Even after four contracts related to the long-awaited Green Line extension project were approved at a price more than 44 percent over budget, the state’s top transportation officials didn’t appear worried.
Instead, in the fall of 2014, Beverly Scott, general manager of the Massachusetts Bay Transportation Authority, and her deputies were rushing to complete an application for a federal grant that would fund half of the $2 billion project.
“We are hoping it will happen before the Governor’s term ends,” Scott wrote in a November 2014 e-mail. “Everything in and under review.”
In January 2015, her wish came true. Decades after the project to extend the light rail line into Medford and Somerville was first proposed, Governor Deval Patrick stood alongside Congressman Michael Capuano, US Senator Elizabeth Warren, and other officials to celebrate winning a federal grant that would bring the state nearly $1 billion.
But just seven months later, the project was stopped in its tracks, dogged by newer estimates that showed the project could cost $1 billion more than projected. And on Monday, state transportation officials will receive a report on how to scale back the project dramatically. They will ultimately have to decide whether to proceed with a stripped down plan — or to pull the plug altogether.
How did the project go so wildly off the rails? A Globe review of internal e-mails, a consultant’s analysis of the process, and interviews with key players has found that officials were so eager to finish the job quickly that they relied for months on flawed budgets instead of taking the time to better update cost estimates. The MBTA and the private company chosen to manage the project failed to heed several big warnings — beginning as early as 2013 — that pointed to ballooning costs, some of which sprouted from station designs that became more elaborate and complex as time went on. Officials failed to account for rapidly increasing labor costs as the economy improved. And the T and its consultants had little experience with a contracting method for the project that was completely new to the state.
It wasn’t until the spring of 2015 that officials appeared to realize that the true cost of the project threatened the state’s ability to build it at all.
“Everyone was so busy moving forward that they didn’t take time to look backwards,” said Rick Krebs, who was hired to develop cost estimates for the project through his company, Stanton Constructability Services. “Everything was pressed for time.”
The future of the project now lies with the fiscal control board that oversees the MBTA, and the separate board overseeing the Massachusetts Department of Transportation budget. They must decide whether to forgo a long-promised project that has already gobbled up thousands of hours of manpower and hundreds of millions in state transportation funding — or to endorse a much more modest version, trusting the agency to deliver the project on time and on budget.
“I don’t think anyone wants to give back $1 billion, but we just need to see a good, comprehensive plan that is also financially responsible,” said control board member Brian Lang.
A new approach
The idea of extending the Green Line goes back generations. Supporters believe that the 4.7 miles of track and seven new stations in Cambridge, Somerville, and Medford, could spark billions of dollars in development, bring up to 15,000 permanent jobs and 41,000 construction jobs to the area, and give nearly 50,000 rides daily to residents and workers in some of the densest communities in Greater Boston.
In 1990 the state seized on the project as a way to offset the environmental impact of the Big Dig and agreed to finish it by 2011. In 2005, the Conservation Law Foundation sued, accusing the state of dragging its feet; that led to an agreement in which the T agreed to finish the project by 2014.
“Ultimately, it’s all about a promise that was given to the region that’s carrying the load of the negative air impacts from the Big Dig,” said Rafael Mares, a vice president with the Conservation Law Foundation. “We’ve delayed the project so long that we’ve forgotten what its purpose is.”
Years of waiting created pressure to meet the deadline, so T officials chose an unconventional form of contracting designed to speed up construction. Some industry experts had concerns about the process because it would be entirely new to Massachusetts, and the MBTA would be testing it out on one of its biggest projects to date — but administration officials in 2012 convinced state lawmakers to allow it.
The new approach involved allowing the designated project manager and construction company to negotiate the price of portions of the project as they went along, a move that would allow the agency to start construction on some phases while the others were still being designed.
Still another entity would be charged with making independent cost estimates, as a check to make sure both the manager and builder were using realistic numbers.
The MBTA hired HDR/Gilbane, a consortium of two firms, as the project manager. It chose White-Skanska-Kiewit, a consortium of contractors whose construction work dominates the Seaport, to build the project. Krebs was hired to make his own estimates on some Green Line contracts.
The process also involved yet another company, Hatch-Mott-MacDonald, charged with offering an independent review of the whole process. By 2014, that company already had hints that the project budget was in trouble. In a monthly report, the company said the construction company had submitted an estimate for overall construction costs in late 2013 that was considerably higher than that of the project manager.
Though the report advised the T and HDR/Gilbane to review the discrepancy, officials continued with their plans unabated.
T officials would later say that they relied on advice from Krebs, who predicted the price would eventually drop.
Even some federal officials had doubts about the T’s initial budgets, according to progress reports on the project. In 2014, the Federal Transit Administration asked the T to increase the project budget from $1.6 billion to $1.99 billion — the figure that the T would publicly stick with until the summer of 2015.
By the fall of 2014, pressure was growing for the T to secure the federal funds. In September, Richard Davey, then the state’s transportation secretary, wrote a tersely worded e-mail to T officials, including Scott, asking them to get moving on paperwork.
“Let me be clear, I don’t care why they [haven’t] been signed yet, but they need to be signed today.” he wrote. “Among all of you, figure it out.”
Meanwhile, the team was hit by an unexpected setback in November: Massachusetts voters voted down a provision of state law pegging the gas tax to the rate of inflation, which meant transportation funding could take a $1 billion hit over the next decade. According to Scott’s e-mails from the time, that news promoted little talk about the Green Line contracts that were already over budget. Instead, state officials were scrambling to show the federal government that the state could still pay for the project, even with the gas tax repeal. At one point, officials drafted a letter from Patrick to US Transportation Secretary Anthony Foxx to reassure federal officials that the state still had substantial transportation revenue.
