The RPA Construction Cost Report
A much-awaited Regional Plan Association report about construction costs in New York has come out, as a supplement to the Fourth Regional Plan, and I’m unimpressed. I thought that I would either enjoy reading the RPA’s analysis, or else be disappointed by it. Instead, I’ve found myself feeling tepid toward most of the analysis; my objections to the report are that its numbers have serious mistakes, that the recommendations at the end conflict with the analysis, and that it seems to overvalue other English-speaking countries, even when their construction costs are the highest in the world outside the US.
The big contrast is with Brian Rosenthal’s expose in the New York Times. The main comparison city to New York there is Paris, where the extension of Metro Line 14 resembles New York’s subway extensions; for the article, Brian talked to construction managers here, and either visited the site himself or talked to people who did, to compare the situation with that of New York. As a result, I learned things from Brian’s article that I did not know before (namely, that the excavation per station for the Line 14 extension wasn’t less voluminous than for Second Avenue Subway). The RPA report gives a few details I wasn’t familiar with, such as escalators’ share of construction costs, but nothing that seems big.
I feel like I slag on the RPA a lot nowadays – it started with their report from three years ago about Outer Borough transit and continued with their wrong approach to Triboro, but more recently I didn’t think much of their take on suburban TOD, or the Gateway project, or the Fourth Regional Plan in general. This isn’t out of malice or jealousy; when I talked to Tom Wright six months ago I sympathized with the political constraints he was operating under. The problem is that sometimes these constraints lead either to unforced errors, or to errors that, while I understand where they come from, are big enough that the organization should have pushed and made sure to avoid them. In the case of the construction cost report, the errors start small, but compound to produce recommendations that are at times counterproductive; agency officials reading this would have no way of reducing costs.
Mistakes in the Numbers
The RPA is comparing New York’s costs unfavorably with those of other cities around the world, as well as one American city (Los Angeles). However, at several points, the numbers appear different from the ones I have seen in the news media. Three places come to mind – the first is a nitpick, the second is more serious but still doesn’t change the conclusions, the third is the most egregious in its implications.
The first place is right at the beginning of the report. In the executive summary, on page 2, the RPA gives its first example of high New York costs:
The Second Avenue Subway (SAS), for example, has the distinction of being the world’s most expensive subway extension at a cost of $807 million per track mile for construction costs alone. This is over 650% more per mile than London’s Northern Line extension to Battersea — estimated at $124 million per track mile.
Both sets of numbers are incorrect – in fact, contradicted by the rest of the document. SAS is $1.7 billion per route-km, which is $850 million per track-km. The Northern line extension to Battersea is also much more expensive. I can’t tell whether these figures are missing something, such as stations or overheads, but as headline numbers, they’re both lowballed.
The second place is when the report discusses station construction costs. Not having seen any advance copy, I wrote about this issue two weeks ago, just before the report came out: the three new SAS stations cost $821, $649, and $802 million, according to the Capital Program Dashboard. In contrast, on pp. 16-17, the RPA gives lower figures for these stations: just $386 million, $244 million, and $322 million. The RPA’s source is “Capital Construction Committee reports,” but my post on station costs looked at some of those and found costs that are not much lower than those reported in the Dashboard. The RPA figures for the last two stations, 86th and 72nd, seem close to the costs of finishes alone, and it’s possible that the organization made a mistake and confused the cost of just finishes (or perhaps just excavation) with the total cost, combining both excavation and finishes.
With the correct costs, the difference from what Paris spends on a station (about $110 million on average) seems so stark that the recommendations must center station construction specifically, and yet they don’t.
The third and most problematic mistake is table 10 on page 50, which lists a number of subway projects and their costs. The list is pretty short, with just 11 items, of which 3 are in New York, another is in Los Angeles, one is in Toronto, and 2 are in London. The Toronto project, the Spadina subway extension to Vaughan, and one of the London projects, the Northern line extension, are both lowballed. The RPA says that the Northern line extension’s cost is $1.065 billion, but the most recent number I’ve seen is £1.2 billion, which in PPP terms is $1.7 billion. And the Vaughan extension, listed as $1.961 billion in the report, is now up to C$3.2 billion, about $2.55 billion in PPP terms. Perhaps the RPA used old numbers, before cost escalations, but in such a crucial report it’s important to update cost estimates even late in the process.
