I DON'T USUALLY BLOG ON THE WEEKEND BUT I MISSED YESTERDAY...
We know Maryland is not a union state but let's look nationally at how corporations that now feel empowered at having all their corporate pols reelected are now moving to crush the unions and push you and I further into poverty. We have union news across the nation.....some good, bad, and ugly. As I said, people are beginning to see that the organized efforts given by unions are a must and I think unions are beginning to admit to abuses on their own part. We want to be clear......where unions may compromise it is corporation's objective to crush unions so do not think you will reach a common ground. I want to take a few of the headline cases to highlight the issues. Labor is at a disadvantage because we have fewer pols in office working for us......but we have voice and numbers and that does matter.
You see below that Hostess was brought to its knees by a private equity firm that loaded it with debt and now the company will go out of business and restructure as a new company minus the union labor and benefits. This is the same strategy used by private equity companies like Romney's Bain Capital since the 1980s and yet your Third Way corporate democrat did nothing to protect workers from these abuses. These workers were right to stand firm even as the business collapsed because the circumstances would have been just as bad if not. Now that the election is over and Obama is through using Bain Capital as the bad guy you will not see this Third Way democrat offering any solutions for these actions. When Obama talks of the middle-class, he is talking of the upper-middle class.....the shareholder class that works for profits over people. That is why everyone keeps asking 'why is a democrat supporting this policy'? Well, it is because they are Reagan Republican Liberals and we keep reelecting them!!!!
Restructuring & Bankruptcy November 16, 2012, 8:23 am
As Labor Talks Collapse, Hostess Turns Out Lights By MICHAEL J. DE LA MERCED and STEVEN GREENHOUSE
- Twinkies and Ding Dongs could find new life under a different owner, once Hostess begins an auction of its brands and assets.What might be the last Twinkie in America — at least for a while — rolled off a factory line Friday morning. It was just like the millions that had come before it, golden, cream-filled empty calories, a monument to classic American junk food.
But it is likely to be the last under the current management. After not one but two bankruptcies, Hostess Brands, the beleaguered purveyor of Twinkies, Ho Hos, Sno Balls and Wonder bread, announced plans to wind down operations and sell off its brands.
Since filing for Chapter 11 bankruptcy protection in January, Hostess has been trying to renegotiate its labor contracts in a bid to cut costs. But the talks fell apart, and last week one union went on strike.
The so-called liquidation will probably spell the end of Hostess, an 82-year-old company that has endured wars, countless diet fads and even an earlier Chapter 11 filing. Although the company could theoretically negotiate a last-minute deal with the union, Hostess is moving to shut factories and lay off a large majority of its 18,500 employees.
But Twinkies and the other well-known brands could eventually find new life under a different owner. As part of the process, Hostess is looking to auction off its assets, and suitors could find value in the portfolio.
“The potential loss of iconic brands is difficult,” said the company’s chief executive, Gregory F. Rayburn. “But it’s overshadowed by the 18,500 families that are out of work.”
The company’s current problems stem, in part, from the legacy of its past.
An amalgam of brands and businesses, the company has evolved over the years through acquisitions. In the 1960s and 1970s, the company, then called Interstate, bought more than a dozen regional bakeries scattered across the country. A couple of decades later, it paid $330 million for the Continental Baking Company, picking up a portfolio of brands like Wonder and Hostess.
As the national appetite for junk food waned, the company fell on hard times, struggling against rising labor and commodity costs. In 2004, it filed for bankruptcy for the first time.
Five years later, the company emerged from Chapter 11 as Hostess Brands, so named after its most prominent division. With America’s new health-conscious attitude, it sought to reshape the business to changing times, introducing new products like 100-calorie Twinkie Bites.
But the new private equity backers loaded the company with debt, making it difficult to invest in new equipment. Earlier this year, Hostess had more than $860 million of debt.
The labor costs, too, proved insurmountable, a situation that has been complicated by years of deal-making. The bulk of the work force belongs to 12 unions, including the International Brotherhood of Teamsters and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union.
The combination of debt and labor costs has hurt profits. The company posted revenue of $2.5 billion in the fiscal year 2011, the last available data. But it reported a net loss of $341 million. You don't hear of the concessions made by labor with the last contract.
With profits eroding, the company filed for Chapter 11 in January. It originally hoped to reorganize its finances, seeking lower labor costs, including an immediate 8 percent pay cut.
The negotiations have been contentious.
