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AG seeks $108m in Big Dig refunds

Shoddy work is cited as settlements pursued

The office of Attorney General Thomas F. Reilly has demanded $108 million in refunds from Big Dig contractors, the first time his office has stated an amount it believes taxpayers are owed because of shoddy work.

The demand was made in a Feb. 7 letter to the lawyer representing Bechtel/Parsons Brinckerhoff, the private sector manager of the project, and the two-dozen smaller design firms supervised by the consortium.

The state will file a lawsuit against Bechtel/Parsons Brinckerhoff and the other firms if the two sides do not reach a settlement, Stephanie S. Lovell, the first assistant attorney general said in an interview yesterday.

Still, Lovell held out the possibility of a settlement. ''We should put some effort into figuring out if this can be drawn to a conclusion,'' she said. ''I'm pushing to know what we are doing, one way or the other.''

Since Feb. 7, Lovell said, she and the lawyer for the design and management contractors have talked a half-dozen times, even though ''we haven't gotten into full-scale negotiations.''

David Hatem, the lawyer for Bechtel/Parsons Brinckerhoff, declined comment. A statement issued last night by the management consortium said: ''We firmly disagree with the attorney general's view of his claim on both the facts and the law. Both before and since receipt of the letter we have had continuous discussions with the attorney general. We remain committed to trying to reach a fair and fact-based settlement.''

Lovell said the state has evidence of more than 200 instances of serious lapses by Bechtel/Parsons Brinckerhoff or its subcontractors, including putting a sewer manhole in the wrong place, building a leaky roof, and paving an uneven section of roadway. Some 600 other potential claims submitted to the attorney general's office last year lacked enough evidence to go forward, she said.

The demand letter, obtained by the Globe, seeks $67 million from Bechtel/Parsons Brinckerhoff and $41 million from the design firms.

The state's settlement claim is based on tort and contract legal theories that the contractors failed to meet the ordinary standard of performance of their industries and that they failed to deliver the services they contracted to provide to the state.

There is another legal theory under consideration, one with potentially very expensive consequences for the contractors. The state could sue under the state's false claims act, which can make a government contractor who accepts payment for substandard work liable for triple damages.

''It is something we are actively considering,'' Lovell said.

The demand letter was sent about four months before the Democratic State Convention in June, at which Reilly is seeking the nomination for governor. The demand letter may blunt possible criticism of Reilly that he has taken too long to resolve the refund issue, even if the claim results in a lawsuit that would be years away from being litigated.

In the past, settlement figures mentioned by people involved in the project have ranged from $50 million to $250 million.

Since the late 1980s, the Big Dig's cost ballooned from under $3 billion to the current estimate of $14.6 billion, and it has experienced years of delay. The project, which put Interstate 93 in Boston underground and dug the Ted Williams Tunnel from the old terminus of Interstate 90 to Logan International Airport, is now substantially complete.

Efforts to gain refunds for shoddy work, often called cost recovery, had an inauspicious start. In the 1990s, Bechtel/Parsons Brinckerhoff, as the overall project manager, was responsible for cost recovery, in essence policing itself as well as the firms it managed.

In 2002, after the estimated cost of the project increased from $10 billion to $14 billion, Peter R. Pendergast, then the general counsel of the Massachusetts Turnpike Authority, which manages the project, sought $250 million from Bechtel/Parsons Brinckerhoff, a demand that was refused.

The Globe reported in 2003 that cost recovery to that date had produced only $35,707 in refunds and found that cost-recovery efforts were neglected to the point of files being lost.

''It admittedly wasn't a front-burner issue for me,'' Michael P. Lewis, the state's top project official, said at the time.

At that point, there were only about 100 refund claims, most of them already closed. The Turnpike Authority then hired a retired judge, Edward M. Ginsburg, to lead a new team of lawyers and engineers on cost recovery.

Ginsburg's team said in a $150 million lawsuit against Bechtel/Parsons Brinckerhoff in 2004 that the consortium for years hid the true cost of the project from state officials. Ginsburg negotiated a $4 million settlement with one design firm and filed suits against about a dozen others.

But Ginsburg and his team were swept out of the cost-recovery process last year after revealing that the tunnels were plagued with hundreds of leaks. The number of cost recovery issues by that time had swelled to almost 500. During the political firestorm over the leaks, Reilly agreed to take over those cases in February 2005.

Ginsburg's $150 million suit was suspended while the attorney general's office delved into a case-by-case review of possible refunds. Lovell said state officials have found little evidence to support Ginsburg's suit.

''We have not found evidence to support the view that public officials did not know,'' she said. ''I think the evidence is a mixed bag. I can't put the smoking gun in anyone's hand.''

Lovell said she inherited many difficulties. For one, the statute of limitations may have expired on many claims, and a law passed in 2003 to waive the statute retroactively could be challenged as unconstitutional.

Also, on numerous occasions Turnpike Authority officials agreed to pay ''global settlements'' of claims made by construction contractors. In those instances, the Turnpike Authority and the construction contractors agreed on a lump sum to settle hundreds of issues, but left few detailed records, Lovell said.

Without those records, the attorney general's office had little basis to pursue a case against the designer or manager of the construction contractors. ''I played the cards I was dealt,'' Lovell said.

While the demand letter from the attorney general's office cites $20 million to compensate the state for delays due to the leaky roof, it makes no claim for the repair of the roof. Lovell said that's because the contractors are paying for the repairs themselves.

Similarly, there is no cost recovery claim for the breach that spilled tens of thousands of gallons of water into the I-93 tunnel in 2004. That breach prompted the repair not only of that section of the tunnel but almost 100 others found to be deficient. Lovell said the cost of those repairs is also being borne by the contractors.

Sean P. Murphy can be reached at smurphy@globe.com.

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