Construction Costs are National

I’m about to send a thinktank a draft of a table of subway construction costs, and I’d like to preview one of the most important findings from the data. This is based on 125 distinct items, totaling 2,297 kilometers – some complete, some under construction, a handful proposed. I’ve alluded to this here before, for example when writing about national traditions (US, Soviet, UK) or about Russian and Nordic costs. But the basic observation is that construction costs are not really a feature of an individual metro line, but of a city, and usually an entire country.

What this means is that if one line in Madrid is cheap, then we can expect other lines in Madrid to be cheap, as well as in the rest of Spain; if one line in London is expensive, then we can expect other lines in London to be expensive, as well as in the rest of the UK. In fact, in both countries the construction costs of metro systems in the capitals also accord with the construction costs of intercity high-speed rail: cheap in Spain, expensive in Britain, with Germany somewhere between Spain and Britain and France somewhere between Spain and Germany.

Some examples

The examples in this section are somewhat cherrypicked to be the ones with narrower ranges, but there are very few examples with truly large ranges over a similar period of time (i.e. not secular increases as in Canada). I am specifically excluding regional rail, as it tends to be more expensive per kilometer than subways.

Panama: Line 1 cost around PPP$260 million per kilometer for 53% underground construction, and Line 2 is cheaper, around $150 million, but is entirely above-ground. This is consistent with a factor-of-2.5 underground premium over elevated lines, well in line with the literature.

Greece: Athens Line 4 is €104 million per km, with construction having started recently. Thessaloniki has two lines in the database, the main line due to open next year and an extension to Kalamata due to open in 2021, and Athens is also about to wrap up an extension of Line 3 to Piraeus. All cost figures may be found here on PDF-p. 9. The two Thessaloniki projects are respectively €135 million/km and €118 million/km, the former at least including rolling stock and I believe the latter too; the Athens Line 3 extension, without rolling stock and with somewhat wider stop spacing, is much cheaper, €61 million/km, but this rises to €82 million/km with rolling stock.

Sweden: the Stockholm Metro extensions under construction all cost pretty much the same per kilometer. Three extensions are under construction at once, in three different directions; per this source, the costs per kilometer (in kronor) are 1 billion, 1.25 billion, and 1.15 billion, with the most expensive of the three involving brief underwater tunneling.

Russia: I asserted in an old post that Russian construction is expensive, with only a handful of projects. Since then I’ve found a source asserting that the entire 2011-20 program is 1.3 trillion rubles, for what appears to be 150 km, 57% underground. This is in PPP terms $364 million per km. Other costs are vaguely in that range – Railway Gazette claims the cost of boring in Moscow is (again in PPP terms) $400-600 million/km, Line 11 is around $310 million/km for underground suburban construction, one line mentioned on Railway Gazette in St. Petersburg is $310 million/km underground, another St. Petersburg line is maybe $360 million/km.

What does this mean?

That there’s correlation between different cities’ construction costs within the same country suggests the differences in costs are predominantly institutional or socio-political, rather than geological. This is further reinforced by looking at countries with very similar socio-political regimes, namely the Nordic countries: all of them are cheap, and even though Stockholm and Helsinki both have similar gneiss geology, the Oslo line I use for comparison does not (and neither does somewhat more expensive Copenhagen).

To further reinforce the institutional point, the costs of high-speed rail in different countries seem to follow the same order as the costs of metros. Spain is cheap: Ferropedia quotes construction costs below €20 million per kilometer. The UK, in contrast, just announced a cost overrun on HS2, a 540 kilometer network, to £88 billion, and even allowing for future inflation, this is maybe 7 or 8 times as expensive as in Spain. France and Germany are in between, in the same order as their metro costs. China, as far as I can tell comparable to France in its metro construction costs, has a high-speed rail construction cost range somewhat higher than France’s, mostly explainable by using more (generally avoidable) viaducts.

30 comments

  1. @gok

    So do Spain, Greece, and the Nordic countries have cheap construction for the same socio-political reasons, or are they independently cheap for different reasons? They seem like institutionally quite different countries.

    • Alon Levy

      I imagine they’re independently cheap; Greece per some links I’ve found even has lump-sum contracts, which are verboten in Spain.

    • Mikel

      A simple hypothesis: Nordics = efficient institutions, Greece = low labor costs, Spain = some of both?

      Also for Spanish HSR, generally speaking the easiest part (the trunks radiating from Madrid) was done first (and in the NAFA’s case, to lower standards), while some of the hardest branches are still unfinished and thus don’t increase the average.

        • Alon Levy

          Yeah, but somehow Madrid-Barcelona still has very little tunneling – the three tunnels Wikipedia mentions, not counting the El Prat tunnel or the Sants-La Sagrega tunnel, total 6.7 km.

          • Mikel

            This press release form Adif contains more detailed information. Madrid-Barcelona has ~25 km of tunnel, much of which is the Barcelona urban approach (I’m not sure if they are counting the cut-and-cover crossing of Zaragoza). The total tunnel length in Madrid-French border is quoted as 88 km.

            The other three trunks are also relatively easy, particularly Madrid-Sevilla, despite Madrid being more than 600 m above sea level. Madrid-Valladolid has the very long Guadarrama base tubes but is otherwise (including its existing branches) on mostly flat, rural land. Much easier than under-construction lines like Zamora-Ourense, the Pajares bypass (85% tunnel/viaduct) or the Basque Y (60% tunnel including a 5-tube underground flying junction). The latter is going to be interesting cost-wise because part of it is being built by the Basque government instead of Adif AV.

