University of Massachusetts Boston ScholarWorks at UMass Boston John M. McCormack Graduate School of Policy and McCormack Graduate School of Policy and Global Global Studies Publications Studies 7-1-1997 Managing the Central Artery/Tunnel Project: An Exploration of Potential Cost Savings Allan K. Sloan University of Massachusetts Boston Follow this and additional works at: http://scholarworks.umb.edu/mccormack_pubs Part of the Public Policy Commons, State and Local Government Law Commons, Transportation Commons, Transportation Law Commons, and the Urban Studies Commons Recommended Citation Sloan, Allan K., "Managing the Central Artery/Tunnel Project: An Exploration of Potential Cost Savings" (1997). John M. McCormack Graduate School of Policy and Global Studies Publications. Paper 10. http://scholarworks.umb.edu/mccormack_pubs/10 This Research Report is brought to you for free and open access by the McCormack Graduate School of Policy and Global Studies at ScholarWorks at UMass Boston. It has been accepted for inclusion in John M. McCormack Graduate School of Policy and Global Studies Publications by an authorized administrator of ScholarWorks at UMass Boston. For more information, please contact [email protected]. The John W. McCormack \ Institute of Public Affairs MANAGING THE CENTRAL ARTERY/TUNNEL PROJECT: An Exploration of Potential Cost Savings July 1997 University of Massachusetts Boston The McCormack Institute The John W. McCormack Institute of Public Affairs is a multi-purpose public pohcy research institute, established in 1983 at the University of Massachusetts Boston and named in honor of the late John W. McCormack, former Speaker of the U.S. House of Representatives. The institute's components include four centers, each with its own area of focus: the Center for State and Local Pohcy, the Center for Social PoHcy Research, the Center for Women in Politics and Public Pohcy, and the Center for Democracy and Development. The. institute also administers UMass Boston's M.S. Program in Public Affairs and publishes Tlie New England Journal of Public Policy. The McCormack Institute's fellows and staff-—who are drawn from such diverse fields as journalism, pohtics and government, and the social sciences—represent vital connections between the University commu- nity and centers of power and innovation in the private and public sectors. They are involved in university teaching, survey research, edu- cational outreach projects, and a variety of publications including books, academic papers, and newspaper columns; they also appear regu- larly as guest speakers, moderators, and panelists on TV and radio. Through the work of these distinguished academics and practitioners, the institute seeks to contribute to informed public discourse and to play a constructive role in public pohcy formulation and problem- solving. Tlie views contained in this paper are those of the author(s) and not the John W. McCormack Institute of Public Affairs. MANAGING THE CENTRALARTERY/TUNNEL PROJECT: An Exploration of Potential Cost Savings Submitted to the Commonwealth of Massachusetts Senate Committee on Ways and Means House Committee on Ways and Means The Joint Committee on Transportation of the House and Senate Allan K. Sloan Project Director Visiting Fellow, McCormack Institute Project Team Joseph Barresi, Senior Fellow, McCormack Institute Samuel Gozzo, Consulting Engineer Aundrea Kelley, Executive Coordinator,UMass Boston Claude Lancome, Consulting Attorney David Luberoff, Policy Consultant Edward Moscovitch, Consulting Economist Carson Tsao, Cost Analyst, UMass Boston Elaine Werby, Senior Fellow, McCormack Institute McCormack Institute Project Steering Committee Robert Woodbury, Director Katherine Allen, Research Fellow Richard Hogarty, Senior Fellow Richard Manley, Senior Fellow Robert D. Moran, Visiting Fellow July 1997 Table of Contents page Executive Summary Introduction 8 Chapter I - History & Evolution of CA/T Costs 10 Chapter 2 - Current Budget 18 Part 1. Structure and Status Part 2. Budget Allocation by Program Area Part 3. Budget for Mitigation Part 4. Scope Changes and Implications - Chapter 3 Cost Containment/Reduction in the Construction Process . 33 Part 1. CA/T Budget Scenarios Part 2. Cost Containment/Reduction A. Bidding process for construction contracts B. Construction contract management C. Environmental assistance D. Other measures Chapter 4 - Cost Containment/Reduction in Project Management .... 