But most worryingly, the costs on table 10 also include mistakes in the other direction, in Paris and Tokyo. The cost estimate listed for Line 14 South in Grand Paris Express is $4.39 billion. But the Cour des Comptes’ report attacking Grand Paris Express’s cost overruns lists the line’s cost as only €2.678 billion, or about $3.3 billion; this is in 2012 euros, but French inflation rates are very low, well below 1% a year, and at any rate, even applying American inflation rates wouldn’t get the cost anywhere near $4 billion. In Tokyo, the RPA similarly inflates the cost of the Fukutoshin Line: it gives it as $3.578 billion, but a media report after opening says the cost was ¥250 billion, or about $2.5 billion in today’s PPP conversion, with even less inflation than in France.
I can understand why there would be downward mistakes. Reports like this take a long time to produce, and then they take even longer to revise even after they are supposedly closed to further edits; I am working on a regional rail report for TransitMatters that has been in this situation for three months, with last-minute changes, reviews by stakeholders, and printing delays. However, the upward mistakes in Paris and Tokyo are puzzling. It’s hard to explain why, since the RPA’s numbers are unsourced; it’s possible they heard them from experts, but didn’t bother to write down who those experts were or to check their numbers.
The Synthesis Doesn’t Follow the Analysis
Manuel Melis Maynar’s writeup in Tunnelbuilder about how as CEO of Madrid Metro he delivered subway construction for, in today’s money, around $60 million per km, includes a number of recommendations. The RPA report cites his writeup on several occasions, as well as his appearance at the Irish Parliament. It also cites secondary sources about Madrid’s low construction costs, which appear to rely on Melis’s analysis or at least come to the same conclusions independently. However, the RPA’s set of recommendations seems to ignore Melis’s advice entirely.
The most glaring example of this is design-build. Melis is adamant that transit agencies separate design from construction. His explanation is psychological: there are always some changes that need to be made during construction (one New York-based construction manager, cited on p. 38 of the RPA study, says “there is no 100% design”), and contractors that were involved in the design are more likely to be wedded to their original plans and less flexible about making little changes. This recommendation of Melis’s is absent from the report, and on the contrary, the list of final recommendations includes expansion of design-build, a popular technique among reformers in New York and in a number of English-speaking cities.
Another example is procurement. I have heard the same explanation for high New York costs several times since I first brought up the issue in comments on Second Avenue Sagas: the bidding process in New York picks the lowest-cost proposal regardless of technical merit (Madrid, in contrasts, scores proposals 50% on technical merit, 30% on cost, and 20% on speed), and to avoid being screwed by dishonest contractors, the state writes byzantine, overexacting specs. As a result, nobody wants to do business with public works in New York, which means that in practice very few companies bid, leading to one-bid contracts. Brian’s article in the New York Times goes into how contractors have an MTA premium since doing business with the MTA is so difficult, and there’s also less competition, so they charge monopoly rates.
The RPA report’s analysis mentions this (pp. 3-4):
In addition, the MTA’s practice of selecting the lowest qualified bidder, even though they are permitted to issue Requests-for-Proposals, has resulted in excessive rebidding and the selection of teams that cannot deliver, resulting in millions of dollars in emergency repairs.
However, the list of recommendations at the end does not include any change to procurement practices to consider technical merit. The recommendations include post-project review for future construction, faster environmental review, reforms to labor rules, and value capture, but nothing about reforming the procurement process to consider technical merit.
Finally, the report talks about the problem of change orders repeatedly, on pp. 3, 15-16, and 38-39, blaming the proliferation of change orders for part of the cost escalation on SAS. Melis addresses this question in his writeup, saying that contracts should not be awarded for a lump sum but rather be itemized, so that change orders come with pre-agreed costs per item. None of this made it to the final recommendations.
