Foreign aid chief previously oversaw infamous Boston project

WASHINGTON -- The Bush administration official whose agency approves most of the Iraq rebuilding contracts previously tried to rein in costs for Massachusetts' "Big Dig," the expensive highway project that has become a symbol of government contracting run amok.

Under Andrew Natsios' leadership as administrator, the U.S. Agency for International Development has awarded the largest Iraq contract to Bechtel Corp., the company that helped manage the two-decade-old Boston project that has cost more than five times its original price tag.

While still a Massachusetts official, Natsios imposed severe financial controls on Bechtel after being asked by the governor to control the spiraling costs of the Big Dig project. Bechtel has co-managed the project with a New York firm, Parsons Brinckerhoff.

State and federal officials and taxpayers were stunned in early 2000 when the overseer of the project -- Natsios' predecessor as the head of the Massachusetts Turnpike Authority -- announced it would cost $1.4 billion more than expected.

Natsios, then the state's finance chief, was sent to the Turnpike agency in April 2000 to take charge of the project, which is replacing an elevated section of Interstate 93 with an underground highway and connecting the Massachusetts Turnpike with Logan International Airport.

Radical changes

Natsios cut the fees of Bechtel/Parsons, increased the firms' liability for mismanagement and set standards for additional earnings so high the companies couldn't meet them. He also made everything about the project public, reversing the prior secrecy that enveloped the project and its costs.

Natsios declined to be interviewed for this story. But USAID said he played no part in choosing Bechtel for the Iraq contract, which could be worth $680 million. Under federal law, the USAID professional contract staff made the choice, the agency said.

USAID spokeswoman Ellen Yount said Bechtel's costs in Iraq will be closely monitored by at least seven government contracting experts in Iraq, and possibly nine additional staff members in the region who are available if needed.

Under Bechtel's contract, the company will need specific USAID approval to proceed with any work once it reaches 80 percent of the $680 million contract cap.

Bechtel, a San Francisco engineering giant, has strong Republican connections.

Former Secretary of State George Shultz and ex-Secretary of Defense Caspar Weinberger are two of the prominent Republicans who worked there, and Shultz remains a board member.

The cost escalation in the Big Dig, originally a $2.6 billion project, remains the subject of a furious debate -- which probably will go on after the estimated 2005 completion. Bechtel blames state officials for changes and errors, while state officials contend they were following Bechtel's advice. The current estimated cost: $14.6 billion.

Bechtel's Big Dig project manager, Matthew Wiley, said the company objects to the word "overrun" to describe higher costs.

"We don't have decision authority with the contract," Wiley said. "Do we make decisions in the field? Sure, we're not perfect. The majority of major cost decisions rest with the client (the state). We make recommendations, they make the decisions."

He said the company would pay back money in cases where the company was at fault for higher costs.

Natsios only dealt with the Big Dig for a year starting in late 1999, just before the $1.4 billion cost increase was revealed. At the time, he was finance director for then-GOP Gov. Paul Cellucci.

The Democratic state treasurer at the time, Shannon O'Brien, questions whether Natsios did everything possible to learn of the massive overrun before the Turnpike Authority chairman revealed it to the media.

"I was extremely frustrated that the Cellucci administration, including Natsios, was not more aggressive" in pressing then-turnpike Chairman Jim Kerasiotes to tell the truth, said O'Brien, a political rival of Natsios and the losing Democratic gubernatorial candidate in 2002.

But Paul Ladd, a current federal official who then was a top aide to Natsios, said his boss couldn't have tried harder to learn the truth.

In November 1999, Natsios held up a state bond issue when Turnpike Authority officials were late in providing financial data for a disclosure statement to potential bondholders.

On Dec. 23, 1999, Natsios became alarmed when the state overseers suddenly announced a thorough financial review of a project they previously described as on time and on budget.

Natsios instructed Ladd to inform bond rating agencies of the review, and to offer Turnpike officials state surplus funds to cover overruns -- if they only would come clean with the real costs, Ladd said.

In January 2000, O'Brien vowed to hold up the next state bond issue until the independent Turnpike Authority released the true costs. She said Natsios didn't join in her threat at the time.

Three months later, in April 2000, Cellucci rushed from a tense, private briefing with federal transportation officials, and demanded Kerasiotes' resignation. Natsios was appointed to resolve the problems.

A stinging federal audit accused the state's former overseers of "repeatedly and deliberately" failing to disclose exorbitant overruns, causing "one of the most flagrant breaches of the integrity of the federal-state partnership in the history of the nearly 85-year-old federal-aid highway program."

"We had been beating them up for months," Ladd said of Natsios' efforts. "For her (O'Brien) to say Andrew wasn't doing anything shows she didn't know what he was doing. He was insistent the truth had to be fully disclosed."

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On the Net

Bechtel: www.bechtel.com

U.S. Agency for International Development: www.usaid.gov/iraq