More on Consultants and Design-Build

A few months ago, there appeared an article comparing construction costs for subways in the US and Europe. It has a little table, not PPP adjusted, with cases from elsewhere, but the bulk of the reporting covers differences between the US and Europe. It’s interesting and I urge everyone to read it – but read it critically. It has a long list of bullet points naming various differences, some already covered here, some new but still within reason.

One aspect that seems especially apt is this:

The construction cost [in the US] represents slightly more than 50% of the overall program cost, while soft costs and stakeholders’ commitments at 45% are significantly higher in comparison with other types of major projects or similar projects in other global regions.

Labor cost and construction schedule are the most important factors affecting the construction cost. Labor cost is often driven by labor union rules which vary significantly among states and cities. One of the highest labor costs of tunnel construction workers is the Sandhogs in New York which can be as high as $110/hr and on an overtime basis, it can reach over two to three times this value. Their rates are higher than other tunnel workers in the country and significantly higher than European or Asian workers rates. Also, the number of workers assigned in the tunnel in New York is significantly more than other parts of the country and as much as 4 times more than tunnel workers assigned to comparable projects in Europe. Tunneling being linear structures, the opportunities to accelerate the construction schedule in order to reduce overall labor cost are limited.

That said, I’d like to caution about fully accepting everything the article says. The key issue is that the authors’ experience is as consultants – they work for AECOM. This means that to at least some extent, their expertise is informed by their work as outside consultants, which means that they are the most familiar with projects that at some point invite consultants in.

This is important, because this may be an important difference between low- and medium-cost countries. I am not sure – I’m trying to investigate those differences more carefully, but this involves listening to German complaints about NIMBYism and trying to figure out how relevant it is that NIMBYs are far less empowered in Southern Europe, counting Turkey as part of that region since it acts much like a peripheral European country in construction. I don’t think that low-cost countries in Southern Europe use international consultants – Milan and Madrid at least don’t, and Istanbul used Italian consultants at one point but nowadays seems mostly to design things itself.

What’s more, AECOM’s experience is not just in countries that use AECOM’s advice regularly, but also in specific projects that bought its services. This is relevant to the claim that,

European owners spend less time and money on planning, studies, conceptual developments, and detailed design. Most projects are implemented using the Design-Build model with the detailed design provided by the contractor during construction to suit his means and methods; this results in efficiency and eliminates repeating of design work.

There’s the rub: design-build does exist in Continental Europe. Turkey uses it, and France is glancing in that direction. But it’s uncommon – Italy and Spain do not use this method, and France largely does not either and I think neither do Germany or the Nordic countries. Moreover, design-build in Turkey means there is extensive in-house oversight, much more so than in American or British design-build projects.

French design-build is even more tightly overseen, because its purpose is not to forgo public planning. Rather, France traditionally maintains the separation of public planning, private design, and private construction, in order to fight corruption and guarantee fair procurement. This separation leads to problems when projects require redesign in case they are very complex, and as a result, Grand Paris Express exists as a large public-sector planning agency to facilitate coordination between the design and construction teams. Technically this can be called design-build, but it has approximately nothing to do with American design-build projects that pay Skanska or Dragados a large sum of money to dig a subway and have extensive public regulations and red tape but little public engineering. The role of the public sector in American, British, and increasingly rest-of-Anglosphere eyes is to make sure companies follow capricious rules but not to actively build infrastructure or, perhaps, change the rules to be more favorable to swift action.

Regrettably, in the coda the authors buy into this mentality that the public sector cannot change the rules. They list various action items that can be undertaken to reduce costs, all of which are very good – those items include streamlining regulations, improving risk sharing mechanisms, and offloading some peripheral costs, among others, rather than expanding design-build. They’re missing a few things that we’re learning from the low-cost world – for example, Istanbul makes an effort to site stations in parks in order to be able to build them more easily and reduce their costs, which I believe is also true of Milan. But for the most part, the list of things that the US needs to do to have what France and Germany have cannot be too dissimilar to that produced by the authors.

But then the authors throw it all away and say it’s unlikely that the US could match European costs. They give a bare-bones explanation that boils down to saying “these recommendations won’t really be implemented.” I agree to some extent – it’s plausible, though not yet certain, that New York will need to union-bust the sandhogs and probably also the other trades, and these are politically powerful unions that know very well that they earn several times what their labor is worth and fight to preserve this. But, first of all, not every recommendation is that fraught; questions of risk sharing, public planning, and procurement do not lend themselves to political populism and remain unreformed mostly because the Northeastern US has timid, reactive governance.

