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Lessons Learned

 

Federal Task Force on the Boston Central Artery/Tunnel Project (Summary of 34 Recommendations)

Brief Description of Recommendations

  1. Division Office make annual, independent cost-to-complete estimate
  2. Division Office document process used for developing independent cost estimate of CA/T Project
  3. FHWA establish monitoring practices and procedures for mega-projects
  4. Division Office expand finance plan review role for Financial Specialist and P&R Program manager
  5. FHWA determine MHD and MTA to be "high risk" grantees with respect to CA/T Project
  6. Secretary request Governor to reevaluate MTA's day-to-day role in CA/T Project
  7. CA/T Project management to meet all external information or access requests
  8. FHWA require B/PB submit certified letter describing their role in management of CA/T Project, etc.
  9. FHWA make recommendation on debarment and suspension action under 49 CFR Part 29
  10. Division Office continue to ensure oversight and coordination efforts to contain costs, delay, and conflicts
  11. Secretary consult with Governor about changing State CA/T Project leadership
  12. Division Office document system for aggregation of cost and schedule related data routinely accumulated
  13. FHWA Headquarters withdraw MA Division's acceptance of Finance Plans (FP) for CA/T Project
  14. Division get written assurance from MA for receipt of all State independent audit data on CA/T Project
  15. CA/T Project perform annual bottom-up review for the remaining years of the CA/T Project
  16. CA/T Project PPM data to show potential project cost exposures identified in the Up/Down chart
  17. CA/T Project PMM to discuss projected delays and MTA mitigation measures being considered
  18. FHWA require FP based on more realistic cost and revenue scenarios and include contingency plans
  19. FHWA require FP include all costs; regardless of source of funding; include costs borne by State
  20. FHWA require annual budget and cash flow needs; include GANs repayments and AC conversion
  21. FHWA require FP include a short discussion of past costs and impact on the initial assumptions
  22. MHD to reach agreement with local officials on the terms of a balanced statewide program
  23. FHWA not allow post-construction credits and revenues as offset reductions to CA/T Project costs
  24. CA/T Project obtain independent certification of accuracy of Finance Plan information
  25. ** FHWA have independent contractor review CA/T Project OCIP and help develop National OCIP policy
  26. CA/T Project adjust bid discount rate to properly reflect recent trends; add described adjustments
  27. FHWA require Finance Plan include revenue sources likely available to the CA/T Project
  28. State's option for general funds to serve as surety until other funding sources are identified
  29. CA/T Project potential forecast for all project elements should be best estimate of the completion cost
  30. CA/T Project potential forecast should be maintained on a current basis for all project elements
  31. CA/T Project potential forecast total should not be constrained by MTA policy
  32. CA/T Project furnish FHWA, quarterly, overall CA/T Project Budget vs. Potential Forecast Variance Report
  33. CA/T Project and FHWA continue with cost containment initiatives to achieve greatest savings
  34. FHWA and MHD enter into agreement to formalize task force recommendations

unbold = recommendation fully completed
bold = initial recommendation completed, continuous (on-going) activity in-place
** = initial recommendation not yet completed

Summary Of Actions Taken To Address The Recommendations Of The Federal Task Force On The Boston Central Artery/Tunnel Project

Review Of Project Oversight And Costs

#1 Recommendation: The Division Office should make an annual, independent cost-to-complete estimate to be used as a primary source of information for decision making regarding the adequacy and acceptability of all future Finance Plans submitted for the Central Artery/Tunnel (CA/T) Project.

Responsible Office: Massachusetts Division

Responsible Individual: CA/T Oversight Manager

Initiative(s)

  • Division Office will do cost to complete estimate for annual Finance Plan Submissions.

#2 Recommendation: The process used by the Division Office staff in developing the independent cost estimate should be fully documented and refined with assistance from other elements of the FHWA. It should be published as a best practice for use in other mega-projects.