There’s a World Outside the Anglosphere
If the report’s recommendations are not based on its own analysis, or on correct construction cost figures, then what are they based on? It seems that, like all failed reform ideas around the US, the RPA is shopping for ideas from other American cities or at least English-speaking ones that look good. Its recommendations include “adopt London’s project delivery model” and “expand project insurance and liability models,” the latter of which is sourced to the UK and Australia. Only one recommendation so much as mentions a non-English-speaking city: “develop lessons learned and best-practice guidance as part of a post-project review” mentions Madrid in passing, but focuses on Denver and Los Angeles.
This relates to the pattern of mistakes in the cost figures. Were the numbers on table 10 right, the implication would be that London, Paris, and Tokyo all have similar construction costs, at $330, $350, and $400 million per km, and Toronto is cheaper, at $230 million per km. In this situation, London would offer valuable lessons. Unfortunately, the RPA’s numbers are wrong. Using correct numbers, London’s costs rise to $550 million per km, while those of Paris and Tokyo fall to $260 and $280 million. Toronto’s costs rise to $300 million per km, which would be reasonable for an infill subway in a dense area (like the Fukutoshin Line and to some extent the Metro Line 14 extension), but are an outrage for a suburban extension to partly-undeveloped areas.
Using correct numbers, the RPA should have known to talk to people in countries that don’t speak English. Many of the planners and engineers in those countries speak English well as a second language. Many don’t, but New York is a large cosmopolitan city with immigrants with the required language skills, especially Spanish.
Nonetheless, the RPA report, which I am told cost $250,000 to produce, does not talk to experts in non-English-speaking countries. The citations of Melis are the same two English-language ones I have been citing for years now; there is no engagement with his writings on the subject in Spanish or his more recent English-language work (there’s a paper he coauthored in 2015 that I can’t manage to get past the paywall update: kind souls with academic access sent me a copy and it’s not as useful as I’d hoped from the abstract), nor does the RPA seem to have talked to managers in Madrid (or Barcelona) today. Across more than 200 footnotes, 30-something are sourced to “expert interviews,” and of those all but a handful are interviews with New York-based experts and the rest are interviews with London-based ones.
As a result, while the report is equipped to explain New York’s internal problems, it fails as a comparative piece. The recommendations themselves are primarily internal, based on things Americans have been discussing among themselves for years: streamlining environmental review, simplifying labor rules, expanding design-build.
The labor reforms mentioned include exactly one specific case of excessive staffing, reported in the New York Times (and, beforehand, on an off-hand remark by then-MTA Capital Construction chief Michael Horodniceanu), about the number of workers it takes to staff a tunnel-boring machine. The New York Times article goes into more detail about the entire process, but the RPA report ignores that in favor of the one comparison that had been going around Transit Twitter for years. Instead of proposing specifics for reducing headcounts, the report talks about changing the way workers are paid for each day, relying on internal reforms proposed by people dissatisfied with the unions rather than on any external analysis.
The Cycle of Failure
I’ve been reading policy papers for maybe a decade – mostly American, a few Israeli or Canadian or British or French. There’s a consistent pattern in that they often treat the practices of what they view as a peer city or country as obvious examples of what to do. For example, an American policy paper on Social Security privatization might explain the Chilean system, and recommend its implementation, without much consideration of whether it’s really best industry practice. Such papers end up at best moving sideways, and at worst perpetuate the cycle of failure, by giving governments the appearance of reform while they in fact cycle between bad options, or occasionally stumble upon a good idea but then don’t understand how to implement it correctly.
If New York wants to study whether design-build is a good idea, it’s not enough to put it in the list of recommendations. It needs to do the legwork and read what the best experts say (e.g. Melis is opposed to it) and look at many cities at once to see what they do. I would feel embarrassed writing a long report like this with only 7 case studies from outside the US. I’d want to examine many more: on the cheap side, Stockholm, Milan, Seoul, Barcelona, Madrid, Athens, Naples, Helsinki; on the expensive side, London, Singapore, Hong Kong, Toronto, Melbourne, Munich, Amsterdam; in between, Paris, Tokyo, Brussels, Zurich, Copenhagen, Vienna. On anything approaching the RPA’s budget for the paper, I’d connect with as many people in these places as I could in order to do proper comparative analysis.
