Construction Costs and Experience

The most persistent criticism I have heard of my writings on construction costs, coming from YIMBY Princeton, is the importance of gradual expertise and experience. Against my claim that Americans build subways for higher costs than the rest of the world due to poor management practices, regulations, and procurement, and scope creep, YIMBY Princeton says that high costs are a result and not a cause of the rarity of American subway investment. I believe that high US costs are endogenous and therefore the US is reluctant to fund rail transit; he believes that disinterest in transit is endogenous and if the US were willing to build more rail lines, then construction costs would naturally go down through economies of scale and steady accumulation of project management expertise. I promised last year that I would go over his argument more carefully, and am going to do so in this post.

The obvious difficulty with this debate is that we agree there is negative correlation between construction costs and the extent of construction, and disagree on causation. Wikipedia lists 55 countries with metro systems, with a handful more with under-construction metros, but this is not enough of a dataset for large-n studies. There are too many control variables – for example, it’s easier to build the first subway line than the tenth, which reduces the proper comparisons for New York to a handful of large cities. Instead, the only real way to figure out what causes what is to rely on a handful of natural experiments.

I can come up with a number of natural experiments. One is ambiguous about causation: the role of poor project management in the high construction costs in Boston and Paris. The others all suggest that high costs are endogenous to the US, rather than unwillingness to build subway tunnels. These include the history of construction costs in New York, London, and Paris in the 1930s; the construction costs in London today; and the history of construction costs in Seoul from the 1970s to the present.

Project management

I know of two overpriced rail extensions blamed explicitly on poor project management: the Green Line Extension in Boston, and Grand Paris Express. As I explained in CityLab a few months ago, the GLX was budgeted at $3 billion for just 7.5 km of light rail trench in preexisting open cuts, but the MBTA cut this to $1.1 billion in actual construction plus $1.2 billion in rolling stock and sunk costs through hiring a more experienced project manager. In Paris, one of the reasons the Cour des Comptes cited in its report about the cost overrun is lack of experience in managing such a large project; as a result, the 200 km system, with 160 km underground, is now up to €35 billion.

The problem is that even with better cost control, Boston’s construction remains pricey. At $150 million per km, GLX is expensive for a line in a preexisting right-of-way, and not far behind GPX’s $220 million per km for an 80% underground network. While both Boston and Paris can expect future construction to be cheaper if they apply the lessons of GLX and GPX cost overruns, their absolute costs remain different, with Boston spending more per unit than Paris. At best this is neutral between my explanation and that of YIMBY Princeton.

Construction costs, dieselpunk edition

New York’s subway construction costs have risen since the start. In 1900-4, the First Subway cost $32 million for 22 km of subway and 1 km of viaduct (namely, the 125th Street viaduct on today’s 1 train), and another $3 million for 9 km. In today’s money, this is $39 million per km underground and $9 million per km elevated. JRTR has some statistics for the Dual Contracts, built in the 1910s and early 20s, and the IND, built in the 1930s. The Dual Contracts cost $366 million, equivalent to around $8 billion today; the total route-length added was about 180 km, of which 70 km was underground, consistent with a cost of about $80 million per underground km. Then the IND cost $815 million, equivalent to about $14 billion today, for 97 route-km, practically all underground, or about $140 million per km.

The projected cost of Second Avenue Subway kept rising. In 1929 the projection was $86 million, or about $1.2 billion in today’s money, or $90 million per km; this was before the IND cost overruns materialized (at a time of general deflation). In 1939 it was up to $249 million, or $4.2 billion today, about $320 million per km; by 1949, it had crept up to $500 million, or $5 billion today and $390 million per km. Put another way, WW2-era America, a country that had just built massive public works in the Depression as well as the war, including the IND and Chicago’s two subway lines through the Loop, was already projecting a higher per km cost than is routine in nearly the entire world today. Moreover, the plan was to build Second Avenue Subway cut-and-cover, a technique that is cheaper today than the deep boring typical of comparable infill subways in the first world.

