The Money Pit: Could IT Have Prevented Budget Overruns in Boston’s Big Dig?

The story broke on feb. 1, 2000: the Big Dig was not just over budget, it was wildly, insanely, frighteningly and perhaps feloniously over budget. The front-page headline in the Boston Herald read: “Big Cost of Big Dig Could Grow by $1.4B.”

The “B” was for billion.

People were outraged; no one was surprised.

The Big Dig has been a fact of Boston life for almost a decade. Since ground was first broken in 1991, the city has been torn up, dug up and burrowed under. The Central Artery/Tunnel Project (the Big Dig’s official name) was designed to replace the old six-lane, 1.5-mile elevated Central Artery (see “Big Dig at a Glance,” Page 220). When it opened in 1959, the Artery was supposed to accommodate 75,000 vehicles a day. Today, more than 190,000 motorists from Boston’s northern and southern suburbs sit in hellish traffic for up to 10 hours, Monday through Friday.

When the Big Dig is completed (target date: 2004), the elevated highway that has divided neighborhoods, scarred the city and hidden the waterfront for over 40 years will be gone, replaced by an eight-to-10-lane expressway running beneath the streets of Boston. There will also be a tunnel underneath the Fort Point Channel, another beneath Boston Harbor, two bridges over the Charles River, and 27 acres of public and commercial space where the Artery once stood. (For details on what’s being constructed, see “Angioplasty on the Artery,” Page 220.)

Throughout the ’90s, as Boston watched the tall cranes gather and the deep holes grow, it was obvious that an enormous amount of money was being spent. Back in 1982, Massachusetts politicians (most famously House Speaker Thomas P. “Tip” O’Neil) lowballed the estimated cost of the project to secure funding through the federal Surface Transportation and Technical Corrections Act. The politicians said it would cost $2.2 billion. Today, the price tag is $14.1 billion—most of it coming out of taxpayers’ wallets—and climbing.

Of course, that $14 billion pays for a lot. The Dig is the largest and most technologically complex public works project in U.S. history—bigger than the Panama Canal or the Hoover Dam. In the course of the Big Dig:

* 200 separate construction and design contracts will be awarded.

* 161 lane miles of highway are being laid in a 7.5-mile corridor.

* 15 million cubic yards of dirt and 2.5 million cubic yards of clay are being dug up and replaced with enough concrete (3.8 million cubic yards) to build a sidewalk 3 feet wide and 4 inches thick from Boston to San Francisco and back three times.

* 29 miles of gas, electric, telephone, sewer, water lines and other utility lines (maintained by 31 different companies) are being rerouted.

* 4,800 trees and 33,000 shrubs will be planted.

* A tunnel is being constructed 120 feet below street level; in some areas it is just 3 feet below an existing subway tube.

* A casting basin big enough to hold three Titanics was built by draining a portion of the Fort Point Channel in order to create a dry environment in which to construct the tunnel; then the basin was flooded to float the tunnel into place.

* A 1,457-foot-long cable stay bridge is being built that will come within 2-and-a-half feet of the FleetCenter (where the Boston Celtics and Bruins play).

The challenge was to do all this in the middle of an old and densely populated city without disrupting the subway and Amtrak trains running above the new underground highway, without exacerbating painful commutes, without driving residents nuts and without destroying local businesses. Project officials cite these necessities as the reason why the cost has skyrocketed, and, indeed, they are not lying.

Nor are they telling the whole truth.

Cost overruns are endemic to the construction business. They can result from hundreds of causes—bad weather interrupts a day’s work; contractors underestimate the number of laborers for a job; soil is either harder or softer than anticipated.

IT has no power over the weather or soil. But IT can help conscientious project managers keep contractors accountable for their work and ensure that the work being done each day is in line with the master schedule and track costs. So if a contractor discovers a hidden water main, the removal of which may cause a delay or necessitate adding another crew to remove it, the project manager can adjust the schedule and the budget to compensate for the costs associated with this additional work.