The Teamsters, which has 6,700 members at Hostess, said it played an instrumental role in ousting Hostess’s previous chief executive, Brian J. Driscoll, this year after the board tripled his compensation to $2.55 million. The union also hired a financial consultant, Harry J. Wilson, who had worked on the General Motors restructuring.
While highly critical of management missteps, the Teamsters agreed in September to major concessions, including cuts in wages and company contributions to health care. As part of the deal, the union was to receive a 25 percent share of the company’s stock and a $100 million claim in bankruptcy.
“The objective was to preserve jobs,” said Ken Hall, the Teamsters’ general secretary-treasurer. “When you have a company that’s in the financial situation that Hostess is, it’s just not possible to maintain everything you have.”
But Hostess reached an impasse with the bakery union. Frank Hurt, the union’s president, seemed to lose patience with Hostess’s management, upset that it was in bankruptcy for the second time despite $100 million in labor concessions. He saw little promise that management would turn things around.
“Our members decided they were not going to take any more abuse from a company they have given so much to for so many years,” said Mr. Hurt. “They decided that they were not going to agree to another round of outrageous wage and benefit cuts and give up their pension only to see yet another management team fail and Wall Street vulture capitalists and ‘restructuring specialists’ walk away with untold millions of dollars.” Thank you for standing firm regardless of the closure.....the work environment would have been exploitation.
About a month ago, Mr. Rayburn said, the bakers union stopped returning the company’s phone calls altogether. For its part, the bakery union said the company had taken an overly aggressive approach. David Durkee, the union’s secretary-treasurer, said Hostess had given an ultimatum. “They said, ‘If you do not ratify this, we are going to liquidate based on your vote.’ ”
With the company standing firm, the bakery union struck last week, affecting nearly two-thirds of the company’s factories across the country. The Teamsters drivers honored the picket line, further shutting down the operations. The company gave union members until 5 p.m. on Thursday to return to work.
Mr. Rayburn said the financial strain of the strike was too much for the company, which had already reached the limits of its bankruptcy financing. Over the last week, Hostess lost tens of millions of dollars as many customers’ orders went unfilled. And its lenders would not open their wallets one more time.
By Thursday morning, Hostess’s executives were ensconced in the company’s headquarters in Irving, Tex., still hoping that enough employees would return to work to resume production. A small number of workers had already crossed the picket lines that had sprung up at most of the baker’s factories, but more than 10 plants remained well below their necessary capacity.
Mr. Rayburn’s deadline of 5 p.m. passed without either side backing down. Soon after, executives asked the company’s legal advisers to finish the court motions that would begin the liquidation. Papers had been drawn up well before that afternoon.
Around 7 p.m., Mr. Rayburn had his final discussions with the company’s board and his senior managers and made the call to begin winding down.
“We were trying to focus on where people were having success, but I had to make a call,” Mr. Rayburn said.
WALMART IS EXPANDING OVERSEAS AND HAD NET REVENUES OF $114 BILLION AS THEY PUSH WORKERS UNDER $9 AN HOUR AND DISMANTLE HEALTH CARE BENEFITS. HERE IN BALTIMORE IT WAS JOHNS HOPKINS WHO PRESSURED CITY COUNCIL NOT TO REQUIRE A $10 AN HOUR BASE WAGE FOR THE STORE TO BE BUILT IN BALTIMORE. DO YOU HEAR YOUR INCUMBENT SHOUTING LOUDLY AND STRONGLY AGAINST PROFITS OVER PEOPLE? IF NOT......
VOTE YOUR INCUMBENT OUT OF OFFICE?
ARE YOUR LABOR AND JUSTICE LEADERS RUNNING CANDIDATES AGAINST INCUMBENTS NEXT ELECTION?
Wal-Mart Workers' Black Friday Strike
By Elizabeth Dwoskin | BusinessWeek – 23 hours ago Nov 16, 2012
America’s biggest retailer may be in for an unexpectedly painful holiday season. Protesting low wages, spiking health care premiums, and alleged retaliation from management, Wal-Mart Stores workers have started to walk off the job this week. First, on Wednesday, about a dozen workers in Wal-Mart’s distribution warehouses in Southern California walked out, followed the next day by 30 more from six stores in the Seattle area.
The workers, who are part of a union-backed employee coalition called Making Change at Wal-Mart, say this is the beginning of a wave of protests and strikes leading up to next week’s Black Friday. A thousand store protests are planned in Chicago, Dallas, Miami, Oklahoma, Louisiana, Milwaukee, Los Angeles, Minnesota, and Washington, D.C., the group says.
