In this assignment, you are to play the role of an expert on managing major programs

MGT279 . Management of Major Programs 20 15 University of Management and Technology 1 MGT 279. Management of Major Programs Assignment 4 Boston’s Big Dig In this assignment, you are to play the role of an expert on managing major programs. Assume the following lengthy article that appeared in the Boston Globe comprises a report you have received about the Bi g Dig project in Boston , one of the costliest and most politically charged major programs in history. You should read the report with a measure of skepticism – the writer is neither an expert in managing major programs, nor a disinterested third party observer of events. Still, the “report” is filled with interesting facts that certainly indicate that we are dealing here with a trouble -filled program. When you are done reading the report, please address the following questions: 1. In summary, what does the report’s author blame for the problems encountered on the Big Dig project? 2. As an expert, to what extent do you think the author has got things right? Based on your knowledge of what it takes to manage major programs, how would you summarize what went wrong with this project ? 3. To what extent do you feel that if the Big Dig had followed the US Department of Defense approach to managing major programs it would have been more successful?

What problems might arise in trying to employ the US DoD approach? 4. What lessons can be derived from the Big Dig experience that can be shared with individuals and organizations that are about to begin work on a major program? Your answer should be no longer than ten pages long, using single space and 12 point font. In reviewing your respons e, I will be looking for evidence that you can hold original views that reflect a solid grasp of program management issues. MGT279 . Management of Major Programs 20 15 University of Management and Technology 2 Below is the Boston Globe report : The Central Artery viaduct snakes within feet of the Fleet Center, which was left off early Big Dig design plans (Globe Staff Photo / David L. Ryan) PART ONE Artery errors cost more than $1b By Raphael Lewis and Sean P. Murphy, Globe Staff, 2/9/2003 t was spring 1997, only a few weeks after he took an engineering job with the Big Dig's private -sector managers, Bechtel/Parsons Brinckerhoff, when David Beck realized something was terribly amiss at the then -$10.8 billion project. The FleetCenter was mis sing. Not the actual FleetCenter, of course. The flashy facility had been grabbing headlines since a groundbreaking ceremony on April 28, 1993. It was the design drawings. Bechtel had failed to depict the 19,600 -seat arena in its preliminary designs, which were completed in October 1994, and instead showed an obstacle -free area for contractors to lay utility lines. Bechtel then failed to fix the problem before signing off on the final design drawings three years later. "I sent out some e -mails, and made a couple of calls, saying, `Hey guys, we have a problem here,' " Beck recalled. Months passed, and construction work was under way before the designs reflected the FleetCenter's existence, records show. MGT279 . Management of Major Programs 20 15 University of Management and Technology 3 "It fell through the cracks, if you will," William R. Mayer, a top Bechtel engineer, recently acknowledged. But even though Bechtel's gaffe cost taxpayers $991,000, the company never paid a penny back for its mistake. And no one from the state or federal government ever asked. A ye arlong Globe investigation found hundreds of similar errors committed by the Big Dig's management company, which is led by one of the world's largest engineering firms, Bechtel Corp. of San Francisco, and includes another industry titan, Parsons B rinckerhoff of New York. The Globe determined that at least $1.1 billion in construction cost overruns, or two -thirds of the cost growth to date, are tied to Bechtel mistakes. Yet, even as Bechtel's errors helped drive up the Big Dig's cost, the company n ever paid for any of its mistakes. Instead, it profited. To date, Bechtel has received more than $264 million beyond what its original contracts called for, in part because Bechtel received additional money to fix its errors, records show. After years of inaction on cost overruns, the Big Dig late last month hired a retired judge to determine whether Bechtel -- or any contractors -- owe refunds for mistakes in design, construction, or management. But the state is unlikely to get repaid for as many as two - thirds of the errors because the statute of limitations has passed. The Globe investigation included scrutiny of 12,000 changes to more than 150 construction and design contracts, review of 20,000 pages of project documents, and more than 100 interviews wi th current and former Big Dig officials, construction specialists, and contractors. The chief findings: • During the 17 years it has managed the Big Dig, Bechtel has neglected to perform basic work called for in its contracts, such as conducting crucial f ield surveys of the elevated Artery, and verifying the locations of utility lines and buildings such as the FleetCenter.