I have less data than I’d like for other cities’ construction costs in the interwar era, but where they exist, they are a fraction of New York’s. The London Underground extension to Cockfosters in the Depression cost £4m for 12 km, 60% underground, per Wikipedia. In today’s money it’s $45 million per underground km. In Paris, there was little growth in real costs between 1913 and 1930: according to a presentation by Pascal Désabres, construction costs in today’s money in both 1913 and 1930 were about €23 million per km, or about $29 million per km.

London’s mounting costs

In the 1930s, London built an Underground extension for $45 million per km. After the war, it could no longer do so. According to numbers in the Financial Times, the Victoria line cost £4.5 million per km in the 1960s, all underground, which is about $110 million per km in today’s money, while the Jubilee line, built in the 1970s, cost about $250 million per km.

The Victoria and Jubilee lines were more complex projects than the Cockfosters extension, going under older Underground lines. The Jubilee line also included the construction of a transfer station with the Northern and Bakerloo lines at Charing Cross, whereas previously they only connected at the next two stations, Embankment and Waterloo. However, the construction technique, the tunnel-boring machine, is one that is supposed to have a much smaller city-center premium over outlying construction, since there is no surface disruption.

But whereas the Victoria and Jubilee lines had excuses for their high costs, more recent Underground extensions do not. In the 1990s, the Jubilee line extension cost around $500 million per km in today’s money, going under a few older Underground lines and crossing the Thames four times (in an environment with not much underwater premium) but mostly extending the system to the east, to previously underserved areas like Canary Wharf. The under-construction Battersea extension, crossing under one older line and serving a relatively undeveloped area at Battersea Power Station, is about $550 million per km. The next Underground extension under discussion today, that of the Bakerloo line to Lewisham, is budgeted at £3.1 billion over 7 km, or about $620 million per km, crossing under no Underground lines and largely following a wide road.

Under YIMBY Princeton’s theory, London’s construction costs should be decreasing as it obtains more experience tunneling in a constrained urban area with millennium-era sensitivity to environmental impact like noise. But on the contrary, costs keep growing.

Seoul’s low costs

If London is the expensive city that should under YIMBY Princeton’s theory get cheaper but isn’t, Seoul is the cheap city that should have been expensive in the 1980s but wasn’t. JRTR has data from the 1970s to the 1990s: after an increase at the beginning, Seoul’s construction costs stabilized in the 1980s and 90s at about $80 million per km in constant dollars in today’s money. These costs seem to persist today, judging by the Sin-Bundang Line, which cost 1,169 billion won for 18 km, converting to about $90 million per km in PPP dollars.

Seoul is consistent with the theory that costs are endogenous to a city or country. There is high correlation between the construction costs of different lines within the same city: having set non-US records with the Jubilee line extension, London keeps building very expensive Underground extension of the Northern and Bakerloo lines; Paris is spending around $250 million per underground km on a number of Metro extensions; Seoul keeps building subways at just under $100 million per km.

33 comments

  1. Michael James

    Your piece gives the impression of a last section (perhaps labelled “Conclusions”) having been cut off. I can’t quite see any interpretation or understanding of why these various costs are what they are or came to be.

    I would guess that Korea is simply at the earlier point in development that places them where Europe was, say, post-war (or even earlier) when costs were still under control. The government still tightly controls all projects and there is ferocious–but all-Korean–competition.

    My long-standing thesis as regards the Anglosphere is the steady removal of government control, or indeed appropriate expertise let alone authority within their public services: all aspects of these big projects is outsourced (and of course there is a revolving door between the public service and industry that serves to further undermine the former). On these pages we’ve highlighted the faintly ridiculous movement of NYC’s MTA chiefs to the companies they previously “supervised” in their public service roles.

    In recent comments we discussed the explosion in costs and forever-delays in some big German infrastructure projects such as Stuttgart’s underground railway station, Berlin Hauptbahnhof, the Berlin Brandenburg International airport (BBI) which went thru attempted but abandoned privatisation then continuous cost inflation that continues to this day. Some of this appears to be under-bidding to win contracts (which one presumes in the past would have not got past appropriate experts in government).

