The conflict between the Massachusetts Water Resources Authority and the state inspector general's office continued yesterday when the inspector general released a report critical of the authority.

In a 57-page report, Inspector General Robert A. Cerasoli spelled out his office's concerns about possible problems with the design and construction of the $2.5 billion Deer Island sewage treatment plant in Boston Harbor.

The report states that authority officials approved a final design for the plant that was "loaded with inappropriately luxurious and costly features, furnishings, and equipment."

An elaborate staircase, custom oak cabinets, certain lighting fixtures, and lockers that resemble those found in a "luxury country club," exemplify the excesses at the Deer Island facility, Cerasoli said. Douglas B. MacDonald, executive director of the authority, said he viewed the report, released yesterday, with a combination of frustration and satisfaction.

"We have tried to comply with all of the wishes of the Inspector General's office throughout this process," MacDonald said in an interview. "If you look at the end of the report, we actually do get some credit for cost reductions in the plant."

MacDonald said that each of the concerns raised in the report about luxurious" items have been addressed, and costs have been reduced in almost every category. MacDonald suggested that the inspector general's review was done using outdated and inaccurate cost predictions.

The MWRA was charged with providing the financing for the construction of the plant and the cleanup of the Boston Harbor by a federal judge in 1986. At the time, the two projects were estimated to cost around $7 billion.

The authority has sold about $2 billion in revenue bonds for its projects. Debt service on the bonds is paid from the rates that 43 communities pay the authority for water and sewer services.

Because of favorable market conditions and significant cost revisions, revised estimates put the costs of the new plant and the harbor cleanup at around $4.7 billion.

MacDonald said the bulk of the authority's ongoing drive to lower costs has been undertaken at the recommendation of several state agencies, including the inspector general's office.

In his report, Cerasoli said a good many of the cost reductions at Deer Island were implemented in the last six months since his office has been investigating the MWRA.

"If the inspector general is contending that we are cutting as we are doing the construction, we are," MacDonald said. "That is exactly what we are paid for."

Daniel O'Brien, MWRA's manager of engineering services, said that the elaborate lockers described in the inspector general's report are little more than a cinder block placed under a locker to make it easier to mop the floors.

Many of Cerasoli's complaints stemmed from two value engineering reviews of the facility. Value engineering is the practice of having independent engineers and advisers review the plans for a facility and offer advice on where savings could be achieved.

Cerasoli applauded the principle of using value engineering, but he said that the MWRA did not implement enough of the suggestions made by the engineers.

He said that if the MWRA enacted all of the engineers' recommendations, $85 million would have been saved. Instead, Cerasoli said they have enacted only $19.8 million in savings.

This summer, ratepayers in the state protested rising water and sewer rates. Cerasoli's office contended that without significant cost reductions for Deer Island and the harbor cleanup, the average Massachusetts household would pay more than $2,000 a year for water and sewer services by 2005.

"Evidently, the MWRA still has not gotten the message," the report concludes. "Ratepayers cannot afford and should not be asked to underwrite wasteful extravagances."

MacDonald said the Deer Island plant will employ several hundred people and should be open by the summer of 1994.

Past capital projects in the Boston area have been plagued by inefficiency and neglect, MacDonald said. He said he is trying to reverse the trend with the Deer Island facility. The plans for the plant are not extravagant, he said.

"The ratepayers deserve nothing less than our efforts to prevent decay and future structural deterioration," MacDonald said in a letter to Cerasoli. "Perhaps [your staff] should take the time to understand our projects, as well as the roles played by MWRA staff engineers, outside consultants, and regulatory and oversight agencies."

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