United States General Accounting Office
GAO Report to the Chairman, Subcommittee
on Transportation and Related Agencies,
Committee on Appropriations, House of
Representatives
July 1997
TRANSPORTATION
INFRASTRUCTURE
Progress on and
Challenges to Central
Artery/Tunnel Project’s
Costs and Financing
GAO/RCED-97-170
United States
GAO General Accounting Office
Washington, D.C. 20548
Resources, Community, and
Economic Development Division
B-275370
July 17, 1997
The Honorable Frank R. Wolf
Chairman, Subcommittee on Transportation
and Related Agencies
Committee on Appropriations
House of Representatives
Dear Mr. Chairman:
The Central Artery/Tunnel project in Boston, Massachusetts—one of the
largest, most complex, and most expensive highway construction projects
ever undertaken—is well under way, with contracts worth nearly $8 billion
either completed or awarded. Construction began in 1991, and the project
is expected to be substantially completed in December 2004. As of
February 1997, federal funds accounted for $4.7 billion (about 82 percent)
of the $5.7 billion obligated for the project, with the remainder coming
from state funds. The level of future federal funding for the project
depends upon the amount provided under the next federal highway
program authorization; the current authorization expires on September 30,
1997.
In response to your concerns about the need to monitor the costs of this
project and the uncertainties associated with its financing, we evaluated
(1) the estimated cost of the project and (2) Massachusetts’ plans for
financing it.
As of March 1997, Massachusetts had estimated that the total cost of the
Results in Brief Central Artery/Tunnel project was $10.8 billion—$400 million more than
the $10.4 billion estimate contained in its September 1996 finance plan.
This increase occurred primarily because of growth in the project’s
estimated construction costs. Costs actually increased by more than
$400 million, but the state assumed in its $10.8 billion cost estimate that
the increases would be partly offset by savings, primarily from the
project’s owner-controlled insurance program. However, the state also
assumed that most of these insurance savings—$778 million—would not
be realized until 2017, long after construction is completed. As a result, the
project’s total funding needs through 2004, when the project is scheduled
to be completed, are $11.6 billion—$778 million more than the project’s
$10.8 billion cost estimate. Furthermore, uncertainties exist about whether
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the savings projected by the state in the insurance program will be
achieved.
The state’s $10.8 billion cost estimate also depends on achieving the
aggressive cost containment goals established for the project. While the
state has made some progress in its cost containment program, officials
acknowledge that it has ambitious goals that will be difficult to meet. If
current trends in the project’s construction costs continue, further cost
increases of some magnitude seem likely. As a result, the project’s cost
could increase between $100 million and $500 million.
Massachusetts has implemented a plan to finance its share of the project’s
cost, including a strategy to finance funding shortfalls. The state’s
December 1996 feasibility study identified a funding gap of $1.8 billion to
$2.3 billion between fiscal years 1998 and 2002, depending on the federal
funds provided. However, unless additional savings are implemented, this
shortfall could be about $450 million higher than expected because the
feasibility study does not include cost increases that occurred through
March 1997.1 Furthermore, funding shortfalls could be an additional
$100 million to $500 million more if the state does not meet its cost
containment goals for construction.
To finance the shortfalls, the state plans to borrow $1.7 billion through a
combination of revenue bonds issued by the Massachusetts Turnpike
Authority and grant anticipation notes—short-term notes issued by the
state to borrow against future federal funds—as authorized by legislation
passed in 1997. However, this plan may be insufficient to meet the
project’s financing needs because it substantially covers the funding
shortfalls only under the best case funding scenario modeled in the
feasibility study. In addition, while the financial markets will decide
whether the use of grant anticipation notes is feasible, uncertainties exist
about the use of these notes because the amount proposed by
Massachusetts is unprecedented and relies on borrowing against federal
funds that may not be authorized until after the next federal highway
authorization expires, sometime around 2003. If Massachusetts’ plan to
address shortfalls is not sufficient, the state may have to borrow additional
funds. This additional borrowing could make it difficult to stay within the
state’s limits on the issuance of new debt. The state imposed these limits
on itself to constrain the growth of state debt in order to improve its credit
ratings.
1
As noted above, the amount of cost increases was greater than the $400 million increase in the state’s
estimate for the project’s total cost because increases have been partially offset with savings, and most
of the savings attributable to the project’s insurance program will not be realized until 2017.
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The Central Artery/Tunnel project, an Interstate Highway System project
Background in Boston, Massachusetts, will build or reconstruct about 7.5 miles of
urban highways—about half of them underground. As shown in figure 1,
the project will (1) extend Interstate 90 east, mostly in tunnels, through
South Boston, under Boston Harbor (through the Ted Williams Tunnel),
and to East Boston and Logan International Airport; (2) replace the
Central Artery—an elevated portion of Interstate 93 through downtown
Boston—with an underground roadway; and (3) replace the I-93 bridge
over the Charles River.
The project is currently managed by the Massachusetts Highway
Department (MHD).2 Day-to-day design and construction activities are
managed by a management consultant—a joint venture of Bechtel/Parsons
Brinckerhoff—under contract with MHD. Federal funds are authorized
under the Intermodal Surface Transportation Efficiency Act of 1991, which
expires on September 30, 1997. The Federal Highway Administration
(FHWA) approves and oversees the expenditure of the project’s federal
funds. For example, FHWA reviews the project’s design plans and
construction specifications and determines whether they meet applicable
safety and quality standards and are eligible for federal funding.
Massachusetts periodically prepares finance plans detailing the remaining
estimated cost of the project and the sources of funds the state plans to
use to finance this cost. Since March 1996, the state has also prepared
monthly project management reports. These reports, which present the
estimated cost of the project on the basis of current costs and savings, are
used to identify trends, manage the project on a total-cost basis, and
monitor the progress of cost containment goals. In 1995 the Secretary of
Transportation announced that FHWA would require states to prepare
finance plans for federally assisted highway projects with an estimated
total cost of $1 billion or more, and FHWA has requested that Massachusetts
prepare a plan annually or more frequently if events warrant. FHWA has no
requirements for states to prepare total cost estimates for projects nor
standards for how such estimates should be prepared.
2
The Massachusetts Turnpike Authority will assume ownership and management of the Central
Artery/Tunnel project under a state law approved in Mar. 1997. The Authority and MHD are currently
drafting an agreement delineating the roles, responsibilities, and terms of an eventual transfer.
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Figure 1: Map of the Central Artery/Tunnel Project
Source: Massachusetts Highway Department.