“You can’t take on a project that size without technological support,” says Kurt Keidel, a management consultant with New York City-based PricewaterhouseCoopers. “The coordination issues are phenomenal. Technology is used to plan thousands and millions of activities on a project like this,” he says.

Was the Big Dig’s problem weak technology? Poor support?

CIO wanted to know whether a lack of IT might have been a factor in turning the Big Dig into the largest money pit in the history of the nation. What we discovered was not a lack of good IT but a lack of good project management.

Big IT

In the late 1980s, bechtel group, the $12 billion San Francisco-based engineering and construction giant, part of the Bechtel/Parsons Brinkerhoff (B/PB) joint venture overseeing the construction on the Big Dig, developed Synergy, an application specifically designed to manage the Dig’s finances. Synergy evolved into the Dig’s Oracle Construction Information System (CIS), which was developed from 1991 to 1995 after construction began, according to Peter M. Zuk, the Big Dig’s former project director. (Zuk is now vice president of global construction for Level 3 Communications in Denver.)

The CIS consists of an Oracle database and software from Primavera Systems, Timberline Software Corp. and Microsoft Corp., as well as a procurement tracking system developed by Bechtel in-house. The database runs on an Alpha server with 2GB of RAM and 13 hard drives with 210GB of storage. The Oracle CIS handles every aspect of the project including requests for information, changed orders, submission of design specs, accounting, budgeting, engineering, forecasting, reporting, scheduling, staffing, tracking and procurement. During peak construction, it processes $3 million worth of work every 24 hours.

“We looked at off-the-shelf software packages, but because the project is so big—and because so many constituents are involved—we found they weren’t robust enough to handle the specific needs of the Big Dig,” says Bechtel’s Walter J. Erb, who came aboard the project as IT manager in 1995. “One contract can have 14 funding sources,” says Robert Norman, Bechtel’s MIS supervisor, who worked on developing the Oracle CIS. “It’s impossible to use an off-the-shelf package. There is nothing in the world that will cope with the vulgarities of a project this size,” he adds.

The CIS tracks the Big Dig’s 150 separate construction contracts and 50 to 60 design contracts, which are funded by 20 different sources. The two primary sources of funding are the federal government, as represented by the U.S. Department of Transportation Federal Highway Administration (FHWA), which has ultimate oversight of the project and is covering as much as 70 percent of the $14 billion cost, and the Commonwealth of Massachusetts, which is kicking in the remainder. Thomas C. Arcand, CIO of the Massachusetts Turnpike Authority, which is in charge of overseeing B/PB, says that the financial data identifying which organization funds which portions of the project is kept separate in the system for auditing purposes so that officials can track the funding as it progresses. So, from the time CIS was first introduced in the mid-1990s, project managers have received regular reports on what was being spent compared with what was originally bid for each of those 150 construction contracts, of which 30 or more proceed simultaneously.

And, according to the project officials, the system worked.

Erb says, “The Oracle database was instrumental in keeping track of where cost overruns were and giving good indications as to where reductions could be made. At anytime you can run a report [from the Oracle CIS] to see where we are cost-wise.”

Former Project Director Zuk says, “The information system gave accurate scheduling and cost information from which we could make decisions about whether or not to accelerate contracts to avoid slippage on [project] milestones.”

And Acting Project Director Michael Lewis, who has worked on the Dig since 1992 and previously served as the deputy project director, says that project managers use the information system to determine how certain problems may affect the critical path schedule and how to readjust the schedule if necessary.

What this all means is that project officials should have known if, when and where an overrun had occurred.

And, in fact, they did.