    Then with Paris, I am wondering if this relatively new cost inflation may be related to EU law forcing more outsourcing to the private sector, perhaps disfavouring earlier ‘favoured’ contractors (French of course) and tight government supervision an control?
    You have written of Manuel Melis Maynar, the former CEO of Madrid Metro, and how he contained construction costs through relatively banal mechanisms (which one suspects were stock standard prior to neoliberal practices).

    Note that all of this outsourcing and PPPs etc was supposed to increase efficiency and drive down costs. But the reality has turned out to be the exact opposite.

    • Tunnel Vision

      I am really tired of hearing about the Madrid Metro and why it was so wonderful. What happened on that job was a Contractors wet dream, the designs are just guidance, build what you want and bill me and don’t worry about costs because later on well award you a nice cushy contract somewhere to make up for any losses you make on this project…….not a hope in hell of that happening in the US, the State Education Laws regarding Professional Engineers, the Building Code Compliance requirements and the various liability lawyers will make sure of that, together with the FTA Procurement guidelines…..PPP will not fix everything as long as the agencies awarding the PPP project continue to interfere. I’m working on a PPP project right now and the designs for the underground portion have been rejected twice even though they are signed and sealed by a PE, and comply with the Technical Requirements of the Project. The ultimate owners Engineer deciding they should be designing the project, not the Concessionaire and the design/builder who are taking the cost risk. So knowing that’s going to happen what do you do as a concessionaire, that’s right price the risk of this interference leading to higher costs. There is plenty of experience available in the US to manage projects. Unfortunately not much of it works for transit agencies though or other agencies. So many owners think that an underground project or a multi contract program is the same as a bus garage, or a water treatment plant and decide that they will be the Project and Construction Managers on the Project because they cant trust a team of highly experienced consultants to do that. So you have people who view consultants as the enemy until they are at or near retirement supervising projects where they have no vested interest in delivering on time or budget because they have no personal reputation at play. That lack of experience and agency arrogance leads to stupefyingly stupid decisions being made by people who should at best be office engineers but are in positions of authority and responsibility. I’ve been involved in projects where the owner has completely ignored advice requested and provided by the designer and then blame the designer when the contractor fails because they cant admit that they did not manage the contractor properly. On the other hand there are many consultants and designers who should never ever be allowed anywhere near a project……

      One issue that gets ignored to some degree in this discussion on costs is the make up of the companies that actually construct the work. In the US the tunnel contractors for example are a limited group of contractors owned typically by companies that are constructors. Compare that with companies like Dragages, Bouygues, Vinci, Obayashi etc. who are multi strand corporations, Bouygues for example own satellites, telecoms industries and are vastly diversified. To some degree a loss on a construction project is less likely to hurt them from a global perspective than some of the US Contractors. Does that make them more competitive, or able to lower their costs? Not sure as they are not significantly cheaper when they bid jobs in the US, but it perhaps makes them more able to tolerate risk than a family owned company. And lets face it Contractors price risk. Also the procurement and contract environment in different countries can affect costs. In the US 100% performance bonds are common, in other countries these don’t exist or are significantly lower, labor only subcontracting is permitted in some countries but not others, real estate acquisitions costs are different country to country, Buy America and Ship America can impact costs in the US, unions have different strengths and influence on work practices etc. etc. making it very difficult to truly compare costs between cities around the world.

      • Tunnel Vision

        One other thing to add about recent costs escalation is that there is so much tunnel work right now that skills are in short supply leading to a spike in costs.

        • Tunnel Vision

          Oh, and underbidding contracts and experts in government. If low bid is your decision for an underground project, experts don’t enter into it. Look at MTA and the award of CQ028 in the mid 2000’s on ESA. Massively underbid, but MTA procurement rules state that unless the contractor is not responsive or responsible you have to accept the lowest bid, similar rules are in place around the world. For example in Hong Kong projects were low bid, and you could during the bidding process request a contractor to adjust prices that appeared to be based on rates that were too high or too low, but he could refuse to do that and still be awarded the job if he was low bidder. Many times all you get is the price, and a bid spread designed for risk management, not the actual cost of doing the work.