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In December 1996, the state released a study (referred to as the feasibility
study) addressing options for financing the state’s share of the Central
Artery/Tunnel project. In March 1997, a state law conveyed ownership of
certain roadways and tunnels in downtown Boston, including those
comprising much of the Central Artery/Tunnel project, to the
Massachusetts Turnpike Authority and authorized the Authority to issue
revenue bonds to help finance the project’s construction and other costs.
To provide further financing for the project, Massachusetts’ May 1997
transportation bond bill authorized the state to issue short-term notes to
be repaid with future federal funding.
During the last 12 months, the project has progressed toward completion
at a faster rate than at any time in its history. In June 1997, MHD estimated
that about 90 percent of the project was designed and more than
26 percent was constructed. The Ted Williams Tunnel opened to
commercial traffic in 1995 and to passenger vehicles on a limited basis
during 1996. The tunnel’s permanent connections to the Massachusetts
Turnpike are under construction and will open to all traffic in 2001 (see
fig. 2).
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Figure 2: The Ted Williams Tunnel
Source: MHD.
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As shown in figure 3, work on the tunnels that will replace the
above-ground Central Artery is under way, with 6 of the 10 principal
construction contracts awarded as of April 1997. The northbound and
southbound Central Artery tunnels are scheduled to open to traffic in 2002
and 2003, respectively. After 2002, the pace of construction should slow
considerably, as demolition of the elevated Central Artery, surface
restoration, and street improvements take place. The project is scheduled
to be substantially completed in December 2004.
As of March 1, 1997, $5.7 billion had been obligated for the Central
Artery/Tunnel project. Contracts for a larger amount—$7.7 billion—had
been completed or awarded as of March 31, 1997. To accomplish this level
of contract activity, Massachusetts has made extensive use of advance
construction, which allows it to begin many projects concurrently by
obligating federal funds over several years. For example, although $2.1
billion in contracts will be awarded in fiscal year 1997, only $180 million
will be obligated, consistent with FHWA’s regulations. The remainder will be
obligated over a 5-year period. Appendix I provides additional information
on federal and state obligations for the Central Artery/Tunnel project and
Massachusetts’ use of advance construction.
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Figure 3: Construction of the
Underground Central Artery
Source: MHD.
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As of March 1997, Massachusetts estimated that the total cost of the
State Estimates the Central Artery/Tunnel project was $10.8 billion—$400 million more than
Total Cost at $10.8 the $10.4 billion estimate contained in the state’s most recent finance plan
Billion, but Funding of September 1996. Increases occurred primarily in the project’s estimated
construction costs and were partly offset by savings. However, a
Needs Are Higher substantial portion of the estimated savings are expected to come from the
project’s insurance program but will not be realized until long after
construction is completed. Because these savings will not be available as
the project incurs costs, the project will require total funding of
$11.6 billion through 2004, when it is scheduled to be completed.
Furthermore, uncertainties exist as to whether the insurance savings
projected by the state will be achieved.
Rising Costs Partially Overall, Massachusetts estimates that the cost of the Central
Offset by Savings Artery/Tunnel project has increased from about $10.4 billion to
$10.8 billion over the last 12 months. Although the estimated cost actually
increased by more than this amount, the state has found savings to
partially offset this growth.
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Figure 4: Central Artery/Tunnel Cost
Estimates, March 1996 to March 1997
Dollars in millions
11,000
10,800
10,600
10,400
10,200
rch ril y ne ly st er er er er ary ry rch
Ap Ma Ju Ju gu mb tob mb mb nu rua
Ma Au pte Oc v e ce Ja eb Ma
Se No De F
Notes: These figures have been adjusted to exclude credits for “air rights”—proceeds the state
expects to receive from developing property acquired for the project’s construction that will
become excess at the end of the project. At FHWA’s request, MHD’s September 1996 finance
plan changed how air rights were treated in earlier plans from a credit to the cost of the project to
a source of revenue. However, the state’s monthly project management reports through
March 1997 continued to treat air rights as a credit to the project’s cost. Project officials stated
that future finance plans would continue the practice of treating air rights as a revenue source
rather than a cost credit, and in May 1997, the Central Artery/Tunnel project manager told us that
the state planned to revise its monthly cost-reporting system to treat air rights in the same fashion.
According to the September 1996 finance plan, the project’s $10.4 billion total cost estimate
reflected project costs as of June 1996 and included recognition of future insurance savings
totaling about $226 million. Those savings were taken in November 1996.
Source: GAO’s analysis of MHD’s data.
The largest increase in the project’s estimated cost was for
construction—the largest cost component of the Central Artery/Tunnel
project. Between March 1996 and March 1997, estimated construction
costs increased by about $500 million, a 7.4-percent increase. While a
number of factors contributed to the increased construction costs, about
$278 million occurred because bids on construction contracts were higher
than projected. Most of these increases occurred on two large-dollar
contracts—totaling nearly $800 million—awarded in January and
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March 1997. On one contract for segments of the tunnels to replace the
above-ground Central Artery, state and FHWA officials stated that several
factors contributed to the increase, including the complexity of integrating
the new tunnel with the existing Boston Harbor tunnels while sustaining
traffic, and noise mitigation measures that were costlier than expected. On
another contract for tunneling for the I-90 underground connection to the
Ted Williams Tunnel at Fort Point Channel, state and FHWA officials said
that complex tunneling techniques never before used to this extent in the
United States contributed to higher-than-expected bids. State and FHWA
officials expressed confidence that the circumstances experienced on
these two contracts were unique and that remaining contracts would not
experience the same types of cost increases.
Two other categories of cost increases resulted in about $230 million in
additional construction costs. First, estimates of construction costs
prepared during the design phase were more than the amount budgeted.
Second, actual and estimated costs of changes to awarded construction
contracts exceeded the amount budgeted for such changes.
The project has also achieved savings to offset cost increases; the largest
savings have come in the project’s owner-controlled insurance program.
While contractors in a construction project traditionally purchase their
own insurance and add the cost of their premiums to the contract, the
Central Artery/Tunnel project purchased “wrap-up” insurance that
provides workers’ compensation insurance, general liability insurance, and
other coverage for all contractors and subcontractors working on the
project. Wrap-up insurance programs generally result in lower total
insurance costs for a number of reasons, including the elimination of
redundant insurance services and profit margins associated with the
purchase of insurance by each contractor and subcontractor.
Since December 1994, the estimated cost of the insurance program has
been reduced by over $700 million. These estimated savings result from,
among other things, a better-than-expected safety record and
lower-than-expected accident claims on the project. Most of the estimated
insurance savings are attributable to anticipated refunds which, along with
other insurance related funds, will earn interest until all claims are paid, at
which time these remaining funds will be returned to MHD. Project officials
estimate that MHD will receive these proceeds, including refunds and
related interest, in 2017—13 years after construction is completed.