Responsible Office: Massachusetts Division

Responsible Individual: CA/T Oversight Manager

Initiative(s)

  • MA Div. has documented cost to complete estimate process used.

#3 Recommendation: The FHWA must establish monitoring practices and procedures for mega-projects.

Responsible Office: Infrastructure

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • Developed Major Project Team Concept Paper containing monitoring practices and procedures.
  • Developed and issued Financial Plan Guidance.

#4 Recommendation: The Division Office should expand the roles of current staff to include a review of the Finance Plan by the Financial Specialist and the Division Planning & Research Program manager. This will provide a technical analysis of the information presented in the Finance Plan, and provide additional assurances on the adequacy of data contained in the document.

Responsible Office: Massachusetts Division

Responsible Individual: Division Administrator

Initiative(s)

  • MA Div. will use Finance and Planning staffs to assist in review of the annual Finance Plan Updates.

#5 Recommendation: The Task Force recommends that the FHWA determine that the Massachusetts Highway Department (MHD) and the Massachusetts Turnpike Authority (MTA) are "high risk" grantees as defined in 49 CFR Section 18.12, with respect to the CA/T Project. As high risk grantees these agencies must provide more detailed financial and project management reports, as recommended in other sections of this report.

Responsible Office: Infrastructure and Administration

Responsible Individual: Director, Office of Program Administration and Federal-aid Financial Management Division Chief

Initiative(s)

  • Letter issued to MHD and MTA designating them as high risk grantees and outlining the terms of the designation.

#6 Recommendation: The U.S. Secretary of Transportation should request that the Governor of Massachusetts reevaluate the appropriateness of the MTA's continuing role in day-to-day management and control over the CA/T Project.

Responsible Office: Office of the Secretary

Responsible Individual: Secretary of Transportation

Initiative(s)

  • Secretary met and discussed MTA role on CA/T project management with the Governor. Following this meeting, the Governor changed the MTA manager; MTA continues to manage the day-to-day activities of the CA/T Project.

#7 Recommendation: It is recommended that the CA/T Project management take whatever steps are necessary to ensure that all requests from external monitoring agencies for information, records, or access to records are met in a responsive and timely fashion. A failure to provide this access should be considered a violation of 49 CFR Section 18.42(e), which will impact the reimbursement and further availability of Federal funds.

Responsible Office: Massachusetts Division

Responsible Individual: CA/T Oversight Manager

Initiative(s)

  • Met with new Chairman and received assurance that availability of information to oversight agencies and the public was one of his goals.
  • Met with senior CA/T staff and received assurance that audit coordination and follow-up actions were being reassigned from the legal department to the Acting Assistance Project Director with a new position being established as the focal point for these activities.
  • Include this item in the Partnership Agreement as Item #3, executed by Executive Office of Transportation and Construction (EOTC), MHD, MTA, and FHWA.

#8 Recommendation: Require B/PB to submit a certified letter to the Federal Highway Administrator describing their role in the management of the CA/T Project, including whether either company raised questions regarding escalating cost exposure and/or the decision to withhold material information from the FHWA.

Responsible Office: Infrastructure

Responsible Individual: Program Manager, Infrastructure

Initiative(s)

  • Letter sent to MTA with copy to B/PB; requested that B/BP submit the certified letter.
  • B/PB certified letter received and accepted.

#9 Recommendation: It is recommended that the FHWA Office of Chief Counsel review the circumstances surrounding the failure to disclose information concerning the potential $1.4 billion overrun and recommend whether to take action under 49 CFR Part 29 - Government-wide Debarment and Suspension (Nonprocurement) And Government-wide Requirements For Drug-free Workplace (Grants).

Responsible Office: Chief Counsel

Responsible Individual: Program Legal Services Division

Initiative(s)

  • The Office of Chief Counsel recommended that "With the changes in management of the CA/T Project and implementation of the other task force recommendations, we do not think there is a need to seek debarment of those who failed to notify FHWA of significant cost increases." No action should be taken to pursue Government-wide Debarment and/or Suspension since the purpose of suspension and debarment is to protect the public interest and not to punish.

