Black hole

On one hand, it is forward-looking and progressive, much like the city's renowned academic community. Relying on cutting-edge technology and construction techniques, it will replace 7.5 miles of antiquated highway with a sleek subterranean monument to advances in transportation infrastructure. When the project is completed, a new road will emerge from Boston's depths to span the Charles River on a futuristic suspension bridge-at 10 lanes the widest of its kind in the world-supported from 270-foot towers by gleaming pearl-colored cables.

On the other hand, the Big Dig is a testament to the old-school traditions of a city where politics and revenge are said to be the two favorite pastimes. Born of the disproportionate congressional influence of its patron, the late Democratic House Speaker Thomas P. "Tip" O'Neill, the project, which traces its roots back to the early 1970s, has embroiled five different gubernatorial administrations and tried the patience of commuters, under whose tires the Big Dig has been moving forward fitfully for almost a decade. In the process, its date of completion has slipped six years, from 1998 to 2004, and its price tag has grown from $2.6 billion to more than $14 billion.

The most dramatic moment came on Feb. 1, 2000, when state officials announced the Big Dig would cost $1.4 billion more than expected, just hours after they filed a finance report with the Federal Highway Administration (FHWA) that failed to hint at any overrun. That announcement ended up bringing down both the iron-fisted state transportation czar-who had linked his own larger-than-life persona with a promise to finish the project "on time, on budget"-and the federal administrator responsible for overseeing the project. It also set off a furious search for blame in the state legislature, Congress and the federal transportation community, each of which expressed puzzled outrage at the enormity of the apparent cover-up and the amount of the overrun, which eventually ballooned to $3.2 billion.

As of early this year, it appeared that a new Big Dig management team had succeeded in putting the effort back on track. But the Big Dig raises troubling issues for similar multibillion-dollar undertakings that involve cooperation among numerous federal, state and local agencies. One thing is certain: Before a single car has passed through the newly paved underbelly of Boston, the project has left a psychic scar on the world of transportation management as real as the gaping hole it has ripped through the center of this thriving metropolis.

Digging Deeper

Almost from the time the Central Artery/Tunnel project was approved by Congress in 1987, federal officials have been concerned about potential cost overruns. That's because Uncle Sam is footing a major portion of the bill for the project. When the Big Dig began, the federal government was slated to cover 90 percent of its costs. Now, the federal contribution is capped at $8.5 billion, or roughly 60 percent of the current projected cost.

It took several years for the project's state and local managers to admit that costs were out of control. The Massachusetts state auditor, the Transportation Department's inspector general and the General Accounting Office all warned at various points that a 1995 estimate of $10.8 billion as the final cost was too low. Nevertheless, the Massachusetts Turnpike Authority, given authority for the Big Dig under a 1997 reorganization of the state's transportation jurisdictions, repeatedly refused to budge from the figure.

So in October 1999, when the turnpike authority submitted a new plan for the project-three months late-to the Federal Highway Administration's regional office in Boston, there was little surprise that the overall cost figure remained the same. Turnpike Chairman James Kerasiotes and Big Dig Director Patrick Moynihan, blasted a draft report by the Transportation inspector general claiming expenses would run to $11.8 billion and lobbied hard for approval of the plan. They said the IG's report was the product of a "backward-looking management technique that shows a fundamental lack of understanding of how a multimillion-dollar megaproject needs to be managed." Yet Kerasiotes and Moynihan did acknowledge that cost overruns totaling $500 million were possible.

On Feb. 1, 2000, FHWA agreed to conditionally approve the finance plan, but ordered a more detailed assessment, due in April, of the potential cost overruns. What happened next would inexorably alter the eight-decade highway-aid partnership between the federal government and the states. It also would cement for many observers the perception of the Big Dig as the epitome of government waste and mismanagement.

Just hours after the FHWA's Massachusetts Division administrator, Peter Markle, had signed off on the finance plan, and with no warning to federal transportation officials, Kerasiotes announced at a press conference that the Big Dig was actually $1.4 billion over budget. The increase included $915 million in unforeseen construction costs and $482 million in areas such as design, right-of-way acquisition and project management expenses. Jaws dropped as the level to which federal managers had been kept in the dark became clear.

"We felt deep disappointment that things could get so far out of hand and still be represented as [being] in good shape," says Mortimer Downey, who was then Deputy Secretary of Transportation. "To push so hard for approval of a finance plan one day and make the announcement that same day that they were that far over budget was very disappointing."