According to project officials, standard industry practice is to assume that
claims are paid over a 13-year period after the project is completed.
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Project’s Total Funding The state’s $10.8 billion estimate of the project’s total cost includes a
Needs Are $11.6 Billion credit to the cost of the project of $778 million, which represents the
receipt of insurance proceeds. However, these funds will not be available
until 2017 and thus cannot be used to help pay for the cost of the project.
As a result, the project’s total funding needs during the period of
construction will be $778 million greater than the $10.8 billion total cost
estimate, or about $11.6 billion. (See table 1.) FHWA stated that while the
insurance proceeds would not be available for use in meeting the Central
Artery/Tunnel project’s costs, they could be used for other federally
eligible transportation projects in Massachusetts.
Table 1: Central Artery/Tunnel
Project’s Total Cost and Funding Dollars in millions
Needs Data as of
September 1996 Data as of
Obligations and cost finance plan March 1997 Change
Obligations through fiscal year 1996 $5,169 $5,081
(estimated) (actual) ($88)
Estimated obligations fiscal year 1997
through 2004 5,979 6,523 544
Total estimated obligations through
2004 $11,148 $11,604 $456
Insurance proceeds in 2017 722 778 56
Total (net) project cost $10,426 $10,826 $400
Source: MHD.
Insurance Savings May Not Although Massachusetts’ cost estimate assumes that insurance proceeds
Be Realized will be received in 2017, the insurance program may not continue in its
present form until that time. According to industry representatives and
officials on other transportation projects with wrap-up insurance policies,
most workers’ compensation claims are filed within 2 years after
construction ends. Industry and project officials also said that within 18
months to 5 years after construction ends, the liability for satisfying any
further claims is frequently transferred to a reinsurer or another party who
manages the claims until they are paid. The state estimates that workers’
compensation and general liability claims payments after 2006 will total
about $28 million; however, it also assumes that the insurance trust
accounts will carry over $300 million until 2017 and accumulate interest
during that period. In particular, the state credits to the cost of the project
about $226 million, representing interest accumulated between 2006 and
2017. However if the liability were sold to a reinsurer, these proceeds
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would be largely unavailable to the project, and the total estimated cost of
the project would rise from the state’s $10.8 billion estimate to about
$11.1 billion.
In commenting on a draft of this report, MHD stated that it has decided at
this time not to use a reinsurer and to retain the funds until 2017. However,
it noted that this decision would need to made in consultation with FHWA in
about 2004, nearer to the end of the project.
In addition, the state’s assumptions have other uncertainties. Estimated
savings from the project’s insurance program stem in part from estimates
of lower-than-expected accidents and claims. In 1992, the cost estimates of
the workers’ compensation component of the wrap-up insurance program
were established on the basis of a 75-percent “loss ratio;” that is, the value
of claims paid was expected to total 75 percent of premiums. However,
over the last 4 years, the actual loss ratio has been about 30 percent. As a
result, the project has reduced its assumptions about the insurance loss
ratio from 75 percent to 55 percent. Although experience has been
somewhat limited to date on wrap-up insurance for large construction
projects, project officials stated that large programs tend to end with loss
ratios of 45 percent to 55 percent.
While only future experience will demonstrate whether the state’s
accident and claims assumptions are correct, it should be noted that the
Central Artery/Tunnel project is only 26-percent complete, and the project
is beginning 6 years of underground tunneling in the congested downtown
area. This construction will be complex; it will, for example, require
maintaining highway traffic on the existing Central Artery’s elevated
structure directly above tunnel construction and maintaining rail and
subway operations below and near tunnel construction. In the coming
years, the number of contractor personnel and the level of construction
activity in the downtown area will greatly increase. If loss claims were to
increase, and if the loss ratio were 65 percent, rather than the 55 percent
assumed in the cost estimate, the project’s cost would increase by about
$56 million.
Project officials stated that the project has completed 18 months of the
6-year construction schedule and that accidents and claims have
decreased during that time. Officials expressed confidence that the state’s
assumptions will hold and believed that if that is the case, it may be
possible to reduce the estimated cost of the insurance program even more.
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While MHD is aggressively pursuing its cost containment goals, the project
Construction Costs is not meeting these goals. Unless additional offsetting savings are found,
Could Increase it will be difficult to avoid increases in the cost of the project. We estimate
Further If Cost that these increases could add between about $100 million and
$500 million to the cost of the project if current trends continue.
Containment Goals
Are Not Realized In 1995, MHD established an overall goal of holding the cost of changes to
the project’s construction contracts to 10.7 percent or less of the
contracts’ estimated bid prices. This overall goal was based on two
assumptions: (1) holding cost growth on contracts awarded after
November 1994 to an average of 7 percent of the awarded bid price and
(2) holding cost growth on contracts awarded through November 1994 to
about 25 percent of the awarded bid price—the average amount that was
being experienced on those contracts at that time. Cost increases above
MHD’s goals have occurred on contracts awarded both before and after
November 1994. As of December 1, 1996, cost growth on awarded
contracts totaled 17.4 percent of contract bid prices, rather than the
project’s 10.7-percent goal, as shown in table 2.
Table 2: Percentage Increase in Costs
on Awarded Central Artery/Tunnel Dollars in millions
Project Construction Contracts, as of Cumulative
December 1, 1996 awarded Percent Percent
Number of contract cost growth actual cost
Contracts contracts price goal growth
Contracts awarded through
November 1994 36 $1,108 25.0 28.4
Contracts awarded after
November 1994 28 1,571 7.0 9.7
All awarded contracts 64 $2,678 10.7 17.4
Source: GAO’s analysis of MHD’s data.
As table 2 shows, the contracts awarded after November 1994 have
experienced much lower growth in costs (9.7 percent) than the contracts
awarded through November 1994 (28.4 percent). MHD and FHWA officials
believe that the cost performance of contracts issued after November 1994
is a more meaningful indicator of the effect of MHD’s cost containment
efforts than the performance of contracts issued before that date because
MHD did not have a cost containment program in effect until 1995. As of
December 1, 1996, 49 construction contracts had not been awarded. If
those contracts experience the same 9.7-percent cost growth as the
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contracts awarded after November 1994 (instead of the 7-percent goal),
the cost of the project would increase by about $100 million.
However, it may not be possible to limit the growth in contract costs to the
9.7 percent experienced on the 28 contracts awarded after November 1994
because those contracts have not been in effect for very long. As of
December 1, 1996, only 5 of the 28 contracts, valued at less than
$10 million, had been completed, while 11 contracts (accounting for about
70 percent of the $1.6 billion cost of the 28 contracts) were less than
25-percent complete. Nevertheless, almost one-half of the 28 contracts had
already exceeded the 7-percent cost containment goal. For example, one
contract that MHD awarded in 1995 to construct the underground Central
Artery is 22-percent complete and will not be finished until 2000. However,
MHD estimates that this contract had already exceeded its bid price by
13 percent as of December 1, 1996.
