Executive Summary

The Project on Government Oversight's report findings include:

• In the mid-1980's the Central Artery/Tunnel Project was originally sold to Congress as a $2.3 billion highway operation. Currently, the Project has ballooned to $9.6 billion. However, the current $9.6 billion price tag has been estimated by state officials as being low, and some state legislators believe the price tag will reach $12 billion.
  
• This is the most expensive highway project in the history of the United States. In comparison, the Chunnel, the thirty-two mile tunnel connecting France and England, cost $16 billion.
• The Federal government is responsible for 80% to 90% of the final cost, but is playing almost no oversight role in how the money is being spent.
• The original completion date was 1998. Currently the estimated completion date is 2004.
• The Federal government has written a blank check to Massachusetts, who in turn has given free reign to the primary contractor, Bechtel/Parsons Brinckerhoff Quade & Douglas.

  An example of Bechtel/Parsons' control was discovered when POGO received information for a Freedom of Information Request from the State of Massachusetts. POGO had to write a check payable to Bechtel/Parsons for this public information.

  A Massachusetts Highway Administrator complained: "One must rely almost solely on B/PB because the DPW (Massachusetts Department of Public Works) is not managing the contract as we have urged."

• Twenty-nine state employees working on the Central Artery/Tunnel Project are actually paid by either Bechtel or Parsons. Personnel "seconded" to the contractors include: the Media Relations Director, the Director of Communications, an Accountant, and the Supervising Accountant. Any impartial oversight these twenty-nine workers may have had over the Project has been eliminated by allowing Bechtel/Parsons to pay them.
• The Federal government has subsidized the purchase of buildings, under the excuse of these buildings being in the right-of-way of the construction project.

  The Wang Building, bought by the government for $29 million had only cost $11 million for the land and the building a few years earlier. Massachusetts admits now that the purchase was unnecessary, but that because of the federal handout, ". . . the building becomes a long-term Commonwealth asset at (Central Artery/Tunnel) Project expense."

  The Anelex Building was procured in 1984 for $25 million, tens of millions less than the $94.3 million paid by the government. This cost included a settlement of $15 million with the New Boston Garden Corporation, who leased space in the building for storage of the Celtics' parquet floor and the Bruins' Zamboni machine. The Federal government is responsible for $84.8 million of the total cost.

  The number of lanes approaching the tunnel from downtown will narrow from eight lanes to merge into the two-lane tunnel. In addition to the bottleneck, a traffic light will be installed before the tunnel's entrance. An internal FHA document asserted, " . . . the Third Harbor Tunnel will be obsolete the day it is opened to traffic and the depressed Central Artery will, be at best, an inferior facility."

• The Commonwealth of Massachusetts Auditor released four reports detailing additional unnecessary costs that the project has incurred:

  Up to $64 million because data provided during the pre-bidders' conference was ambiguous and was not representative of the actual soil conditions. Thus, the project must reinforce unstable excavation support walls.

  $23 million worth of ramps will have to be torn apart because the designs were later changed, thus eliminating the need for the newly constructed structures.

  $11 million was added to the cost of the project as a result of not effectively coordinating construction work by not: executing a timely agreement with the airport, relocating a helipad, identifying underground utility lines, and properly organizing construction schedules. In addition to the over $11 million paid to date, these delays could cost the project an additional $10-20 million.

  $7 million because of the failure to plan for the timely disposal of excavated materials. The excavated materials had to be stored, which changed the temporary placement of the harbor tunnel tubes at an additional cost to the project.
  