          • Alon Levy

            Even in the US, low-bid isn’t universal. California in theory awards HSR contracts by a combination of price and a technical score, and in Boston I’m told they’d blacklist anyone who tried doing what Tutor Perini does in California on a regular basis.

          • Nathanael

            The problem is that the MTA will deem a contractor “responsible” even if they build a station below water level which isn’t watertight, as happened at South Ferry.

            Boston would put the contractor on a blacklist for that. So would *Indiana*, for goodness sake.

            There’s something fundamentally corrupt about the way the MTA awards contracts. I think the idea of an in-house construction division is probably correct. They can’t do any worse.

      • Michael James

        Tunnel Vision 2018/03/19 – 13:34

        (Nice name …)

        In as much as your words are coherent, they actually appear to confirm why Madrid managed to contain costs for ambitious Metro projects: there was someone in charge who was motivated to do it (and who must have been supported by the politicians … I assume). I think this must be the case in all places that manage this feat (including in the contemporary world, Korea, Hong Kong, Singapore, China and–until recently?– France and Germany). Though I am unclear what Alon is saying about Paris since in his recent article Bryan Rosenthal said that the Paris M14 extension was being done at one sixth the cost per km of the SAS. Rosenthal also noted the sparse use of consultants in Paris versus the hundreds to thousands in any NYC project. And he wrote:

        Tim Gilchrist, a transportation adviser to Govs. Eliot L. Spitzer and David A. Paterson, noted all costs are passed on to the M.T.A. “Nobody at the negotiating table is footing the bill,” he said. Critics pointed out that construction companies actually have an incentive to maximize costs — they earn a percentage of the project’s costs as profit, so the higher the cost, the bigger their profit.

        Combined with the revolving door “of the 25 M.T.A. agency presidents who have left over the past two decades found that at least 18 of them became consultants or went to work for authority contractors, including many who have worked on expansion projects”.

        I am disappointed Alon doesn’t dive more deeply into these issues. I think it is obvious that this is where the real differences lie. Yesterday I read thru the whole sorry history of the Berlin Brandenburg Airport (official IATA call sign = BER) and many media reports on it (CityLab actually called it a “clusterfuck of epic proportions” which is pretty strong for that newsletter) yet it still requires someone to give an overview of how it went so wrong. All of these words indicate what went wrong but it remains unclear how it was ever allowed to progress thru the (assumed) multiple levels of experts and management etc involved in such a mega-project. For example, it turned out one of the main engineers wasn’t an engineer at all but was merely an engineering draughtsman (ie. someone who drew technical drawings for engineers) . The wiring was amateur-hour with comms lying side-by-side with high-power cables, and most of all the fire safety was beyond description, contravening convention at so many levels it is inconceivable how it ever got approval (well of course, once it was built, it didn’t get approval as the horrorshow was revealed but this only happened literally weeks before they were rolling out the red carpet for the opening (quite literally the red carpet was on-site, the media gleefully reported)).

        What it points to is that there was no one ultimately in control. Probably this was set up from the beginning when the German governments (three levels, city, state + federal) wanted to privatise it, essentially to outsource all responsibility, and in the “new” Germany have private industry apply cost-control (hah! one of those failed economic theories). When the privatisation failed it seems they continued with the mentality that private players would “self regulate” and ensure the project–at least its engineering FFS–would be the ‘usual’ high standard Germans expect. The players involved in the failed privatisation were the same bidders for the project, and they seriously and almost certainly knowingly underbid to ensure the same consortium got the job. Then the relevant authority (formed by the three governments) was forced to raise billions of euros on the private market, yet again putting pressure to falsely keep costs low.
        So, TV, the reason Melis Maynar gets mentioned in any of these discussions it is for this very remarkable phenomenon: someone actually in charge, with authority, not undermined by politicians and motivated to contain costs while building to a high standard. As far as I can tell, you haven’t added anything significant to the discussion except to reinforce these conclusions.