And second, the authors say it’s unlikely the US could match European costs even if their recommendations are followed. They don’t explain why – there are few intangibles in the article, and they mostly seem peripheral to the main question, for example the fact that the US is an auto-oriented society. I can’t tell if it’s just uncertainty, which does not appear in the body of the piece, or if there’s more to it. It could just be a writing artifact and what they meant to say was that their recommendations could help New York match Parisian costs but they’re skeptical their recommendations are politically palatable to New York.

I emphasize the criticism, even though it’s generally a good overview, because all of the experts we talk to have biases. These could be consultant biases, or political biases (Turkey is far more polarized than any mature democracy), or engineering biases, or language biases. Even reading my blog is to some extent a bias – people who read me and think well of my analysis might well look for reasons in their own domain why design-build is bad, which means that to be certain I am correct in my prescription against it, we need to cleanroom this, for example by interviewing people who do not know me directly (or at all) and asking how engineering is done where they are.

40 comments

  1. Bryan

    I don’t have any fully formed opinions about design build, but I think there’s an interesting trend I’ve seen in the design-construction world that hasn’t really existed before and that is that you are starting to get these major firms who do both. I work for a big design firm that DOESNT do construction, and so when they do design-build it’s through a JV or something. But I’m curious to the extent that a design-build singular firm acts on their biases so much more because they own so much of the risk.

  2. Jacob Manaker

    It is also worth noting that the venue (a trade magazine for the tunneling industry) is likely to introduce bias too. For example, they don’t really address palatial stations, which you’ve cited before as one of the major ways in which politically-influenced planning translates into high costs. The most they do say is that we should “pay public amenities and community and stakeholders’ provisions through other funds rather than transit” and “Remove politics from infrastructure projects”…which I suppose is tangentially approaching the issue, but not stating it outright.

  3. Herbert

    One of the “lessons learned” from Stuttgart 21 (scare quotes because I’m not actually sure it was the correct or even a durable lesson) is that NIMBYs need to be preempted by inviting local stakeholders to give their input early in the process. This has produced the disastrous “Dialogforum Schiene Nord” which produced the ridiculous “Alpha E” though critics allege the problem may in part be that no representative of certain parts of the region (namely, those that would benefit from a greenfield alignment) were invited. Similarly, critics say it was a mistake to not give railway technicians who could explain the infrastructure and capacity constraints a “seat at the table”. Whatever the faults or virtues of the system, it is undeniable that in isolation these consultations cost lots of money.

    We still have to see how worthy public involvement was in the http://www.stadtumlandbahn.de project (there is a NIMBY initiative which cloaks their NIMBYism in environmental rhetoric). It did however modify the proposed line in some places imho to the better. With http://www.ulm-augsburg.de and http://www.bahnausbau-nordostbayern.de it remains to be seen what trying to involve citizens on the ground floor will do to the success of the projects…

  4. df1982

    There are some weasel words in that quote on sandhogs: wages “can be” “as high as” $110 an hour, or more with overtime. But how much is the average wage actually? Is $110 an exception or close to the average? They’re obviously paid higher than most workers, but then again you would expect that given they are dealing with heavy machinery and working in some inhospitable environments (spending all day in a tunnel next to loud machines excavating rock is not anyone’s idea of a pleasant workplace).

    All in all, I can’t think that the salaries received by construction workers have much more than a trivial effect on total infrastructure costs. In a worst case scenario it might blow out costs by a few tens or hundreds of millions, but we’re talking about projects that can run into 11 figures (on another note, if it’s a public sector project then the state will recoup a large chunk of these inflated salaries back as taxes).

    But fastidious rules on which workers can do what and how many workers can do how much probably do have a major impact on overall costs, as they have flow-on effects on the whole project. So if I was looking to reform labour relations in this area, this is what I would focus on. In the end it doesn’t affect the individual worker, as they would still be paid the same amount of money for the same duration of work (and increasing their productivity would presumably release fiscal capacity for more infrastructure projects, keeping employment levels reasonably stable).