By Feb. 10, 2000, Transportation's inspector general had identified an additional $942 million in additional increases and scathingly criticized Markle's office, which had also objected to the October 1999 IG's draft, for "an alarming lapse in oversight." The report recommended that FHWA perform an independent assessment of all future data provided by the turnpike authority before approving any further Big Dig operations, a startling break from the established state-federal partnership.

On Feb. 17, 2000, then-Transportation Secretary Rodney Slater announced the formation of a task force to examine what led to the problems with the Big Dig and to make recommendations for revamping the FHWA oversight system to prevent future fiscal debacles. Those who had long opposed the project for both its price tag and autocratic management seized on the announcement.

Rep. Frank Wolf, R-Va., chairman of the House Appropriations Committee panel that oversees highway funding, called for an immediate freeze on funding and a criminal investigation of the Big Dig's managers. "Most projects in the country don't cost $1.4 billion, and this was just the increase," said Wolf. "It's almost become comical up in Boston." Wolf added that the crisis had reduced Transportation's standing to the point where "I don't think there's any confidence left" in the department's ability to independently assess the project.

Senate Commerce, Science and Transportation Committee Chairman John McCain, R-Ariz., openly discussed the possibility that the final cost of the project could be as much as $20 billion and pushed for a cap on federal money for the project. Within weeks the Securities and Exchange Commission would join the FBI and Justice Department in probing the failure of Big Dig officials to reveal the overruns earlier to the turnpike authority's bond investors and federal officials.

Back in Massachusetts, Gov. Paul Cellucci expressed full support for Kerasiotes, not only rejecting calls to jettison the turnpike chairman, but claiming that "his stewardship has been superb." In the headstrong manner that had allowed him to acquire virtual free reign over all things transportation in the state, Kerasiotes vigorously defended his Big Dig efforts. "What keeps getting missed in all this is that this project has been managed, I think, better than any other project of its kind anywhere, ever," he said. "On many levels, the state should be applauded on its approach to this issue."

Big Man at the Big Dig

Kerasiotes' detractors, and even some of his supporters, would tell you that he has an ego to match the scale of the largest urban transportation project in U.S. history. For better or worse, Kerasiotes, who was named Massachusetts' Secretary of Transportation and Construction by former Gov. William F. Weld in late 1992, had become the face of the Big Dig. In the formative years of the project, his gruff, can-do persona was seen as the perfect fit for such a complex effort. He insisted that the cost be capped at $10.8 billion in 1995, instituting an official policy of "managing to the budget" that required any increases to be offset by decreases elsewhere in the operation.

He was so unwavering in his assessment of the price tag that Weld, now a venture capitalist in New York City, was willing to take his word over that of a top official from Bechtel/Parsons Brinckerhoff Quade & Douglas, the consulting firm that has earned nearly $2 billion as chief consultants on the project. The official warned in a 1994 meeting that the cost of the project was rapidly spiraling, but Kerasiotes dismissed such concerns as a ploy to get more money out of the state. Weld went along with his transportation secretary and won a landslide reelection later that year, despite claims by his opponent that the Big Dig was in deep financial straits.

Cellucci, who became acting governor in 1997, when Weld was nominated to be U.S. ambassador to Mexico, shared Weld's confidence in Kerasiotes and admiration for the vigor with which he took on the difficult job of containing the Big Dig's costs. In 1998, campaigning for his own term as governor, he responded to all questions about the project by pointedly repeating the "on time, on budget" theme. When State Treasurer Joe Malone, Cellucci's Republican primary opponent, challenged the claim, Kerasiotes questioned Malone's facts and suggested he might consider checking into the local mental hospital.

Kerasiotes stood firm in the wake of the Feb. 1 revelation that the Big Dig was way over budget. Claiming that the announcement showed a commendable willingness to confront fiscal unpleasantries, he disavowed the possibility that he might be removed. Kerasiotes noted the work he had done to "beat the living daylights" out of the project's cost, saying the overruns would have been three times higher without such diligence. In a stunning denial of what had been his trademark position, Kerasiotes even disavowed the $10.8 billion figure. "I haven't been out there selling the number $10.8 [billion]," he said, despite having publicly staked his reputation on delivering the project at that price. "Instinctively, anybody who's ever looked at anything like this knows it's going to cost more."