        • Alon Levy

          Hong Kong and Singapore have very high construction costs, though. They market themselves as competent; that doesn’t mean they are so.

          I quote Madrid a lot because it’s cheap by European standards. The significance of this is that nobody in Paris thinks “oh, we’re cheaper than London and New York, so we’re doing well.” The main comparison within France is not the UK unless the French are trying to denigrate someone, but Germany, the Nordic countries, and maybe the Low Countries. Within its peer group Parisian construction isn’t unusually cheap, and Parisian operations are if anything on the less passenger-friendly side (the trains are not as punctual as in Germany, let alone Switzerland or the Netherlands). This is why you have railfans complaining about M18 and M17 being wastes of money. But Madrid is the cheapest in its comparison group, so it thinks of itself as cheap, pushing back against local mistrust in government authorities.

          • Michael James

            Right but I think you are focussing solely on costs rather than what characterises these (mostly Anglosphere) projects: not just humungous out-of-control costs but also pure incompetence and lack of professional management. One expects costs to be “high” in a first-world crowded city like Paris (and for that matter Hong Kong–on the measure of developable land, the most crowded in the world, and partly as a consequence the most expensive city to buy property or rent). The thing is that these two things go together and I reckon you need to get to the ultimate cause (not the proximal symptoms). The RER & Metro expansion in Paris may be (excessively) expensive but it is a terrific project and frankly I don’t know why anyone would not have confidence they will bring it off (once they have decided to do it). It seems the same isn’t true of Germany anymore with almost all mega-projects running into trouble in the past decade. Likewise Hong Kong which built the world’s largest infrastructure project in the past quarter century (as a single unified project): the new airport with new highways, railways, bridges, terminals etc.

            Parisian operations are if anything on the less passenger-friendly side (the trains are not as punctual as in Germany, let alone Switzerland or the Netherlands)

            Hmm. I think you need to update that opinion. There seems a lot of disquiet about the neglect of the German rail system over the past 15 years or so, including punctuality:

            https://www.theguardian.com/world/2016/jun/11/why-german-trains-dont-run-on-time-any-more
            Why German trains don’t run on time any more
            For all the old cliches about Teutonic efficiency, much of Germany’s transport infrastructure is in a terrible state of disrepair, and many major works have been badly botched. A chronic lack of investment is to blame
            Kate Connolly, Saturday 11 June 2016

            Even the trains that are running on time are often much slower than those of other European countries … very overdue repairs and modernisation taking place across the 33,000km (20,500 mile) rail network, from replacing ageing tracks and 19th-century signalling stations to repairing crumbling bridges and platforms, some of which are so old they are said to be close to collapse.
            … economists have warned is now in such a shoddy state, due to years of underfunding, that it is starting to have a serious impact on Germany’s GDP
            To blame is a chronic lack of investment – with money being poured into the welfare state to the detriment of everything else – as well as the nation’s obsession with balancing the books.

            I know it is pure Guardianista but it so has the ring of truth:

            As the fireworks flew and the brass band played at the recent opening of the 57km-long Gotthard Tunnel under the Swiss Alps, Angela Merkel, who was on the first train to pass through it, could not resist the remark: “This is something we Germans still need to work on a little”.
            The project was not only completed on time and within budget, she noted with admiration, but it will shave the best part of an hour off the regular journey time between Zurich and Lugano.

            The fact is that a bunch of German mega-projects (BER airport, Stuttgart rail station, Hamburg’s concert hall) are among top of the list of projects-gone-wrong that are studied by the experts. (Berlin’s Hauptbahnhof might have once been on this list but its evident success means it is not discussed so much anymore; the same might be true for the Elbphilharmonie; so some of the hoopla is overblown; as I said earlier one needs to distinguish between projects that essentially succeed even if too expensive versus those omnishambles like BER, or even those like SAS which “succeed” but at eye-watering absurd cost.)

