|BIG DIG The Central Artery/Tunnel project will change the way Boston works, but it cost $14.6-billion. (Photo courtesy of bigdig.com)|
The Commonwealth of Massachusetts and the Massachusetts Turnpike Authority filed suit March 16 against the joint venture of Bechtel/Parsons Brinckerhoff seeking damages of up to $146 million in connection with its role as project consultant on Bostons $14.6-billion Central Artery/Tunnel project. At particular issue is the escalation in project costs, which went from $2.6 billion in 1982 to the final tally of $14.6 billion. B/PB claims that the charges are without merit.
Filed in Suffolk County Superior Court, the civil suit seeks return of up to $140 million in profits and $6 million in bonuses paid to the joint venture of Bechtel Corp. and Parsons Brinckerhoff Quade and Douglas Inc. They are, respectively, subsidiaries of Bechtel Group Inc., San Francisco, and Parsons Brinckherhoff Inc., New York City.
The suit alleges that B/PB violated contractual and fiduciary obligations by underestimating budget costs on the project, thereby receiving incentive compensation for staying within budget. The state also charges that B/PBs actions deprived it of the opportunity to consider other financial ways to complete the $14.6-billion project and that it incurred additional costs connected with litigation. Despite the charges, MTA spokesman Douglas K. Hanchett says the agency will not comment further.
"This lawsuit is without merit. It has no basis in fact, in our contract, or in the law. It ignores years of exhaustive disclosures that B/PB made to state agencies about project costs," B/PB says in a statement. "We are confident that a fair and open legal process will decisively repudiate these baseless allegations."
B/PB has been CA/T project consultant since 1985 when it was hired by the Massachusetts Highway Dept. to manage design, construction, cost estimates and budget forecasts. Control of the project was passed to MTA in 1997.
The 20-year project was to connect two Interstate highways and Logan International Airport with a series of tunnels and bridges while keeping traffic open through Boston. It also involved removing a 50-year elevated highway that split the heart of the city. Major work has been completed and the viaduct is being demolished.
According to court documents, B/PB in 1993 estimated total project costs at $7.7 billion. The suit charges that B/PBs estimated costs the following year nearly doubled, yet the joint venture advised the state that the project was still doable for $8.0 billion.
The suit contends that B/PB engaged in a "shell game to obscure anticipated costs, manipulated the cost forecasts by deleting, deferring or transferring to third parties critical construction cost components utilized assumptions not reasonable in light of actual experience and withheld material information."
In 1996, B/PB raised its estimate to $10.4 billion, indexed for inflation, which it considered aggressive but achievable. It raised the estimate again in 1997 to $10.84 billion, as the state issued revenue bonds and notes to pay for the project. Serious trouble started in December 1999 when B/PB officials briefed then-MTA Chairman James J. Kerasiotes of a potential $1.4-billion increase to $12.2 billion, which was raised to $14.1 billion the following year. Kerasiotes lost his job in the political firestorm that followed.
The lawsuit contains eight counts, including breach of fiduciary duty, negligent misrepresentation, breach of contract, unjust enrichment, restitution, professional malpractice and violation of the federal False Claims Act.
Facing mounting criticism and political pressure over the increases in 2003, MTA Chairman Matthew J. Amorello hired an independent counsel, retired probate Judge Edward M. Ginsburg, to boost a tepid in-house cost recovery effort that had garnered about $35,000 since the mid-1990s. "The chairman wanted an independent process that was fair to everybody," says Ginsburg. He brought in lawyers and engineers and began to address the issue of financial reporting.
B/PB has at least 20 days from service of the lawsuit to respond. Discovery and trial preparation then would begin unless there is an out-ofcourt settlement. "It is our hope that these things can be resolved and we arrive at a fair settlement," says Ginsburg. There may be additional legal action against B/PB and other firms. The cost recovery team is "fact-finding" possible design errors and omissions problems that it hopes will be resolved "engineer to engineer," says Ginsburg.
While the lawsuit raises old but disturbing issues, no mention is made of cost growth from project inception in 1982 to 1992. Also not mentioned is a finding in a March 20, 2001, report from Massachusetts Inspector General Robert A. Cerasoli stating that B/PB in 1994 provided the governor and state officials with a $14-billion estimate. click here to view charts
That report also noted "state managers directed state and B/PB staff to undertake a cooperative effort to maintain the fiction of an on-time and on-budget $8-billion project." According to the IG report, "records show that they did so by applying a largely semantic series of exclusions, deductions and accounting assumptions that covered up the $6-billion difference."
The report also notes that "B/PB officials disclosed to local [Federal Highway Administration] officials all budget assumptions [and] that FHwA officials acted in partnership with state officials to downsize the Big Dig cost estimate for public relations purposes."
"There is a mountain of evidence in prior legal proceedings that B/PB disclosed their knowledge of project costs to the appropriate public officials," says a former CA/T official.
B/PB also claims it saved $1.7 billion on the project through value engineering, rigorous cost containment actions and a reduction in insurance costs. B/PB cut its fee from 10% to 7% in 2001.
The project has paid the joint venture $2 billion, of which about $500 million was passed through to subconsultants. "If you were to convert the current $14.6-billion cost estimate to a 1982 dollar basis, it would amount to $8 billion," says William H. Edwards, B/PB budget manager. "The $6.6 billion in alleged cost growth is due to nothing but inflation."
The American Council of Engineering Cos. of Massachusetts has been closely monitoring MTAs cost recovery process. "I think the suit has very little chance of success because the commonwealth had very smart people in charge of this project and its hard to see how they didnt know about budget changes and didnt understand them," says Abbie R. Goodman, its executive director.