Political observers and Big Dig adversaries shook their heads at Cellucci's unwillingness to remove the chairman, even after a Wall Street Journal article appeared in which Kerasiotes asserted that the governor feared him, and called Cellucci's top political adviser a "moron" and his former chief of staff a "reptile."

The Federal Highway Administration's Markle, a career federal manager, met a far different fate than Kerasiotes. He was quickly reassigned in March 2000 after congressional critics, led by Wolf, demanded accountability for the overruns. Many career FHWA engineers quietly objected to the move, claiming political appointees suspected increases were coming but scapegoated the longtime administrator when their suspicions were confirmed.

After two months of fallout, it appeared that the controversial Kerasiotes had weathered the storm and would remain at the helm of the Big Dig to its completion, even with powerful federal forces such as Slater and Sen. Edward M. Kennedy, D-Mass., implying that the project's future depended on a clean slate at the turnpike authority.

Taken to Task

All that changed in April 2000, when Cellucci received the report of a special FHWA task force on the Big Dig. The report was blisteringly critical of Kerasiotes, Markle and the existing state-federal partnership for highway aid. The task force accused the turnpike authority of "intentionally withholding knowledge" of the overruns and jeopardizing the "integrity and future success of the federal/state partnership by repeatedly and deliberately failing to disclose the full scope of the . . . project's finances."

Claiming Markle was too closely allied with turnpike authority representatives to perform his role as independent overseer, the report called the crisis "one of the most flagrant breaches of the integrity of the federal/state partnership in the history of the nearly 85-year old federal-aid highway program" and called for Kerasiotes' removal. Within an hour of receiving the report, Cellucci had telephoned Kerasiotes and requested he resign. Kerasiotes holed up in the office of the turnpike authority's legal counsel, making calls and consulting aides to gauge whether he should fight the request. In the end he gave in, but his publicly aired letter of resignation indicated little remorse or acceptance of responsibility and seemed to cast himself as a good-government hero done in by his dedication to the cause.

"Clearly, people feel I did mislead them," Kerasiotes wrote. "I must accept that verdict and move on. But I tell you, in my heart, I feel I pushed back on the budget's bottom line for only one reason: It was how I did business, to push back, to demand. Maybe I pushed too hard, maybe I demanded too much."

With the personnel struggle behind them, federal transportation officials dug into the structural flaws that the task force's report had laid bare. How did FHWA officials on the ground in Boston allow more than $3 billion in overruns to go virtually undetected, particularly given that the 1998 Transportation Equity Act for the 21st Century had explicitly required review of the project's annual finance plan?

The report asserted that Markle's office lacked the sophistication or inclination to challenge the turnpike authority's figures. As a result, FHWA issued detailed guidelines for reviewing the Big Dig's finances and created a Headquarters Major Projects Team to oversee megaprojects. According to the task force, Markle's unwillingness to explore accusations of trouble at the Big Dig stemmed from mistaken trust in the Kerasiotes team, that eventually cost him his job in Boston.

"The division administrator's trust in his [Big Dig] project counterpart was misplaced, as demonstrated by the state's actions before and after the finance plan was accepted conditionally," the task force reported. Had the division administrator taken other steps within his delegated authority . . . the FHWA might have avoided the resulting embarrassment and loss of public confidence in its stewardship."

Oversight Overload

Among its many "firsts" and "mosts," the Big Dig may be among the most audited projects in the nation's history. On the state level alone, the project has been the subject of 15 reports by the state auditor and similar numbers of investigations by the Massachusetts inspector general and attorney general. The web of scrutiny is so complex that the state legislature, in which at least four committees spend weeks each year deliberating Big Dig-related issues, created an Oversight Coordination Committee for the sole purpose of overseeing the state's overseers of the project.

Federal efforts are similarly extensive, with Transportation's inspector general the most ardent watchdog, followed by the department itself, FHWA, the Environmental Protection Agency, the General Accounting Office and several congressional committees. Before the project's completion, its managers will need to get specific approval for more than 1,000 "permit actions" from city, regional, state and federal agencies. Still, Kerasiotes and the turnpike authority managed to conceal a 30 percent cost increase for months last year and had not been compelled to provide a budget revision since 1995, although sources as varied as the state inspector general and GAO pegged the likely cost at $12 billion as early as 1997.