            In my browsings to try (but failing) to locate a deeper analysis of the BER omnishambles I came across a book (below) and immediately bought it–even though its normal price (for a 2016 publication) is $100, Amazon has it at $6.60 (while their Kindle price is $94.00) I have been expecting to get a cancellation message if they detect this apparent anomaly but no, it is apparently winging its way to me now.

            Large Infrastructure Projects in Germany: Between Ambition and Realities, May 24, 2016
            by Genia Kostka and Jobst Fiedler; ISBN-13: 978-3319292328.

            Not that I hold any hopes much will be revealed as the blurb says “Overall, the case of Germany also offers the opportunity to assess various new forms of project delivery, such as public-private partnerships (PPP) …”
            As I see it, their attempt to run BER as a de facto PPP is what lies behind the disaster. That a review by so-called experts in 2016 is circling back to PPPs, and calling it “new”, tends to signal that maybe they haven’t passed thru their disastrous phase of neoliberalism quite yet. Well, Schäubel is gone but Merkel is still in power, and looks like another 4 years wait for her 4th term to run its tedious course.

          • Alon Levy

            What people who take trains all over the Continent seem to think is NL/CH > Germany > France > Italy > Middle Ages > US.

          • Michael James

            Alon Levy 2018/03/20 – 18:27

            What people who take trains all over the Continent seem to think is NL/CH > Germany > France > Italy > Middle Ages > US.

            I am sure you have impeccable statistical studies to support that contention …
            But ok, I can live with that.
            Especially when one realises that France is 15 times the size of NL & CH, and about 1.8 x Germany.

    • Nathanael

      Michael James: I think you’re right about the outsourcing. I think it’s the major cause of the cost inflation.

      Boston is still using contractors, but its major cut in Green Line costs came from *insourcing* the management — and blacklisting the contractor who had been scamming them, so that only legitimate contractors tried to bid next time.

  2. Eric

    IIRC in St Louis and San Diego, light rail costs were very cheap for the initial line, then grew for later lines. Possibly elsewhere too.

    • EJ

      In San Diego the initial line was mostly a rebuilt existing rail line, the extensions involved new construction.

  3. chip0

    A couple of nitpicks regarding the Green Line Extension costs: The costs were reduced not only by bringing in more experienced management (and changing the acquisition process), but also by radically scaling back the stations from full fare-gated stations with grade-separated access including redundant elevators, to simple open platforms with access at grade or via ramps and on-board fare collection (this was made possible by the T’s plan to go to all-doors boarding on the Green Line with the upcoming new fare collection system).
    And, while the GLX is being built in a preexisting right-of-way, it’s one that’s shared with an active commuter rail line, which greatly complicates matters.

    • Eric

      What they SHOULD have done is just added a few infill stops on the commuter railway, and electrified it. Instant 90% cost savings…

      • Nathanael

        No. The Green Line needed to be extended.

        The commuter rail simply isn’t fast frequent enough or high enough capacity. It would need to be electrified first. Yeah, they should do that too… but good luck…

          • Nathanael

            Nope. Start adding up the costs of catenary, substations, and new equipment, and it comes out rather high — particularly since the US has so little experience with high-voltage overhead, and the FRA has exotic unique-to-the-US regulations for “heavy rail”. 😦

            It’s still worth it, but it’s much more expensive than GLX. In order to substitute for GLX, you’d also have to add a bunch of infill stations ($$$) and then a turnback for the local runs, and then you probably want to run local and express, which means another pair of tracks…. you end up building GLX without through-running to downtown.

  4. chip0

    And about 10% of the service level, even with electrification; not even remotely close to meeting the requirements of the project.

      • anonymouse

        In terms of raw capacity, 10 trains per hour with 2-car light rail trains with 72-foot cars is less than 4 trains per hour with 5-car commuter rail trains with 85 foot cars.

        • Nathanael

          (1) Nobody in Cambridge or Somerville wants to deal with repeated 15 minute waiting times — it’s very tied to Boston. It needs high frequency.
          (2) It would pack the commuter rail so much that the people on the outer edge of the commuter rail lines wouldn’t be able to find a seat.