    • Alon Levy

      I believe these costs are actually pretty average in New York. You have sandhogs pulling $1,000 a day routinely. It’s a multiple of what the same workers get paid here, which is of course a lot higher than Aldi cashier wage and is a pretty solid living wage, but is not top corporate lawyer wage, because here we don’t have a labor aristocracy.

      Headcounts are an issue too, but it’s often the same issue. The sandhogs are equally resentful of any attempt to streamline headcounts, e.g. they insist on retaining elevator operator jobs as a sinecure for older workers. That’s also where you get the 24-workers-doing-the-job-of-8 thing – in New York, tunneling jobs that do not require union sandhogs, for example water tunnels far enough Upstate that the city union isn’t involved, manage to make do with 10-15. So you have a union that’s basically labor aristocracy, with heredity (look at their racial demographics – that’s not normal for New York), low productivity, and very high pay.

        • Henry Miller

          The what about them finger pointing will forever ensure we never get anywhere. Either you end up pointing in circles where everyone is too small individually to matter; or you point to one thing that is really expensive but there is no way to lower the costs without breaking down into details that then join the what about circle.

          Every time someone points out a cost that is too high we need to band together and say no to high costs. If the group being pointed at (in this case blue collar sandhogs, or laywers or consultants) don’t like it they can say “fine: find someone else to do the job cheaper and see where that gets you”. Either they are not worth the money because absent legal requirements to hire them (which I am taking aim at) someone would do just as good for cheaper, or they are worth it because either the quality is too poor or nobody is willing to work those conditions for the pay.

          Similar for the lawyers/consultants: if they are too expensive then we need to figure out how to do without. Each lawyer and consultant hired does provide value, just like each sandhog provides value. Some are worth their high price because of the results they bring. A great lawyer can win tough court cases that a average lawyer would lose – this is well worth the price in many cases which is why some lawyers are worth a lot of money. Of course sometimes paying even a cheap lawyer is more costly than what you lose in court. A consultant can provide similar value for the price (though it is harder to put into one sentence what – the term consultant is too generic), and likewise sometimes are not worth the money.

          The difference is we know for a fact that the sandhogs in NYC charge much more than world rates and require more of them on a shift. Everyone likes to point at generic “lawyers and consultants”, but we need more information to figure out if they are really a problem or not. I’m hoping Alon can figure that out, but so far we don’t have anything that is detailed enough that I can act on.

          Money is limited, every penny saved is money that can be put into another project – or money that can be left in the pocket of the tax payer who – like everyone – has something else they can’t quite afford to do with their money. I’d like to debate what to do with the left over money, not come asking for more to finish some project that is too expensive.

          • Alon Levy

            My current (uncertain) belief is both-and: the sandhogs and other unions in the trades are too low-productivity and high-income, and also the consultants remove value by diffusing responsibility and encouraging defensive design.

          • df1982

            Sure, a good agency should try to keep costs low wherever they can. But the cost inflation Alon is talking about is not a mark-up of a few percentage points, it’s a mark up of a factor of 2 or 3. There is no mathematical way that construction worker wages could be responsible for anything more than a tiny percentage of that differential. And yet whenever cost containment gets brought up, somehow it’s always unionised workers who have the finger pointed at them (not on this blog too much, but out there in the general media world).

            Spitballing here, but I would say cost overruns are something like 95% due to bad practices in project management, and at most 5% to do with high construction worker wages. Of course, as I mentioned before, inefficient work rules can exacerbate poor project management, and if anything should be tackled in terms of labour relations, this is it. It is also more politically achievable, since you’re not talking about making workers materially worse off, just increasing productivity and efficiency.

            Oh, and Alon, Germany definitely has a labour aristocracy. Maybe less flagrantly so than the US, but it’s still there. Pretty much every industrialised nation does (and plenty of developing countries too). But shouldn’t the goal be to raise living standards for other workers up to their level, rather than vice versa?

          • Alon Levy

            The US has a big problem of inequality not just between white- and blue-collar workers, but also within both categories, and the sources of inequality within the two categories differ. In the white-collar world, public-sector salaries are depressed: American teachers earn about 55% the average wage for a college-educated worker, the lowest in the OECD; in Germany, which is among the highest, this is around 95%. Managerial salaries show a big differential too – the MBTA pays a project manager $106,000, but in the private sector in Boston a project manager with comparable experience gets $140,000, so that the MBTA’s planning staff consists of a) total nerds who’re okay with getting paid less to do what they love and b) people who couldn’t get private-sector work.