The failures contributed to more than $350 million in construction overruns, project records show. • Construction on virtually all of the Big Dig's major contracts began with incomplete and error -filled designs, which led to nearly $750 million in other construction cost overruns, records reveal. Bechtel created the basic design for the entire Big Dig, set the design schedule, and signed off on all the final design drawings. • Bechtel failed to heed warnings of problems in the design drawings, even from its own engineers, records and interviews reveal. Those deficiencies were usually fixed only after contractors discovered them, when it was far more expensive to make changes. In almost all cases, Bechtel solved the design problems by recommending that the state approve hundreds of millions of dollars in payments to contractors for additional work. • Bechtel failed to detect or call atten tion to serious flaws in construction work, leading to tens of millions of dollars in repair and delay costs. MGT279 . Management of Major Programs 20 15 University of Management and Technology 4 Bechtel's top Big Dig official, project manager C. Matthew Wiley, said the firm has done its job as well, if not better, than any other engineeri ng firm could. "I believe the Bechtel/Parsons Brinckerhoff team has performed admirably, and to a higher professional standard of care than required in our contract," he said. Bechtel officials disputed that any part of the $1.6 billion in construction c ost overruns to date resulted from mismanagement or deficiencies in its designs. They attributed about $1 billion in overruns to justifiable expenses that cropped up as they confronted engineering challenges and community concerns. The remaining $550 mill ion in overruns, they said, was the cost of shortening the project's schedule from late 2007 to mid -2005. By cutting time off the project, Bechtel's so -called fast -track initiative created a net savings of about $1 billion, they said. But if Bechtel -- an d the state officials who relied upon the company -- expected overruns due to a "fast -track" plan, they never told the public until after overruns busted the Big Dig's budget. In fact, no documentation of such a plan exists in the Big Dig's voluminous fil es, the Globe found, calling into question the assertion that "fast -tracking" was an actual initiative and not an after -the -fact justification for overruns. What the Globe did find was that Bechtel had no financial incentive to minimize errors, and that i ts officials routinely advised the state to pay overruns to smooth over problems that were often of Bechtel's own making. Bechtel was "like the fox guarding the chicken coop," said C. William Ibbs, a construction management professor at the University of California at Berkeley and a frequent consultant to both the Big Dig and Bechtel. "We would like to think they are honest people and act with the highest integrity," Ibbs said. "But they are profit driven." Error by design: A case study On July 15, 1997, state officials gathered to award a contract to build tunnels from Haymarket Square to the North Station, where the elevated Artery loomed four stories above street level. The terrain demanded t he most precise designs and complete research Bechtel could offer; otherwise, a minefield of obstructions would send delays rippling throughout the Artery work zone. MGT279 . Management of Major Programs 20 15 University of Management and Technology 5 First, the contractor had to build new steel legs to hold up the rusty old highway. Then, the contractor had to tunnel through crumbling bedrock, old sewer mains, and wooden piers from long -forgotten wharves. And they had to do it all without interrupting traffic. Bechtel estimated the job would cost about $260 million to complete, and Big Dig officials hoped they were right. After all, they had pledged repeatedly to the public that the project's cost would not rise above $10.8 billion. As it turned out, the low bi d came in at $218 million. Artery officials rejoiced. But their joy was short -lived. Today, the contract held by Jay M. Cashman Inc. has grown $128 million beyond the bid submitted that July day, an increase of nearly 60 percent. In many ways, it stands as an object lesson in Bechtel's problematic management. Cashman and the other contractors had virtually no hope of cobbling together accurate cost estimates, records show. The reason: Bechtel had poorly managed the contract's design, and it was nowhere n ear complete. As a result, the cost of the job was artificially low because Cashman never had a chance to submit bid prices for significant aspects of the work required. The plans the contractor bid on were confusing, hastily assembled, and sometimes con tradictory, records show. In the eight weeks before the bid opening, the engineering firm hired to finish Bechtel's preliminary designs for the Cashman job redrew them nine times, the Globe found. Bidders received the last packet of drawings just five days before the contract was awarded. But that was hardly the end of the design process. On 16 occasions between July 1997 and October 2002, Bechtel sent Cashman new design packets that included as many as 400 new drawings. The packets addressed 1,800 written requests for clarification from Cashman on discrepancies between the designs and the actual conditions workers confronted. One major problem appeared almost immediately after Cashman got the go -ahead to begin work. Crews found that Bechtel's complicated scheme to support the Artery while excavation work proceeded below was not viable, records show. The discovery set off an eight -month odyssey of reengineering, overtime, and extra shifts to correct the designs. Project records and interviews with official s involved with the contract indicate that Bechtel violated standard industry practice by neglecting to survey and measure the elevated roadway before construction began. Instead, Bechtel relied on aerial photos taken in 1987 and 1988 and 1950s -era archite ctural drawings. Measurements would have MGT279 . Management of Major Programs 20 15 University of Management and Technology 6 determined exactly where structural elements such as support footings rested and not where planners a half -century earlier had said they would be. Anthony Lancellotti, Bechtel's engineering manager, acknowledged th at the Artery was not properly surveyed, saying the company took a calculated risk that the combination of aerial photos and old "as -built" drawings would be sufficient. "Each contract is exposed to certain risks," Lancellotti said. That risk turned out to be quite costly. The failure to survey the Artery cost at least $16 million to correct and about $10 million more in overtime and extra shifts to avoid schedule delays, according to contract records and interviews with contractors. Other costly problem s wrought havoc, too. Cashman found a 9 -foot -wide sewer main and other obstructions not mentioned on the designs in places where the firm was to supposed to build tunnel walls, records show. When Cashman drilled down to bedrock, which determined the heigh t of the tunnel walls, it sat about five feet higher than designs showed, requiring new plans for more than a mile of tunnel walls. And Cashman encountered a subterranean pocket of tidal muck that caused repeated tunnel wall cave -ins, in part because Bech tel did not allow the company to try a different construction method for several months, records show. The cost: $1.2 million. A little more than a year after Cashman took on the Artery contract, the company's managers were fed up. In April 1999, Jamie Do yle, Cashman's project director, fired off a letter to Bechtel engineers calling the contract "unconstructible." He blamed the problem on unfinished designs. "With even a summary understanding of the history of the issues dealt with, it becomes clearly ev ident that the plans, at bid time, were at best, no more than 65 percent plans," Doyle wrote. "The prudent bidder has a legal as well as moral right to expect that he is bidding on 100 percent plans." Bechtel officials insist the designs in the Cashman co ntract were adequate, and that contractors routinely complain to make extra money. Still, Cashman was expected to finish in February 2001, but the job dragged on an extra 22 months. The delay cost Bechtel nothing. In fact, as with all the other overruns, it only added to the company's profit. While taxpayers covered the $128 million in overruns, Bechtel took home an additional $3.7 million for its extra time. MGT279 . Management of Major Programs 20 15 University of Management and Technology 7 Forget and forgive Even when an outside agency pointed out problems in Bechtel's preliminary designs, Bechtel failed to heed the warnings. On Dec. 22, 1994, MBTA officials met with Bechtel to discuss the firm's plans to raze a ramp near the FleetCent er. The T's representatives told Bechtel that it would cause the Green Line and the ramp to collapse, according to project records. But Bechtel did not change the plans. Three years later, after the project discovered that T officials were right all along , Bechtel ordered the contractors to install an elaborate support system. Cashman received an additional $250,000 for the new work, records show. Bechtel officials insist they were forced to make frequent changes to designs in that area because the MBTA's plans and schedule changed frequently. They said they did their best to minimize costs and conflicts. "They were a moving target," Bechtel's Lancellotti said of the MBTA. But Beck, the former resident engineer, recalls meeting resistance from his Bechte l bosses upon finding errors or problems. When he told a senior Bechtel manager about the Green Line problem, the manager told Beck, "No, we do not have errors on our drawings," according to Beck. Beck did not last much longer on the project. In 1998, a N orth End resident complained about construction noise, and Beck dismissed the complaint as exaggerated. Bechtel fired him, at the insistence of state officials. Beck acknowledged his role in the incident but says he was fired primarily for his criticisms of the Big Dig and its management. "It's too bad because we were doing great, important work," Beck said. "It's just that it could have been done so much better." State officials, the ultimate overseers of the project, took little notice of what Beck or any other critic said and simply paid for Bechtel's mistakes. "I've always taken the position that, if you make a mistake . . . the last thing i n the world you want to do is hit somebody over the head," said James J. Kerasiotes, the state's top official overseeing the Big Dig for the first decade of its construction. Bechtel has neglected to perform basic work called for in its contract, such as conducting field surveys and verifying the location of large utilities and buildings like the FleetCenter. MGT279 . Management of Major Programs 20 15 University of Management and Technology 8 Fast track to overruns The problems that dogged the Cashman contract, and the t ens of millions of dollars needed to fix them, were pervasive throughout the Big Dig, records show. On more than 3,200 occasions since 1991, the state paid extra money to contractors to compensate for design flaws, some big, some small. For example, the drawings for the Ted Williams Tunnel left a 4 -foot gap between tunnel sections, which was discovered by perplexed workers only after the massive tunnel tubes were eased into position, records show. The problem caused at least $307,000 in new work. Another set of designs, which detailed specifications for a trucking route through South Boston, instructed contractors to connect an electrical line to a certain manhole. "The manhole does not exist," project officials later acknowledged, as they authorized a $6 3,000 overrun payment. Drawings for the Big Dig's Operations Control Center called for 12 -foot -wide openings in the walls for ventilation. But "a 20 -foot opening was required," a project memorandum states. The state paid $1 1,000 to make the vent system fit. And another design called for laying 12 inches of gravel beneath a road section in East Boston. As it turned out, the required amount was actually 15 feet. The cost: about $560,000. All these small errors helped ad d up to something very large: $1.6 billion in unplanned construction costs. About $1.1 billion of that can be traced back to deficiencies in the designs, records show: $357 million because contractors found different conditions than appeared on the designs , and $737 million for labor and materials costs associated with incomplete designs. The rest, about $500 million, Bechtel filed under the category "Other." The innocuous - sounding category covered all manner of extra expenses, from extra street sweeping t o additional police details to new shipments of concrete -- most of it necessary because of design -related delays. When the Globe first questioned the completeness of Big Dig designs, Michael P. Lewis, the state's Big Dig project director, said the design s were "100 percent" finished when put out to competitive bidding. State law requires as much, to ensure that taxpayers get the lowest price possible for every aspect of work involved. A few weeks later, however, Bechtel's Lancellotti, as well as Lewis, p ulled back slightly, saying "virtually all" designs were "98 percent complete" when construction activity commenced. The designs left only minor items out at bid time, they said. MGT279 . Management of Major Programs 20 15 University of Management and Technology 9 Shortly thereafter, they acknowledged three major construction contracts wen t out to bid while designs were still "substantially incomplete." The designs were not ready in time to meet federal funding deadlines, they said. Those three contracts -- two on the Ted Williams Tunnel and one near South Station -- have increased by more than $250 million, records show. Finally, Bechtel officials said they had intended to begin most contracts with some design elements unfinished, to save time. About $550 million in overruns were necessary to fill in some of the gaps caused by such "fast t racking," they said. But there is no documentary evidence that such a plan existed, the Globe found, and if Bechtel truly intended to forge ahead while expecting to fill in the gaps with overruns, the firm did not publicly state that. Asked under the stat e's public record law to provide any reports, memos, or correspondence that detailed, or even mentioned, such a plan, Bechtel and state officials said there were none. They did provide a copy of the management plan Bechtel submitted to the state in Februa ry 1985. In it, the company proposed going ahead with relocation of utility lines even as engineers were still developing the conceptual design of the project. They called it "fast tracking." The plan was limited only to the earliest stages of the project, before anything was awarded to contractors. By the mid -'90s, however, Bechtel was moving ahead with far more than just utility lines before the final drawings were complete. One of Bechtel's top engineers protested the company's practice of putting out i ncomplete designs and then filling them in later, according to a legal complaint filed in federal court in Boston. Bruce Newman, who designed the Big Dig's massive electronic security system, says he was fired after complaining that Bechtel was e ngaging in "major violations of accepted practice" and breaking state laws. He sued Bechtel in federal court, and the two parties reached a confidential settlement in 2000. Bechtel, in court papers, said Newman was let go as part of wider layoffs. But the company did not dispute that Newman was told to sign off on drawings that he called "extremely simplistic." Project records confirm much of what Newman alleged -- that the design process had fallen further and further behind schedule as construction pres sed forward. State officials refused to delay construction to give engineers time to work out serious omissions in the designs, records show. As a result, almost all Big Dig construction contracts were awarded amid a last -minute flurry of design revisions , just as the Cashman contract was. Thousands of new drawings poured in just days before bids were due, records show, making inaccuracies in the bids a virtual certainty. MGT279 . Management of Major Programs 20 15 University of Management and Technology 10 Once construction began, Bechtel and the design firms it managed fired out hundreds of "design update" packages to contractors already in the field, often with new information that conflicted with other designs. Some of those updates arrived years into construction, records show. To Ibbs, the construction specialist, Bechtel's willingnes s to provide contractors with incomplete designs was irresponsible. And the more difficult the project, he said, the more crucial it is to make designs precise. "You have to take care up front," in the design process, Ibbs said. "If I am doing a one -of - a-kind project in Boston, that demands even more care." Construction criticism In December 1998, more than a year after Cashman won its contract, federal inspectors paid a routine visit to the job site, interviewing laborers, scribbling notes, obs erving workers pour concrete and install steel beams. They found some troubling lapses, according to a Federal Highway Administration inspection report. Topping the list of concerns: Workers had installed at least one massive steel beam that was made of a weaker grade of steel than project regulations allowed, the inspectors said. The inspectors rated the quality of work "unsatisfactory." State officials promised better oversight. Cashman disputed most of the charges. But the inspectors raised a crucial question: Why didn't Bechtel spot the problems first?