          • Nathanael

            I’m all for fixing the operations of the MBTA commuter rail, which could use a hell of a lot of improvements, but you know the FRA regulations: do you really think it’s going to cost *less* to bring it up to high-frequency standards on *FRA-regulated* tracks than on FTA-regulated tracks? Freight runs on these lines and the Commonwealth can’t get rid of it.

  5. Adam

    the los angeles red line:

    26.4 km with 14 stations built for 4.5 billion at a cost of 170 million per km.

    the full length was opened in 2000, so adjusted for inflation that is:

    26.4 km with 14 stations built for 6.64 billion at a cost of 251 million per km.

    caveats are a bitch, there were allegations of corruption and underbuilding tunnel wall thicknesses in the construction.

    So in los angeles, the new purple line extension is 14.6 km budgeted a cost of 6.3 billion or 431.5 million per km.

    Los angeles has been building a lot of rail since they started doing the red line construction groundbreaking in 1986, so if Princeton YIMBY Is correct, their extensive experience in building rail in the last 32 years should not yield this result.

    What has changed in the last 18 years that has caused subway construction in Los Angeles to increase from 251 million per kilometer to 431 million per kilometer?

    My theory is “if you fund it, consultants will come” and that 180 million per kilometer is being extracted to pay for a nearly infinite number of consultants and “experts” rather than the work being done by competent in house staffers.

    there is no other explanation that accounts for the universal global cost explosions of the last twenty five years. this is a world wide system of consulting and it is in incredibly lucrative, and they face no consequences for nor pushback against their rent extraction, so they keep asking for ever larger consulting fees (and then getting it) leading to a positive feedback loop of ever expanding costs.

    Soon we will spend more on the army of consultants than on the combined costs of the actual laborers, machinery and materials.

    • Michael James

      Yes. Rosenthal pointed out that there were very few consultants involved in the Paris M14 project compared to NYC SAS which had at least 500. (Plus overmanning of most actual construction work, sometimes grotesquely such as five to ten fold on the TBMs.)

      But it is way more than simply the direct billed cost of consultants. These guys have to show they have earned their high cost, so naturally they essentially invent and impose on the project all kinds of stuff and this adds even more to the cost of the project. In addition to the delays they introduce which impose yet more cost inflation. In effect its biggest effect is that the project goes out of control.

      • johndmuller

        Ordinarily I don’t have anything much against consultants, who generally know their field and can provide a reality check for in house staff.

        Sometimes they are a little counter-productive, in that their job is essentially to find fault with the other workers and/or consultants on the project, and the more they do their job the slower everyone else’s jobs get – depends on whether those things really need an eye on them or not. Worst case is when they find fault with the project itself (although perhaps saving an even worse case).

        In the political realm, in particular, consultants provide some other, more nefarious roles. When projects are first being considered, consultants can shape the scope and options to highlight favored choices; later on, pluses and minuses can easily be tacked onto “good” or “bad” possibilities. Construction hassles can be kept out of one’s constituents’ neighborhoods; vice versa for benefits; costs and benefits can appear enhanced or minimized. Consultants are very good at figuring out exactly who is their boss and what they want to see in the report; if you have any doubts about evolution, QED. Most of the time, this is politely subtle, but some managers and consultants are more concerned that there being no mistakes in this area, even to the point of literally talking about it with few words minced.

        Additionally, and probably worse, consultants are way overused for slowing things down, as in: “Let’s send this out for a study”, which usually means: “I don’t want to look like I’m against this, but it is more controversial than I have the backbone for at the moment”; or else: “Maybe they’ll find some better reason to delay or kill this than we have so far”. If something has been put to sleep long enough, then all the initial studies and reports will need to be redone also. Opponents of a plan are usually happy enough to go along, for the same general reasons. Studies may be commissioned by both sides of an issue, and counter studies etc., on and on and on.

    • Red Line Reader

      The Red Line was opened in four segments throughout the 90s, so the actual adjusted unit cost is probably slightly higher. But also, the Purple Line cost that you quoted is not correct. The total line budget is $7.2 billion dollars (and that’s before Tutor Perini gets started), or $497m per km.