#10 Recommendation: The Division Office should continue its oversight and coordination efforts to ensure that the containment of costs and the mitigation of delays and conflicts remain a primary CA/T Project focus.

Responsible Office: Massachusetts Division

Responsible Individual: Division Administrator

Initiative(s)

  • The Project's cost containment efforts are ongoing with FHWA participating.
  • The Project's Cost Recovery program is ongoing with FHWA participating.
  • The FHWA MA Division Office's Contract Change procedure requires a cost evaluation of all proposed changes and this is ongoing.

#11 Recommendation: The U.S. Secretary of Transportation should consult with the Governor of Massachusetts to seek changes in the State CA/T Project leadership consistent with the recently announced change in Federal CA/T Project leadership.

Responsible Office: Office of the Secretary

Responsible Individual: Secretary of Transportation

Initiative(s)

  • Secretary met with the Governor, who made the management change.

#12 Recommendation: Documentation of the Massachusetts Division Office's process for independent validation of CA/T Project costs should include a system for aggregation of cost and schedule related data routinely accumulated in the normal course of project oversight by FHWA CA/T staff.

Responsible Office: Massachusetts Division

Responsible Individual: CA/T Oversight Manager

Initiative(s)

  • FHWA Area Engineers will, on a quarterly basis, review and update project cost and schedule information. This information will be used by FHWA managers to verify Project Management Monthly (PMM) information presented by the CA/T Project.
  • PPM cost information reconciled with FHWA estimate.
  • Schedules for major milestones for the I-90 and I-93 openings discussed weekly between FHWA and CA/T.

#13 Recommendation: The delegation of authority to accept annual Finance Plans for the CA/T Project should be withdrawn to FHWA Headquarters.

Responsible Office: Infrastructure

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • Headquarters memo withdrawing delegation sent to MA Division Office.
  • State notified that delegation for acceptance of CA/T Finance Plan Updates had been withdrawn to FHWA Headquarters Office of Infrastructure.

#14 Recommendation: The FHWA Division Office should obtain written assurance from the State that all data with respect to the independent audits of the CA/T Project (e.g., O'Brien Kreitzberg and Deloitte Touche) will be provided to the FHWA. The FHWA should independently and objectively review this and other external reviews of the Project (such as by the OIG, state auditors, etc.), and must not accept assurances provided by Project officials.

Responsible Office: Massachusetts Division

Responsible Individual: Division Administrator

Initiative(s)

  • Appendix B of the October 2000 Finance Plan Update contains the results of the independent evaluation of costs and schedules performed by the State's consultant, Deloitte Touche.
  • Meeting held with MTA staff to discuss how this would be accomplished and timing of reviews of draft Finance Plan Updates by planning groups and FHWA.
  • Included as Item #4 in the Project Partnership Agreement executed by EOTC, MHD, MTA, and FHWA.

#15 Recommendation: CA/T Project should perform an annual bottom-up review for the remaining years of the CA/T Project, beginning with the last quarter of 2000. The results of these efforts should be incorporated into the PMM.

Responsible Office: Massachusetts Division

Responsible Individual: Division Administrator

Initiative(s)

  • A revised format of the PMM was developed to include enhanced schedule and cost information, and is being used for the monthly PMM meetings. The FHWA and CA/T continue to evaluate and discuss improvements and other options for the PMM.
  • CA/T project will conduct bottom to top review of cost to complete as part of the annual Finance Plan Update.
  • Requirement for annual total project forecast (bottom-up review) included as Item #5 in the Project Partnership Agreement executed by EOTC, MHD, MTA, and FHWA.