  

"Some state legislators - less intimate with the project but more blunt in their assessments - believe the price tag will reach $ 12 billion. . . Project officials defend themselves, saying that soaring costs are the result of a process beyond their control - driven as much by politics as it is by engineering - that has increased the scope and therefore the cost." 4

Bechtel/Parsons Has Had Free Reign

Two engineering firms manage the entire Central Artery/Tunnel Project: The Bechtel Group Inc.; and Parsons Brinckerhoff Quade & Douglas. The two firms, Bechtel/Parsons, have overall responsibility for the project design, preliminary engineering, the selection of section design consultants and control over management and coordination of all construction contracts. 5 The Department of Transportation (DOT) has allowed Bechtel/Parsons the liberty to take control over the entire Central Artery/Tunnel Project.


Conflict Of Interest

Conflicts of interest have been observed throughout the Central Artery/Tunnel Project. Currently, twenty-nine state employees working on the Central Artery/Tunnel Project are actually paid by either Bechtel or Parsons. 6 [See Appendix B] Personnel "seconded" to the contractors include, the Media Relations Director, the Director of Communications, an Accountant and the Supervising Accountant. These employees are in charge of disseminating information to the?media, sending information to independent agencies that are investigating the Central Artery/Tunnel Project, and keeping track of the financial accounts for the State.

An internal Massachusetts document asserted, "These are persons under the control and supervision of Massachusetts personnel but whose compensation is provided by the Central Artery/Tunnel Project's management consultant or subcontractors." 7 The oversight responsibilities these twenty-nine workers may have had over the Central Artery/Tunnel Project has been tainted by allowing them to be paid by Bechtel/Parsons. Massachusetts and Bechtel/Parsons have had the best of both worlds: Massachusetts does not have to pay its own employees; and Bechtel/Parsons has been able to control state personnel who should be overseeing the Central Artery/Tunnel Project.


Misappropriation Of Right-Of-Ways

Title 23 of the Code of Federal Regulations, Subchapter A, Part 1, Section 1.23, "Right-of-Way," states, "The State shall acquire right-of-way of such nature and extent as are adequate for the construction, operation, and maintenance of a subject." Massachusetts has purchased buildings that were not in the right-of-way (ROW). ROW acquisitions concerning the Central Artery/Tunnel Project have been scrutinized because many appear to have been acquired without proper justification, at the expense of the taxpayers.

Massachusetts has acknowledged they have handled ROW acquisitions inadequately and changes were needed to correct their practices. An internal Massachusetts memo to the Federal Highway Administration (FHA) states:

"This Department [Massachusetts] is committed to improving the process by which it acquires property . . . Your administration is rightly concerned with our problems of the past in delivering those services." [See Appendix C, p. 1]

The Wang Building ($29 million) and the Anelex Building ($71.2 million) were two of the buildings that were examined by the Massachusetts Inspector General and found to be unnecessarily costly and acquired even though they were not in the right-of-way (ROW). The DOT stated that the Federal Highway Administration Massachusetts Division " . . . did not actively, objectively, or thoroughly evaluate ROW decisions made by the State." [See Appendix D, p. 4] This resulted in the unnecessary expenditure of $24.8 million, of which the Federal government was accountable for $22.3 million. [See Appendix D, p. ii] While the State pushed acquisitions that were not needed, FHA approved them within days and without pursuing alternatives.

William Coughlin, a free-lance writer who has been investigating the Central Artery/Tunnel Project since the 1980's, has found that the Wang Building, bought by Massachusetts for $29 million, became a huge windfall for Wang Laboratories. Wang bought the property and built the building for $11 million only a few years earlier. 8 The DOT Inspector General stated, "In our opinion, the Division did little, if any, objective evaluation of this acquisition; the Division merely "rubber stamped" the State's decision." [See Appendix D, p. 7]?The building was bought for the initial purpose of providing office space for the Central Artery/Tunnel Project and to avoid costly litigation and a potential jury award to the previous owner. The Federal government was left holding the bill for the building, while the company and the State were rewarded with the inflated price tag and the subsidized office space respectively. An internal Massachusetts memo stated:

". . . the building would remain standing at the end of the Project, and since we are able to obtain Federal participation in the acquisition of the building for administration purposes associated with the Project, the building becomes a long-term Commonwealth asset at Project expense." [See Appendix E, p. 4]

