the state up to $50 million,
according to two people who attended the first
negotiating session.
Turnpike Authority lawyers said they left the morning
meeting hopeful that at last Bechtel would pay for
some of its mistakes.
What they did not know was that Bechtel's newly hired
lobbyist, Andrew Paven, had been busy working his
connections with the state's political elite. Paven
arranged for Bechtel executives to go directly from the
first negotiating session into a meeting with Acting
Governor Jane M. Swift's chief of staff and the
secretary of administration and finance.
The afternoon bargaining session with the Turnpike
lawyers never took place. After sitting down with
Swift's two top aides, Bechtel rescinded its offer to
Bechtel's contributions to candidates for national office
J. Joseph Moakley
$5,500 Plus $22,500 from lobbists
James P. McGovern
$4,800 Plus $9,450 from lobbists
Edward M. Kennedy
$8,000 Plus $21,584 from lobbists
William F. Weld
$11,250
John F. Kerry
$4,800 Plus $17,500 from lobbists
Richard E. Neal $5,575 from lobbists
William D. Delahunt $10,918 from lobbists
To candidates for governor
William F. Weld
$13,500
Paul Cellucci
$19,970
Jane M. Swift
$750
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refund to the state up to $50 million. The two aides declined comment.
A week later, when two of three Turnpike Authority board members voted to delay the
toll hike, hoping they could instead rely on Bechtel's making a refund, Swift fired the
duo, calling them "fiscally irresponsible." Swift, who declined comment for this article,
told reporters at the time that the firings had nothing to do Bechtel. Indeed, the two board
members, Christy Mihos and Jordan Levy, were challenging Swift on a range of policy
matters. She believed they were irresponsible; they believed she was usurping power
from the Turnpike Authority.
Levy and Mihos, however, were convinced their firing had to do with their tough stance
against Bechtel, and they sued to get their jobs back. Bechtel brought in more firepower -
- the company's new damage control expert, James P. "Jock" Covey. A veteran diplomat
and Middle East expert, Covey put the word out that Bechtel wanted help.
By April 2002, Covey had found the hired hands he sought. For lobbying, he selected
Massachusetts Bay Associates, a firm founded by former State Representative R. Emmet
Hayes, husband of then-state Treasurer Shannon P. O'Brien, who was running for
governor. Covey also recruited Cheryl Cronin, a politically connected lawyer and
strategist whose clients include Swift and House Speaker Thomas M. Finneran. Cronin,
who in December threw Swift's send-off party at her Back Bay home, counseled the
acting governor during her earlier appearances before the State Ethics Commission over
her use of aides to perform personal tasks.
While negotiating against the Turnpike Authority on behalf of Bechtel, Cronin was also
representing the acting governor in a lawsuit brought by Christy Mihos, the fired
Turnpike Authority board member. Cronin declined to comment.
Bechtel's new team of lobbyists, strategists, and consultants pumped more than $14,000
into campaign funds of members of the state legislature in the months that followed their
hiring, the Globe found. Among leading politicians, Swift, who had already dropped out
of the governor's race, got nothing. O'Brien and running mate Chris Gabrieli reaped more
than $4,000. Finneran did not get any contributions from Bechtel's backers in that period,
records show, but has received more than $2,000 from Bechtel's lobbyists and
subcontractors since 1995.
"There's times when you think you're getting a raw deal," said Bechtel's Wiley,
explaining the contributions. "You need to maintain those working relationships. It may
not change the deal but it gives you a chance to make your case."
In May 2002, the state Supreme Judicial Court ruled that Swift was not justified in firing
the two Turnpike Authority board members.
But the Bechtel critics returned to find their power was about to be diluted. Two months
after the court ruling, the Legislature, in a late-night vote, expanded the three-member
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Turnpike Authority board to five, giving Swift two new appointees and making Bechtel's
critics a minority.
Former State Representative Joseph Sullivan, as cochairman of the Legislature's
Transportation Committee, wrote the bill. Sullivan said he moved to expand the Turnpike
Authority board to provide greater community input into the Big Dig, and not to help
Bechtel.
A few months earlier, Sullivan had considered a run for lieutenant governor. Among the
advisers he sought out was Paven, Bechtel's top lobbyist in Boston.
Sullivan sought Paven's counsel on at least three occasions to discuss a potential run,
even relying on Paven to recruit pollsters and other strategists, interviews with those
involved revealed.
"Andy [Paven] introduced me to him," said pollster Irwin "Tubby" Harrison, who met
with Sullivan and Paven at the Federalist restaurant in the shadow of the State House in
December 2001 -- a month when Paven donated the maximum $200 to Sullivan's
campaign.
"Other than talking about the possibility of his running for lieutenant governor, I don't
recall much," Harrison said.
Paven would not comment on any meetings with Sullivan about a race for lieutenant
governor. But he did acknowledge speaking to Sullivan from "time to time" to argue
Bechtel's side of the negotiations with the Turnpike Authority.
Sullivan, a Braintree Democrat who left the Legislature last month to head the state
Lottery Commission, said he had known Paven, a Quincy native, for many years. He
consulted Paven as a friend, Sullivan said.
State Senator Robert A. Havern, cochairman of the Transportation Committee with
Sullivan, said it was clear that expanding the board would help Bechtel. Havern said he
and his Senate colleagues had actually wanted to keep the board intact and to "let the
negotiations play out" between Bechtel and the Turnpike Authority. But Havern said he
changed his mind out of deference to Sullivan.
Swift filled the two newly created seats on the Turnpike Authority board with developer
and longtime GOP contributor Richard K. Anderson and veteran lawyer John "Jack"
Moscardelli.
Moscardelli is a close friend and jogging partner of Peter Berlandi, Bechtel's chief State
House strategist for half a decade. Moscardelli said he has no ties with Bechtel.
Since Swift appointed the new board members, negotiations aimed at getting money back
from Bechtel have stalled.
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At the talks, Cronin argues on behalf of Bechtel and the Turnpike relies on Leonard L.
Lewin, the former chief counsel to the Cellucci and Swift administrations. Lewin, who
would not comment, is no stranger to Cronin. In fact, he worked side-by-side with Cronin
during his stint as chief counsel in Swift's appearances before the state's Ethics
Commission.
Lewin and Cronin have not had much negotiating to do, however. Turnpike lawyers say
Bechtel officials rarely agree to meet for talks, and when they do, they send Cronin and
lower-level employees with no decision-making power.
If negotiations ultimately fail, as officials on both sides have predicted, the state would
face a fork in the road: Sue Bechtel, or drop the pursuit of reimbursement entirely.
The one means foreiting a decade's worth of overruns. The other route would mean a
long, costly legal battle.
Either way, Bechtel's Boston lobbyists would be well positioned to push the company's
cause with policymakers. After all, the lobbying firm, O'Neill and Associates, signed a
contract in December with the Executive Office of Transportation and Construction, the
same state agency that pays Bechtel for its work on the Big Dig.
Globe correspondent Joseph Spurr contributed to this report. Raphael Lewis can be
reached by e-mail at [email protected]. Sean P. Murphy can be reached at
This story ran on page A1 of the Boston Globe on 2/11/2003.
© Copyright 2003 Globe Newspaper Company.