#16 Recommendation: The data contained in the PMM should be modified to show potential project cost exposures identified in the separate document referred to as the Up/Down chart. The PMM or similar vehicle should include such items as: (1) anticipated cost exposures in design and/or construction activities; (2) projected labor rate increases; (3) anticipated petroleum price increases or decreases; (4) expected increases in operational costs such as insurance premiums, consultant support services, and materials: and (5) potential and settled claims.

Responsible Office: Massachusetts Division

Responsible Individual: CA/T Oversight Manager

Initiative(s)

  • PMM was revised to show potential cost exposures, and is being used for the monthly PMM meetings. The FHWA and CA/T continue to evaluate and discuss improvements and other options for the PMM.
  • Requirement for PMM to show potential cost exposures included as Item #6 in the Project Partnership Agreement executed by EOTC, MHD, MTA, and FHWA.

#17 Recommendation: The Significant Schedule Trends Report shows possible delays to all six remaining key milestones. The PMM should indicate why the projected delays have occurred and what measures are being considered by MTA management to remedy this deficiency.

Responsible Office: Massachusetts Division

Responsible Individual: CA/T Oversight Manager

Initiative(s)

  • PMM was revised to show trends, possible delays, and remediation measures, and is being used for the monthly PMM meetings. The FHWA and CA/T continue to evaluate and discuss improvements and other options for the PMM.
  • Requirement to document projected delays, identify causes of delays, and provide measures under consideration to remedy delays is included as Item #7 in the Project Partnership Agreement executed by EOTC, MHD, MTA, and FHWA.

#18 Recommendation: The Finance Plan should be based on more realistic cost and revenue scenarios, and include contingency plans to cover potential revenue shortfalls or cost overruns. Inclusion of contingency plans will minimize the surprises inherent in an overly optimistic forecast scenario and provide for an earlier discussion of how potential circumstances would be addressed.

Responsible Office: Program Administration

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • Developed and issued Financial Plan Guidance, which requires realistic cost and revenue schedules with contingency plans to cover potential shortfalls and overruns.

#19 Recommendation: The Finance Plan, since it is a picture of the funding revenues and outlays for a project, should include all costs associated with the project, regardless of the source of funding. Since this project does not recognize costs borne by the State, such as personnel expenses for MTA employees, the total CA/T Project cost figures are inherently low. A more realistic picture would include such costs. Since they are directly attributable to the CA/T Project, although they would not be included in a budget for the B/PB joint venture.

Responsible Office: Program Administration

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • Developed and issued Financial Plan Guidance, which requires that all costs associated with a project be included.

#20 Recommendation: By showing post-construction funding as lump-sum amounts, the annual budget and cash flow needs through the conclusion of the project financing are not clear. For example, funds needed for the GANs repayments and the conversion of advance construction should be shown annually.

Responsible Office: Program Administration

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • The comment letter issued for the March 15 Finance Plan Update contained the requirement for inclusion of a schedule in the next Finance Plan Update detailing the time frame for use of OA beyond 2003.
  • The June 2000 and October 2000 Finance Plan Updates contained out-year obligations for conversion of AC.
  • Items #1 and #2 of the Project Partnership Agreement executed by EOTC, MHD, MTA, and FHWA limits OA to $8.549 billion, including AC conversions.

#21 Recommendation: Although the financing requirements are intended to accurately depict the future needs of the CA/T Project, it is recommended that future Finance Plans include a short discussion of past costs and the impact these have had on the initial assumptions. This permits the reader to gain a full understanding of the finances for the Project, past, present, and future.

Responsible Office: Program Administration

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • The Finance Plan Updates will provide total cost information.

#22 Recommendation: The Federal Highway Administrator should require the MHD to reach agreement with local officials on the term of a balanced statewide program. By making the agreement a formal condition of STIP approval, the FHWA and the FTA would have a means of ensuring the commitment is satisfied.