            In the blue-collar work, the situation is the exact opposite. The public sector usually pays better than the private for comparable work (but, of note, this is not the case for bus drivers or subway drivers); anything involving mainline rail is labor aristocracy too. Occasionally, this benefits low-ish-paid minorities, like the cleaners in New York getting paid somewhat above market rate but that’s still just $56,000/year with meh productivity. But for the most part, it leads to pay well in excess of the average, and those unions are also extremely white and male because when you pay $110/hour for work that people would gladly do for $35/hour, you have to gatekeep, and the mechanisms of gatekeeping in the Northeast include discriminatory laws, informal discrimination, and workplace harassment.

            You can’t give everyone this privilege, because there isn’t enough surplus to distribute. Giving everyone $110/hour while letting them work at mid-20th century productivity levels means that mechanically, someone has to get paid less. There aren’t enough managers and top-1%ers that you can support this purely out of reducing top-1%er incomes. You can hike wages at the very bottom, like forcing Walmart and other low-wage employers to pay $15/hour. You can do sectoral bargaining so that non-union Southern industrial workers earn $30-35/hour in line with how dangerous the work is rather than the $10-15/hour they earn today. But in an economy whose GDP averages around $70/hour, you can’t guarantee $110/hour, or even $50/hour, without extensive productivity improvements and upskilling, both of which the trades have resisted ferociously.

          • michaelrjames

            I second df1982’s remarks. Especially when you consider that there is a strict limit to how many sandhogs are required to do the tunneling–there will be a maximum of two TBMs per tunnel and often only one. (Also not sure if the people running the business end of these $100 million dollar machines are sandhogs?) It’s probably partly why the over-manning is tolerated because it simply is not significant enough in overall costs. Let’s not forget what Rosenthal wrote when comparing NYC’s Second Avenue Subway with Paris M14:

            And The Times observed construction on site in Paris, which is building a project similar to the Second Avenue subway at one-sixth the cost. … In Paris, which has famously powerful unions, the review found the lower costs were the result of efficient staffing, fierce vendor competition and scant use of consultants.
            The extension of the 14 Line in Paris, for example, was very similar to the Second Avenue subway project in length, depth, soil type, environmental issues and regulations, but it cost just $450 million per track mile. [$280m/€247m per km]
            [In NY] Consulting firms, which have hired away scores of M.T.A. employees, have persuaded the authority to spend an unusual amount on design and management, statistics indicate. Public officials, mired in bureaucracy, have not acted to curb the costs.
            A Times analysis 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.
            Soft costs for East Side Access are expected to exceed $2 billion. The project plan called for the hiring of 500 consultants from a dozen different companies, according to a 2009 federal oversight report.

            But I especially stress df1982’s last paragraph, and in fact Alon mentioned it too: ingrained inequality in the US which is the worst in the rich developed world except for Singapore and Hong Kong. It spreads across all aspects of life including unequal access to housing, healthcare and education and in fact the policing & judicial system. It’s the reason for Trump. With the chaos and even worse to come in the following months, the Covid-19 crisis reveals more than ever the old maxim: divide and conquer. Pointing the finger to overpaid sandhogs is in this tradition, because it is pure distraction from the real issues causing this cost madness.

          • adirondacker12800

            They rarely if ever point at the fleets of environmental consultants or platoons of lawyers. It’s impolite to point out fellow symbol manipulators are fleecing the system. Much more fun to point out highly skilled blue collar workers.

          • Alon Levy

            I don’t know who “they” are, but I literally talked about the dangers of overreliance on consultants in this post. And ask me sometime what I think of the American system of government-by-lawsuit or the related government-by-Karen.

          • adirondacker12800

            They are you and everybody else who brings up overpaid featherbedding sandhogs fairly frequently. You yammer on about bad design or extravagant details. But not about endless circle jerks among lawyers and consultants and entitled “stakeholders”.

          • Alon Levy

            What do you mean? It’s literally the subject of this post. Plus other things I’ve written recently, about consultants, adversarial legalism, and what have you.