In a conference call with reporters on Thursday, workers who were either planning to strike or already striking explained their situation. “We have to borrow money from each other just to make it to work,” said Colby Harris, who earns $8.90 an hour after having worked at a Wal-Mart in Lancaster, Tex., for three years. “I’m on my lunch break right now, and I have two dollars in my pocket. I’m deciding whether to use it to buy lunch or to hold on to it for next week.” He said the deduction from his bimonthly pay check for health-care costs is scheduled to triple in January. In 2013, Wal-Mart plans to scale back its contributions to workers’ health-care premiums, which are expected to rise between 8 percent and 36 percent. Many employees will forgo coverage, Reuters reports.
Sara Gilbert, a manager who was striking in Seattle, called in on her cell phone: “I work full-time for one of the richest companies in the world, and my kids get state health insurance and are on food stamps,” she said.
Along with Target and Sears, Wal-Mart has plans to open retail stores at 8 p.m. on Thanksgiving night. Employees said they weren’t given a choice as to whether they would work on Thanksgiving and were told to do so with little warning. “They don’t care about family,” said Charlene Fletcher, a Wal-Mart associate in Duarte, Calif. She said she is expected to report for work at 3 p.m. on Thanksgiving Day. The workers said that when they complain about scheduling and other problems, management cuts their hours or fires people.
With 1.4 million U.S. workers, the Bentonville (Ark.)-based company is the U.S.’s largest private employer. For years, Wal-Mart has been targeted by unions and workers complaining about low wages, scant benefits, and retaliation against those who speak out.
Until now, the company has crushed attempts by employees to organize. So it’s unusual that Making Change at Wal-Mart has been able to organize a number of strikes—the first in the company’s history, they say. The first strike occurred in Los Angeles in October. That strike spread to 28 stores in 12 states, organizers say.
In an e-mail, Wal-Mart spokesman Kory Lundberg called the strike “just another exaggerated publicity campaign aimed at generating headlines to mislead” the retailer’s customers and employees. “The fact is, these ongoing tactics being orchestrated by the UFCW are unlawful and we will act to protect our associates and customers from this ongoing illegal conduct,” he wrote, referring to the United Food and Commercial Workers International Union.
The workers intend for next week’s protests to be much bigger. They say their goal is not to shame the company, but to improve conditions. “Wal-Mart needs to know,” said Harris, “that if we didn’t want to work with them, we would have quit.”
Yet the strikes—timed to coincide with the holiday shopping rush—are clearly intended to put pressure on the company during the busiest time of the year, when Wal-Mart most needs its employees. Holiday cheer is a tough sell if your workers are picketing in the parking lot.
I listened as NPR News......all Wall Street all the time, spoke of the Long Island utility that performed so badly during the Sandy recovery. LIPA is a public-private partnership with a UK corporation and is not a public utility. NPR is determined to make you think so, as are proponents of these partnerships....think charter schools. We know what public-private partnerships do......look at the Fannie-Freddie debacle; look at the military with private contractors; look at federal student loans when privatized; and look at THE BIG DIG IN MASSACHUSETTS......A HUGE PROJECT GIVEN OVER TO PRIVATE CONTRACTORS WITH A LOSS OF PUBLIC OVERSIGHT THAT WAS A TAXPAYER NIGHTMARE.
In today's article, NPR is set on making the unions the criminal element in the utilities history and indeed there were problems with labor in that respect. What NPR doesn't tell you is that this partnership with the UK firm led to revenue loss and failure to reinvest. What happened with LIPA is happening all across the country with utilities.......the profits are privatized and the costs made public. I don't have to convince Maryland citizens of this as we battle our own BGE/Exelon.......all private.....as they do just the same with Maryland elected official's blessing. So, whether the media badmouths Freddie and Fannie as rogue government programs, we know that it was the private partnership that blew the organization up. Here in Maryland, Maryland Transit Authority (MTA) is defunding public transportation in the form of MTA buses and trains as it sends all funding to the private partner Veola in their expansion. Public transit riders are left with terrible service due to lack of funds while Veola offers free service downtown and impoverishes taxi/bus drivers.
Maggie McIntosh, Anthony Brown, and O'Malley love privatizing profits and having taxpayers cover costs!!!!
Lt. Governor Brown, Joint Committee on Oversight of Public-Private Partnerships Submit Recommendations to Governor and General Assembly
ANNAPOLIS, Md. (January 10, 2012) – Today, the Joint Legislative and Executive Commission on Oversight of Public-Private Partnerships, chaired by Lt. Governor Anthony G. Brown, submitted to Governor Martin O’Malley and the General Assembly a series of recommendations for streamlining and enhancing the framework for establishing public-private infrastructure projects in Maryland.