While we cannot predict the total cost increase on all construction
contracts, we believe that it will be difficult to meet the goals set in 1995
and to avoid increases in the cost of the project. For example, assuming
that awarded construction contracts experience no further cost growth
after December 1, 1996, costs for the remaining 49 unawarded contracts
could increase by only 5.7 percent if the cost containment goal of 10.7
percent is to be met. If, however, the unawarded contracts experience the
same 17.4-percent growth experienced by the awarded contracts, as
shown in table 2, the total cost of the project would rise by about
$500 million.
State officials agreed that the project has ambitious cost containment
goals that will be difficult to meet. However, they stated that the existing
goals are essential to provide designers and contractors with an incentive
to control contract changes and restrict cost growth. They believe that any
relaxation of the goals would deprive state managers of the leverage
needed to control costs and that ultimately such a relaxation would
become a self-fulfilling prophecy, resulting in even further cost increases.
MHD Is Taking Steps to Since our May 1996 report,3 MHD has analyzed the reasons for cost
Reduce Costs, but Options increases and developed strategies to reduce the cost of construction
for More Savings May Be contracts. For example, MHD now requires firms bidding on Central
Artery/Tunnel construction contracts to include a bid of the cost and time
Limited
3
Transportation Infrastructure: Central Artery/Tunnel Project Faces Continued Financial Uncertainties
(GAO/RCED-96-131, May 10, 1996).
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associated with removing unanticipated underground obstructions. MHD
officials stated that this estimate allows them to obtain a competitive price
at the outset of a contract for unknown factors rather than face negotiated
change orders and delays after a contract is awarded. The project’s
construction managers stated that, although it is still too early to assess
measurable results, some of these initiatives could reduce the cost and
number of contract changes, primarily by avoiding delays in these
contracts.
MHD has also made progress in reducing estimated construction costs
during the design process. During the design of a highway, bridge, or
tunnel, preliminary design concepts are refined into detailed plans and
specifications, and preliminary construction cost estimates can increase.
MHD stated in 1995 that preliminary cost estimates, on average, increased
18 percent. To control cost increases, MHD initiated a “design-to-cost”
program in 1995. Under this program, contractors design their segments of
the project within an agreed baseline budget for construction costs. The
design contractor must periodically submit progress estimates as well as a
final design. If the estimate in any of the submittals exceeds the agreed
baseline budget (assuming that MHD has not requested changes to the
agreed baseline budget), the contractor is required to redesign the
project—at the contractor’s own expense—so that the estimated
construction cost falls within the baseline budget.
The design-to-cost initiative is intended to result in no growth in the
estimated cost of construction during the design phase. An MHD analysis
shows that, as of April 1997, estimated construction costs under this
program have increased in total by about 4 percent, compared with the
historical 18-percent rate.4 As of April 1997, MHD required design
contractors to find cost reductions on four contracts to reduce estimated
cost increases by $60 million. The Deputy Project Manager for Design
stated that contractors’ plans have resulted in reductions of about
$44 million of this $60 million and that he is confident that the remainder
will be recouped as well.
While MHD has made some progress in containing costs, options for further
savings may be limited. For example, as of March 1997, only four principal
construction contracts—two for the Route 1A interchange at Logan
International Airport and two for the underground Central Artery—were
4
Experience with the design-to-cost program has been limited to date because, as of Nov. 1996, only 10
contracts had progressed through the final design point in the design-to-cost program. Eight of these
10 contracts had their original baseline budgets established late in the design process. Generally, cost
growth would be more likely to occur earlier in the design process.
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early in the design stage, where greater opportunities exist for significant
scope reductions or changes. MHD is redesigning the scope of one of the
Route 1A interchange contracts to reduce its costs by about $56 million.
With limited opportunity to reduce the project’s scope, the state is looking
for other ways to cut costs. For example, MHD has proposed that the
amount currently budgeted for inflation in unawarded contracts be
reduced from 3.35 percent to 2.35 percent, on the basis of recent inflation
rates in the Boston area. This lower inflation rate would reduce estimated
project costs by about $140 million. FHWA officials are reviewing this
proposal. MHD is also reducing the estimated cost of the project by moving
certain costs out of the project’s budget. For example, in 1996, MHD
reassigned about $20 million in costs from the Central Artery/Tunnel
project to the statewide road and bridge program. These costs were
associated with project contracts for temporary structures at the Charles
River and the replacement of an existing bridge connecting to the project’s
Interstate 90/93 interchange. Project officials stated that these costs were
more appropriately reflected as statewide transportation expenditures
because they would have been incurred whether or not the Central
Artery/Tunnel project was built. Officials said that they are considering
assigning some other project costs to the statewide program.
While the level of future federal funding is uncertain until the federal
State’s Plan for highway program is reauthorized, Massachusetts’ plan for financing the
Financing Project May state’s share of the Central Artery/Tunnel project identified funding
Be Insufficient shortfalls. To address these shortfalls, the state has implemented a plan to
borrow $1.7 billion through Massachusetts Turnpike Authority revenue
bonds backed by toll increases and short-term grant anticipation notes to
be repaid with future federal funds. However, this plan may not be
sufficient because (1) shortfalls may be greater than modeled in the state’s
plan and (2) while the financial markets will decide whether the use of
grant anticipation notes is feasible, uncertainties exist about the use of
these notes because the amount proposed by Massachusetts is
unprecedented and relies on borrowing against federal funds that may not
be authorized until the next federal highway authorization expires,
sometime around 2003.
Funding Shortfalls Exist The state’s December 1996 feasibility study identified a project funding
Under All Scenarios shortfall of $1.8 billion to $2.3 billion from fiscal years 1998 through 2002.
The study referred to this as the “interim” shortfall because the project’s
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needs outstrip sources of funds during the accelerated construction years.
According to the study, from fiscal years 2003 to 2005, construction needs
subside and a funding surplus of $1.6 billion reduces the project’s “total”
funding shortfall to about $200 million to $700 million.
The shortfall ranges are due to uncertainty about future federal funding.
While the feasibility study modeled two potential federal funding
scenarios, shortfalls could be greater or smaller under other possible
federal funding scenarios. For example, under several of the
reauthorization proposals introduced in the Congress during 1997, the
project’s funding shortfalls in fiscal years 1998 through 2002 would range
from $1.6 billion to $2.5 billion. Details of the various funding scenarios
are discussed in appendix II.