          • michaelrjames

            Right, but it would be good if you could subject the claims by AECOM in that report you cited (extract below) to critical analysis and comparison with some of the usual suspects. Their claim that actual construction is >50% of total costs is immediately suspect. Isn’t your project with Eric Goldwyn precisely curating such data? Of course the problem is in assessing whether any of these claims of “x% soft costs” are true.

            Cost Drivers
            We examined the cost drivers in the United States for transit tunnel projects. The cost breakdown in the United States are generally as follow:
            35% Soft Costs including owner cost, preconstruction costs including EIS/EA, feasibility studies, program management consultant, design consultant, construction management, right of way easement, permits, insurance, finance, bonding, etc.
            10% Third Party Costs including utility diversions, remedial work, and stakeholders’ commitments
            55% Construction Cost
            Evaluating the Construction cost alone, the approximate breakdown is as follows:
            • Labor – 40% to 50%
            • Permanent material 15% to 18%
            • Construction material, temporary works, consumables, etc. – 10% to 12%
            • Contractor construction equipment, TBM, etc. – 18% to 20%
            The construction cost represents slightly more than 50% of the overall program cost, while soft costs and stakeholders’ commitments at 45% are significantly higher in comparison with other types of major projects or similar projects in other global regions.

    • Tunnelvision

      This are the rates as they are established by Local 147’s Collective Bargaining Agreement…. there’s a base rate and some add on’s such as working through lunch etc. Also depends on seniority and specific role, but $100/hr is the going rate in NY.

  5. Patrick Jensen

    The Nordic countries absolutely use design-build-contracts. Relevant search words are “totalentreprenad” (Swedish) totalenterprise (Danish and Norwegian) and ST-urakka (Finnish).

    Moreover, agencies in the Nordic countries are prolific users of consultants and do little in-house design work these days. A revolving door between agencies and consultants is also an issue that’s frequently seen as pernicious, but seems to work fairly well in the Nordics.

    I think some clues as to why anglosphere costs are so high might be found in the experiences in GM:s and Toyota’s joint car plant in Fremont:

    “— we asked the trainees what they would most want to take back with them to Fremont of all they had seen at Toyota. Their answer was invariably the same: ‘The ability to focus on solving problems without pointing fingers and looking to place the blame on someone. Here it’s ‘five whys.’ Back home, we’re used to the ‘five whos’.’ Call attention to the problem to solve it, or to the behavior to change it, but not to the individual for being just ‘wrong.’

    ‘Problems’ were indeed viewed completely differently. Americans like to respond ‘no problem’ when asked how things are going. —- The response to this by the Japanese was, ‘No problem is problem.’ There are always problems, or issues that require some kind of ‘countermeasure,’ or better ways to accomplish a given task. And seeing those problems is the crux of the job of the manager.”

    https://www.lean.org/shook/DisplayObject.cfm?o=1166

    • Alon Levy

      At least the way it was explained to me in Norway, they use consultants for design, but then the construction is done by a different firm, so it’s design-bid-build, just the contractor for the design is called a consultant.

      • Patrick Jensen

        That’s one way of doing it, but not the only one. Designs are typically done in four or three stages, together with a cost–benefit appraisal. The stages are:

        – Feasibility study/preliminary plan, often in conjunction with regional land use plans
        – General plan, often in conjunction with general land use plans (can be merged with third stage in smaller
        – Track/road plan, for land aquisitions and detailed land use plans
        – Construction plan

        The first three (or two) stages typically involve just the agency and a bunch of consultants. Very little is done in-house nowadays. The last stage is when contractors are brought onboard to optimize construction methods, staging and materials.

        I think the key difference with more expensive regimes isn’t consultants vs. in-house engineering, but rather clearer ownership of projects, several cut-offs at which a project can be abandoned and a reasonable division of risk among stakeholders, resulting in less defensive engineering.

  6. michaelrjames

    One thing I learned from that AECOM article:

    The bid contingency will be paid for whether the risks and its costs materialize or not.

    So it seems that contingencies in these big projects is really just a kind of bonus paid to the contractor in proportion to the “difficulty” of the project. And who do we guess makes the assessment of those risk factors?
    Several projects that ran into problems towards their final stage, like London Crossrail and Sydney Randwick LRT, involve substantial new contingency costs, which now I interpret to be merely “go away” fees to the private contractors. It buys nothing, which at least helps explain the mystery as to where this money goes.