Responsible Office: Massachusetts Division

Responsible Individual: Division Administrator

Initiative(s)

  • MHD planning department held meetings with transportation planning agencies and industry representatives to develop a consensus definition of the $400 million Statewide Program.
  • A Memorandum of Understanding (MOU) has been agreed to by representatives of the transportation planning agencies and the State. The State and twelve of the thirteen Metropolitan Planning Organizations (including the Boston area MPO) have signed the agreement.
  • The execution of this MOU by the Massachusetts Executive Office of Transportation and Construction, the MHD, and Regional Planning Associations as a condition of STIP approval is included as Item #8 in the Project Partnership Agreement executed by EOTC, MHD, MTA, and FHWA.

#23 Recommendation: The Finance Plan contains potential project offsets that have been determined to be outside the scope of the CA/T Project. These include the OCIP credits, air space leases, and the sale of the CA/T Project management building. While post-construction credits and revenues may be included in cash flow models, the Task Force recommends that they not be allowed as offsets to reduce the cost of the CA/T Project.

Responsible Office: Program Administration

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • MTA Chairman assured FHWA that credits would not be shown in finance plan documents unless funds were available to be used to support cash flow needs.
  • The comment letter issued on the Finance Plan Update contains this issue.

#24 Recommendation: The FHWA should require the CA/T Project management to obtain an independent certification as to the accuracy of the information contained in the Finance Plan. This certification would accompany the Plan upon submission to FHWA for review and acceptance.

Responsible Office: Program Administration

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • Finance Plan Updates contain a certification from Massachusetts' Executive Office For Administration and Finance.

#25 Recommendation: The FHWA should retain the services of an independent contractor to conduct a review of the OCIP and the risks associated with the CA/T Project, and to assist the FHWA in the development of National policy on OCIPs.

Responsible Office: Program Administration

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • Contractor (AECom, with sub-consultant of Aon) completed a review of the insurance records, interviews of principals, and a draft report to assist FHWA in defining the insurance needs for the project.
  • Final report on the CA/T Project's OCIP issued.
  • Final OCIP national policy to be developed by AECom and issued by FHWA

#26 Recommendation: The CA/T Project figures for extra construction costs are optimistically low. The bid discount rate of 13 percent and PCA rates of 7 percent to 10 percent should be changed to properly reflect recent trends. If this is done, the likely cost of the remaining construction work will be estimated at $300 million to $480 million higher than reflected in the bottom-up CA/T Project estimate. A more realistic estimate would be $1.7 to $1.88 billion in potential project cost overruns. This increases the potential total project cost to the range of $13.4 to $13.6 billion. (The $13.4 billion figure is the total of the $10.8 billion pursuant to the C/SU Rev. 6 estimate, plus $900 million in allowable credits, plus the $1.7 billion project overrun). In addition, if inflation rates rise, as is the present trend, the estimate should be further adjusted to reflect this trend. Finally, further adjustments should be anticipated for litigation, vulnerability, environmental contingencies, and other unforeseen events likely in a project of this magnitude.

Responsible Office: Program Administration

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • After FHWA and MTA reconciled the variances in the project cost estimates, the Finance Plan Update used basically the figures from the high end of the FHWA estimate range.
  • Potential forecast and variance requirements were included as Item #10 and Item #11 of the Project Partnership Agreement executed by EOTC, MHD, MTA, and FHWA.

#27 Recommendation: The Finance Plan should include revenue sources that are likely to be available to the CA/T Project. If a revenue source requires legislation, legislative support needs to be demonstrated. If the revenue is to be provided by another State agency, agreement or concurrence from that agency needs to be obtained.

Responsible Office: Program Administration

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • The comment letter issued on the Finance Plan Update included this issue.
  • The Governor signed the necessary legislation. (About $1.9 billion for CA/T and $500 million for the Statewide Program).

#28 Recommendation: Another option, pending legislative action on the above proposals, is for the State to commit its general fund to the CA/T Project. The general funds would serve as surety until other funding sources are established. State officials advised the Task Force that funds may be available for budget surpluses or other reserve funds.

