Liability contracts could complicate Big Dig recovery efforts

The state’s ability to recover damages from the Big Dig’s overseer for the ceiling collapse that killed a passing motorist and closed nearby tunnels may be limited by project liability agreements signed by Massachusetts officials.

One of the agreements covered the period when the 3-ton ceiling panels that killed 39-year-old Milena Del Valle of Boston were being installed in the Massachusetts Turnpike connector tunnel where the collapse occurred on July 10. A second agreement covered the period when the connector underwent final inspections and was opened to the public.

The first agreement, signed in July 1996 and remaining in effect until January 2001, limited the money that could be recovered to the state’s insurance protection, plus 150 percent of the management fee received by the overseer, Bechtel/Parsons Brinckerhoff. That fee has been estimated at $150 million.

The second agreement, signed in February 2001 and extending through December 2005, altered the liability limit so it included the insurance protection, plus $100 million from Bechtel/ Parsons Brinckerhoff.

Bechtel’s limit
State officials later estimated the state’s insurance protection at $50 million, meaning the contract limited Bechtel’s liability to $150 million in total.

No price tag has been set for tunnel repairs; engineers are working on reinforcements to the ceiling fastening system. Gov. Mitt Romney has already sought $20 million to cover initial costs.

The 2001 agreement also continued an earlier exemption freeing Bechtel/Parsons Brinckerhoff and its subcontractors from any liability for loss of use of the project — which the collapse has created — as well as any loss of revenue to the state — such as recent lost toll collections in the Ted Williams Tunnel. It links the connector tunnel to Logan International Airport.

A lawyer who negotiated that agreement on behalf the Massachusetts Turnpike Authority said he vehemently protested the contract because he felt the liability limits were too low. He said he was ordered to complete it by then-Turnpike Chairman Andrew Natsios.

$100 million not a lot
“When you consider the order of magnitude of the issues that we were dealing with, believe it or not, $100 million was not a lot,” said Peter Pendergast, who served as general counsel to the Turnpike Authority from August 2002 to July 2002. He is a campaign consultant to Christy Mihos, a former Turnpike board member and Bechtel/Parsons Brinckerhoff critic who is now an independent candidate for governor.

“I couldn’t predict the future as to everything that was wrong with the project and what it would cost to fix it, as well as maintain it going forward, but I knew it could be huge dollars,” Pendergast said.

Natsios disputes
“I have to say that Peter has a short memory and he’s protecting himself from what’s happening,” said Natsios, who left the Turnpike to serve as head of foreign disaster assistance at the U.S. Agency for International Development.

“Peter was quite satisfied with the agreement when it was happening,” Natsios added. “He not only negotiated that, but he signed off on that.”

Revamped insurance
The former chairman said the 2001 contract, known formally as Work Program 15, revamped the pay and incentive structure for Bechtel/Parsons Brinckerhoff at a time when he was trying to correct a $2.4 billion cost overrun incurred under prior chairmen.

The 1996 contract, meanwhile, was called Work Program 14 and was signed by commissioners of the Massachusetts Highway Department, which supervised the project at that time.

Natsios said the insurance program — including the liability limits — were revamped after demands from federal officials, who were paying for the bulk of the $14.6 billion project, the most expensive in the nation’s history.

He also pointed to a clause in the both the 1996 and 2001 contracts declaring that in spite of the liability limits, any claim, loss and damages resulting from “willful misconduct, gross negligence, …fraud or active concealment” could be recovered through a lawsuit.

“Well, what do you think happened?” he asked, criticizing Bechtel/Parsons Brinckerhoff’s oversight.

A spokesman for Attorney General Tom Reilly, who is pursuing a criminal case stemming from the accident, and who had already been spearheading state cost recovery efforts with Bechtel/Parsons Brinckerhoff, suggested the liability cap and lost-revenue clauses could complicate his efforts. Reilly is a Democratic candidate for governor.

“Without question, the agencies and governors who have run this project have been too close to Bechtel, and portions of these contracts clearly favor Bechtel’s interests over those of taxpayers,” said a statement from David Guarino, Reilly’s spokesperson. “But the final chapter on Bechtel in Massachusetts isn’t written yet, and we’ll do everything we can to hold them and anyone else accountable for their failures on this project.”

Andrew Paven, spokesman for Bechtel/Parsons Brinckerhoff, declined to comment.

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Topics Massachusetts