    I’d be interested to know if the Europeans (note: excludes the UK) include such fees. Especially the French.

  7. Tunnelvision

    Non Turkish consultants are routinely used in Turkey. I worked on the Melen water project a few years ago, the company I work for has offices in Turkey and the Marmary and Eurasia crossings involved WSP amongst others. As someone who has worked on feasibility studies an d designs for rail systems, as far as possible you attempt to locate stations or other surface structures are into existing open spaces, be they parks or other brown field sites. One of the main constraints though in somewhere like NY is the lack of such open spaces and that once you get away from the road system you need to acquire easements to pass under private property, which gets expensive and can take a while. Denmark uses DB extensively, Copenhagen Metro was I believe mostly all DB and its stations were all located in parks or open spaces, but the short train length, relatively low speed, tight curve’s and lack of other underground infrastructure enabled the alignment to stay mostly beneath city streets or away from residential and commercial properties. What you also see in some places is so called Progressive DB or Early Contractor Involvement where a collaborative approach to the design is taken, not strictly DB in its purest sense but not Design Bid Build either. I believe that’s the approach being considered for Bart to San Jose extension as its currently working reasonably well on the Silicon Valley wastewater project in the same region.

    I’m currently working on three DB projects in the US. The biggest challenge as the designer for the contractor is that the ultimate owners of the facilities want to meddle throughout the entire design process. This is what causes costs to increase as the Owners Engineer essentially undertakes a parallel design effort and then demands that their preferences are implemented even though they have no liability for the final design product, and this drives costs up as we have to factor that into our design price knowing that this is going to happen. Insistence on 30/60/90/100% design submissions, rather than using collaborative model based design approaches don’t help either. Most Agencies and Owners in the US are incapable of running a DB project properly and they squander the alleged benefits of design build accordingly.

    On a real costs basis, the use of consultants to undertake design work is generally cheaper than using Agency Staff, For example here in the US the multiplier that is used to cover a consultant overhead and allow them to make a normal profit is around 3, that is the company needs to recover 3 x the hourly rate paid to the staff member. A few years ago a similar exercise for staff at the MTA showed that in reality their multiplier was 5. This is mainly because of the all the benefits that such agency staff get long after they are retired, index linked pensions have to be paid for, health benefits for life etc. Whether this is true elsewhere is a debate, but the true cost of retaining a large agency staff is often miscalculated because all cost of such benefits gets forgotten about.

    It should also be pointed out that the vast majority of London Undergrounds network was designed by consultants, as was the NY City Transit system. The very first section, Northern Line was designed by Basil Mott and David Anderson who founded Mott, Hay and Anderson which is now Mott MacDonald, and the forerunner of what is today WSP designed much of the NY system. Other countries have different approaches to urban planning and provision of mass transit systems, no one size fits all but to blame consultants for the high cost of underground projects in certain locations is not in my opinion justified. You need to look at the Contracts that projects are awarded under and how the risk is allocated and managed between the various participants, that is far more the driver for construction costs than anything the designer does. One also has to remember that on a Design Bid Build procurement where the Owner hires a consultant, the ultimate decision making is the Owners, if they want gold plated faucets that’s what they get even if it costs a fortune.

    • Gok (@Gok)

      > The biggest challenge as the designer for the contractor is that the ultimate owners of the facilities want to meddle throughout the entire design process

      Do you get any sense this is better or worse for US projects that will have PPP operators as opposed wholly public agency operators?

      • Tunnelvision

        One of the projects is a ppp project. Its slightly less bad, but then some of the other agencies who are getting facility upgrades but not paying for them have got their fingers in the cookie jar and in those areas, we are expected to deliver the gold plated version while being paid for the discount version.

  8. jon

    I would be curious to understand if Brooks Act qualifications-based selection was used in these places. Regarding the above comment on consultant multiplier, in my neck of the woods (U. S. Southeast) consultant multipliers range from 1.9x (very low) to 3x (outrageous). In-house multipliers are 1.3x-2x and are generally based on lower classifications such that if you in-housed more professional services you couldn’t because you would be asking 20%-40% of local consultants to quit and take pay cuts.

    For rail we can’t get qualified staff because the qualified persons all come out of the Northeast and don’t want a pay cut despite the cost of living decrease.

