Review the case study 7.1 - Classic Case: de Havilland’s Falling Comet in the attachment and answer all the questions to the best you can. Review the case study 8.2 - Boston’s Central Artery/Tunnel Pr

Clearly, the Central Artery—a crumbling, overused, and increasingly dangerous stretch of highway—had outlived its usefulness. Michael Dwyer/Alamy Figure 8.10 Boston’s Big Dig The solution to the problem was the advent of the Central Artery/Tunnel (CA/T) project, commonly known to people from the Boston area as the “Big Dig.” Under the supervision of the Massachusetts Turnpike Authority and using federal and state fund- ing, the CA/T project comprises two main elements:

(1) replacing the aging elevated roadway with an 8- to 10-lane underground expressway directly beneath the existing road, with a 14-lane, two-bridge crossing of the Charles River, and (2) extending Interstate 90 through a tunnel beneath South Boston and the har - bor to Logan Airport. Originally conceived and initi- ated in the early 1980s, the project was a continuous activity (some would say “headache”) in the city for more than 20 years. The technical challenges in the Big Dig were enormous. Employing at its peak about 5,000 work- ers, the project included the construction of eight miles of highway, 161 lane miles in all, almost half below ground. It required the excavation of 16 million cubic yards of soil, enough to fill the New England Patriots’ football stadium 16 times, and used 3.8 million cubic yards of concrete. The second major challenge was to perform these activities with- out disrupting existing traffic patterns or having a deleterious effect on the current highway system and its traffic flows. Thus, while miles of tunnels were being excavated underneath the old Central Artery, traffic volume could not be slowed on the elevated highway. Case Study 8.2 289 The project had been a source of controversy for several years, most notably due to its soaring costs and constantly revised budget. At the time of the project’s kickoff in 1983, the original projections for the project’s scope assumed a completion date of 1998 and one- time funding from the federal government to cover 60% of the project’s original $2.5 billion budget. In fact, the budget and schedule have been revised upward nearly constantly since the project kicked off. Consider the following budget levels: year Budget (in billions) 1983 2.56 1989 4.44 1992 6.44 1996 10.84 2000 14.08 2003 14.63 Final cost projections soared to over $14.5 billion and the project officially wrapped up in late 2004, or seven years late. Cost estimates and subsequent expen- ditures were so bad that by 2000, a federal audit of the project concluded that the Big Dig was officially bank- rupt. One component of the federal audit concluded that a major cause for runaway project costs was due to poor project management oversight. Specifically, it was found that project management routinely failed to hold contractors to their bids or to penalize them for mistakes, resulting in huge cost increases for the Big Dig. Because of the intense public scrutiny and sensitive nature of the project, managers also stopped tracking or publicly acknowledging escalating costs, fearing that the political backlash could cripple the project. In fact, Taxpayers for Common Sense, a non- partisan watchdog group, charged that the project’s economics became so bad that managers delayed bud- geting for contracts worth $260 million to a consulting firm because they could not offset such a large cost in the short term. In response to public outcry over the delays and rising costs, the project manager submitted his resignation. Not surprisingly, the citizens of Boston have viewed the opening of the Big Dig with a genuine sense of ambivalence. Though a technological marvel that will undoubtedly improve the lives of its users, while reducing carbon monoxide emissions and improving the “green” reputation of the city, the project proved to be such a financial morass that public officials qui- etly canceled a planned celebration of a major section’s opening. Finger pointing and a search for the causes of the Big Dig’s poor cost estimation and control were vigorous. For its part, the Massachusetts Turnpike Authority planned a $150 million lawsuit against the firms that managed the project, arguing that many of the cost overruns could be attributed to poor project management and oversight.

Increasingly, the question being asked was: Were original cost estimates for the CA/T given in good faith or were they “tuned” to meet political realities?