Fuzzy Math

Even before the first shovel was thrust into the ground, the estimate for the Big Dig had already far exceeded the original 1982 $2.2 billion figure, according to reports from the state Office of the Inspector General (OIG), the Massachusetts Office of the State Auditor, the federal General Accounting Office (GAO) and the FHWA. When construction began in 1991, the cost of the project was projected at $5 billion. And the estimates escalated each year, as revealed in each new report issued by the state, the GAO and FHWA. (See “The Big Timeline,” Page 210)

There didn’t seem to be any limit to how much the Big Dig might cost. Between 1991 and 1994 the estimates rose from $5 billion to $9.6 billion. The money pit was beginning to assume epic proportions, and the Chairman of the Massachusetts Turnpike Authority James J. Kerasiotes decided to do something about it. In 1994 Kerasiotes, a political appointee of then-Governor William F. Weld, declared that the project’s budget would be capped at $10.8 billion—or merely five times the original estimate.

Kerasiotes ordered that any new costs would have to be balanced against reductions in the original construction specs. According to Acting Project Director Lewis, “If there were any cost increases, the project had to find a corresponding cost decrease to keep the budget at cost neutral.”

For example, to compensate for new expenses, Kerasiotes decided that the tiles on the walls of the Ted Williams Tunnel would not go from the bottom of the floor to the tippity-top of the ceiling; they would cover only two-thirds of the walls. According to the Dig’s public affairs office, that would save $25 million.

With Kerasiotes’s edict, everyone heaved a sigh of relief. Matters were now under control, and the money pit faded from the public’s consciousness as Bostonians focused on traffic jams and wondered at the gaping excavation sites opening like sores around the city.

But the Big Dig’s finances did not fade from the screens of various state and federal inspectors, auditors and investigators.

Boston, We Have a Problem

The massachusetts office of the state Auditor issued a series of 10 reports from Nov. 1, 1989, to Dec. 31, 1999, chronicling oversights in the design of the Fort Point Channel tunnel, which in 2002 will connect the Massachusetts Turnpike with the Ted Williams Tunnel. Out of a total of $288 million that the auditor identified as “unnecessary, excessive and avoidable project costs,” he attributed $19 million to inadequate management oversight in the design of the tunnel, which led to costly delays. The report blamed B/PB for not providing engineering and design reports to its subcontractors in a timely manner and for not heeding their advice on the design of the tunnel. The report also blamed the Commonwealth of Massachusetts for failing to manage B/PB.

Michael Bertoulin, Bechtel’s milestone manager of the Fort Point Channel portion of the turnpike extension, blames subcontractors for failing to provide complete information other contractors needed to complete their own engineering and design reports. He also says the subcontractor’s suggestions for changing the design of the tunnel would have been too time-consuming and costly.

(Bechtel’s public affairs department told CIO that Matt Wiley, project program manager for the Central Artery/Tunnel Project, would not be available for comment.)

The Massachusetts OIG also issued a series of reports from 1993 through 1999; it identified compliance problems with state regulations, unclear contract specifications and a continuing failure to apply rigorous cost containment measures on contracts as contributors to the massive cost overruns.

A 1997 report from the GAO suggested that the finance plan that the project had submitted to the FHWA in 1996 did not provide adequate information to assess the Big Dig’s ultimate cost. The GAO recommended that the state secretary of trans- portation include in a new finance plan “a revised estimate of the project’s costs and funding needs that more closely reflects the state’s actual experience with its cost containment program and a contingency plan for financing the project if costs increase further or if the sources of financing are not sufficient.”

Translation: The GAO was neither content with Kerasiotes’s budget cap nor his cost containment strategies. The GAO wanted to know more. It wanted the specifics of when and where increases and reductions were being made.

The GAO didn’t get them. The finance plans that the Big Dig submitted for fiscal years 1998 and 1999 did not satisfy the GAO. Nor in the government’s view did they comply with federal law that requires that the plan provide a detailed estimate of the cost to complete the remaining elements of the project, including reasonable projections of future cost increases. According to a draft report from the U.S. Department of Transportation’s Office of Inspector General dated Oct. 7, 1999, the 1998 finance plan “did not disclose significant cost information about the project, such as construction cost increases or that contract awards were exceeding budget.” The annual finance plan for 1999 that was submitted two months late on Jan. 7, 2000, didn’t include this information either. There also was no indication in this plan of a potential cost overrun, according to an FHWA report.

