What’s a few billion when it comes to construction mega-projects?
In my column Thursday, and another one on Monday, I describe how the Panama Canal expansion project will likely change the way shipping and the global economy function. It is too early to tell; the Canal does not open until 2014, possibly 2015 because of delays due to faulty cement. But the expectation is that a wider canal will allow larger ships to traverse the continent, luring shipping routes from around the world, and possibly opening up mega-deliveries to ports that have not been the beneficiaries to date, including Boston’s port. Boston, like many other ports, has not invested in the dredging or modernization efforts needed to easily accept these post-Panamax ships, though it may benefit from expanded distribution lanes that will bring more commerce here.
But the ties between Boston and Panama are more than shipping lanes. It turns out that one of the major conspiracy theories that animates Panamanians who oppose the Canal expansion as a big investment dream with little benefits to real people involves our Big Dig. The manager of the project is none other than Parsons Brinckerhoff (PB). PB, as part of a joint venture with Bechtel, led both the design oversight and construction of the Big Dig, an effort that was first estimated at $2.6 billion and blossomed into $14.6 billion. The finished project included those concrete ceiling slabs that killed a motorist in 2006. PB also paid a nearly half million dollar settlement with the state. Massachusetts still can do business with PB; it has been in business with the state for years on a number of projects, including the Cape Cod Canal.
But here in Panama, the relatively small price-tag that is delivered publicly is viewed as another PB “markdown.” The entire expansion including new canals, more efficient locking systems, and wider space for bigger ships is just $5.25 billion according to PB’s assessment, a number that even its former chief engineer called exceedingly lowballed. The number matters, of course, because the Panama Canal Authority Board (ACP), which governs the Canal, is paying for half of the price-tag through fees it is collecting at the port. The other half is from public banking investments. Even after PB’s troubles in Boston, and almost right after the ceiling accident, ACP renewed its contract with the company.
I’m not big into business conspiracy theories, though they are fun to read about. PB is a huge company, one of the largest US based engineering and design firms. The truth is that very few international companies can manage big public projects; and the reality is that all major infrastructure efforts (goodness, even every home project) all have cost overruns. But Boston’s woes with PB are alive and well down here at the Canal because there are concerns about possible government corruption and whether the expansion isn’t just a diversion from addressing Panama’s real economic woes. The ACP continues to minimize its relationship with PB, probably well aware that the Massachusetts’ Inspector General in a report about the Big Dig wrote that they came up with their original budget “by applying a largely semantic series of exclusions, deductions, and accounting assumptions.” Maybe if the canal is expanded, on time, and within budget budget, PB might live its reputation down. I suspect we will only know when we start.