In addition to federal funding, the feasibility study identified the state
sources of funding that were expected as of December 1, 1996. These
sources included (1) about $1 billion in state funds to match federal funds
and to pay for the portions of the project funded exclusively by the state;
(2) a $200 million contribution from the Massachusetts Port Authority; and
(3) $400 million in state bonds, which was authorized in 1995, and which
will be assumed by the Massachusetts Turnpike Authority. The feasibility
study’s assumptions are shown in table 3.
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Table 3: Feasibility Study Analysis of
Central Artery/Tunnel Project Funding, Dollars in millions
as of December 1, 1996 (Fiscal Years Fiscal years
1997 Through 2005) 1997-02 Fiscal years Fiscal years
Obligations and sources “interim 2003-05 1997-2005
of financing shortfall” “surplus” “total shortfall”
Obligations $5,696 $283 $5,979
Sources of financing
Federal
- High-funding scenario 2,435 675 3,110
- Low-funding scenario 1,916 675 2,591
State bonds 800 240 1,040
Mass. Port Authority 200 0 200
Mass. Turnpike Authority 100 0 100
State bonds to be assumed by
Mass. Turnpike Authority 400 0 400
Total sources of financing
- High-funding scenario 3,935 915 4,850
- Low-funding scenario 3,416 915 4,331
Proceeds
Air rights proceeds 0 255 255
Insurance proceeds 0 722 722
Total proceeds 0 $977 $977
Surplus/(shortfall)
- High-funding scenario ($1,761) $1,609 ($152)
- Low-funding scenario ($2,280) $1,609 ($671)
Note: This table excludes a $50 million contribution from the Massachusetts Bay Transportation
Authority, which was included in the feasibility study’s high-funding scenario but is not being
pursued by the project at this time.
Source: GAO’s analysis of the feasibility study.
Funding Shortfalls Could The funding shortfalls could be higher than expected because the shortfall
Be Greater Than estimate in the feasibility study reflects the obligation estimate used in the
Anticipated September 1996 finance plan. Since that time, construction and other cost
increases have raised the project’s funding requirements by about
$450 million through March 1997. While some of those increases were
offset by insurance savings in the total cost estimate, most insurance
savings will not be realized until 2017, long after the project is completed.
Thus, the cost increases that occur during construction will still need to be
funded. Furthermore, shortfalls may be $100 million to $500 million
greater if the state’s cost containment goals for construction are not met.
Page 19 GAO/RCED-97-170 Central Artery/Tunnel Project
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State officials acknowledged that these goals are ambitious and that it will
be difficult to meet them.
The state could reduce the shortfall through additional savings. However,
the $1.6 billion surplus between fiscal years 2003 and 2005, which the
feasibility study used to calculate the total shortfall through 2005, will be
smaller than reported. According to the September 1996 finance plan, the
surplus funds accrued between fiscal years 2003 and 2005 will be moved to
the peak construction period through short-term financing. However, as
shown in table 2, nearly $1 billion of this surplus is revenues from the
development of air rights—proceeds the state expects to receive from
developing property acquired for the project’s construction that will
become excess at the end of the project—and savings from the project’s
insurance program. As mentioned earlier, the state assumes that the
insurance savings will not be realized until 2017. In addition, air rights
revenues will be largely unavailable to the project until after 2005. This is
because about half the property expected to be available will not be ready
for development until late 2004.
In commenting on a draft of this report, the state confirmed that insurance
and air rights proceeds would not be used to help finance the project’s
debt and stated that future finance plans would clarify that proceeds are
expected to be received after 2005. FHWA stated that while these proceeds
will not be available to meet the Central Artery/Tunnel project’s funding
needs, they could be used for other transportation-related purposes in
Massachusetts.
Plan for Addressing State legislation enacted in 1997 authorized $1.7 billion in state borrowing
Shortfalls Is in Place, but It to address the funding shortfalls identified in the December 1996
May Not Be Sufficient feasibility study. Specifically, under legislation enacted in March and May
of 1997, the following will occur:
• The Massachusetts Turnpike Authority will contribute $700 million by
December 31, 1998, through revenue bonds backed by toll increases. On
July 1, 1997, the Authority Board voted to increase one-way tolls on the
Sumner, Callahan, and Ted Williams Tunnels—effective July 10,
1997—including increased tolls on passenger vehicles from $1 to $2. An
Page 20 GAO/RCED-97-170 Central Artery/Tunnel Project
B-275370
additional $1 increase is planned in 2002 on these facilities as well as
increases on the Massachusetts Turnpike’s Boston Extension.5
• The state will issue up to $1 billion in short-term grant anticipation notes,
to be repaid with future federal highway funds.
The authorized funding will substantially meet the funding shortfall
identified by the feasibility study under the “high” federal funding
scenario. However, additional state funding will be needed if federal
funding is lower than the high funding scenario. Furthermore, the state’s
funding will not cover the $450 million in additional funding needs through
March 1997 discussed previously or the additional funding that may be
needed if MHD does not meet its goals to contain construction costs.
The financial markets will ultimately decide whether the use of grant
anticipation notes is feasible. There is limited precedent for the use of
such notes, especially in amounts of this magnitude. While grant
anticipation notes have been used in other states, they have been issued
for a substantially lower amount.6
In addition, using grant anticipation notes to borrow $1 billion will require
Massachusetts to borrow against federal funds that may not be authorized
until after the next federal highway authorization expires, sometime
around 2003. The feasibility study assumed that all federal funds for the
project from fiscal years 1998 through 2002 would be needed to pay for the
project and that funding would not exceed costs until 2003. The study
further assumed that, during the surplus fiscal years from 2003 through
2005, the project would have $283 million in funding requirements and
receive about $675 million in federal funds. (See table 3.) Therefore, in
order to borrow $1 billion or more in grant anticipation notes,
Massachusetts would have to repay the notes using federal funds beyond
the likely 5- to 6-year duration of the next highway authorization bill and
beyond the scheduled end of the project.
5
According to the Turnpike Authority’s chief financial officer, the enacted and planned toll increases
will be sufficient for the Authority to make the required $700 million contribution and assume the
$400 million in state bonds authorized in 1995 (see table 2). The state has also proposed an additional
$300 million contribution from the Turnpike Authority at the end of the project, if necessary.
According to the chief financial officer, if this contribution is needed, the Turnpike Authority may have
to raise tolls again.
6
For example, Pennsylvania issued $450 million in short-term notes over a 5-year period, from 1986 to
1991. The notes—from 3 to 6 years in duration—were issued as general obligation notes and backed by
the full faith and credit of the state. Pennsylvania used its Interstate Construction Program funds to
pay the notes and state legislation gave these principal payments first priority in the state’s use of
those funds.