Initial estimates by Maryland departments overseeing capital projects have found that additional utilization of public-private partnerships could contribute between six percent and ten percent, or $205 million and $315 million respectively, of Maryland’s $3.1 billion annual capital budget while creating as many as 4,000 jobs. This includes an estimated $160 million to $240 million annually that could be invested in Maryland transportation projects through public-private partnerships.
“Creating jobs and putting Marylanders back to work is our highest priority, and investing in infrastructure projects is one of the most effective ways to spur job creation and encourage economic growth,” said Lt. Governor Brown. “Through well structured public-private partnerships we can increase investment in our infrastructure, ensure accountability, and create more jobs. I commend the members of the Commission for their hard work in bringing stakeholders together to develop these comprehensive recommendations. I look forward to working with the Governor and General Assembly to encourage public-private partnerships that will strengthen Maryland’s infrastructure while retaining the State’s control of critical assets.” Do you feel in control of the State's critical assets?
The fifteen member Commission was established in 2010 under HB 1370/SB 979 to evaluate and improve the State’s framework for and oversight of public-private partnerships. Under Lt. Governor Brown’s leadership, the Commission held six public meetings, as well as a Maryland Forward policy forum attended by over 200 representatives from the labor, business, transportation, construction, and other infrastructure-related communities, in order to fulfill its responsibilities and increase the potential for private investment in public infrastructure projects.
As prescribed by law, other members of the Commission include Senator James E. DeGrange (D), District 32; Senator Richard F. Colburn (R), District 37; Delegate Tawanna P. Gaines (D), District 22; Delegate Stephen W. Lafferty (D), District 42; Nancy K. Kopp, State Treasurer; Alvin C. Collins, Secretary of General Services, Beverley K. Swaim-Staley, Secretary of Transportation; William E. Kirwan, Ph.D., Chancellor, University System of Maryland; Carolane Williams, Ph.D., President, Baltimore City Community College; David Wilson, Ed.D., President, Morgan State University; Joseph R. Urgo, Ph.D., President, St. Mary's College of Maryland; Robert C. Brennan, Executive Director, MEDCO; Michael J. Frenz, Executive Director, Maryland Stadium Authority; and Robert Brams, Partner, Patton Boggs LLP.
“Our experience with the Seagirt Marine Terminal project has demonstrated that public private partnerships can succeed in our state,” said Transportation Secretary Beverley K. Swaim-Staley. “These recommendations will help us build the foundation needed to broaden our scope and better utilize public private partnerships as another tool to address our infrastructure needs in the future.”
“It has been a pleasure to work with Lt. Governor Brown and all the members of the Commission throughout these past months, and I believe the recommendations we have put forward will greatly improve the process for developing public-private partnerships for infrastructure projects in Maryland,” said Senator James E. DeGrange. “I look forward to working with the Administration and my General Assembly colleagues to put these recommendations into action.”
The recommendations made by the Commission addressed numerous issues, including the definition of a public-private partnership, the role of State financing, the use of proceeds and revenue sharing, workforce considerations, the process for legislative oversight of future public-private partnerships, and the process for identifying and evaluating potential public-private partnerships. The Lt. Governor will lead legislative efforts during the 2012 Legislative Session to address the Commission’s recommendations. The full report from the Commission can be accessed at http://mlis.state.md.us/other/Public-PrivatePartnerships/index.htm.
Lt. Governor Brown leads the O’Malley-Brown Administration’s economic development portfolio. In his role as Chair of the Joint Legislative and Executive Commission on Oversight of Public-Private Partnerships, the Lt. Governor has held numerous hearings, as well as a policy forum for over 200 attendees, in recent weeks to evaluate the State’s framework for public-private partnerships in order to increase the potential for private investment in public infrastructure projects. Additionally, Lt. Governor Brown chairs Maryland’s FastTrack initiative – part of Maryland Made Easy (www.easy.maryland.gov) – to streamline the state permitting process for businesses and developers and serves as Chair of the Governor’s Subcabinet on Base Realignment and Closure
BELOW WE SEE WHAT IS A TEMPLATE FOR PUBLIC-PRIVATE PARTNERSHIPS AND IT IS OF COURSE COURTESY OF WALL STREET/HARVARD'S HEADQUARTERS AND TAKES ON ALL THE ELEMENTS OF A COMPLEX FINANCIAL INSTRUMENT......FULL OF DELIBERATE CRIME AND CORRUPTION. I CAN'T SHOW THE ENTIRE ARTICLE, BUT FOR MARYLAND WHO IS CAPTURED BY THESE SAME WALL STREET POLS........YOU CAN BET THE SCENARIO WILL BE THE SAME WITH WHAT ANTHONY BROWN/O'MALLEY, AND MAGGIE MCINTOSH HAVE IN STORE FOR MARYLAND'S TRANSPORTATION PARTNERSHIPS.
