Professionalism/Boston's Big Dig Project

Introduction

Boston Central Artery

The Boston Central Artery, also called the John F. Fitzgerald Expressway, was a 1.5 mile, raised six lane stretch of Interstate-93 which ran through downtown Boston. Constructed in 1959, the Central Artery was designed for 75,000 vehicles daily. By the 1990s, there were 190,000 vehicles on the Central Artery everyday. If the Central Artery was still in use in 2010, experts estimated daily traffic jams of 16 hours. The Central Artery was also considered an eyesore and residents reviled it because it divided neighborhoods and separated the downtown financial district from the waterfront.

By the 1970's the six lanes were unable to accommodate the traffic of Boston. Around this time Bostonians began to envision a system of underground tunnels and bridges to replace the Central Artery.

The Big Dig

The Big Dig is a series of tunnels which replaced the Central Artery. It not only supplanted the disruptive elevated highway with the Rose Kennedy Greenway, but expanded the six lane road to 8-10 lanes and made Logan International Airport more accessible from downtown.Although the Big Dig provides numerous benefits to Boston drivers, it was a massive undertaking. The tunnels needed to be built underneath the city without compromising the structural integrity of the existing elevated roadways. Planning began in 1982 with an environmental impact survey, which estimated the Big Dig to be completed in 1998 at a cost of $2.8 billion. Leaders in Massachusetts expected as much as 90% of this cost to be assumed by the federal government.

Bechtel and the Government

At the center of the Big Dig project was the Bechtel Corporation, the largest construction company in the United States. Bechtel had three major responsibilities: design, management, and financing. All designs, the majority of which Bechtel had subcontracted out, were approved by Bechtel. They also oversaw all construction and provided quality control, maintenance, and inspection for all subcontracted work. Finally, they negotiated with the federal and state governments for funding. When unforeseen events caused the project to veer off-schedule or go over-budget, Bechtel filed cost overruns and applied for additional funding. The federal government accounted for $8.5 billion of funding, with the rest of the money coming from Massachusetts.

Results

The Big Dig was plagued by delays and cost overruns throughout the design and construction phases. From 1997 to 2003, Bechtel submitted over 10,000 cost overruns accounting for nearly $2 billion. The initial estimate for completion was 1998, but the last tunnel was not opened until 2006. The final cost of the Big Dig including interest is projected at $24.3 billion, far outpacing the $2.8 billion 1982 estimate. Interest on debt incurred from the Big Dig will consume about 40% of the Massachusetts transportation budget for the next 10 years, and will not be fully paid off until 2038.

There have been many problems with the Big Dig attributed to incomplete designs or substandard construction practices, including:

• 1994 -- A 600 foot wall built on unstable foundations was torn down and rebuilt at a cost of $31 million.
• 2001 -- An unsealed dam allows flooding in the Fort Point Channel Tunnel at a cost of $41 million and weeks of delay.
• 2012 -- Manufacturing or design defects caused a light fixture in the Tip O'Neill Tunnel to fall from the ceiling. All light fixtures were replaced at a cost of $54 million.

Ceiling Collapse

On July 10, 2006, a 3 ton concrete ceiling panel fell in the Fort Point Channel Tunnel, killing a woman and injuring her husband. The ceiling was held up by an bolts anchored by epoxy. The ceiling collapsed because the wrong type of epoxy was used. Instead of a standard set epoxy, the bolts were anchored with a fast-set epoxy which is good for withstanding large shocks, but fails when supporting loads over extended periods. The collapse was the culmination of a variety of failures on many levels of the Big Dig project from design to management to finances.

Professional Failures

Incentives Structure

The delays and cost overruns of the Big Dig were fostered by an incentives structure which rewarded shoddy design work and construction practices. Bechtel had a cost-plus contract with the state of Massachusetts, which guaranteed 7% profit on top of costs for design and construction. When Bechtel submitted cost overruns they received additional profit, regardless of whether they were at fault for the mistake. The contract encouraged Bechtel to submit over 10,000 cost overruns over the life of the project to correct design flaws or construction mistakes.

The state also provided Bechtel with a $100 million liability cap, which was less than five percent of Bechtel's revenue from the Big Dig project. Given this minimal liability, Bechtel had no fear of punishment for unprofessional work.

Bechtel's contract made them a virtual extension of the state. The state had few oversight responsibilities and gave Bechtel almost complete control of the project. This "special relationship" is very unusual for construction projects.

Cost Recovery Committee

In 1994, the state created the Cost Recovery Committee to pinpoint design and management mistakes and reign in costs. The Cost Recovery committee was given the power to demand that companies working on the Big Dig refund the state if their mistakes resulted in cost overruns. Peter Pendergast, the Massachusetts Turnpike Authority’s former general counsel, described cost recovery as “a process that appeared as though it was designed to fail." From 1994-2001, the State only recovered a single payment of $35,707. There were $1.4 billion in cost overruns during this period.