After all, Bechtel not only managed the entire design process, it was responsible for enforcing the project's construction guidelines. In fact, on several occasions, Bechtel failed to watch contractors closely or test their work until after it was too late, the Globe found. For example, when the federal inspectors returned to the Cashman work site two years after documenting lapses in Bechtel's oversight, they report ed that Bechtel's "inspection of the structural steel fabrication continues to be an issue." The problem, the federal inspectors said in their June 2000 report, was a projectwide "weakness" in Bechtel's oversight. Bechtel officials, in interviews with th e inspectors, blamed state -mandated caps on their staffing levels, which they said hampered their ability to observe all steel being installed on the project. But steel quality was not the only problem to elude their gaze. MGT279 . Management of Major Programs 20 15 University of Management and Technology 11 Bechtel failed to test the Ted Williams Tunnel ventilation system until a year after the roadway opened to the public in December 1995. As it turned out, mistakes by a contractor had left gaps in the ventilation system, leaving it unable to draw smoke out of the parts of the tunnel in t he event of a fire. Bechtel and project officials insisted that the system was adequate all along, and that at no time were drivers put in harm's way. It took Bechtel until September 2000, nearly four years after the problems were detected, to get the sy stem fixed. It cost taxpayers $5 million. A flood of trouble Bechtel's failure to order timely repairs at the contractor's expense was not limited to the Ted Williams Tunnel. The Globe found examples from the northern edge of the project, where roadside barriers were too short for federal safety guidelines, to the South End, where paving surfaces prematurely cracked because they were applied incorrectl y. But in the Fort Point Channel tunnel crossing, the consequences of Bechtel's mismanagement were disastrous. In November 1999 Drew King, a Bechtel field engineer, noted in a report that a steel dam built to keep water out of the tunnel area was not sea led. Steel sheets that were supposed to be tightly interlocked were instead overlapped. "No interlock between Phase 1 & 2 at corner," King entered into his Nov. 13, 1999, report. In all, King found seven gaps in the dam, ranging fr om 3 to 18 inches wide. But Bechtel never informed state managers of King's findings, two Artery officials said. Nor did Bechtel direct the contractor, Modern Continental Construction Co., to make the needed repairs, records show. Two years later, on Sep t. 22, 2001, a massive leak erupted beneath the tunnel tubes, gushing 70,000 gallons a minute into the site, submerging heavy machinery, and bringing key Big Dig contracts to a halt for several weeks. It was the largest construction setback on the Big Dig in recent years and the main reason for the delayed opening of the Mass. Pike connector to Logan Airport. In the Fort Point Channel tunnels, the site of a major flood in 2001, independent engineers warned Bechtel that the design was "unreasonable," but Bechtel pressed forward, anyway. Above, workers finish plugging the Fort Point Channel leak late in 2001. (Globe File Photo / John Bohn) MGT279 . Management of Major Programs 20 15 University of Management and Technology 12 Big Dig officials say the flood cost at least $41 million. The gaps may not have been the only cause of the leaks, the Globe found. A state inquiry into the flood concluded in 2002 that Bechtel had relied on an "unreasonable" design in the first place, a confidential report by the law firm Kirkpatrick & Lockhart says. Bechtel had heard as much before. In October 1997 an indepen dent group of engineers, who were invited to review the designs before construction began, called them "unrealistic," the report says. But Bechtel disagreed with that assessment and pressed forward. The company never informed Modern Continental that seriou s doubts had been raised about the design, the report says. Modern Continental officials declined to comment. When the firm conducting the state inquiry presented information critical of Bechtel's oversight, the state never went after Bechtel for money. I nstead, the state pursued Modern Continental for the cost of the leaks and relied on Bechtel as its legal ally. Bechtel officials declined to comment on the Fort Point Channel flood. Carolyn Kain, the Turnpike Authority's former deputy general counsel, to ld the agency's chairman that the state had a strong case for a refund from Bechtel. In a confidential e - mail, Kain wrote that the evidence "points directly" at Bechtel. If Bechtel refused to pay immediately, she said, "It is my recommendation that litigat ion be commenced forthwith." A few weeks later Matthew Amorello, the Turnpike Authority's chairman, fired Kain, who had clashed with the authority's leaders on a number of matters. A spokesman for Amorello said Kain's dismissal was not connected to her le gal conclusions on Bechtel. The Turnpike Authority has yet to take any legal action against Bechtel for the leaks.

Instead, the authority's board recently voted to give Bechtel a new contract. The state and Bechtel were joined together anew, and the state also offered Bechtel at least 7 percent profits on top of its wages. The state guaranteed those profits -- even on work required to correct Bechtel's mistakes. Thomas C. Palmer Jr. of the Globe staff contributed to this report. Raphael Lewis can be reac hed by e -mail at [email protected] ; Sean P. Murphy can be reached at [email protected] . This story ran on page A1 of the Boston Globe on 2/9/2003. © Copyright 2003 Globe Newspaper Company. MGT279 . Management of Major Programs 20 15 University of Management and Technology 13 Crews working in the section of the tunnel between Haymarket Square and North Station found hundreds discrepancies between the design drawings and the actual site conditions. (Globe Staff Photo / David L. Ryan) PART TWO State's cost -recovery efforts have been nearly a lost cause By Sean P. Murphy and Raphael Lewis Globe Staff, 2/10/2003 n Jan. 26, 2000, state officials convened a high -level meeting to consider whether the Big Dig's managers owed taxpaye rs a refund for mistakes. The project's budget had ballooned by $1.4 billion, despite public assertions to the contrary. And the managers, Bechtel/Parsons Brinckerhoff, a private, for -profit company, had contributed to the budget crisis through a series o f mistakes and misjudgments. Yet when it came time for the Cost Recovery Committee to decide, the officials agreed:

No refund. They had never demanded a refund from Bechtel. Created in 1994 to pinpoint design and management mistakes, the Cost Recovery Committee routinely overlooked or excused Bechtel's errors, according to a Globe examination of project records. MGT279 . Management of Major Programs 20 15 University of Management and Technology 14 What made the January meeting really unusual, however, was that it had taken place at all. Until then, the Cost Recovery Committee had not met or taken a single official action since Feb. 2, 1998 -- two years earlier -- records show. Cost recovery "was admittedly never the front -burner issue for me," said Michael P. Lewis, who served as the Cost Recovery Committee chairman as well as the project's state design director. "Perfection was not the standard." he added. Lewis's very involvement in the committee raises questions. As the state's Big Dig design director, Lewis had overseen Bechtel's management of the design phase. T o review Bechtel's work meant passing judgment on his own supervision of Bechtel. Lewis now serves as the state's Big Dig project director. Bechtel, too, had a conflict of interest in cost recovery, the Globe found. State procedures called for Bechtel "to identify issues of potential cost recovery," which meant the state relied on Bechtel to point out flaws in its own designs and management. Now, with the federal government unwilling to pay new cost increases in the Big Dig, state officials say they are p repared to pursue Bechtel for the company's mistakes. In 2001, they eliminated the Cost Recovery Committee. It had returned only a single payment of $35,707 in eight years -- and in that case, not from Bechtel but from a smaller design firm supervised by B echtel. The committee's responsibilities were turned over to state lawyers. But they failed to get back any money after 15 months on the job. So late last month, the Turnpike Authority, which oversees the Big Dig, made another change, handing cost recover y responsibilities to a retired family court judge. Turnpike officials cited a need for an independent review when they hired Edward M. Ginsburg. But the clock is ticking. The statute of limitations prohibits the state from pursuing cases that date back m ore than three or six years, depending on whether the case is for breach of contract or negligent performance. That means much of the work that went into the Big Dig, including the entire Ted Williams Tunnel, is now almost certainly off -limits to Ginsburg and his staff. What's more, Bechtel spurned a state request in January 2002 to waive the legal limitation on review of all of its work. The company said it would only waive the limit on individual cases. To recover anything at all, Ginsburg must overcome the state's poor record -keeping. No neat summary of design and management problems exists. And the state never kept a running account on Bechtel's performance, either. In 1997, the state decided to evaluate Bechtel every six months, but quickly dropped th at initiative, the Globe found. So Ginsburg must start from scratch -- plowing ahead with little experience in construction law and no knowledge of the Big Dig's long and complicated history. MGT279 . Management of Major Programs 20 15 University of Management and Technology 15 Peter Pendergast, the former Turnpike Authority general counse l who arrived at the agency in the wake of the 2000 cost overrun scandal, said he was startled by the project's flimsy records and the conflict of interest of those involved in cost recovery. "Cost recovery was a process that appeared as though it was des igned to fail," Pendergast said. "The numbers speak volumes about the effectiveness of the program," he said, noting the committee's record of only $35,707 in refunds. After a year of interviewing Big Dig officials and scrutinizing tens of thousands of p ages of documents, the Globe found major lapses in the state's oversight of the Big Dig: The state's contract with Bechtel was fundamentally flawed, effectively rewarding the engineering behemoth for delays and overruns. Because the state pays Bechtel on an hourly basis, rather than setting specific prices for various jobs, Bechtel will receive more than $2 billion by the time the project is completed, including about $180 million in profit. Before all of the delays and cost overruns, Bechtel was projected to receive a much more modest $350 million in gross receipts and roughly $38 million in profit. Faced with thousands of cost overruns potenti ally tied to its own work, Bechtel referred just three to the Cost Recovery Committee for further investigation, according to records.