In a similar pattern, William Coughlin also found that the Anelex Building was procured in 1984 for $25 million, 9 tens of millions less than the $94.3 million paid by the government. [See Appendix F, p. 1] This cost included a settlement of $15 million with the New Boston Garden Corporation,10 who leased space in the building for storage of the Celtics' parquet floor and the Bruins' Zamboni machine.11 The Federal government is responsible for $84.8 million of the total cost. [See Appendix F, p. 1]

A third questionable proposed ROW acquisition, the Spaulding Rehabilitation Hospital, was going to be obtained by the government and be demolished. Many designs for construction did not effect the hospital, but Massachusetts chose the only design that would have required buying the hospital. Nevertheless, local attention highlighted the unnecessary and costly purchase of this building. The FHA has since decided not to participate in the purchase of the hospital. As a result, the State has recently decided to look at alternate designs that would not infringe on hospital property. The hospital believes that an agreement was reached and that they would be compensated for the cost of the building and relocation expenses. The hospital has threatened legal action. If it were not for the intense scrutiny of this purchase, the Spaulding Rehabilitation Hospital boondoggle could have cost the taxpayer close to $100 million.


Massachusetts Has Been Robbing The Store

The Massachusetts Inspector General has tracked the progress of the Central Artery/Tunnel Project and has detailed the many problems the State has had throughout, yet their warnings have unfortunately been ignored:

• Massachusetts Highway Department had transferred work that could have been performed in-house to an external consultant.12
• Two $400,000 contracts delivered to private firms were "vulnerable to favoritism."13
• "The [Lazard Freres] Report represented an $880,000 public expenditure aimed at supporting the previous Administration's agenda rather than testing its assumptions."14
  

An internal FHA document describes the poorly managed Central Artery/Tunnel Project and the State's inability to handle such a contract:

"That is the environment under which work proceeds in the Commonwealth. We thought that this engineering effort might be significantly different from the regular DPW [Massachusetts Department of Public Works] operation but found that it wasn't. Development of highway projects take a lot of time and the engineering effort is not financially managed well. . . . We have urged the DPW to bring the engineering effort under better control mostly by discussion and letters but also by withholding small amounts of federal-aid." [See Appendix G, p. 2]

A similar observation has been made by the House Oversight Bureau. The House Oversight Bureau has found that the Central Artery/Tunnel Project has been riddled with conflicts that has limited Massachusetts' effectiveness:

". . . the Massachusetts Highway Department is in a poor position to properly oversee the project. . . . The result is an inherent conflict in which the principal management contractor is often placed in the position of overseeing its own work . . . The failure to correct previous mistakes or to consider more cost effective alternatives is a significant factor in the continuous cost escalation of the project."15

Massachusetts' "poor position to properly oversee the Project" may stem from the lack of oversight the State has over Bechtel/Parsons. The Chief Engineer for Massachusetts, who is responsible for design, construction, and maintenance for all state highways and bridges within the Commonwealth, has no oversight responsibilities over the Central Artery/Tunnel Project. In testimony before the House Oversight Bureau, the Chief Engineer stated, his office performed more of a "coordination" role between the State and Bechtel/Parsons, not, an oversight role. The Chief Engineer, who has "Ultimate responsibility" for Massachusetts' surface transportation, spends " . . . ten to twenty percent . . . " of his time, per week, on the Central Artery/Tunnel Project.16 In an average work week, the Chief Engineer spends only 4-8 hours supervising the construction of the largest highway project in U.S. history.