Page 21 GAO/RCED-97-170 Central Artery/Tunnel Project
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According to officials at three bond rating agencies, uncertainties
associated with the availability and timing of future federal funds means
that the financial markets will almost certainly demand some form of state
backup in the event that federal funds are not available to repay the notes.
This demand may entail some difficulties for the state. Massachusetts
already has one of the highest debt burdens in the nation and has put both
statutory and administrative measures in place, such as limits on the
issuance of new debt, to constrain the growth of state debt in order to
improve its credit ratings. These limits restrict the state’s flexibility in
issuing additional debt, and Massachusetts has emphasized the need to
stay within those limits as part of any solution to financing the Central
Artery/Tunnel project. For example, the Massachusetts Deputy Secretary
for Administration and Finance told us that the state is attempting to
structure an issuance of grant anticipation notes that would not require it
to guarantee the notes with the full faith and credit of the state. State
legislation also exempts the notes from the state’s statutory debt ceiling.
According to state officials, there is no contingency plan for financing the
project should the combination of revenue bonds and grant anticipation
notes prove insufficient. However, the feasibility study described several
potential sources of state funds, including additional state
borrowing—subject to the debt ceiling—or further toll increases. The
study also described other sources, such as gasoline taxes, taxes
generated from increased property values, and the diversion of state funds
from other projects, but explained that these options do not appear
feasible or practical.
The Central Artery/Tunnel project faces numerous and complex
Conclusions challenges in constructing tunnels through a densely populated downtown
urban area, within a few feet of buildings and subway tunnels, while
keeping automobile and rail traffic flowing. In addition to these technical
obstacles, Massachusetts faces the challenges of controlling costs and
paying for the project.
Massachusetts is to be commended for establishing aggressive
management goals and for making progress in controlling the cost of the
Central Artery/Tunnel project. By managing the project on a total-cost
basis, monitoring progress against that goal, developing action plans to
control costs and schedules, and holding contractors accountable for cost
increases, the state has shown that it is serious about cost containment.
Page 22 GAO/RCED-97-170 Central Artery/Tunnel Project
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Despite the state’s efforts, the project’s estimated costs have been rising,
and opportunities to produce more savings may be limited. To maintain
total project costs at about $11 billion, the state would not only have to
meet but exceed its aggressive cost containment goals. State officials
acknowledged that these are ambitious goals that will be difficult to meet.
If current trends continue, further cost increases of some magnitude seem
likely. We support the project’s adhering to its cost containment goals as a
means of holding down costs. But these goals form the basis for the state’s
cost estimate and its finance plan. Decoupling the existing goals from the
project’s cost estimate and revising that estimate to more closely reflect
the project’s actual experience with its cost containment program would
provide a more realistic basis for securing needed financing.
While future federal funding remains an uncertainty, Massachusetts has
made progress in the last 12 months by restructuring its public institutions
to bring the resources of the state to bear on financing the project.
However, a number of challenges remain to be overcome before a plan
that is sufficient to meet the financing needs of the Central Artery/Tunnel
project is in place. While Massachusetts could borrow additional funds to
meet funding shortfalls, it will be constrained by its statutory and
administrative debt limits. These constraints on the state, the magnitude of
the shortfalls, and the likelihood of additional costs of some magnitude are
likely to require Massachusetts to reassess its financing plans, particularly
once federal funding for the next 5 to 6 years is established through
reauthorization of the federal highway program.
To provide a more realistic estimate of the cost and financing of the
Recommendations Central Artery/Tunnel project, we recommend that the Secretary of
Transportation direct the Administrator, Federal Highway Administration,
when FHWA requests the Commonwealth of Massachusetts to prepare a
new Central Artery/Tunnel project finance plan, to include in that plan
(1) a revised estimate of the project’s costs and funding needs that more
closely reflects the state’s actual experience with its cost containment
program and (2) a contingency plan for financing the project if costs
increase further or if the sources of financing are not sufficient.
We provided copies of a draft of this report to the Department of
Agency Comments Transportation and the Massachusetts Executive Office of Transportation
and Our Evaluation and Construction. We met with FHWA officials, including the Associate
Administrator for Program Development, and with state officials, including
Page 23 GAO/RCED-97-170 Central Artery/Tunnel Project
B-275370
the Chief Financial Officer of the Massachusetts Turnpike Authority and
officials from MHD’s Central Artery/Tunnel Project Office.
While FHWA and the state generally agreed with the information contained
in this report, they disagreed with the estimate in our draft report that the
project would cost $11.1 billion and our recommendation to revise the
estimate of the project’s cost to more closely reflect the state’s actual
experience with its cost containment program. Specifically, FHWA and the
state contended that (1) while FHWA has no standards for states to follow
in preparing estimates for total project costs, they believed that all costs
incurred and proceeds generated by the project should be considered in
calculating “total cost” regardless of when they occur, even years after the
project is complete and (2) most of the state’s estimates of insurance
savings affect only the total cost estimate and do not reduce the project’s
total funding needs. We revised the report to present the state’s total cost
estimate of $10.8 billion and to delineate the differences between the total
cost estimate and the project’s total funding needs of $11.6 billion. We
continue to believe, however, that uncertainties remain over whether the
insurance savings projected by the state for 2017 will be realized.
FHWA and the state also disagreed with our recommendation to revise the
project’s cost estimate to more closely reflect the state’s actual experience
with its cost containment program. While recognizing the difficulty of
meeting the goals, they stated that decoupling the goals from the estimate
as we recommend would send the wrong message to the project’s
contractors and deprive state managers of the leverage needed to control
costs. While we commend Massachusetts for adhering to its aggressive
cost containment goals, we also believe that the state’s cost estimate—an
estimate that forms the basis for financing the project when significant
shortfalls are projected—should recognize reasonably expected costs
based on current available information about the state’s experience with
its cost containment program. We have therefore retained our
recommendation.
Both FHWA and Massachusetts offered technical comments to clarify and
amplify the information presented in the draft report. We have
incorporated those comments throughout the report as appropriate. In
addition, MHD provided a letter presenting additional views on the progress
of its cost and schedule containment initiatives (see app. IV).
Page 24 GAO/RCED-97-170 Central Artery/Tunnel Project
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The scope and methodology used in preparing this report are presented in
appendix III. We performed our work from November 1996 through
June 1997 in accordance with generally accepted government auditing
standards, but we did not independently verify the data obtained from
MHD’s database.
As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after the
date of this letter. At that time, we will send copies to the cognizant
congressional committees; the Secretary of Transportation; the
Administrator, Federal Highway Administration; and other interested
parties. We will also make copies available to others on request.