On 12 other occasions, the state or the federal government initiated cost -recovery cases against Bechtel. Meanwhile, the state approved thousands of cost overruns to make up for mistakes or omissions related, either directly or indirectly, to Bechtel's design or management, records show. The Cost Recovery Committee exonerated Bechtel in all 15 cases it considered against the company. On at least two occasions state officials rejected evidence presented to them by an independent specialist that Bechtel mismanagement was at the heart of costly delays. In one instance, a state -hired engineer cited Bechtel for being "remiss" in its management of the design of the Fort Point Channel tunnels in 1992, which fell behind schedule for eight months. But state officials met with the engineer to discuss revising his report. In his final report, Bechtel's management was not faulted at all . In the second instance, the engineer found that Bechtel had failed to make sure that designs for a huge concrete wall were sound. The wall had to be torn down and rebuilt, at a cost of an extra $31 million. Bechtel paid none of it. 'Trust and confidenc e' When Bechtel/Parsons arrived in Boston, trumpeting almost 200 years of construction experience, it cut a unique agreement with the state. In December 1985 the state signed MGT279 . Management of Major Programs 20 15 University of Management and Technology 16 the first of 16 contracts granting the massive engineering firm the pow er to act as a virtual extension of government. Where standard government contracts keep companies such as Bechtel at a distance, even hiring specialists to oversee their work, state officials envisioned a different approach in Massachusetts. Th eirs would be a "very special owner/management consultant relationship of trust and confidence," according to the contractual terms agreed upon by the two sides. But while the state pledged its trust in Bechtel, the giant engineering firm left nothing to chance when it came to making a profit on the Big Dig. According to the company's contracts, the state pays Bechtel's 500 or so employees by the hour, on a "pay as you go" basis. That means that whenever a delay or mistake occurs, Bechtel gets paid for mo re work, rather than being forced to swallow some of the costs of its errors. Sometimes, the state pays Bechtel engineers at overtime rates to correct its own mistakes, according to project records. Roughly 10 percent of Bechtel's work in its current contr act has qualified as overtime. And the state pays some Bechtel employees far more generously than its own workers.

Bechtel's project manager, C. Matthew Wiley, makes $290,000 a year, records show, nearly twice the salary of the state's project director, L ewis, to whom Wiley reports. Another 84 Bechtel employees are paid more than $100,000 a year, records show. The state also guarantees Bechtel a minimum 7 percent profit, no matter if the project runs late or over budget. Until February 2001, the guarantee d profit reached 11 percent and even 20 percent for select construction work. The contracts built a firewall around Bechtel's profits. No matter how much money Bechtel's errors and poor decisions cost taxpayers, the contracts capped Bechtel's liability at $100 million. That's less than 5 percent of all the money Bechtel will charge the state for its work. And it's $80 million less than what Bechtel will make in profit. In an interview, Wiley said that Bechtel "performed admirably" to a higher professional standard "than required in our contract." Concerning issues with the quality of Bechtel's work, Wiley said: "We've said a number of times we are willing to comply with the contract. If there are issues, we are willing to discuss them." 'Their fingerprint s are all over the design' In defending Bechtel, Wiley said his company's role as project manager has been "frequently misunderstood" by critics and the public. That role, as it relates to cost overruns, is fairly straightforward. When problems arise on construction sites, it's the project manager's job to figure out what went wrong, get the problem solved, and assign blame. Bechtel has acted as the traffic cop at the busy MGT279 . Management of Major Programs 20 15 University of Management and Technology 17 intersection of more than 50 design contracts and nearly 110 construction contracts doing almost $15 billion in work. But because the state also hired Bechtel as the chief designer of the entire Central Artery/Tunnel project, it relied on Bechtel to pass judgment on its own design work. And design permeates every aspect of the Big Dig, from devising traffic plans to choosing the path of tunnels to picking the color of roadside barriers. All bids for construction are based on the designs, which provide step -by -step instructions for building each piece of the project. Thus, almost all cons truction claims for overruns are based on design problems, usually because contractors claim that their jobs required more work than was set out in the original plans. Bechtel did not do all of the project design itself. The company set the design process in motion with preliminary drawings that comprised about 30 percent of what was needed to build the project. Then, Bechtel turned to smaller firms for design completion, which answered to Bechtel. Bechtel reserved for itself all fundamental design decisio ns -- the what, where, and how of the project. Bechtel remained involved throughout the process by conducting regular reviews. When construction companies complained of design errors or omissions, Bechtel had a contractual responsibility in its other role as project manager to discover the underlying reason behind them -- a designer's mistake, perhaps, or a flawed work zone survey, according to project officials. It was Bechtel's job to figure out who was at fault for the problem. Indeed, the Cost Recover y Committee's procedures relied on Bechtel "to identify issues of potential cost recovery . . . involving a design professional's performance." During the eight years of the Cost Recovery Committee's operation, more than 10,000 overruns were approved, tot aling $1.4 billion, records show. Bechtel reviewed and recommended that the state pay all the overruns. And yet hundreds, perhaps thousands, of the overruns were rooted in missing or incorrect information in the designs process supervised by Bechtel. But Bechtel almost never assigned blame. Despite its contractual obligations, the company only three times flagged a cost overrun that prompted the Cost Recovery Committee to scrutinize Bechtel -- for a potential total of $48,911, records show. In those three cases, the committee voted against asking Bechtel to pay up. As for the work of the smaller design firms, Bechtel referred alleged mistakes by those companies to the committee only 17 times, records show. Of those cases, just one firm, Lin Associates, a greed to reimburse the state for work that had to be done over. According to project records, Lin's faulty design of a temporary road in South Boston cost the state an extra $339,198. Lin settled that claim in 1996 by MGT279 . Management of Major Programs 20 15 University of Management and Technology 18 refunding the state for about 10 percent of the actual cost of repaving the road -- $35,707, records show. That payment represents the total financial accomplishment of Bechtel and the Cost Recovery Committee in finding fault for engineering mistakes. Meanwhile, the design firms have rec eived just under $1 billion in fees, roughly double what Bechtel had estimated at the project's outset. Bechtel itself received $341 million for its design efforts.