In December, weeks before Patrick left office, state officials finally received word: The grant was theirs.
But amid the victory, the relationship between the T’s project manager and its construction company was fraying, as costs increased. The two sides had been meeting throughout 2014 to discuss their differences. Krebs said both sides often left meetings suspicious of one another’s intentions.
The project manager “thought the contractor was trying to take advantage of the [state],” he said. “And then the contractor didn’t feel that [the project management team] was qualified to do the estimate.”
The project manager’s cost estimates for individual contracts were often much lower than those of the construction company, according to figures released by the T. At one point, the T agreed to a contract for drainage improvements and relocating commuter rail tracks for $116.6 million, nearly 86 percent over budget, according to a consultant’s analysis of the process.
What was driving up costs so dramatically? One factor was elaborate station designs with features that went beyond the Green Line’s typical stops. While most stops on existing lines are not shielded from the elements, T officials wanted buildings with fare gates. They also agreed to include a community walking and cycling path, priced at up to $100 million.
Julie Brown, a contractor who worked with Krebs, said she was surprised to see stations with price tags of about $70 million apiece.
“Good public design is important . . . but there’s only so much appetite for what the public is willing to pay for or can afford,” said Brown in an interview.
Krebs believed that the T veered away from the project’s initial conceptual design.
“I don’t think they realized the complexity of what the final design would be,” Krebs said. “The bottom line is that they didn’t have the money for the scope they had designed, and it all blew up because they didn’t have the money for what they wanted to build.”
Additionally, Brown said, labor costs exceeded early estimates. The labor market had become hot since the T first developed its cost estimates, and subcontractors would rather work on a private development than deal with the perceived red tape of a government project. The construction company had some trouble soliciting bids from subcontractors, according to Brown.
Public kept in the dark
The process set up by the MBTA allowed White-Skanska-Kiewit, the construction company, to be awarded a contract as long as it was 10 percent within the range of Krebs’s cost estimate. But during the process, the estimates would change several times, including Krebs’s own.
Consultants hired by the control board to evaluate its use of the new contracting process believed it allowed White-Skanska-Kiewit to achieve “maximum profit,” since it was allowed to change its estimate several times to get closer to Krebs’ figures. They found that the T had failed to use several safeguards to control costs, such as placing a limit on how high the markups on all its costs could ultimately go, or limiting the number of times the construction company could renegotiate the cost estimate.
The situation finally became untenable in the spring of 2015, a particularly chaotic time that included record-breaking snowstorms and the ascension of a new governor, Charlie Baker. That’s when the T and its project manager needed to negotiate a large contract in the project, to construct the relocated Lechmere Station and new Union and Washington Street stations.
The T assumed that the contract would cost about $387 million, and later adjusted the figure to $487 million. But WSK submitted a bid in May of more than $889 million. It was a mind-boggling difference that would have eaten up the money for the rest of the project, and T officials had yet to award an even bigger contract for the remaining four stations.
Krebs said that had set off alarms: “We sat down, and we said, ‘We’ve got a problem.’ ”
Yet even as officials worried that they might have to put the project out to bid again, T officials kept the public largely in the dark. In June 2015, Karen Arpino-Shaffer, an HDR/Gilbane consultant, said during a public meeting that she had heard rumors about budget problems, but believed they were unfounded, according to Ken Krause, a longtime supporter of the project. Later that month, she said the T was negotiating the issue, but the numbers were far apart, Krause said. Arpino-Shaffer did not return a request for comment.
The MBTA finally announced the cost overruns to the public in August, saying that the project could go $700 million to $1 billion over budget. Transportation Secretary Stephanie Pollack was blunt: All options were now on the table, including the cancellation of the project.
Joe Pesaturo, a T spokesman, did not answer specific questions on mistakes in the process, but wrote, “Through careful analysis of the project, MassDOT found the original estimates produced by the prior administration to be inaccurate.”
Since then, the T’s fiscal control board has been working to wind down contracts with the project manager, the builder, cost estimator, and the project designer. Officials have replaced multiple MBTA employees from the project. Representatives from HDR/Gilbane and White-Skanska-Kiewit declined to comment.
In addition to hiring consultants to help cut costs on the project, the MBTA control board hired firms to investigate what had gone wrong. T officials refused to release their report until the secretary of state’s office ordered them to in January.
The boards that oversee the project have said it will go forward only if it can fit within a reasonable budget — by cutting costs and finding new funding. Just last week, the cities of Cambridge and Somerville pledged to chip in $75 million.
Even if the project were canceled, the T would still end up spending up to $700.6 million on the project, including $182.7 million for 24 new Green Line trolleys.
The prospect of another vote on the Green Line is a bitter pill to swallow for supporters who have waited decades for the long-ago promise to be fulfilled.
Capuano, who served as mayor of Somerville before being elected to Congress, said stopping the project would be the “height of fiscal irresponsibility.” He said he worries that federal officials and the public would be reluctant to fund future large projects if the state isn’t able to pull this one off.
“If they say ‘no’ to this, how will they ever say ‘yes’ to a big project?” he said. “If they can’t do this project, you tell me how they could do South Coast rail, high-speed rail to Springfield, or how they would widen any highway? How can they justify that if they walk away from a billion dollars?”
Still, Lang said the board could go either way.
“I don’t think there’s a person on the board that doesn’t want it to go forward,” he said. “But the devil is in the details.”