MARYLAND CITIZENS CAN'T GET ACCOUNTABILITY FOR THEIR TRANSPORTATION TRUST NOW......EXPAND IT WITH PRIVATIZATIONS? OH REALLY?
VOTE YOUR INCUMBENT OUT OF OFFICE!!!!
The Big Dig was the most expensive highway project in the U.S. and was plagued by escalating costs, scheduling overruns, leaks, design flaws, charges of poor execution and use of substandard materials, criminal arrests, and even one death. The project was scheduled to be completed in 1998 at an estimated cost of $2.8 billion (in 1982 dollars, US$6.0 billion adjusted for inflation as of 2006). The project was not completed, however, until December 2007, at a cost of over $14.6 billion ($8.08 billion in 1982 dollars)as of 2006. The Boston Globe estimated that the project will ultimately cost $22 billion, including interest, and that it will not be paid off until 2038. As a result of the deaths, leaks, and other design flaws, the consortium that oversaw the project agreed to pay $407 million in restitution, and several smaller companies agreed to pay a combined sum of approximately $51 million.
Lessons of Boston’s Big Dig
Nicole Gelinas City Journal
America’s most ambitious infrastructure project inspired engineering marvels—and colossal mismanagement
Leave it to Massachusetts, though, to turn the Big Dig’s reputation from resounding success to humiliating failure—first in terms of the project’s cost. From day one—even after accounting for politicians’ erring on the low side to gain public approval—the Big Dig was fated to cost more than its 1982 price tag of $2.6 billion.
That number didn’t include much of the project’s mitigation, including big changes like the billion-plus extra to remake the Zakim Bridge. Nor did it include the real costs of staying on schedule. The Big Dig often let its contractors start work on pieces of the project before designs for other key parts were complete. This approach—part of the project’s philosophy of getting things done now and asking questions later—meant expensive changes to contracts. By the early 1990s, as the state added new work, and as its consultants and contractors looked underground to see what was actually there, the Big Dig’s price tag had ballooned to nearly $8 billion.
True, critics aren’t being entirely fair when they compare the project’s final cost, $14.8 billion, with the initial estimate; $2.6 billion in 1982 is $5.6 billion today, thanks to inflation. And inflation has similarly distorted the cost of the many expensive changes made to the project—because the more realistic cost estimates that accounted for those changes were also calculated in then-current dollars, rather than in the dollars that the state eventually had to pay. Still, there’s a lesson here for managers of other infrastructure projects: be careful with that first number, because it can become a permanent benchmark against which to measure success or failure.
Perhaps it’s understandable that inflation and massive increases in scope would swell the project’s price tag. But the Big Dig’s planners truly failed the public through a deliberate decision: for years, they used dubious accounting methods that hid true costs.
In 1994, two years into construction, Bechtel and Parsons officials compiled convincing evidence that the Big Dig would cost nearly $14 billion in completion-year dollars—far more than public officials were disclosing—and took their findings to the state, says former state inspector general Bob Cerasoli, who supervised a 2001 report on the Big Dig’s finances. But the state didn’t tell the public, so alarming Bechtel that its president flew to Boston to see then-governor William Weld. Afterward, according to Cerasoli’s report, “state managers directed state and [Bechtel and Parsons] staff to . . . maintain the fiction of an . . . $8 billion project. . . . They did so by applying a largely semantic series of exclusions, deductions, and accounting assumptions that covered up the $6 billion difference,” often with the knowledge of federal highway officials.
Some state officials thought that if they delayed disclosing money woes, the public would be so thrilled with early improvements like the Ted Williams Tunnel, which opened in 1995, that they wouldn’t pay attention to boring finances. But as an internal “pros and cons” document noted, if the state didn’t inform bondholders, it risked fraud charges—and, in fact, federal securities regulators later reprimanded Weld’s Big Dig boss, James Kerasiotes, for “misleading” investors. Even more pressing, the state needed actual money to continue its project, so it had to come clean despite worries that “we could become the central controversy of the next year in Massachusetts.” It was after the state finally fessed up that the feds imposed their permanent funding cap on the project.
