Conclusion

Measured against B/PB's $13.78 billion 1994 estimate, the Big Dig, ironically, has been constructed on time and on budget. B/PB has been paid almost $3 million in incentive fees for maintaining the Project on-time and on-budget based on the old "official" estimate of $10.8 billion. This Office concludes that the most recent Chairman and top Big Dig officials have long been aware of the facts presented in this report. This Office derived the findings for this report from Big Dig records. Documents indicate that B/PB has consistently made detailed disclosures to successive Big Dig managers. Based on these records and the disclosure of these facts in 1994 to the former Governor and his chief advisors, this Office concludes that the current Governor and his appointees have not disclosed the real Big Dig budget story to federal investigators, Congress, the State Treasurer, and the State Legislature.

There is also a continuing failure to disclose by federal authorities about the role played by local FHWA officials in establishing the 1995 Big Dig budget. Internal FHWA records reveal that local FHWA officials assisted in downsizing the 1995 Big Dig budget through the application of billions of dollars worth of accounting assumptions. Based on the evidence, this Office concurs with the response of the former Project Director to a November 1999 DOTIG report:

Needless to say, it is surprising that you now choose to critique the Project's finance plan methodology and the cost/funding assumptions after all the other cognizant federal agencies have acknowledged and relied on them for several years.

This Office's review of internal FHWA records indicated that local FHWA officials acknowledged and relied on the cost assumptions and finance plan methodology that semantically defined the Big Dig total cost estimate.

In 1995, FHWA conducted an in-depth, multi-disciplinary review of the publicly reported Big Dig budget. Through this review, FHWA gave a seal of approval to hundreds of exclusions, deductions, and accounting assumptions used in the 1995 budget estimate. However, the March 2000 FHWA Task Force report failed to address the role that local FHWA officials played in affirming the downsized 1995 budget. When the Task Force conducted its investigation, it concluded that: "Prior to the enactment of TEA-21 in 1998, the role of FHWA did not include a review of the aggregate construction cost of projects." A local FHWA official informed this Office that he told the Task Force about the 1995 FHWA Big Dig budget review entitled Process Review on Cost Estimate Rev# 6. The Process Review concluded, after a two-month multi-part review, that:

FHWA review of this documentation determined that the total dollars as presented in the Rev 6 estimate for Design and Construction contracts is an accurate and reasonable depiction of total cost.

Since the FHWA Review Team made this conclusion, this Office was surprised to find in local FHWA documents that state officials had disclosed more than 218 exclusions and assumptions with a multi-billion dollar impact during this 1995 review. Based on this discovery, this Office concludes that local FHWA officials assisted state officials in the public relations downsizing of the Big Dig cost estimate and that FHWA was cognizant of the cost/funding assumptions that were built into the 1995 Big Dig cost estimate.

This Office believes that local FHWA officials bear great responsibility for the fiscal policies that led to the overrun. For this reason, this Office believes that the FHWA funding cap is an injustice that serves to divert blame away from local FHWA officials. As a result, FHWA should eliminate the Big Dig funding cap. When the State Legislature adopted Chapter 3 of the Acts of 1997 establishing a state funding mechanism for potential Big Dig budget overruns it did so in the absence of critical information. The Legislature was not told that the cost estimates in the federally accepted Finance Plans included assumptions that excluded billions of dollars. Therefore, the Legislature agreed to fund a potential Big Dig shortfall based upon incomplete and inherently erroneous information.

Endnotes

  1. The difference between the current $14.1 billion estimate and the former estimate of $10.8 billion is $3.3 billion. The Project has reported an overrun of $2.5 billion. The difference between the $3.3 billion and $2.5 billion is explained by the reversal of the almost $900 million insurance offset credit that had been used to maintain the $10.8 billion estimate since 1997.  
  2. According to press reports from May 16, 2000, a spokesperson for the State Treasurer said: " I can confirm that the SEC has advised our office that they are now conducting a formal investigation, and we will continue to assist them as they move forward."   
  3. Before 1994, the 1992 official cost estimate was the last that had purportedly resulted from a bottom-to-top review of costs. 
  4. To-go costs refer to future costs that the Project is not yet contractually committed to pay for.  
  5. Black's Law Dictionary 1000 (5th Edition 1979): Pro-tanto refers to a partial payment or claim. Commonly used in eminent domain cases to describe a partial payment made for the taking by the government.  
  6. The same month that FHWA released its budget review, the U.S. General Accounting Office (GAO) released its first report concerning the Big Dig budget. Both reports commented on some of the budget assumptions. However, neither report identified the extent to which the budget assumptions had masked the true cost of the Big Dig.  
  7. Officials stated that they planned to pay for some Project costs by selling state land and building rights on or above state property (also known as air rights.)  
  8. GAO stated that it performed this audit in accordance with generally accepted government auditing standards (GAGAS). 
  9. The Director of Transportation Issues for GAO, in 1994, who managed the early GAO audits of the Big Dig, later became the Inspector General for the U.S. Department of Transportation (DOTIG). As the Inspector General, he has been one of the most vocal critics of the state's purported failure to disclose true costs. During his tenure at both agencies, the GAO had released five reports and the DOTIG 13 reports concerning the Big Dig.  
  10. Tool bag refers to the mechanisms used by Project officials to lower the official cost estimate.