In an explosive report condemning lax oversight of the largest public works project in U.S. history, a federal task force today charged that managers of Boston's multibillion-dollar highway project intentionally concealed cost overruns, and recommended their ouster. Within an hour, the chief of the project--known as the "Big Dig"--was asked to resign. And he did.
Task force members grimly spread the blame among state and federal officials alike, concluding that budgetary sleights of hand and secretive bookkeeping by project managers kept cost estimates artificially low, while federal highway officials failed to examine the financial forecasts on their own. As a result, what has been sardonically called America's gift to Massachusetts will be even more generous than originally intended, with a new price tag of up to $13.6 billion--a cost increase of about $6 billion in the past decade.
The repeated and deliberate failure by Central Artery/Ted Williams Tunnel Project managers to disclose the full financial picture "stands as one of the most flagrant breaches of the integrity of the Federal/State partnership in the history of the nearly 85-year-old Federal-aid highway program," the report said. The federal government, which has contributed $5.8 billion, will ultimately assume as much as 70 percent of the cost of moving Boston's downtown highway underground and completing related construction.
The breakdown in trust led Republican Gov. Paul Cellucci to immediately seek the resignation of Massachusetts Turnpike Authority Chairman James J. Kerasiotes, the project's mastermind. Kerasiotes was replaced by state Administration and Finance Secretary Andrew S. Natsios.
"In his zeal to do the job and complete this project, I think he did something you can't do in a democracy--you can't withhold information," said Cellucci, who pledged to "open the windows, open the doors" of the project after being briefed in Washington. "We need to restore credibility to the numbers."
"What the Big Dig needs now is a change of culture," Natsios agreed.
"If I have misled anyone, I am sorry," Kerasiotes said in a statement. "Clearly, people felt that I did mislead them. I must accept that verdict and move on."
That the Big Dig is in a big mess is no surprise to political observers here. Warnings have been sounded for years about the huge project's soaring budget, and the federal report confirms what many have long suspected: Management has failed, and construction costs are as tangled as the traffic woes the endeavor was meant to solve.
Year after year, warnings about cost overruns and mismanagement went unheeded. Official cost estimates mushroomed from $7.7 billion in 1992 to $10.8 billion several years later, even as the General Accounting Office and the Federal Highway Administration, among others, predicted costs in excess of $11 billion.
Agencies seeking project details were put off or given incomplete information, task force members and others said. Direct access to information was not permitted, and no mechanism existed to monitor the project's overall financial management, they said.
"We've been predicting for quite some time that costs were going to be higher than identified," said Raymond DeCarli, deputy inspector general for the U.S. Department of Transportation. "Last May, we were sitting at $13 billion in costs, and the only reason that wasn't public sooner was that managers in Boston said it wasn't possible, and [that] we were some kind of crazy people."
Even the Federal Highway Administration division here, which recently knew of at least $500 million in additional costs, relied on state reporting.
"We were asking questions and reviewing things, but if people are not forthcoming, then naturally you get misled as to what is actually occurring," said Federal Highway Administrator Kenneth R. Wykle. Still, he said, "we should have done an independent verification instead of accepting [the figures] at face value."
No one is suggesting that the project, now in its final stages and with a scheduled completion date of 2004, should be abandoned--leaving Boston with a gaping hole in its center. But the massive financial shortfall has sent Massachusetts politicians and bureaucrats scrambling to raise the much-needed cash while simultaneously trying to close another kind of gap--involving their credibility--here and in Washington.
Fourteen task force members first swooped into town after news reports forced Big Dig managers to confirm a $1.4 billion funding gap in February. The surprise announcement came just hours after federal highway administrators approved their latest annual finance plan, which did not mention the shortfall.
The Securities and Exchange Commission launched a probe into whether project officials misled investors and bond agencies. U.S. Transportation Secretary Rodney E. Slater threatened to freeze federal funding for the project, whose managers had consistently maintained that costs were holding steady at $10.8 billion. A federal highway official overseeing the project was reassigned, and Cellucci hired accounting firm Deloitte & Touche to conduct an audit.
Though they sent a vitriolic memo to federal officials last fall denying a rise in costs, Big Dig managers knew by then that there would be a "significant" overrun. But they did not want to reveal it until they had calculated an exact figure and recovered the costs. "We felt it was very important that we come up with a number and it be accurate," said project manager Patrick J. Moynihan in a recent interview. "Once you establish a number, it's the number. . . . I regret that people believe they were misled."
Having exposed one of the worst failures in public checkbook balancing in recent history, the task force today issued 34 recommendations, including a rejection of the Cellucci administration's bailout plan as unsound and an investigation by federal transportation officials into whether Big Dig managers, including Kerasiotes, should be banned from federally funded projects. The report also raised concerns about the close ties between private consultants and project managers, whom officials here and in Washington accused of dismissing outside criticisms as acts of betrayal.
"There seemed to be an arrogance that they were always right, we were wrong," said state auditor Joseph DeNucci, who issued 11 audits since 1993 alleging mismanagement and financial waste. "For 10 years, no one was paying attention."
The cost to complete the Boston Central Artery Tunnel project has increased tremendously since the initial 1984 estimate.
1984 $ 2.3 billion
1995 $10.8 billion
February* $12.2 billion
Yesterday** $13.6 billion
*Includes $1.4 billion overrun
**Federal task force estimate
Here is how the Massachusetts Turnpike Authority breaks down its estimated $1.4 billion cost overrun. A federal task force said the overrun will be much higher.
Construction $915 million
Project management $260 million
Right-of-way settlements $ 72 million
Design $ 60 million
Other $ 90 million
SOURCE: Federal Task Force on the Boston Central Artery Tunnel Project