Please call me at (202) 512-2834 if you or your staff have any questions.
Major contributors to this report are listed in appendix V.
Sincerely yours,
John H. Anderson, Jr.
Director, Transportation Issues
Page 25 GAO/RCED-97-170 Central Artery/Tunnel Project
Contents
Letter 1
Appendix I 28
Obligations and the
Use of Advance
Construction on the
Central Artery/Tunnel
Project
Appendix II 30
Future Federal
Funding Scenarios for
the Central
Artery/Tunnel Project
Appendix III 32
Scope and
Methodology
Appendix IV 34
Letter From the
Massachusetts
Highway Department
Appendix V 36
Major Contributors to
This Report
Tables Table 1: Central Artery/Tunnel Project’s Total Cost and Funding 12
Needs
Table 2: Percentage Increase in Costs on Awarded Central 14
Artery/Tunnel Project Construction Contracts, as of December 1,
1996
Page 26 GAO/RCED-97-170 Central Artery/Tunnel Project
Contents
Table 3: Feasibility Study Analysis of Central Artery/Tunnel 19
Project Funding, as of December 1, 1996
Table I.1: Federal and State Obligations for the Central 28
Artery/Tunnel Project
Table I.2: Central Artery/Tunnel Project Advance Construction 29
Plan
Table II.1: Comparison of Various Federal Funding Scenarios for 31
Massachusetts and the Effect on Funding for the Central
Artery/Tunnel Project
Figures Figure 1: Map of the Central Artery/Tunnel Project 4
Figure 2: The Ted Williams Tunnel 6
Figure 3: Construction of the Underground Central Artery 8
Figure 4: Central Artery/Tunnel Cost Estimates, March 1996 to 10
March 1997
Abbreviations
GAO General Accounting Office
FHWA Federal Highway Administration
ISTEA Intermodal Surface Transportation Efficiency Act
MHD Massachusetts Highway Department
Page 27 GAO/RCED-97-170 Central Artery/Tunnel Project
Appendix I
Obligations and the Use of Advance
Construction on the Central Artery/Tunnel
Project
As of March 1, 1997, $5.7 billion had been obligated for the Central
Artery/Tunnel project. About $4.7 billion, or 82.5 percent, of those funds
came from federal sources, while $1 billion, or 17.5 percent, came from
state sources, as shown in table I.1.
Table I.1: Federal and State
Obligations for the Central Dollars in millions
Artery/Tunnel Project Source of funds Obligations
Federal funds
Interstate Construction Program $3,940
National Highway System Program 254
Bridge Program 181
Surface Transportation Program 283
Other programs 60
Total federal funds $4,718
Total state funds $1,003
Total obligations $5,720
Note: Numbers may not add due to rounding.
Source: Central Artery/Tunnel Project Office, MHD.
Advance Construction As of April 1, 1997, about $8 billion in contracts for the Central
Artery/Tunnel project had either been awarded or had been completed. To
accomplish this rate of contract activity, Massachusetts made extensive
use of advance construction, particularly during fiscal year 1997. Advance
construction allows a state to begin many more projects concurrently than
under a traditionally financed highway project. With advance construction,
under FHWA’s July 1995 regulations, a state may begin a project and
obligate federal funds in phases over the several years required to build
the project.
Massachusetts plans to award 28 contracts totaling $4.2 billion in this
manner. As of April 1, 1997, about $3 billion of this $4.2 billion had been
awarded. As table I.2 shows, the bulk of this contracting activity occurred
in fiscal year 1997. In fact, during a 6-month period between October 1996
and March 1997, nearly $1.7 billion in contracts were awarded.
Page 28 GAO/RCED-97-170 Central Artery/Tunnel Project
Appendix I
Obligations and the Use of Advance
Construction on the Central Artery/Tunnel
Project
Table I.2: Central Artery/Tunnel Project Advance Construction Plan (as of September 1996 Finance Plan)
Dollars in millions
Advance construction contracts
awarded
Total Obligations by fiscal year
Fiscal year Number value 1995-96 1997 1998 1999 2000 2001 2002 2003 2004
1995 3 $451 $152 $299
1996 5 740 69 104 $221 $209 $101 $28 $5 $3
1997 10 2,136 180 496 676 587 187 10
1998 6 511 24 96 159 110 59 44 $19
1999 1 93 3 8 21 30 26 5
2000 2 185 3 20 71 81 10
2001 1 115 42 60 13
Total 28 $4,231 $221 $583 $741 $984 $858 $408 $234 $166 $34
Note: Numbers may not add due to rounding.
Source: GAO’s analysis of MHD’s data.
According to MHD, this advance construction strategy will save $1 billion in
the total cost of the project and 5 years in construction time. In May 1996,
we reported that while Massachusetts was relying on future funding to pay
the bills, substantial funding shortfalls existed in those years and
Massachusetts did not have a plan for financing the project.7 Since that
time the Federal Highway Administration has required the state to provide
either full funding or to provide state legislative contract authorizations
for the full value of all awarded contracts. Massachusetts has since
authorized state legislative contract authorizations for the full value of all
awarded contracts, although it plans to rely on federal funds,
Massachusetts Turnpike Authority bonds, and other sources as the
ultimate source of financing.
7
Transportation Infrastructure: Central Artery/Tunnel Project Faces Continued Financial Uncertainties
(GAO/RCED-96-131, May 10, 1996)
Page 29 GAO/RCED-97-170 Central Artery/Tunnel Project
Appendix II
Future Federal Funding Scenarios for the
Central Artery/Tunnel Project
Future federal funding for Massachusetts will not be resolved until the
Congress reauthorizes the Intermodal Surface Transportation Efficiency
Act (ISTEA) of 1991. However, we modeled six funding scenarios on the
basis of several current reauthorization proposals and assumptions in the
state’s December 1996 feasibility study to estimate the apportionments
that Massachusetts could receive under the reauthorized federal aid
highway program.8 Estimated annual apportionments under all scenarios
are lower than Massachusetts’ average annual apportionments of
$831 million under ISTEA. These scenarios are the following:
• The ISTEA Integrity Restoration Act (H.R. 674) , or STEP 21, assumes that
each state will receive at least 95 percent of the revenues it contributes to
the Highway Trust Fund. Since Massachusetts has traditionally received
more in federal highway aid than it pays in federal highway taxes, this
proposal reduces federal funding to an average of $393 million per year.
• The Surface Transportation Authorization and Regulatory Streamlining
Act (S. 532), or STARS 2000, assumes that Massachusetts’ average annual
apportionments will be reduced to $432 million.
• The “low” funding scenario in the feasibility study reduces Massachusetts’
apportionments immediately to $450 million per year.