When Kerasiotes was finally forced out, he was replaced by Andrew Natsios, who had been Cellucci's secretary of administration and finance and a longtime personal friend. After nearly a year on the job, Natsios had a theory on how the Big Dig slipped through the elaborate net of oversight. "At the state level, the project had a highly centralized system, a very feudal system," he says. "There were no connections between departments, so no one could put all the figures and all the information together. Within the federal government, maybe the FHWA thought the IG was taking care of it and the IG thought the FHWA was. There's a point at which the complexity of the oversight becomes self-defeating." Natsios adds that while Kerasiotes' deception was unacceptable, there are also dangers in spending too much time looking over the shoulders of project managers. "There's always a balance you have to achieve between getting the project done and accountability. And if you get too far on either side, you either have serious accountability problems, which is what we had, or you can't get the project finished."

Downey concurs that the Big Dig has highlighted a deficiency in the state-federal relationship, but hopes the February 2000 meltdown will be a lesson for future megaproject coordinators. "This has been a learning experience for us," he says. "It's about getting our people to recognize that there's an appropriate federal role, much like the role of a banker. You don't just hand money over. You trust but verify. Through evolution, it got too far away from accountability-too close to a partnership."

Few in political and managerial circles doubt that Natsios is the right kind of manager to follow Kerasiotes. A squeaky-clean policy wonk and one-time professor of public administration, he headed disaster relief for President George H.W. Bush's U.S. Agency for International Development, helping to coordinate the nation's humanitarian effort in Somalia and befriending the President's son. He also knew the internecine world of Massachusetts politics, having been a state representative and chairman of the Republican State Committee in the 1980s. Ironically, he had been one of the most vocal critics of the bill that launched the Big Dig, speaking vehemently against it as it came to the floor of the state legislature. "It was inconceivable to me that I would one day be running this project," says Natsios, who made no secret of the fact that he was taking the job out of obligation to his close friend Cellucci and not because he relished the challenge. But early this year, both Cellucci and Natsios announced they would leave their posts to join the Bush administration. Cellucci was nominated to be U.S. ambassador to Canada, while Natsios was named to head the Agency for International Development.

Natsios tore into what he considered to be a bloated turnpike authority with plans to eliminate 10 percent of its staff positions within five years. He also pledged to open the Big Dig to unprecedented public scrutiny and embraced the $14.05 billion price tag as a legitimate cost to complete the project. His candor has been well-received.

"I think he's bringing the kind of hands-on, results-oriented business approach to move the project forward," says Slater. "He's been open." Downey agrees. "Chairman Natsios has done a terrific job. He immediately recognized the importance of good management. He came in and took the appropriate steps."

The most important of those steps was the signing of an 11-point agreement with FHWA that caps the federal contribution at the $8.549 billion committed before the latest overruns. It also codifies the transparency Kerasiotes resisted, making all documents on Big Dig costs open to federal officials, and bolsters monthly reporting requirements to prevent any future February surprises. The arrangement signals a dramatic expansion of federal highway-aid oversight.

Natsios also took on the project's partners at Bechtel/Parsons. Several reports have criticized the closeness of the turnpike authority and the firm. In negotiating the firm's final contract, Natsios demanded that it reduce its fee from the previous 11.5 percent of cost to 7 percent, with the possibility of earning back one point for every $50 million the project comes in below $14.05 billion.

Natsios was not alone in taking issue with the status quo in light of the Big Dig's troubles. Transportation launched a task force to recommend revamping the oversight and monitoring of major projects.

The task force's recommendations focus on identifying and training megaproject oversight managers who will report on each project costing more than $1 billion to a new Transportation Department Executive Council. They would require state and local governments to document their ability to take on large infrastructure projects and complete them as planned and create mechanisms to allow Transportation and FHWA to step in when a project is at risk of overruns or delays.

Moving On

Downey says that the Big Dig's lessons will shape federal transportation policy for some time. "I wish we could have learned them a little cheaper," he says, "but this new level of scrutiny is definitely a legacy of the Big Dig. On any project there may be problems, but there should never be surprises."

If Natsios' designated successor, retired Army Corps of Engineers Brig. Gen. Richard Capka, can bring the project in at $14 billion, the Big Dig's new managers may yet demonstrate they can keep a lid on project costs. But wherever the next Big Dig is dug-and there are several megaprojects in the appropriation pipeline-it will undeniably be shaped by Boston's decades-long underground drama.