In spite of the fact that the CIS tracked all this information, project officials did not provide these specifics in the finance plans that they submitted to the GAO and the FHWA.

Then, on Feb. 1, 2000, Kerasiotes, reportedly fearing an account in the Boston press, launched a preemptive strike by informing the media of a potential $1.4 billion cost overrun beyond his $10.8 billion cap. According to the FHWA, the state had not forewarned the FHWA of a potential cost overrun of such magnitude “in any document provided to the division office, in the [finance] plan or in discussions prior to the conditional acceptance of the plan.”

(Kerasiotes has declined to respond to the FHWA charges, telling CIO: “Since April 11, I haven’t had any comment on the project or the issues raised, and I’m not going to change my course at this point.”)

Because of the sudden news of the overrun, the FHWA established a multidisciplinary federal task force to analyze the oversight of the project.

The task force found that the FHWA, which is responsible for ensuring that tax dollars going to this project are used responsibly and lawfully, failed to fulfill its oversight role. It also concluded that senior management of the Big Dig had evidence of the $1.4 billion overrun prior to submitting their finance plan on Jan. 7, 2000, and that project officials intentionally withheld this knowledge.

The task force recommended a change in the financial review process and in the delegation of authority for accepting the finance plan. It concluded that the existing methods of reporting the status of the project, a report called the “Project Management Monthly” (PMM), didn’t provide “a clear, accurate and timely picture of the total potential project cost exposure or cash flow needs.”

Lewis says that after the project was assessed in late 1999, the FHWA changed the requirements for reporting the project’s finances, and subsequently the accounting system had to change. As it had done under Kerasiotes, the state could no longer apply insurance credits to the finance plan, nor could it employ its cost containment system that had concealed where extra costs were being incurred. Instead, all project costs would have to be identified.

Fixing the Hole

Two months after the $1.4 billion overrun made headlines, Massachusetts Governor Paul Cellucci fired Kerasiotes.

“The governor has acknowledged that one of the mistakes that Mr. Kerasiotes made was that he was not more forthcoming with federal officials,” says John Birtwell, Cellucci’s press secretary. “When the feds came in,” he continues, “they determined that there was a breakdown in communication between their own officials and state officials.” Birtwell says that the feds removed some of their own people and asked the state to do the same. “The problem was at the Artery,” says Birtwell, “and the problem was removed.”

Now the project is the responsibility of former State Finance Secretary Andrew Natsios.

Natsios’s first order of business was to get the project’s finances straightened out. The state hired Deloitte & Touche to conduct a series of independent audits that, as of August, have fixed the cost of the project at $14.1 billion. The state has also worked to improve communication and reporting procedures by enhancing the PMM, holding quarterly review meetings with senior executives and national FHWA officials, and conducting its own bottom-to-top assessment of the remaining project costs every six months.

The big dig had the technology to identify the outrageous cost overruns that have now made it the most expensive and controversial construction project in U.S. history. The problem was not so much that they incurred these staggering costs (though that’s clearly an issue with taxpayers and the Commonwealth of Massachusetts, which has to cough up extra funding), it’s that project officials didn’t communicate the information about the overruns to the FHWA. If they had, the state probably wouldn’t be embroiled with the FBI, the Securities and Exchange Commission (SEC), the U.S. Office of the Attorney General and Massachusetts Attorney General Tom Reilly’s office. All have launched investigations into the Dig for fraud, corruption and administrative violations. The IT that was designed to track the project’s cost and schedule is now being used to pinpoint exactly who knew about the overruns, what they knew and when they knew it.

If there’s a lesson to be learned from the sordid tale of the Big Dig, it’s this: Report problems as they occur; report them accurately and truthfully. It is, as Shakespeare said, “a tangled web we weave when first we practice to deceive.”

And an expensive one, too.