Responsible Office: Program Administration

Responsible Individual: Director, Office of Program Administration

Initiative(s)

  • The comment letter on the Finance Plan Update included this issue.
  • The Governor signed the necessary legislation. (About $1.9 billion for CA/T and $500 million for the Statewide Program).

#29 Recommendation: The PF (Potential Forecast) for all project elements should be a best estimate of the completion cost.

Responsible Office: Massachusetts Division

Responsible Individual: CA/T Oversight Manager

Initiative(s)

  • The requirement for a best estimate of completion cost is included in Item #10 of the Project Partnership Agreement executed by EOTC, MHD, MTA, and FHWA.

#30 Recommendation: The PF should be maintained on a current basis for all project elements.

Responsible Office: Massachusetts Division

Responsible Individual: CA/T Oversight Manager

Initiative(s)

  • The requirement for maintaining the potential forecast on a current basis is included in Item # 10 of the Partnership Agreement executed by EOTC, MHD, MTA, and FHWA.
  • The Project Management Monthly report has been revised to achieve this recommendation.

#31 Recommendation: The PF total for all project elements should not be constrained by MTA policy directives.

Responsible Office: Massachusetts Division

Responsible Individual: Division Administrator

Initiative(s)

  • The requirement for unconstrained potential forecast is included in the Partnership Agreement executed by EOTC, MHD, MTA, and FHWA.

#32 Recommendation: On a quarterly basis, an overall CA/T Project Budget vs Potential Forecast Variance Report should be furnished to the FHWA. This report would contain an explanation of all significant variances, by project element, segregated into the following categories:

  • The components of the reported variances that are deemed to be firm to the point of requiring a corresponding revision to the budget of the affected project element. These kinds of changes include, but are not limited to, the value of actual contract awards (or executed change orders), approved scope changes to be incorporated during design, and expected settlement amounts for asserted differing site condition claims.
  • The components of the reported variances that are deemed by the CA/T Project management to b subject to further adjustment by future management corrective action, or other alternative remedies.
  • The components of the reported variances that are deemed by the CA/T Project management as being speculative in nature. These include reported potential forecast variances that are difficult to quantify and price but which could have a positive or adhere effect on the future cost of the program.

Responsible Office: Massachusetts Division

Responsible Individual: CA/T Oversight Manager

Initiative(s)

  • The requirement for a semi-annual report is included as Item #11 of the Partnership Agreement executed by EOTC, MHD, MTA, and FHWA.
  • The PMM report has been revised to provide this information on a monthly basis.

#33 Recommendation: CA/T Project management and the Division Office should continue with the cost containment initiatives to achieve the greatest savings by:

  • A pro-active and aggressive change negotiation and claims defense;
  • Rigorous controls to prevent scope change for remaining construction work;
  • The encouragement of VECPs to simplify construction logistics and staging on construction contracts;
  • Limiting changes in scope and minimizing scope transfers between projects; and
  • Adding a construction contract clause for price adjustment for fuel prices to the remaining construction contracts.

Responsible Office: Massachusetts Division

Responsible Individual: CA/T Oversight Manager

Initiative(s)

  • The Project's cost containment efforts are on going with FHWA participating.
  • The Project's Cost Recovery program is on going with FHWA participating.
  • The FHWA MA Division's Contract Change procedure requires a cost evaluation of all proposed changes and is on going.

#34 Recommendation: The Task Force recommends the FHWA and MHD enter into an agreement to formalize recommendations contained in this report which are relevant to the working relationship between the parties.

Responsible Office: Massachusetts Division

Responsible Individual: Division Administrator

Initiative(s)

  • Project Partnership Agreement executed by the Massachusetts Executive Office of Administration and Finance, MHD, MTA, and FHWA; limits OA to $8.549 billion, including AC conversions; supplements the existing MHD/FHWA Massachusetts Division Office Project Oversight Agreement as it relates to the CA/T Project.
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