Signing Off On Change Orders

One reason for the huge increases in Central Artery/Tunnel Project costs is due to change orders. Change orders are intended to be used only in unpredictable circumstances that arise during construction. Change orders allow contracts to be altered above the limits that the original contract was worth due to the unforseen conditions. The Massachusetts Inspector General has documented this ongoing behavior:

"The review revealed a pattern of apparently excessive use of contract modifications during the design phase. According to Department [Massachusetts] records for 35 design, geotechnical, and other nonconstruction contracts, the Project has added more than $90 million in additional work on a noncompetitive basis."17

In data supplied by FHA, only 117 out of 1513 total change orders have been rejected by their office. [See Appendix H, Enclosures] Contractors have been able to low-ball estimates because they know that change orders will have a good chance of being accepted after construction has begun.


Lack Of Federal Oversight

As of December 31, 1994 the Central Artery/Tunnel Project has already cost $4.01 billion, of which the Federal government has paid $3.854 billion.18 The Federal government is responsible for 80% to 90% of the final cost, but is playing almost no oversight role in how the money is being spent. Current estimates for the Central Artery/Tunnel Project have ballooned to $9.6 billion.

FHA Regional offices are in charge of overseeing states within their respective region. Due to the large sums of money and the complexity of the Central Artery/Tunnel Project, FHA has established another office in the region, a Boston office, to provide more effective day to day oversight responsibilities. In an effort to gain information about the Central Artery/Tunnel Project, POGO's Freedom of Information request was referred by the Washington FHA to their office in Boston. The Boston office supplied some of the information requested, but stated: "Please be aware that those records you requested, which are not available at the Division Office, may well be available to you at the Massachusetts or Bechtel/Parsons . . . ".19 POGO had to produce a check payable to Bechtel/Parsons for information supplied by Massachusetts. FHA, the agency responsible for 80% to 90% of the current $9.6 billion cost, has given too much authority to Massachusetts and Bechtel/Parsons and lost their ability to adequately control them.

A Massachusetts Highway Administrator complained: "One must rely almost solely on B/PB because the DPW (Massachusetts Department of Public Works) is not managing the contract as we have urged." [See Appendix I, p. 1]

The House Oversight Bureau has questioned the overall responsibility that has been laid at the feet of the contractors by the State.

"The issue of public scrutiny of the project is the source of contention among the oversight agencies and the media. Questions about the availability of certain records in the hands of the consultant and/or the contractors raise even more concerns about oversight and review."20

Currently, the Boston office has a staff of nine: six engineers, one manager, one secretary and one financial specialist (retained in November 1994) assigned to the Central Artery/Tunnel Project on a full time basis.21 Three other financial personnel (a Financial Manager, a Financial Specialist, and an Accounting Technician) have been assigned to work on the largest highway project in the United States on a very limited basis, 10%, 50%, and 25% of their time respectively.22 While FHA offices in Albany NY and Washington DC have minimal accounting and auditing responsibilities over the Central Artery/Tunnel Project, the Boston office is in charge of the daily management and oversight of the design and construction of all federally mandated decisions. However, the contractor has been able to establish total control over the Central Artery/Tunnel Project. The lack of attention by FHA has become one of the reasons why a solution must be found to establish a more efficient path for the Central Artery/Tunnel Project.


The Cost Of Mismanagement

The Commonwealth of Massachusetts Auditor released four reports detailing additional unnecessary costs that the project has incurred:

• Up to $64 million because data provided during the pre-bidders' conference was ambiguous and was not representative of the actual soil conditions. Thus, the project must reinforce unstable excavation support walls. 23
• $23 million worth of ramps will have to be torn apart because the designs were later changed, thus eliminating the need for the newly constructed structures.24
• $11 million was added to the cost of the project as a result of not effectively coordinating construction work by not: executing a timely agreement with the airport, relocating a helipad, identifying underground utility lines, and properly organizing construction schedules. In addition to the over $11 million paid to date, these delays could cost the project an additional $10-20 million.25
• $7 million because of the failure to plan for the timely disposal of excavated materials. The excavated materials had to be stored, which changed the temporary placement of the harbor tunnel tubes at an additional cost to the project.26