The failure of the cost recovery effort can be linked to conflicts of interest within the committee. The Cost Recovery Committee was chaired by Michael P. Lewis, the project’s state design director. This was a clear conflict of interest. In his role as the state's design director, Lewis was responsible for overseeing Bechtel's management of the project. Therefore as chairman of the Cost Recovery Committee, Lewis was reviewing his own work. Any cost overrun that he blamed on Bechtel or a sub-contractor was an acknowledgement of his failure in oversight. Lewis even stated that cost recovery “was never a front burner issue for me.” In fact, from 1998-2000 the Cost Recovery Committee did not meet at all. Bechtel also had its own conflict of interest. Bechtel’s contract called for Bechtel to point out “issues of potential cost recovery.” The state was therefore relying on Bechtel to identify its own mistakes.

Legal Corruption

There are numerous examples of collusion between Bechtel and the Massachusetts state government. In 1995, Michael Lewis asked Bechtel to “sanitize” a cost report to the federal government in order to secure federal funding. Bechtel hid $6 billion dollars in costs from the federal government. In return, the state has helped Bechtel out of difficult situations. In most major cost overruns, the state and Bechtel would work together to blame the sub-contractor or sub-designer. In cases where Bechtel was clearly at fault, Bechtel used connections in the legislature and executive branches to evade punishment.

State favors may also be attributed to the intense lobbying that Bechtel does in Massachusetts. Bechtel has given over $225,000 to campaigns since the Big Dig began. Dozens of Bechtel lobbyists have also served as advisers to prominent politicians in Massachusetts.

Conclusion

Repercussions

In the aftermath of the ceiling collapse, Bechtel was blamed for failing to properly oversee the construction, failing to address construction workers concerns and failing to regularly inspect the completed tunnel. Furthermore, Bechtel was aware of damaged bolts in 1999 but failed to investigate the cause. Bechtel, Powers Fasteners (the epoxy manufacturer), Modern Continental (the contractor for the tunnel), Gannett-Fleming (the tunnel designer) and the Massachusetts Turnpike Authority paid a $28 million settlement to the victim's family. In addition, in order to avoid criminal charges for negligence Bechtel paid over $407 million to the state of Massachusetts, a sum approximately three times the profit that Bechtel made on the entire Big Dig project.

In 2006, then-governor Mitt Romney took control of the project and the Massachusetts Turnpike Authority in hopes of controlling the overspending and corruption. Romney called for a shift of focus: "More important than the substantive decisions you will make during your tenure on this board will be your insistence that this agency rebuff patronage, self-interest and favoritism always in favor of the public interest."

Lessons

The Big Dig ceiling collapse demonstrates the dangers of agency capture. When an agency that is tasked with monitoring the actions of a private company instead works to promote that company’s interests, there is a failure of government and the public suffers. In the case of the Big Dig, agency capture was caused by both personal professional failures and the contractual relationship between Bechtel and the state government. Peter Pendergast, the Massachusetts Turnpike Authority’s former general counsel believed that the lack of oversight was due to a sense of loyalty to Bechtel that developed over years of working so closely. He commented, “The state, Bechtel—you couldn’t differentiate. It was like a regional high school. The kids are from different towns, but they are all on the same team. It’s very human, but…the citizens of the commonwealth were not well represented.” Government officials must be aware of the danger of agency capture and actively work to separate personal relationships from professional decisions. It is also important to account for the potential for agency capture when drawing up contracts between public and private interests. Massachusetts’ contract with Bechtel made Bechtel a virtual extension of the state, trusting Bechtel to protect the interests of the general public. Massachusetts should have hired independent specialists to oversee Bechtel’s work.

The Big Dig ceiling collapse shows the difference between contractual requirements and professional ethics. Despite numerous cost overruns, design flaws, and poor construction methods, Bechtel’s top Big Dig official, project manager C. Matthew Wiley said “I believe the Bechtel/Parsons Brinckerhoff team has performed admirably, and to a higher professional standard of care than required in our contract." This is an alarming statement because true professionals do not define their professionalism based on the terms of a contract. The Big Dig contract rewarded Bechtel for cost overruns and required very little government oversight. Bechtel was in a situation similar to the Ring of Gyges. Bechtel could do whatever it wanted without punishment. Bechtel took full advantage of this power to further its interests at the public’s expense.

Businesses leader need to recognize long-term implications of short-term business strategies. The Big Dig ceiling collapse is similar to Arthur Andersen’s financial meltdown. Arthur Andersen abandoned rigorous accounting standards in favor of dodgy practices that eventually led to the collapse of the company. Bechtel solely focused on maximizing profits on the Big Dig and did a poor job designing the project and overseeing construction. This short-term mentality backfired when the ceiling collapsed and Bechtel not only damaged their professional reputation, but also lost approximately $250 million.