Instead, the RPA put out a paper that acknowledges the cost difference, but does not make a real effort to learn and improve. It has a lot of reform ideas, but most come from the same process that led to the high construction costs New York faces today, and the rest come from London, whose construction costs would astound nearly everyone in the world outside the US.
One of the things I learned working with TransitMatters is that some outside stakeholders, I haven’t been told who, react poorly to non-American comparison cases, especially non-English-speaking ones. Ignorant of the world beyond their borders, they make up excuses for why knowledge that they don’t have is less valuable. Even within the group I once had to push back against the cycle of failure when someone suggested a nifty-looking but bad idea borrowed from a low-transit-use American city. The group’s internal structure is such that it’s easy for bad ideas to get rejected, but this isn’t true of outside stakeholders, and from my conversation with Tom Wright about Gateway I believe the RPA feels much more beholden to the same stakeholders.
The cycle of failure that the RPA participates in is not the RPA’s fault, or at least not entirely. The entire United States in general and New York in particular is resistant to outside ideas. The political system in New York as well as the big nonprofits forms an ecosystem of Americans who only talk to other Americans, or to the occasional Canadian or Brit, and let bad ideas germinate while never even hearing of what best industry practices are. In this respect the RPA isn’t any worse than the average monolingual American exceptionalist, but neither is it any better.
Stockholm on the cheap side? I’m not too aware of the metro expansion but didn’t the citybanan cost a fair bit? US$2billion for 6km, a bit in the middle imo.
Citybanan was $300 million per km, but the ongoing Metro extensions are combined about $110 million per km. Citybanan involves a deep cavern under T-Centralen; the ongoing extensions in theory all extend the system outward, but one does so with a lot of underwater tunneling and takes over a preexisting branch (not included in the length figure, of course, but the new interlocking adds to the cost).
Once again I marvel at the shear lack of knowledge in the RPA authors. Their report is riddled with inaccuracies besides the numbers. For example they state that blasting was banned on ESA. Not true almost 3000 blasts occurred beneath Grand Central. And there’s plenty more wrong statements and comments that are used to draw erroneous conclusions making the overall report questionable. As for Madrid and it being held up as a shining beacon, maybe you should look at the very juicy contracts awarded to the contractors after Madrid and ask yourself how good this was for the Spanish economy. The comments about design would require changes to the State PE laws concerning responsibility for design, in the US an individual takes responsibility whereas in many other countries it’s the design company. Guess who has the more conservative designs because of the LAW. Also this fetish with design Build, where is the proof that it results in lower costs? Construction has three ingredients, cost, schedule and quality and you have to sacrifice 1 of these to enhance the others. Regarding MTA procurements, you guys need to do your research better, on ESA, CM019 the cavern contract, CQ031 Queens tunnels and Cq039 were all procured through RFP’s, not hard money bids. Your comments on specifications are laughable, every project has to provide performance specs and as someone who has worked in Hong Kong, Istanbul, Denmark as well as the UK and US there is little to no difference in the level of specification. Plus in DB there will be detailed specs provided by the Contrcators designer. Maybe in Madrid they just made stuff up as they went.
Again where is your assessment of design build costs, and where is your assessment of RFP versus hard money outcome costs? Where is your assessment of other construction costs in NY, for example vertical construction or bridge/Highway compared to other areas. I think you’ll find that all forms of construction are higher than what their locations. MTA is not perfect and The NY Times is not always correct.
Can I email you and ask you things about Denmark vs. the UK and US?
As for other costs: New York has higher skyscraper construction costs than other cities, but the difference isn’t large. Hudson Yards (built on a railyard) is expensive and so is WTC-related construction, but privately-funded office towers on firma are $3,000-6,000/m^2, whereas Parisian skyscrapers in La Defense are maybe $2,500/m^2 (and are the same height as the $3,000 ones – the $6,000 example is supertall, whereas the La Defense ones aren’t).