58 Chapter 5 - Financing CA/T 63 Chapter 6 - Benefits & Beneficiaries 70 Appendix A Al Sources EXECUTIVE SUMMARY In 1996, under Chapter 205 of the 1996 Acts and Resolves, the Massachusetts Legislature authorized the McCormack Institute of Public Affairs at the University of Massachusetts Boston to "review and explore possible cost savings within the Central Artery/Third Harbor Tunnel project" and to report its findings to the House and Senate Committees on Ways and Means and the Joint Committee on Transportation. For this study, the Institute assembled an interdisciplinary team from within its own ranks and outside, first, to examine the composition and rationale for the project's estimated cost of $10.4+ billion and, second, to identify possible cost savings within this budget. This report describes the findings, conclusions and recommendations of this effort. Our major findings are summarized below: 1. The sizeable cost to design and build these seven miles of Interstate roadways in and adjacent to Downtown Boston is attributable to three major factors; • The extensive tunneling and complicated interchanges required to rebuild and extend the express highway system through the center of an active and vibrant metropolitan region. This has required the design and execution of 119 interlinked construction contracts in eight different construction zones, each densely developed and heavily used. • The need for the design and construction to not only make long term improvements to the urban and natural environment mandated by law but also to take measures to insure the on-going operations of the city during the construction process. This is reflected in 1500 separate mitigation agreements developed during the course ofproject planning and design. • The time - over two decades - needed to undertake engineering and design work, mitigation agreements and construction and the impact of inflation. While there is no precise way to allocate the costs to these three factors, we estimate that about 30% to 35% of the cost can be attributed to the required tunneling and interchange construction alone, about 25% to 30% to the measures needed to mitigate the impacts of the construction and meet required environmental standards, and up to 40% to account for inflation and cost escalation resulting from a 25 year design and construction period. 2. Of the total budget, over two thirds has been either spent or committed. The engineering design is virtually complete, and construction on all the major components is well underway. Reductions in the scope of the project or major changes in mitigation agreements at this stage would be difficult and would create many unacceptable consequences for the city and region. 3. To achieve budget reductions in the scale of 2% to 4%, that is, $250 to $450 million, the McCormack Institute, University of Massachusetts Boston 1 project would have to rely principally on measures to avoid all delays and unanticipated changes in planned scope for all remaining construction packages, plus good luck in completing packages on the critical path on or ahead of schedule. Keeping all elements of the project on schedule is critical to cost control and containment. So far, the project has been remarkably free of contractor litigation which has been key to maintaining the schedule. 4. To date, the challenges of managing the complicated engineering design and difficult construction process have been met by the CA/T project management team. However, there are already upward cost pressures as the tunneling operations in downtown Boston move ahead. The continued diligent application of the cost control and containment measures already in place will be required to keep the budget within existing targets. There are a whole battery of such measures which require extensive cooperation among all the "parties at interest," not only the project management and the contractors, but the Legislature, other state regulatory agencies, and local communities as well. These measures fall into two major areas: • In operating the construction program, now well underway. • In downsizing and transferring functions from the management team of the Joint Venture contractor, who has carried the burden of managing the design and construction process to date, to the permanent agencies responsible for the ultimate operation of the system — the Massachusetts Highway Department and the Massachusetts Turnpike Authority. 5. Most of the key measures involve the management of the contract bidding and administration process within the domain of the project management. However, there are some measures which require legislative action or interagency cooperation to avoid unnecessary costs (See Table 1). These include: • Changes in the laws governing the bidding process, particularly exemptions from filed sub-bid requirements, and experimenting with A-B bidding procedures. • Changes in other legislatively mandated requirements, (use of police details, for example). • Relief from redundant environmental review requirements and assistance of other state and local agencies