• The “high” funding scenario in the feasibility study assumes that
Massachusetts’ apportionments will be reduced incrementally from
$600 million per year from fiscal years 1998 to 2001 to $450 million per
year thereafter.
• The administration’s proposal for the National Economic Crossroads
Transportation Efficiency Act of 1997 (S. 468), or NEXTEA, retains the ISTEA
framework and assumes that Massachusetts will receive an average of
$580 million per year, ranging from $650 million in 1998 to about
$560 million in 2000 and beyond.
• The ISTEA Reauthorization Act of 1997 (S. 586), or ISTEA Works, also retains
the basic structure of ISTEA and assumes that average annual
apportionments for Massachusetts would equal $656 million.9
Table II.1 shows the effect of each scenario on the financing for the
Central Artery/Tunnel project. In modeling the scenarios for fiscal years
1997 to 2005, we used the assumptions contained in the feasibility study,
including obligation and state funding amounts, air rights proceeds, and
savings from the insurance program as shown in table 2. All scenarios
8
We selected reauthorization proposals for which FHWA estimates of average annual state
apportionments were available.
9
FHWA also provided state-by-state estimates for H.R. 1609. Under this bill, Massachusetts’ average
annual apportionments would be the same as those under S. 586, or $656 million per year.
Page 30 GAO/RCED-97-170 Central Artery/Tunnel Project
Appendix II
Future Federal Funding Scenarios for the
Central Artery/Tunnel Project
assume that the state is authorized to obligate the entire amount of its
apportionment each year. In practice, states’ obligational authority has
historically been less than the amount of the apportionment.
Table II.1: Comparison of Various
Federal Funding Scenarios for Average annual Interim Total
Massachusetts and the Effect on Massachusetts surplus surplus
Funding for the Central Artery/Tunnel Scenario apportionment (shortfall) (shortfall)
Project STEP 21 $393 ($2,460) ($936)
STARS 2000 $432 ($2,338) ($756)
Feasibility study “low” $450 ($2,280) ($671)
Feasibility study “high” fiscal year 1998-01 $600
after fiscal year 2001 $450 ($1,761) ($152)
NEXTEA $580 ($1,860) ($60)
ISTEA Reauthorization Act $656 ($1,637) $281
Source: GAO’s analysis of FHWA and state data.
Page 31 GAO/RCED-97-170 Central Artery/Tunnel Project
Appendix III
Scope and Methodology
To determine the estimated costs of the Central Artery/Tunnel project, we
analyzed the monthly management reports issued by MHD from March 1996
to March 1997 and selected cost data on construction contracts as of
December 1, 1996. We met with MHD and management consultant officials
to discuss the monthly reports and to determine the basis for MHD’s cost
containment goals for the design and construction phases and MHD’s
methodology for measuring progress against those goals. We also
discussed our methodology for measuring MHD’s progress against its cost
containment goals with project officials, who generally agreed with our
methodology. We discussed cost containment strategies and progress with
officials at MHD’s Central Artery/Tunnel project office and obtained and
analyzed related documentation.
In assessing MHD’s success in achieving its cost containment goals, we
included scope changes in our calculation of growth in construction costs
because these costs represent actual increases or decreases to total
construction costs that if removed would not be accounted for in our
analysis of growth in construction costs. We excluded the total value of
scope transfers from our calculation of changes to awarded construction
contract values. However, we captured this value as a separate line item
under unawarded contracts in order to account for this source of cost
increases within the total costs of the construction contracts.10
To determine savings from the wrap-up insurance program, we reviewed
insurance cost estimates from the inception of the program through
March 1997 and discussed the program and its estimated savings with
FHWA, MHD, and project officials, as well as the project’s insurance broker
Sheppard, Riley, Coughlin. We also discussed various aspects of wrap-up
insurance programs with industry officials at Liberty Mutual, Sedgwick
James, Inc., the Workers’ Compensation Rating and Inspection Bureau of
Massachusetts, and officials at other transportation projects with similar
insurance programs, including the Los Angeles County Metropolitan
Transportation Authority, the Metropolitan Atlanta Rapid Transit
Authority, the Washington Metropolitan Area Transit Authority, and the
New Jersey Turnpike Authority.
To determine the Commonwealth of Massachusetts’ plans for financing
the project, we analyzed the September 1996 finance plan and the
December 1996 feasibility study. We reviewed supporting
documentation—including additional funding scenarios for which
10
According to project officials, the majority of scope transfers into awarded construction contracts
initially came from unawarded construction contracts.
Page 32 GAO/RCED-97-170 Central Artery/Tunnel Project
Appendix III
Scope and Methodology
state-by-state estimates were available—and discussed financing issues
with officials at FHWA’s headquarters in Washington, D.C., and at FHWA’s
Massachusetts Division Office in Boston, Massachusetts; the state’s
Executive Office of Administration and Finance; MHD’s Central
Artery/Tunnel project office; the Massachusetts Port Authority; and the
Massachusetts Turnpike Authority; and with rating agency officials at
Moody’s Investors Service, Standard & Poor’s, and Fitch Investors Service,
Inc., in New York. We also reviewed Massachusetts’ statewide
transportation plan and discussed it with officials at FHWA and at the state’s
Executive Office of Transportation and Construction in Boston. In
addition, we obtained and reviewed state legislation and discussed it with
officials at the state legislature, the Massachusetts Turnpike Authority, and
the Massachusetts Port Authority.
We performed our work from November 1996 through June 1997 in
accordance with generally accepted government auditing standards.
However, we did not independently verify the reliability of MHD’s data in its
Oracle database, which we used to analyze MHD’s progress in achieving its
cost containment goals.
Page 33 GAO/RCED-97-170 Central Artery/Tunnel Project
Appendix IV
Letter From the Massachusetts Highway
Department
Page 34 GAO/RCED-97-170 Central Artery/Tunnel Project
Appendix IV
Letter From the Massachusetts Highway
Department
Page 35 GAO/RCED-97-170 Central Artery/Tunnel Project
Appendix V
Major Contributors to This Report
Stephen M. Brown
Resources, Steve Cohen
Community, and Gary L. Jones
Economic Phyllis F. Scheinberg
Sara Vermillion
Development Division
Washington, D.C.
Linda Choy
Boston, Teresa Dee
Massachusetts Lena Natola
(342926) Page 36 GAO/RCED-97-170 Central Artery/Tunnel Project
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Address Correction Requested
Transportation Infrastructure: Progress On and Challenges to Central Artery/Tunnel Project's Costs and Financing
Published by the Government Accountability Office on 1997-07-17.
Below is a raw (and likely hideous) rendition of the original report. (PDF)