I don’t have recent highway examples in New York, but elsewhere in the US they exhibit very high costs, too – road tunnels in LA and Seattle are way more expensive than in Paris and Madrid. But they’re built by the same public procurement process as rail tunnels, with the same contractors and same change orders. The Tappan Zee Bridge replacement is also very expensive for its length, but again it’s a public project (using design-build).
Manhattan concrete comes in from plants far away. The next lot over isn’t a parking lot that can be rented out during construction for staging, a place for the crane dangle over and maybe even for mixing the concrete. It’s gonna be pricey. And people will pay rents that pay off the mortgage/investors. Chelsea Market is an unextraordinary collection of commercial building. It just sold for 2 billion. With a B like in boy. Works out to $17,000 a square meter. If the market is 17,000 it makes sense to build new at outrageous prices of 6,000. Or even 8,000.
It won’t affect things much but you have to check what kind of area they are talking about. Sometimes it’s “rentable space” and sometimes it includes the mechanical services that takes up the space where the 20th and 21st, 40th and 41st floors would be.
….with or without the elevator shaft and lobby on each floor? The “telephone closet” and public restrooms that the landlord controls. If the landlord subcontracts maintenance is the closet on each floor where the maintenance staff keeps the vacuum cleaner, floor scrubber etc. rentable or is it’s not… It’s not gonna matter much but there is more than one way to measure things. Again, this is going to minor but significant. New York and Chicago are notorious for having very very strict very very well enforced building codes that make things more expensive.
So their solution is to put the screws on labor unions, while making no structural changes?
Not quite, because they do have some useful ideas, like streamlining the environmental review process. But they’re not touching the procurement process, they’re saying nothing about the expensive construction techniques used for the stations, and they’re not proposing improving in-house expertise in lieu of consultants.
Design-build has its place, it seems like it makes sense where speed is the utmost concern, such as when the I-35W bridge collapsed in Minneapolis. But I am not sure why anyone could argue that it reducies costs, beyond the idea that finishing work faster means less money spent on labor.
Light rail in Denver didn’t really get going until we were able to point to San Diego and Portland. However, American exceptionalism most often comes into play when people don’t want to do something. Denver has purchased German and German-designed buses and rail vehicles for over 35 years (but the Chinese got the latest order of battery buses). The purchases were the logical consequence of agreed-upon planning goals that didn’t have a national label.
The new Denver area commuter rail lines and the Aurora LRT line have been done as design build and all have (or will) be delivered late. An engineering colleague commented “their schedules are witchcraft.”
Yet the SE Line and associated I-25 widenings were design build and came in under budget, ahead of schedule, by many of the same contractors that did the more recent rail projects.
I’m not sure, but some differences were: SE had previous LRT project experience in Denver, SE had previous highway experience in Denver and no traffic conflicts in the other jurisdictions (other than driveways), SE had right-of-way segments already owned by CDOT and RTD, and no segments requiring coordination with railroads. The R-Line (Aurora LRT) involved a city government’s land-use planning and traffic engineering and CU medical center learning curve.
“what Paris spends on a station (about $110 million on average)”
Is this figure correct? I am having a hard time squaring it with the cost estimate you provide for the line 14 south extension. Given that stations appear to be the most significant cost component of transit projects, $3.3 billion for a seven-station project seems awfully high if the stations cost a total of $770 m.
Stations aren’t the dominant component of rail tunnels here. A factsheet about the extension of M1 to the east breaks down the cost as 40% tunnel, 30% stations, 15% equipment, and 15% overheads (link). This is one of my main pieces of evidence that New York has a specific problem with station overbuilding.
Seems like Cuomo gives Tappan Zee as a positive example for Design-Build: just 2 weeks or so ago:
Though NYC is hardly an exemplar of transparency, this is the really big issue. The only way to ensure minimisation of collusion (on charges & costs) is to keep each stage separate, and separately monitored (and by people who don’t have a vested interest in ramping the cost forever upwards). But if government absolves itself of actual real oversight, at all stages, then costs and outcomes will never come under control.