    • Nathanael

      The new purple line extension (a) runs through flammable tar, and (b) is facing some of the most expensive lawyers in the country in Beverly Hills trying to stop it. This is going to raise prices.

      How’s the *Crenshaw Line* pricing in LA? That’s a more normal situation.

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  7. johndmuller

    Construction costs, and in particular those high costs w/r subways in the US, are of course, a favorite topic in this blog. There seems to be little doubt that this is true, although the exact causes are not usually identified.

    I doubt that the movers and shakers consciously sit down and endeavor to create projects that are so extravagantly costly as to make it prohibitively expensive to get any kind of approval or funding. Perhaps there is some kind of international p*ssing contest where the winner is the official who can somehow finagle the most money for a non live or death project without even bothering to convince anyone that it should cost much less???

    Well we know that sometimes politicians propose straw man projects that they cost out to be so expensive that none but the most ardent supporters would buy into, or decorate alternatives which they are trying to kill with such deadly cost baggage. For example, Cuomo does that fairly regularly, like in the study for upstate HSR, or the rail alternatives associated with the Tappan Zee Bridge rebuild. Even Amtrak’s future NEC proposals seem easier to understand if viewed with this possible explanation in mind.

    I’m still a little reluctant to believe this, because sometimes these things get built anyway, so if they are supposed to be so ridiculously overpriced, they are doing a bad job of doing even that.

    The contractors are probably greedy, the oversight is probably somewhat lax and there is likely to be some graft, bribery, theft or other malfeasance going on, but I find it hard to believe that there is so much of that stuff going on. I think that elements like excessive zeal in environmental or safety regulations, or litigious activity on behalf of NIMBYs (or those using any of those as excuses for attempting to derail a project), or political opposition to those proposing the project or the established leadership/government are more likely to be behind massive upgrades in costs (i.e. by paying for delays or lawyers or in things like making a rail tunnel bored rather than cut and cover). The almost certain knowledge of these kinds of cost upgrades sets the stage for contractors to price in massive amounts for contingencies (which will remain even if the contingencies don’t materialize). And of course there is “all of the above”, including a degree of expectation that such ridiculous costs are the norm.

    I really thing that the MTA ought to attempt to build a lot of this stuff on its own. Clearly there is enough potential work to occupy a standing construction division. They already have some of the trades represented, like track laying and signal work, for example. Rather than private contractors creating new entities to take on an MTA project, and buying a complete set of construction equipment on the MTA (at least some of which will survive to be part of their future business, the MTA buys (and keeps it for future business) for itself, They need managers anyway to support the projects, so why not do the actual management instead of managing the contractors managers.

    Could they do worse? Maybe, but there would be fewer cracks to hide in and fewer levels of operations to confuse the issue. They would have a more or less constant budget (as much as anyone does) and could continue working without the constant stoppage waiting for new funding. Obviously institutional knowledge would be a big winner. Maybe things would seem to take longer, but maybe the tortoise sometimes wins the race. Perhaps it would actually even work.

  8. Nathanael

    Mmmm, I don’t know about using London as a natural experiment. The soil south of the Thames was always considered awful for tunneling, which is why there were so few tunnels under it until very recently. I would expect that this would raise the prices of any line which ran south of the Thames, as they had to use Earth Pressure Balance machines and do a lot of dewatering work; the stations were equally complex. How’s the Crossrail pricing, which is almost all in the hard rock north of the Thames?

    Further, while Boston and LA tunnel pricing seem high compared to other parts of the world, they’re not insane-outrageous high (now that the grifting contractor was fired in Boston), and there are a lot of possible explanations.

    I think the real outlier is New York City, which has outrageous pricing even by *US* standards, has nearly perfect geology for tunneling, and has massive amounts of experience. The grifting-contractors theory — which clearly applied to Boston — has TONS of support in the NYC case and I am almost certain it is the primary cause of the grossly excessive NYC construction costs.

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