The company declined to provide a breakdown of that sum to show what portion of its design receipts came as a result of cost overruns. In an interview, lawyer David J. Hatem, who represents both Bechtel and the other design firms on the Big Dig, acknowledged a conflict of interest in Bechtel's judgment of the design firms it oversees. "Their f ingerprints are all over the design, all over the review process," Hatem said of Bechtel. "It's rare that you find a design issue that" doesn't in some way trace back to Bechtel. Hatem said that, because the state's cost -recovery efforts to date have been so limited, he has rarely had to defend Bechtel or the other design firms. "Cost recovery has not consumed much of my time," he said. But Hatem said he is girding for a "flurry of activity" as project construction comes to an end and the state shifts its attention to conducting a "lookback." As for the state losing the legal opportunity to pursue cost recovery because of the statute of limitations, Hatem said the state faces a "tricky act" in trying to preserve its rights. "It's something" the state "has to keep its eye on." 'Bechtel is going to protect its interests' MGT279 . Management of Major Programs 20 15 University of Management and Technology 19 On at least one occasion, a design firm seemed to exploit Bechtel's dual role to avoid paying for alleged mistakes. When threatened with losing a portion of its fee for an alleged design error, the firm Jacobs Sverdrup sent a Jun e 21, 2000, letter to Bechtel saying that if Jacobs Sverdrup had to pay, it may be "necessary to seek recovery of the fee from other potential culpable parties, which is certainly not in the interest of the project." The other "potential culpable parties" would include, most prominently, Bechtel itself. The case against Jacobs Sverdrup is still pending. A spokeman for the firm declined comment. Kurt Dettman, the Big Dig's chief counsel, said the state must overcome Bechtel's conflict of interest if it ever hopes to recover any money. Since Bechtel employees staff most of the project jobs, "They are the ones who know most of the facts on the proj ect, the ones who made most of the decisions on the project," he said. To pursue a case against Bechtel means calling Bechtel employees to give testimony against Bechtel, he said. "When your prime witness is going to be the party you are going after, that 's an issue," he said. "Bechtel is going to protect its corporate interests," he added. "We are going to protect the taxpayer interests. The two aren't always the same." 'It was not designed to be punitive' In the early days of the project, the state an d Bechtel acted as though their interests were quite similar, if not exactly the same. There was no formal procedure to oversee Bechtel's performance at all until 1994 -- when the federal government insisted that the state create one. Under the threat of losing federal funding, project officials assembled the Cost Recovery Committee. The group -- made up of Lewis, state construction manager Joseph J. Allegro, and Federal Highway Administration project engineer Alex Almeida -- was to (Globe Staff Photo / David L. Ryan) 'Cost recovery "was admittedly never the front burner issue for me," said Michael P. Lewis (above), who server as committee chairman. "Perfection was not the standards."' MGT279 . Management of Major Programs 20 15 University of Management and Technology 20 meet at lease monthly t o scrutinize construction overruns and determine if the public deserved a refund for any errors or omissions, according to committee rules. Lewis now says the chief purpose of the committee was "to assure quality." Recovering costs, despite the committee' s name, was not its primary objective, he said. "It was not designed to be punitive," he said. 'They're all on the same team' While the state approved thousands of construction cost increases, the committee considered only 15 cases challenging the quali ty of Bechtel's management of the project, almost always as a "co -target" with one of the smaller design firms Bechtel supervised; in 69 cases, smaller design firms alone were targeted. In the 15 cases involving Bechtel, the committee exonerated the firm each time. Due to its conflicting roles, Bechtel had provided much of the documentary evidence the committee relied upon to make its decisions, records show. From 1994 to the spring of 1997, the group met regularly at the project's South Station headquart ers, keeping a record of its actions and cases. But records show that by Feb. 2, 1998, after roughly three years and some 45 meetings, the committee had stopped convening. The period during which the committee failed to meet coincid ed with some of the project's sharpest cost growth -- $1.4 billion in construction overruns, project records show. None received more than the most routine scrutiny by the state. Lewis, who headed the Cost Recovery Committee, insisted that the group cont inued to meet after Feb. 2, 1998, but that no records of the committee's actions were kept. He asserted that meetings took place irregularly, informally, with no minutes taken -- and with no actions taken. But the records of Cost Rec overy Committee meetings kept by Almeida, the Federal Highway Administration engineer, call Lewis's account into question. Those records show regular committee activity between the group's founding in 1994 and Feb. 2, 1998, including hand -written notes on the margins of meeting agendas describing the committee's actions on specific cases. After Feb. 2, 1998, no cost -recovery documentation exists until the Jan. 26, 2000, meeting. Almeida said in an interview that he recalled informal c ost -recovery discussions at the conclusion of meetings on other project business. He acknowledged, however, that MGT279 . Management of Major Programs 20 15 University of Management and Technology 21 recovering costs was secondary to the construction work, and as a result, finding fault for cost overruns suffered from a lack of attention. "I would say we probably were not the most timely that I think we could have been," Almeida said. Pendergast, the Turnpike Authority's former general counsel, attributed the lack of cost recovery to the sense of loyalty that state project officials had for Bechtel after working so closely for so many years. "The state, Bechtel -- you couldn't differentiate," Pendergast said. "It was like a regional high school. The kids are from different towns, but they're all on the same team. It's very human, but . . . the citizens of the commonwealth were not well represented." 'They didn't want to spend the money' MGT279 . Management of Major Programs 20 15 University of Management and Technology 22 In four of the 15 cases against Bechtel, state officials hired an independent specialist to help judge the company's performance. Each time, they turned to a consultant named Philip Helmes, an experienced engineer. But although officials turned to Helmes f or guidance, they did not always follow his advice. In 1994 the Cost Recovery Committee assigned Helmes to determine fault for a $31 million overrun linked to the redesigning of a 600 -foot wall built as part of the Ted Williams Tunnel near Logan Airport. During construction, the wall shifted 8 inches, signaling the potential for a deadly collapse. It had to be torn down and rebuilt. Helmes concluded that the design firm that planned the wall had relied upon incorrect calculations, a nd that Bechtel had neglected to show the design drawings to its geotechnical specialists. Had the specialists seen the designs, Helmes found, the wall could have been properly built -- and $31 million could have been saved. But the state did not pursue B echtel. Instead, officials chose to file a claim with the state's insurance carrier, thus avoiding a confrontation with Bechtel. But Bechtel failed to properly manage the insurance claim failed, according to the finding of an arbitrator.

Bechtel, in charg e of filing insurance claims on behalf of the state, missed the deadline, the arbitrator ruled.

The late filing meant the insurance company's adjusters lost the opportunity to investigate the construction site, the insurance company contended. The insuran ce company paid the state nothing. Bechtel officials declined to comment on the missed deadline or the wall movement.

There are no plans to reopen the case. The state also assigned Helmes in 1994 to determine the cause of a delay in the design of the tunnel running under the Fort Point Channel. Bechtel and the firm completing its preliminary drawings, Maguire/Harris, had clashed over the viability of Bechtel's design.

