Tuesday, January 3, 2012

The Big Dig, part 3

Were the Big Dig cost overruns unpredictable, due to the tricky nature of tunneling through the heart of a city? Or was it something else? From A History of Central Artery/Tunnel Project Finances 1994 - 2001:
Records and interviews reveal a Big Dig cost history at odds with publicly disclosed information. Most significantly, records show that B/PB presented Big Dig officials with an excruciatingly detailed total cost forecast of $13.79 billion in November 1994, a figure close to the $13.8 billion revised estimate announced by Big Dig officials in October 2000. [...]
Anxious to avoid the sticker shock effect of B/PB's estimate, Big Dig officials undertook a nine-month initiative between June 1994 and March 1995 to decrease B/PB's total cost estimate from $13.8 billion to $8 billion. At this time, the Secretary of Transportation and Construction publicly announced that the on-time and on-budget figure would not exceed $8 billion. Documents cite a directive from Big Dig officials telling B/PB to "hit the target" of $7.98 billion. [...]
B/PB managers insisted that local FHWA officials be told about all deductions, assumptions and exclusions that had been used to reduce B/PB's cost projection. Records show that B/PB and Big Dig officials did so. [...]
Once local FHWA officials learned of, modified, and sanctioned the use of these multi-billion dollar accounting assumptions during the 1994-1995 CSU-Rev.6 budget review process, the accounting assumptions became a permanent, tacit feature of the budget. [...] 
Put another way, once local FHWA officials gave their approval to the use of these accounting assumptions in 1995, they became part of the "semantic" definition of the Big Dig's total cost. The accounting assumptions became a multi-billion dollar minimizing factor for every cost estimate that followed.
Starting in 2000, the Massachusetts Office of the Inspector General began investigating the cost cover-ups behind the Big Dig, and they published their findings in a March 2001 report. They found that state officials ordered Bechtel/Parsons-Brinckerhoff to arbitrarily cut $6 billion from the estimated cost, in order to meet a political goal.
Page 44 of the OIG report

The report concludes that since the FHWA was made fully aware of the reductions and their nature, it is responsible for accepting the bogus $8 billion number and giving respectability to it. Therefore, the Federal funding cap should be raised, since it was based on information the FHWA knew to be unrealistic, and that when the Massachusetts Legislature provided state funds, it did so "in the absence of critical information." (p. 16)

Frankly, although the Mass OIG report is revealing, I think it is somewhat self-serving by implicating the FHWA so heavily. Was the FHWA complicit in hiding the true costs of the project? Yes, it appears. But the duplicity was the direct result of orders from Big Dig officials. Shouldn't they be the ones held responsible for manipulating numbers for political reasons? As for B/PB, they did do the shady accounting they were ordered to do, they also provided all the information about it to the FHWA and investigators. Anyway, there is a whole sordid list of errors to charge B/PB with aside from this.

The OIG report was published over ten years ago. What happened? According to this report (pp.15-18), the Attorney General determined that the report was not sufficient to make a criminal case, and it appears that the remaining cost recovery effort was rolled into a larger lawsuit over a collapse in the I-90 connector. But at least we know that the cost overruns were largely just a return to B/PB's original prediction, which turned out to be pretty accurate.

See also: The Big Dig, part 2, part 4.

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