That is, did officials deliberately underestimate true project costs, fearing that the project would not have been approved in the beginning if the public was aware of its likely cost and scope? If so, the result has been to leave a sour taste in the mouths of the taxpay- ing public, convinced that the CA/T project repre- sents a combination of brilliant technical achievement coupled with poor estimation and lax control. Former Massachusetts House Speaker Thomas Finnerman put the matter directly: “You’d be much, much better off saying upfront, factually, ‘Hey, it’s going to take umpteen years likely and umpteen billions dollars,’ rather than selling it as a kind of smoke and mirrors thing about, ‘Oh, it’s two billion and a couple of years’ work.’” aftermath: Reconsidering the Big Dig Since the completion of the Big Dig, you would expect the commotion to have died down, the complaints to have been resolved, and the people of Boston to have become used to the advantages of this enormous proj- ect. Unfortunately, that has not been the case. Since its “completion” in early 2004, bad press, disasters, and accountability continue to dog the Central Tunnel/ Artery system. In 2001, prior to the completion of the project, thousands of leaks began appearing in the ceiling of sections of the tunnel system. The cause? Records sug- gest that the primary contractor for the concrete pour - ing, Modern Continental, failed to remove debris prior to pouring concrete, resulting in flaws, cavities, and pockets of weakness in the ceiling and walls of the tun- nels. In May 2006, six employees of the main supplier of concrete were arrested for falsifying records. In fact, 2006 was a very bad year for the Big Dig for a variety of reasons. On July 10, 2006, the bolt and epoxy system holding four sections (12 tons) of con- crete ceiling panels failed, causing a section to collapse onto the tunnel roadway and kill a passenger in a car passing beneath the section at the time. That month, a detailed inspection of the ceiling panels throughout the tunnel system identified an additional 242 bolts that were already showing signs of stress! The tun- nel system was shut down for the month of August for inspection and repairs. Also in August, the state assumed control of the Central Tunnel/Artery from ( continued ) 290 Chapter 8 • Cost Estimation and Budgeting the Turnpike Authority, citing the TA’s poor record of supervision and effective project control.

The tragedy became something close a to farce when the Turnpike Authority and Federal Highway Administration refused to release critical documents to the state, including:

• Deficiency reports flagging initial substandard work • Construction change orders and contract revisions • Inspection reports on workmanship and build- ing material quality Until the court system orders the release of all project documents, we may never know the extent of mismanagement and poor decision making that dogged the development of the CT/A. From a public relations perspective, however, the fighting between state and federal authorities over oversight and con- trol of the troubled project is a continuing black eye for all parties involved. In early 2008, the contractors for the Big Dig, including primary contractors Bechtel and Parson Brinckerhoff, were ordered to pay $450 million to settle the state’s lawsuit over the 2006 tunnel collapse. Though this settlement does not absolve the contrac- tors from future lawsuits, it does settle some of the more egregious failures that occurred while they led the project. Michael Sullivan, the U.S. Attorney who led the lawsuit, noted that the contractors originally made a profit of about $150 million from the Big Dig; however, “They lost money as a result of the failures that occurred under their watch.” 26 Questions 1. Consider the following statement: “Government- funded projects intended to serve as ‘prestige projects,’ such as the ‘Big Dig,’ should not be judged on the basis of cost.” Do you agree or dis- agree with this statement? Why?

2. Project success is defined as adherence to budget, schedule, functionality (performance), and client satisfaction. Under these criteria, cite evidence that suggests the “Big Dig” project was a success and/or failure.

3. What are the lessons to be learned from the “Big Dig” project? Was this a failure of project esti- mation or project control by the contractors and local government? internet Exercises 8.1 Go to the Internet and search using the phrase “cost analy- sis tools.” What are some of the links and examples of cost analysis as it applies to projects?

8.2 Go to http://pmworldlibrary.net/ and type “case studies” in the search window. Select a project and report on it from the perspective of its cost estimation, budgeting, and (if applicable) expediting perspectives. Was the project a suc- cess or failure? Why?

8.3 Go to www.cityofflint.com/DCED/CDBG2013_14/Budget Detail_sample.pdf and reproduce the summary project budget worksheet. After examining the various elements in the budget, what are the main cost drivers for projects of this sort?

8.4 Go to www.stickyminds.com/articles.asp and click on “Stickyminds.com Original Articles.” Search for and click on the article by Karl Wiegers, “Estimation Safety Tips.” In the article (found as a pdf link to the site), the author offers tips on making estimates that are accurate and de- fensible by avoiding common mistakes. Which of these points makes the most sense to you personally? Why does it seem a plausible suggestion? PMP certificAtion sAMPle QUestions 1. The project administrator is preparing a preliminary budget for a project and adds in the cost of a new com- puter for the project team to use. What type of cost would this computer purchase represent? a.

Variable b. Direct c. Indirect d. Variable direct 2. The project manager for a large project being devel- oped in northern Ontario recognizes that it will be necessary for her to maintain a close presence at the construction site during its development and has negotiated the use of a building for her team near the construction project. The cost of the building must be factored into the project cost and will increase with use; that is, the cost of heating and other utilities is subject to change depending upon weather and team use. What type of cost would this building represent?

a. Variable direct b. Indirect c. Nonrecurring d. None of the above 3. A project budget identifies $5,000 budgeted for program- ming costs. The actual amount for programming costs is $5,450. Which of the following statements is correct?

a. The $450 represents a negative variance to the budget b. There is no variance to the budget c. The $450 represents a positive variance to the budget d. The entire $5,450 represents a positive variance to the budget