And according to Helmes's report, Bechtel, as design man ager, failed to take steps to resolve the dispute. Finally, when state officials heard of the dispute, they brokered a deal By appointing Bechtel as both the project manager and chief designer, the state allowed Bechtel to judge its own work, an inherent conflict of interest. Above, work continues on and beneath the Central Artery, which has partitioned the city from its waterfront for decades. (Globe Staff Photo / David L. Ryan) MGT279 . Management of Major Programs 20 15 University of Management and Technology 23 to end the impasse. But eight months of delay had occurred -- on a project in which each day of delay can cost hundreds of thousands of dollars. In his first report, Helmes concluded that Bechtel had not managed the situation well, "which impaired project productivity." He cited Bechtel, along with Maguire, as "remiss." But project officials did not accept Helmes's conclusions, Helme s said. After a first draft of his findings circulated among project executives, Lewis met with Helmes. Although current and former project officials were tight -lipped about what transpired, Lewis acknowledged "working with" Helmes to help the consultant " look at the facts." What is clear is that eventually Helmes concluded "that all parties" -- Bechtel and Maguire/Harris -- "performed with a reasonable standard of care" on "this very complicated and unique design challenge." Where the report once said tha t design "was not well managed by Bechtel," it now read: "Solutions could have been developed earlier." Lewis said of Helmes: "I'm quite confident he didn't do anything he wasn't comfortable with." Helmes agreed that he did not feel pressured to change t he report. He said he dropped his conclusion that Bechtel was remiss because the state would not agree to his request for more time to investigate further and nail down his preliminary finding. "It was stopped," he said, of his review of Bechtel. "Apparen tly, they didn't want to spend the money." 'Records get lost, memories fade' If the state has any hope of recovering money from Bechtel and the other design firms, it will need accurate, detailed records. But the records compiled by the state are in disa rray, the Globe found. Project officials cannot even agree on the status of 13 of the 84 cost -recovery cases the Cost Recovery Committee initiated. State records show the cases as open. Federal records show them as closed, with the usual results: No findi ngs against either Bechtel or the design firms it managed. It's not a small matter whether the cases are open or closed: Those 13 cases alone are worth at least $14.5 million in potential refunds to the state, records show. The cost -recovery files consti tute a hodgepodge of memos, tracking forms, letters to and from Bechtel, and financial assessments. Fewer than half a dozen files contain anything resembling a coherent assessment of the facts behind a cost overrun. MGT279 . Management of Major Programs 20 15 University of Management and Technology 24 Many are handwritten, some almost illeg ibly. The files contain official documents incompletely filled out, others undated. Several files were actually lost and "re -created" by officials in the late 1990s, officials said. Lewis and Dettman said they can't find any documents created by the Cost Recovery Committee to keep track of its cases from 1994 to 1997, and in 2000. Yet copies of those records are on file with the Federal Highway Administration in Cambridge. Dettman, the top lawyer at the Big Dig, helped draft the cost -recovery pro cedures in 1994. He now says he was dismayed by the committee's poor record. But while Dettman says he complained to the last three Big Dig project directors of the committee's flagging efforts, he acknowledged his internal warnings changed nothing. "We a re playing the cards we have been dealt," Dettman said of state efforts to get refunds. "We are going to take it as far as we can. Records get lost, memories fade, people die. There will be defenses available to the other side." The state's heavy reliance on Bechtel to recover money was made clear on Jan. 14, 2000, when Joseph Allegro, the state construction manager, made an eleventh -hour stab at recouping costs, three weeks before officials disclosed the $1.4 billion cost overrun. In a brief e -mail, Allegro ordered eight engineers to scour their files for evidence of past mistakes by Bechtel or the smaller design firms under Bechtel's supervision. Three of the eight engineers addressed by Allegro worked for the state, but the other five belonged to Bechtel. "Don't spend a tremendous amount of time," Allegro wrote. "This is not to second -guess anyone's judgment, but to simply ensure nothing fell through the cracks." Allegro got the results he might have expected: No new cases agains t Bechtel. 'We're playing a massive game of catch -up' Now, as the Big Dig drags to completion, with more than two years to go, the state is showing greater interest in recovering money from Bechtel, even though the statute of limitations may cut off refu nds on overruns dating back to the project's first 11 years. Still, Lewis suggested the state could get around the statute in some cases by claiming it should not apply to contracts that are still open, no matter how long ago the individual overrun occurr ed. "I do feel very strongly we need to do an assessment of Bechtel," Lewis said. "I think we can still assess the whole record." But Dettman, who led cost -recovery efforts until Ginsburg's appointment, said the difficulty of overcoming the statute of lim itations makes review of some Bechtel errors pointless. MGT279 . Management of Major Programs 20 15 University of Management and Technology 25 "We're not going to spend a whole bunch of time" on old cases, he said. The Cost Recovery Committee, which met only three times in 2000, had its last official meeting on Feb. 26, 2001, records show. Some 250 cost -recovery cases have opened since November 2000, the vast majority of them involving potential claims against the smaller design firms that completed Bechtel's drawings. Still, Dettman insists that Bechtel is a target in every one of them. "We're going to treat Bechtel like any other contractor," he said recently, before cost - recovery responsibilities moved to Ginsburg. Bechtel is hanging tough. The company refused to sign an agreement to stop the statute of limitatio ns clock from ticking down on its work, except in three cases. Instead, it has forced the state to quickly compile detailed cases involving allegations of Bechtel errors or mismanagement. "We're playing a massive game of catch -up," Dettman said. To help the state, Dettman hired consultants to sift through what remains of the evidence.

Their primary job, he said, was to find cost overruns that have yet to expire. After that, they were supposed to figure out if the state has a strong enough case to warrant pursuing Bechtel. The consultants hired by Dettman have cost taxpayers more than $6 million so far -- without returning a penny. But no review undertaken at this late date will turn back the clock on the thousands of overruns from the project's e arliest years, Dettman acknowledged. Asked how many cases against Bechtel may have been missed through the years, Dettman replied: "I don't know. I don't think anyone knows." Globe reporter Thomas C. Palmer Jr. contributed to this story. Sean P. Murphy c an be reached by e -mail at [email protected] . Raphael Lewis can be reached at [email protected] . This story ran on page A1 of the Boston Globe on 2/10/200 3. © Copyright 2003 Globe Newspaper Company. MGT279 . Management of Major Programs 20 15 University of Management and Technology 26 PART THREE Lobbying translates into clout By Raphael Lewis and Sean P. Murphy, Globe Staff, 2/11/2003 hen inspectors found cancer -causing asbestos dust swirling around a Big Dig work site in 1996, the project's private -sector manager faced a possible trial and millions of d ollars in fines for flouting clean air laws. But the company, Bechtel/Parsons Brinckerhoff, turned to the people who had always helped it. They were Bechtel's supervisors, the same state transportation officials assigned to make sure the company was doing its job. The transportation officials played down Bechtel's failure to track asbestos dumping, and even joined the company in complaining that state environmental inspectors were too aggressive in their oversight, project records show. Finally, in 1998, th e transportation officials hired a lawyer to broker an unusual settlement quietly. Bechtel emerged with its reputation intact and paid just $131,000. But taxpayers paid more than $3 million to clean up the asbestos mess. The asbestos case is but one exampl e of how Bechtel has not only engineered the Big Dig, but has built a fortress around company profits with the help of its state overseers, often at the public's expense. With a cadre of lobbyists and lawyers on Beacon Hill and Capitol Hill, Bechtel h as cemented bonds with policymakers to protect its profits, renew its contracts, and deflect questions about the quality of its management. A yearlong Globe investigation that scrutinized a decade's worth of campaign contributions, contracts, and other rec ords found that Bechtel, politicians, and state administrators closed ranks on many occasions to block scrutiny of the Big Dig by outsiders and internal critics alike. Among the Globe's findings:  Confidential project documents from 1995 reveal that Bech tel willingly hid costs to present a more favorable view of the Big Dig's financial picture at the behest of top state officials seeking a more publicly acceptable bottom line. MGT279 . Management of Major Programs 20 15 University of Management and Technology 27  Bechtel, its subcontractors, and its lobbyists have pumped at least $ 225,000 into the campaign coffers of the Massachusetts congressional delegation and the state's top elected officeholders since Big Dig construction began. Some of those elected officials intervened at crucial junctures in ways that helped the co mpany avoid scrutiny.  Bechtel has retained several well -connected lawyers and lobbyists who, at the same time, worked for some of the state's top elected officials, including two former state governors and various legislative leaders. Doing so gave Bec htel access to lawmakers and powerbrokers. Bechtel's Big Dig project manager, C. Matthew Wiley, and Morris Levy, Parsons Brinckerhoff's senior vice president, defended their companies' use of lobbyists and political contributions. It made the company "vis ible" in a complicated political environment far from the companies' headquarters, Levy said. "We are not political, but we are not apolitical, either," said Levy, who has donated at least $10,000 to Massachusetts politicians in recent years. "It 's to be visible, but not to influence." But Larry Noble, executive director of the Center for Responsive Politics in Washington, a nonpartisan think tank, said Bechtel gives campaign contributions and hires lobbyists because it helps cement ties with lawmakers, quickly solves problems, and protects the company's profit base. "Companies like Bechtel do this because it works," Noble said. "They are bottom -line oriented. It pays to do this, to hire people, to contribute to campaigns. It makes good business sense." State and Bechtel: Strange bedfellows When state officials chose the team of Bechtel and Parsons Brinckerhoff to manage the Big Dig in December 1985, they cited the companies' innovative proposal, and their reputations as industry titans. S eparately, the companies had built some of the world's signature projects. Bechtel had helped build the Hoover Dam, the Alaska oil pipeline, the English Channel Tunnel, and an entire city in Saudi Arabia. Parsons had a role in dozens of major American transportation projects, including the building of New York City's subway system. For the Big Dig, they formed a joint company with Bechtel in charge. Frederick P. Salvucci, then the state transportation secretary, said he selected Bechtel primarily for its demonstrated ability to use a difficult tunneling method. But Bechtel had more than technical expertise. It had stellar Republican credentials, a handy tool when trying to persuade President Ronald Reagan, a California R epublican, to give liberal Massachusetts the nation's most expensive public works project. Not only was San Francisco -based Bechtel a major GOP campaign contributor, but Reagan had plucked two of his Cabinet members, George P. Shultz and Caspar MGT279 . Management of Major Programs 20 15 University of Management and Technology 28 W einberger, from Bechtel's boardroom. That connection continues today: Shultz's daughter, Margaret, works as Bechtel's Big Dig human resources manager. Salvucci dismissed the notion that political considerations colored his decision to award Bechtel the Art ery management job, which was worth hundreds of millions, at a minimum, to the company he selected. Still, Salvucci said he hoped the company would be an asset in appealing to the Reagan administration. "We stuck to the procurement procedures, but I certai nly hoped that the fact that they had Republican ties would help us," Salvucci said. "It would have been a tragedy if we picked them for that reason, but it wasn't." Ultimately, in 1987, Reagan vetoed start -up funding for the Artery project. But the Massachusetts congressional delegation gathered the votes to override Reagan's veto. Thereafter, Bechtel turned its political attention to Massachusetts. Weld and Bechtel: A meeting of minds MGT279 . Management of Major Programs 20 15 University of Management and Technology 29 Just as construction began on the Big Dig in 1991, William F. Weld, a Republican with strong business support, became Massachusetts ' governor, ushering in an era of GOP control of the corner office that continues today. The Weld victory also began an era of considerable access for Bechtel. Weld did not return calls seeking comment for this series. But campaign reports show how much Be chtel meant to the former governor -- especially when he ran for reelection in 1994 and unsuccessfully for US Senate against Democrat John F. Kerry two years later. Between 1991 and 1996, Weld reaped nearly $25,000 from Bechtel and Parsons executives, incl uding several of the maximum $1,000 annual donations from George Shultz, who worked as a Bechtel consultant after his stint in the Reagan White House; Bechtel patriarch Stephen D. Bechtel Jr. and his wife, Elizabeth; Bechtel chief operating officer Adrian Zaccaria; and Levy of Parsons Brinckerhoff. The support came as Weld and Bechtel each expended considerable energy drumming up support for California Governor Pete Wilson's failed bid for the 1996 GOP presidential nomination. That included more than $1.4 m illion raised by Weld's chief fund -raiser, Peter Berlandi. For the first half of the 1990s, Berlandi worked simultaneously as Weld's fund -raiser and as Bechtel's "liaison" with the administration. But his dual role became a major campaign issue in 1994, as Weld's opponents accused Berlandi of shaking down Big Dig contractors for campaign contributions, a claim that was never substantiated. Still, Berlandi severed his Bechtel contract after Weld's re - election, which freed him up to work for Wilson. Berlandi, in an interview, said that he never discussed Bechtel with Weld, and that his work for the Wilson campaign had nothing to do with California -based Bechtel Corp. Memo hints at hiding costs (Globe Staff Photo / David L. Ryan) A confidential 1995 memo written by William H.