Massachusetts’s desire to insulate the public from the Big Dig’s costs also led to a fateful decision by Governor Weld. Weld needed a ready source of money for the project, without hiking taxes or cutting spending elsewhere. So he transferred the Big Dig’s assets to the Massachusetts Turnpike Authority, an unaccountable public entity akin to New York’s Metropolitan Transportation Authority, in return for some of the authority’s future toll revenue, which would back Big Dig bonds. This costly trade added a new layer of bureaucracy to the project, which needed, more than anything, one elected person to be ultimately accountable. After last year’s fatal ceiling collapse, Mitt Romney, governor for nearly four years, could point to the fact that his predecessor’s appointee still ran the Big Dig.
But the Big Dig’s biggest pitfall was that Massachusetts never understood a basic fact: that it couldn’t pay someone else to assume its own responsibility for an immensely complex, risky project. As the National Transportation Safety Board (NTSB) would later say in its report on the 2006 ceiling collapse, Bechtel and Parsons, the state’s long-term consultants, were “performing the role that would normally be carried out by a government agency, specifically, the state highway department.”
Since costs turned the Big Dig into a scandal, the public has often seen Bechtel and Parsons as its villains. The perception in Massachusetts—never dispelled by state officials—is that the duo’s thousand-plus white-collar workers, dwarfing their few dozen public-sector counterparts, ran the Big Dig, expertly controlling and manipulating designers, contractors, and information, without letting anyone else have much say, from colleagues at lowly engineering firms to meddling public officials. But even assuming the worst—and the reality is more complicated—people usually can’t manipulate you unless you let them. As early as 1991, the state’s inspector general warned of the “increasingly apparent vulnerabilities . . . of [Massachusetts’s] long-term dependence on a consultant” whose contract had an “open-ended structure” and “inadequate monitoring.” The main deficiency, as later IG reports detailed, was that Bechtel and Parsons—as “preliminary designer,” “design coordinator,” “construction coordinator,” and “contract administrator”—were often in charge of checking their own work. If, say, the team noticed in managing construction that a contract was over budget because of problems rooted in preliminary design, it didn’t have much incentive to speak up.
The state should also have known that when consultancy work will last years and when consultants plan to introduce technologies so sophisticated that they can overwhelm the state’s ability to oversee them, the state’s going to wind up in a vulnerable position. Massachusetts would have been smart to introduce some checks and balances early on—perhaps splitting the work that Bechtel and Parsons were doing into smaller parts, having separate consultants for preliminary design and for “project management” work, or keeping some of the “management” in house. Instead, in the name of cost efficiencies, the state further blurred the distinction between public and private sectors by folding Bechtel and Parsons employees and its own workers into one “integrated project organization” in 1998. And though the state’s Massachusetts Turnpike Authority was at the top of the new organization chart—which was immensely complicated by multiple layers of theoretical oversight, including supervision from federal highway officials as well as the feds’ General Accounting Office—the state designated Bechtel and Parsons its “owner’s representative” in some areas, complicating even further the answer to the straightforward question: Who was in charge?
Massachusetts’s laissez-faire attitude followed from a fundamental misapprehension: that Bechtel and Parsons were their partners, not outside consultants, and were thus assuming some performance risk. In a 1994 interview, Kerasiotes, then the state’s transportation secretary, argued that Bechtel’s incentive to perform its job properly was its reputation: “Go to San Francisco, walk in the lobby” of Bechtel’s headquarters, he suggested. “What you’re going to see [are] prominent pictures of the Central Artery. . . . If they are causing this project to screw up, . . . they’re not going to market themselves that way.”
But Bechtel and Parsons never took on any performance risk—risk that the public sector carries as the ultimate funder and manager. If the project were an investment-banking deal, Bechtel would have been an advisor counseling a company on whether to undertake a merger, not an investor in that merger. “Our contractual responsibility as management consultant was to deliver a professional standard of care, not to guarantee the contractors’ work,” says Keith Sibley, Bechtel and Parsons’s longtime Big Dig director. It’s a crucial distinction: Bechtel and Parsons promised not perfect results but professional advisory and management work—and reasonable people may differ about what constitutes “professional.” It’s particularly difficult to assess decisions made under an “integrated project organization,” where everything is opaque about who was responsible for which decisions, or whether particular decisions were the result of public and private collaboration.