One reason why (some) politicians like it is because it is an extreme version of outsourcing, which is to say, outsourcing of responsibility by government. Exactly why Melis disapproves of them. Oh, and don’t let’s forget that many of the people in the decision chain end up working for the very companies involved. That’s the kind of thing we would once have sneered at for southern Italian, or third world, politicians, yet it now appears systemic in the Anglosphere.
Meanwhile Trump’s so-called Infrastructure program is an utter dud. Per year he wants to spend more on his damned wall than on all the nation’s infrastructure! It’s a bit odd because he has said (and yesterday said it again), as a world traveller he knows how old and tired much of US basic infrastructure appears. And he is not averse to deficit spending. Yet, there it is …
Has there ever been any significant project public works in the US which could honestly be described as “design-build” by any common-sense standard? It just seems like a buzz-word that the sual cast of corrupt, public-screwing, contractor-welfare, revolving-door, third-rate US “public” agencies used to put some fresh lipstick on the pigs of their same-old same-old procurement practices.
I’ve tried to stop paying attention, but looking at the insanely over-cost, insanely over-budget, insanely behind-schedule, insanely delayed, insanely under-delivering Caltrain electrifiction “design-build” contract from a few years ago (with nothing to show now expect even worse service, and nothing to show at all for another four years, and then delivering neither lower costs nor bettwe service … all for a couple billion public dollars!) what one sees is “owner” design in which perma-temp in-house consultants, with zero real-world, non-Anglo experience specify the design to inch precision detail while the “design-build” bidders (few, trade-protected, hugely over-cost, hugely inefficient) are required to follow those designs to the inch.
This really is no exaggeration! If the “design-builder” were to seek to move any overhead stanchion anywhere in the fifty miles of the project any distance they were required to obtain approval of the “owner”, meaning in reality to run up tens or hundreds of billable hours of the perma-temp consultants who pulled the initial design and requirements and specifications and design criteria out of their own asses.
There was no way for competent, experienced, delivery-focussed, intelligent parties to come in and use real-world designs and practices to deliver a useful project to any sort of performance criteria at all, and of course such parties never even tried to do so.
Is there any significant exception to this bullshit charade?
The Tappan Zee Bridge replacement was done design-build. Cuomo touts that as a way of reducing costs, which means it was budgeted at $5 billion and he got it built for $4 billion. The Øresund Bridge was around $4 billion in 2018 dollars and has an artificial island and a tunnel, but it’s not as if Cuomo ever compared absolute costs, just relative ones.
Yes but was it (I have no idea!) design-build, in the sense I’d expect in which certain outcomes were specified by the contracting agency, against which bidders proposed potentiallly novel delivery methods, including technical designs, self-financing mechanisms, schedules, and costs; or was it “design-build” in the sense I’ve encountered, in which one set of consultants (DBA a “public” agency) micro-specifies a particular piece of infrastructure per usual and then the usual cast of contractors bid as usual while performing a superficial side-show kabuki in which 0.01% “design” savings are proposed through the use of different shades of paint or a slightly modified asphalt mix?
Anybody who has followed anything in the last decades knew that the Tappan Zee outcome was a fore-ordained anti-environmental economic boondoggle of colossal proportions (hey, the same cast working on the micro-specification of the Transbay Terminal catastophe in San Francisco were up to their eyeballs analysing the NY bridge!); the unknown-to-me question is whether there was any meaningful design (involving financial risk/financial reward) by the building contractor.
I’m honestly not sure, but I suspect it was actual design-build. Cuomo’s ODing on novel methods, to the point of trying to get people to reinvent the wheel (i.e. the genius competition). Actually talking to someone who has experience in a non-English-speaking country, lol.
Having lived abroad (China, Thailand, Iraq, Oman, Mexico and now Colombia) working in higher education for the past 15 years, I’m often astonished at how Americentric the USA’s institutions are in general. From my point of view, there are valuable lessons to be learned from almost every culture. We all lose when Americans believe in the false assumptions proclaimed by American Exceptionalism. Thanks for providing statistics to support such arguments. By the way, I love being a pedestrian rather than a slave to the almighty combustion engine!