Edwards (above, right), Bechtel's budget manager, said the state's top three Big Dig officials directed him to "sanitize" a report to hide the Big Dig's true cost. Michael P. Lewis (ab ove, left), now the state's Big Dig project director, was one of the officials Edwards named, along with then -project director Peter M. Zuk and transportation secretary James J. Kerasiotes. The photo was taken in December 2002. MGT279 . Management of Major Programs 20 15 University of Management and Technology 30 But he acknowledged speaking to Weld when, in September 1994, just two month s before that year's gubernatorial election, a rift developed between James J. Kerasiotes, the state's top Big Dig official, and Theodore G. "Tad" Weigle Jr., Bechtel's project manager. At a business -leader breakfast, Kerasiotes promised the project would cost no more than $7.7 billion. But when a Globe reporter asked Weigle, he refused to guarantee that number. Kerasiotes was outraged with the contradiction, and now acknowledges that he demanded that Bechtel remove Weigle from the Big Dig. Weld backed Kera siotes in seeking to remove Weigle, Kerasiotes said. Berlandi helped arrange a meeting between Weld and Gary Bechtel, then Bechtel's president. Bechtel and another senior executive flew to Boston on Dec. 1, 1994, and held tw o meetings with Weld at the Boston Harbor Hotel, one in the morning, and one in the afternoon. Only Weld and Gary Bechtel took part in the morning meeting, Kerasiotes said.

Kerasiotes described the get -together as a "courtesy" to Gary Bechtel. Weld told Kerasiotes afterward that he and Bechtel did not spend much time talking about the Big Dig in their private meeting, Kerasiotes said. Instead, they discussed the Wilson campaign. A Wilson victory would have certainly helped both Weld and Bechtel. For Weld, who made no secret of his ambitions for higher office, a Wilson presidency could have meant a high -level appointment, the customary reward for such ardent and early campaign support. And for Bechtel, a Wilson win would have put in the White House another president with a close relationship with the company. At the afternoon meeting, Weld and Bechtel discussed the Weigle matter and the project's ballooning cost, according to two people who were familiar with the discussions. A month after the meeting, Bechtel removed Weigle, and Weld flew to San Francisco to raise more than $300,000 for Wilson's campaign. Later, when Weld ran for the Senate, his San Francisco connections paid handsome dividends, as contributions from the Bay Area topped $400,000. Among those were Bechtel's top executives and their spouses. Alan Altshuler, a professor of urban policy at Harvard University and author of a forthcoming book on the Big Dig, said the episode demonstrates how Bechtel manages its political relationships in order to bank support for possible future disputes. "This was a case where [Bechtel executives] were obviously being very responsive to the politics in Massachu setts," Altshuler said, adding that he views Bechtel's use of political contributions and lobbyists to be antithetical to the public interest. MGT279 . Management of Major Programs 20 15 University of Management and Technology 31 "You would have wanted a legislative oversight committee or someone to say, 'Hey, that's wrong. These guys should not be active in Massachusetts politics. They are powerful enough,' " he said. "Sanitized" numbers Three months after Weld's meeting with Gary Bechtel, on March 15, 1995, a top Bechtel manager on the Big Dig wrote a memorandum marked "Confidential" and placed it in a file cabinet in the project's downtown headquarters. Bechtel's Big Dig budget manager, William H.

Edwards, authored the memo, which told an explosive story. It detailed a discussion Edwards had with top state officials on the Big Dig. The officials were scrambling to trim the Big Dig's reported costs only hours before a key meeting with federal regulators. Their goal, Edwards wrote, was to reduce the bottom line by $400 million. Michael P. Lewis, then the deputy project di rector, "directed" Edwards to, in Lewis's words, "sanitize" the package he was preparing for the federal officials, some of whom were coming in from Washington for the meeting, the memo said. Edwards noted that Lewis was following the orders of h is bosses, including then - project director Peter M. Zuk and transportation secretary Kerasiotes. "Assemble a 'sanitized' review package that shows summary information only," Edwards wrote, quoting the orders he says he received from Lewis. "Most notable: D o not include the cost exclusion information." Edwards went on to list in detail $332 million in Big Dig costs that he subtracted from the accounting breakdown that was going to be presented to the regulators. The reductions brought the project's overall p rice to $8.069 billion, close to the just -under -$8 billion figure Kerasiotes had said he wanted. The memo, addressed to "File," was copied to three top Bechtel officials, and included minutes of the meeting with federal officials that followed. The minutes show that (Globe Staff Photo / David L. Ryan) Massachusetts Turnpike Authority chairman Matthew Amorello (standing) and Bechtel's Big Dig project manager, C.

Matthew Wiley, at the Big Dig's headquarters in November. Wiley says Bechtel's use of lobbysist keeps the company "visible." MGT279 . Management of Major Programs 20 15 University of Management and Technology 32 Kerasiotes, with Edwards seated beside him, told the Federal Highway Administration that the project's cost was $8.069 billion. Left out from federal review were $135 million in known costs attributable to inflation; $82 million in costs associa ted with a legally binding agreement with the Metropolitan District Commission for park -building; and $115 million subtracted from estimates of construction cost increases. According to the memo, on the following day, Zuk and Lewis returned to Edwards, req uesting further cuts "to hit a cost value of $7.997" billion. Kerasiotes said the efforts to cut costs were legitimate, regardless of how Bechtel portrayed them in internal memos. He said Bechtel was chafing because the cost cuts would mean less money for the company. Zuk, who left the project in December 1998, said the term sanitize "may have been a poor choice of words" on the part of Lewis and himself, who meant it innocuously, as in to clean up, and not to conceal. "The direction was to simplify the pre sentation made to [the federal government] because it was too complicated," said Zuk. He defended the subtractions as justified and proper, even if some of them would be added back into the project's cost in later years. Edwards, who remains Bechtel's Big Dig budget chief, said he was advised by his attorney not to comment. Lewis is now the Big Dig's project director, the highest state official on the Big Dig. He would not comment on the memo, but said through a spokeswoman that federal officials became awa re of the Big Dig's accounting procedures within a few days of the meeting. Yet federal officials disputed that notion on April 1, 2000, when a congressionally appointed task force assembled to probe the rising cost of the Big Dig con cluded that project management "deliberately failed to inform" federal authorities "of the magnitude of the potential overrun." The task force demanded written testimony from Bechtel officials explaining their role in "the decision to withhold material fro m" the Federal Highway Administration. Bechtel's response revealed just how close the company and the state had grown. The company said in a certified letter that its responsibility was to give all pertinent financial information to the state. But the comp any had no such obligation to the federal government: It served only the state. MGT279 . Management of Major Programs 20 15 University of Management and Technology 33 "All decisions on how to use this information, and whether or how to share it with [the Federal Highway Administration], rested exclusively with the MTA," wrote Bechtel's Wiley , referring to the Massachusetts Turnpike Authority. Payback time MGT279 . Management of Major Programs 20 15 University of Management and Technology 34 Just as Bechtel backed up the state in its financial presentations to the federal government, top state leaders assisted Bechtel when the company came under fire for its mistakes. In the summer of 2001, the Big Dig's estimated cost soared by $300 million in just three weeks, prompting an angry outcry from the Turnpike Authority's board.