            Speaking of which, Alon, do you have any Basque metro or tram construction costs in your database? If not, I could try to dig up some, to see if there are noticeable sub-national differences.

          • Alon Levy

            Ooh, please send Basque costs if you have any? I don’t have Spanish urban rail cost data except for Madrid and Barcelona.

            (Also, I fixed the link in your comment.)

          • Herbert

            Spain is also the only country with a twenty first century tramway that’s been shut down…

          • Alon Levy

            The US is probably about to join it, the light rail in San Jose has such painfully low ridership that they’re talking about shutting down one of the lines.

  2. Henry Miller

    The question is WHAT is different. My city can afford to put in some nice projects if we can pay the rates of Spain without any outside help. However if we have to pay US rates, even with state and federal subsidies the cost it too high and the projects are not worth it.

    • electricangel

      Be careful on not worth it. In one of the greatest analyses Alon has done, he pointed out how much less NYC residents pay in depreciation on their transportation due to the lower rates of car ownership. Even at the ridiculous capital costs of building subway tunnels here, we can still come out ahead. Do an all-in comparison on costs, even high ones.

      • Henry Miller

        New York is a much bigger and denser city. They have the potential to get 10x as many riders as we do, so costs of 8x more than Spain are still affordable. I live in an area about 100,000 people (actually 400,000 – but the river is difficult to cross for both the obvious and political reasons).

        Even in New York, if they could cut their costs in half they can do twice as much for the same money, getting more done. Plus those who oppose transit will have less to complain about if the costs are not so high.

  3. Martin

    Here’s a good one to test your theory with: costs of lines built by Virgin in Florida/Nevada/California vs other lines.

    I’m also shocked at how quickly they get to start construction after announcements – granted the land they are building on is less challenging.

  4. James S

    That’s not surprising because national policies impact the costs of everything.

    IE, is concrete subsidized, directly or indirectly? What about steel?

    What about “buy america” style policies that encourage local tools but result in everything costing more?

    What are labor costs – and not just wages, but also benefits. Who pays for the health care costs of the works, the project or is it nationalized?

    What’s the culture of corruption? What percent of the project cost has to go to “appease” the local politicians?

  5. Adam

    virtually all of the cost premiums are nothing more than first-world rent seeking for the big multinational companies bidding the 9-11 figure projects. All the excess is going to the top and no one but the top.

    Add in some beak dipping and lard for the various levels of electeds and that will balance out the rest of mismatch. sub 1% differences for things like environment, labor etc. it’s literally pennies compared to the benjamins the board-room-and-investor caste is vulturing out of our pockets.

  6. Herbert

    Should private ventures building HSR in the U.S. get expertise from “cheap countries”?

  7. Tonami Playman

    Maybe this explains why Swedish Skanska builds cheaply in Sweden, yet builds at British costs in Britain and US cost in the US.

  8. df1982

    I tend to think that labour costs are of little importance when it comes to mega-projects. At most, expensive workers vs cheap workers (within the First World range) would make a total cost differential of a few tens to a few hundreds of millions of dollars. For a multi-billion dollar project that’s a trifle.

    It’s different matter when it comes to union contracts dictating how work is done (e.g. the notorious sandhogs clauses in NY), because this can affect the nature of the project as a whole.

    But the rent-seeking explanation still seems more persuasive to me.

    • Lukas

      Could you explain what these sandhogs clauses are? I tried to google, but did not find anything.

  9. Damien Smith (@indysmith)

    It seems to me from your analysis that countries with first past the post electoral systems tend to have higher costs. Have you seen this in your analysis? (Why Cities Lose by Jonathan Rodden make me think that proportional representation at the national level is generally better for cities and infrastructure).

    • Alon Levy

      The correlation is definitely there, but a lot of that is intermediated by the Anglosphere in general being bad. New Zealand notably has proportional representation but otherwise normal Anglo politics, and the Auckland regional rail tunnel’s costs are pretty expensive.

      • Tom M

        Suspect you’ll find the same outcome for Australia as well which does not have first past the post

        • Alon Levy

          If we’re counting non-plurality single-member districts as in the Australian House, then France and its two-round system should count in that category as well… Australian costs are pretty high (though Sydney’s are not as high as Melbourne’s?), French ones are basically world median.

          • df1982

            Sydney’s aren’t quite as high as Melbourne’s (except for the light rail line which has had major cost blowouts), but the difference isn’t huge and is likely due to the Sydney sandstone being more favourable for tunnelling. The same culture of snouts in the trough pervades both states. WA is actually the best state when it comes to cost containment, which is strange because the place is generally known for its cowboy capitalism.

          • Herbert

            France does not overrepresent empty land. And maybe the fact that everybody who is anybody went to the Grandes Ecoles helps keep out the “big city bad” political campaign traffic so harmful in the U.S.

          • Nilo

            Tons of crazily reactionary senators went to Harvard once or twice

          • Lukas

            Maybe in France the dominance of Paris does play a role? In the US, NYC, LA, etc. are maybe not seen with the same symbolism as in France.
            The perfect counter-argument to this theory is of course the existance of Greater London.

            Maybe the difference is down to a tendency in Britain and North America for classical liberalism (market-based economy, low taxes on capital gains, maximum possible freedom in contract drafting, few state-run enterprises) compared to France (and other parts of continental Europe), which might increase the tendency for less in-house management experience in Goverment spending?

  10. Pingback: What is the Anglosphere, Anyway? | Pedestrian Observations

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.