Bechtel's errors, they said, were at the root of the budget problem, and the company owed the sta te a refund. If the company didn't oblige, they said, the authority could terminate its contract. The Turnpike Authority's lawyers set up two sessions to negotiate a possible refund with Bechtel on Oct. 9, 2001, one to take place at 9 a.m., the other at 3 p.m. The lawyers were demanding tens of millions of dollars, enough to put off toll hikes needed to pay down Big Dig debts. CORRECTION: Because of a reporting error, the third part of the Globe's seri es on problems with the Big Dig incorrectly stated that representatives of the project's managers, Bechtel/ Parsons Brinckerhoff, failed to appear at an Oct. 9, 2001, negotiating session with the Turnpike Authority regarding reimburs ement for management mistakes. Company representatives did show up for a short bargaining session. Top Bechtel executives flew in with a surprising offer:

The company wo uld give the state up to $50 million, according to two people who attended the first negotiating session. Turnpike Authority lawyers said they left the morning meeting hopeful that at last Bechtel would pay for some of its mistakes. What they did not know was that Bechtel's newly hired lobbyist, Andrew Paven, had been busy working his connections with the state's political elite. Paven arranged for Bechtel executives to go directly from the first negotiating session into a meeting with Acting Governor Jane M. Swift's chief of staff and the secretary of administration and finance. The afternoon bargaining session with the Turnpike lawyers never took place. After sitting down with Swift's two top aides, Bechtel rescinded its offer to Bechtel's contributions to candidates for national office J. Joseph Moakley $5,500 Plus $22,500 from lobbists James P. McGovern $4,800 Plus $9,450 from lobbists Edward M. Kennedy $8,000 Plus $21,584 from lobbists William F. Weld $11,250 John F. Kerry $4,800 Plus $17,500 from lobbists Richard E. Neal $5,575 from lobbists William D. Delahunt $10,918 from lobbists To candidates for governor William F. Weld $13,500 Paul Cellucci $19,970 Jane M. Swift $750 MGT279 . Management of Major Programs 20 15 University of Management and Technology 35 refund to the state up to $50 million. The two aides declined comment. A week later, when two of three Turnpike Authority board members voted to delay the toll hike, hoping they could instead rely on Bechtel's making a refund, Swift fired the duo, calling them "fiscally irresponsib le." Swift, who declined comment for this article, told reporters at the time that the firings had nothing to do Bechtel. Indeed, the two board members, Christy Mihos and Jordan Levy, were challenging Swift on a range of policy matters. She believed they w ere irresponsible; they believed she was usurping power from the Turnpike Authority. Levy and Mihos, however, were convinced their firing had to do with their tough stance against Bechtel, and they sued to get their jobs back. Bechtel brought in more firep ower - - the company's new damage control expert, James P. "Jock" Covey. A veteran diplomat and Middle East expert, Covey put the word out that Bechtel wanted help. By April 2002, Covey had found the hired hands he sought. For lobbying, he selected Mas sachusetts Bay Associates, a firm founded by former State Representative R. Emmet Hayes, husband of then -state Treasurer Shannon P. O'Brien, who was running for governor. Covey also recruited Cheryl Cronin, a politically connected lawyer and strategist who se clients include Swift and House Speaker Thomas M. Finneran. Cronin, who in December threw Swift's send -off party at her Back Bay home, counseled the acting governor during her earlier appearances before the State Ethics Commission over her use of a ides to perform personal tasks. While negotiating against the Turnpike Authority on behalf of Bechtel, Cronin was also representing the acting governor in a lawsuit brought by Christy Mihos, the fired Turnpike Authority board member. Cronin declined to com ment. Bechtel's new team of lobbyists, strategists, and consultants pumped more than $14,000 into campaign funds of members of the state legislature in the months that followed their hiring, the Globe found. Among leading politicians, Swift, who had alread y dropped out of the governor's race, got nothing. O'Brien and running mate Chris Gabrieli reaped more than $4,000. Finneran did not get any contributions from Bechtel's backers in that period, records show, but has received more than $2,000 from Bechtel's lobbyists and subcontractors since 1995. "There's times when you think you're getting a raw deal," said Bechtel's Wiley, explaining the contributions. "You need to maintain those working relationships. It may not change the deal but it gives you a chance to make your case." In May 2002, the state Supreme Judicial Court ruled that Swift was not justified in firing the two Turnpike Authority board members. But the Bechtel critics returned to find their power was about to be diluted. Two months after the court ruling, the Legislature, in a late -night vote, expanded the three -member MGT279 . Management of Major Programs 20 15 University of Management and Technology 36 Turnpike Authority board to five, giving Swift two new appointees and making Bechtel's critics a minority. Former State Representative Joseph Sullivan, as cochairman of the Legislature's Transportation Committee, wrote the bill. Sullivan said he moved to expand the Turnpike Authority board to provide greater community input into the Big Dig, and not to help Bechtel. A few months earlier, Sullivan had considered a run for lieutenant governor. Among the advisers he sought out was Paven, Bechtel's top lobbyist in Boston. Sullivan sought Paven's counsel on at least three occasions to discuss a potential run, even relying on Paven to recruit pollsters and other strate gists, interviews with those involved revealed. "Andy [Paven] introduced me to him," said pollster Irwin "Tubby" Harrison, who met with Sullivan and Paven at the Federalist restaurant in the shadow of the State House in December 2001 -- a month when Paven donated the maximum $200 to Sullivan's campaign. "Other than talking about the possibility of his running for lieutenant governor, I don't recall much," Harrison said. Paven would not comment on any meetings with Sullivan about a race for lieutenant governor. But he did acknowledge speaking to Sullivan from "time to time" to argue Bechtel's side of the negotiations with the Turnpike Authority. Sullivan, a Braintree Democrat who left the Legislature last month to head the state Lottery Commission, said he had known Paven, a Quincy native, for many years. He consulted Paven as a friend, Sullivan said. State Senator Robert A. Havern, cochairman of the Transportation Committee with Sullivan, said it was clear that expanding the board would help Bec htel. Havern said he and his Senate colleagues had actually wanted to keep the board intact and to "let the negotiations play out" between Bechtel and the Turnpike Authority. But Havern said he changed his mind out of deference to Sullivan. Swift filled th e two newly created seats on the Turnpike Authority board with developer and longtime GOP contributor Richard K. Anderson and veteran lawyer John "Jack" Moscardelli. Moscardelli is a close friend and jogging partner of Peter Berlandi, Bechtel's chief State House strategist for half a decade. Moscardelli said he has no ties with Bechtel. Since Swift appointed the new board members, negotiations aimed at getting money back from Bechtel have stalled. MGT279 . Management of Major Programs 20 15 University of Management and Technology 37 At the talks, Cronin argues on behalf of Bechtel and the Turnpike relies on Leonard L.

Lewin, the former chief counsel to the Cellucci and Swift administrations. Lewin, who would not comment, is no stranger to Cronin. In fact, he worked side -by -side with C ronin during his stint as chief counsel in Swift's appearances before the state's Ethics Commission. Lewin and Cronin have not had much negotiating to do, however. Turnpike lawyers say Bechtel officials rarely agree to meet for talks, and when they do, the y send Cronin and lower -level employees with no decision -making power. If negotiations ultimately fail, as officials on both sides have predicted, the state would face a fork in the road: Sue Bechtel, or drop the pursuit of reimbursement entirely. The one means foreiting a decade's worth of overruns. The other route would mean a long, costly legal battle. Either way, Bechtel's Boston lobbyists would be well positioned to push the company's cause with policymakers. After all, the lobbying firm, O'Ne ill and Associates, signed a contract in December with the Executive Office of Transportation and Construction, the same state agency that pays Bechtel for its work on the Big Dig. Globe correspondent Joseph Spurr contributed to this report. Raphael Lewis can be reached by e -mail at [email protected] . Sean P. Murphy can be reached at smurph @globe.com . This story ran on page A1 of the Boston Globe on 2/11/2003. © Copyright 2003 Globe Newspaper Company.