    • Richard Mlynarik

      For rail we can’t get qualified staff because the qualified persons all come out of the Northeast and don’t want a pay cut despite the cost of living decrease.

      For rail you won’t get qualified staff because of a point-blank refusal to consider actually qualified and competent people, meaning people from outside the USA.

    • Alon Levy

      Then pay people competitive salaries. There’s a real problem in the US with the public sector paying the trades (which are overwhelmingly white and male) far above market-rate and the office workers (who are actually pretty diverse) less than market rate.

    • Tunnelvision

      Depends on how you calculate your multiplier. The cost of overhead, that is the cost to employ someone, taxes, insurances, health care, office rents etc. can be anywhere from 1.2 to 1.6 times the salary paid. Add profit in and you are around the 2 mark. But if you take it as a straight multiplier of base salary it works out at 2.2 to 2.6 to cover costs and anything above that, say 3, you make a profit, around 7 to 8%. Why are consultants expected to work at cost, are we not allowed to make a profit?

  9. Richard Mlynarik

    I keep coming back to it, but the most pernicious role of the perma-temp consultant mafia in the US is their role in eliminating cost-effective alternatives and cost-effective projects. It sets the tone for everything that follows: cost is no object, cost and schedule blowouts are a given, failure to deliver anything like the proposed benefits is actively rewarded by further bad projects.

    Last week I looked at the “35% design” (and by “design” I mean … well you know what I mean) of an incredibly simple Caltrain grade separation in Burlingame, California. In the alternatives analysis, which passed by several years ago, with little notice and no non-staff non-consultant input, it was determined that a straightforward elvated-rail-over-road alternative was infeasible because of “severe” noise and “severe” aesthetic impacts, “severe” service impact during construction, “fatal” railroad operations impacts, and “severe” impact on station siting and constructibility, “severe” business impacts, “severe” “order of magnitude costs”.

    The alternative promoted by the correct consultants and agency staffers was a “split” grade separation, meaning that the tracks were elevated marginally less, while extensive roadway depression, excavation, utility displacement and relocation, etc, would be required. Because of the above “fatal” and “severe” impacts. All of which are lies.

    Now when we see the “35% design” documents put out to bid, it turns out that the “severe” noise and aethetic impacts amount to a 8 foot difference in rail elevation — less than meaningless — there is zero difference (non “fatal”) in siting the station (the exact same location works!), there never was and never can be “fatal” “railroad operations impacts” — just an outright bald-faced lie from the agency and consultants, the property impacts for road depression are significant, and the amount of roadway and utility work is out of control.

    But hey, they’re just designing the alternative that was selected. Pity they have to go along with the analysis. Pity that the utility work is absolutely guaranteed to blow out months, even years, and tens of millions, pity that the grade separation and station are actively designed to prevent track quadruplication (even through Caltrain/CSHRA explicitly “plan” to build a four-track section ending right where this new two-track-only narrows is being “engineered”.

    And yes, the consultant’s “design” of the shitty alternative for other consultants to build is shitty. But they started from a position of cost is no object, outright hostility to the utility of the delivered project, and early and outright elimination of meaningful alternatives.

    You could have any sort of “design-build” under these circumstances, but all they’d be allowed to do is suggest a slightly different texture for the facings on the concrete retaining walls. A shit project with shit costs is baked in. The system is working exactly as designed.

    • Alon Levy

      Yeah, there’s this overdesign tendency, which I think comes more from internal chickenshit behavior motivated by politics than from the consultants. The consultants’ role is to give the answer that is expected of them. This way you get weird standards like slavish adherence to 19c AREMA turnout geometry, or the insistence on pedestrian overpasses rather than underpasses, etc.

      • michaelrjames

        The consultants’ role is to give the answer that is expected of them.

        But what expectations? I mean, with the systematic removal of competence and institutional memory inside government over the past 40 years, the very definition of a project and its expectations can’t be defined competently by the government. Thus by default it gets defined by the consultants, and is subject to whims (most likely by politicians rather than civil servants within government) as the project gets defined over time.

        The problems defined by Tunnelvision really trace back to government not having the capacity to adequately define what the Design should be in the first place. So, no accident that it turns into quasi-random modifications on the fly, though I don’t really accept Tunnelvision’s claim it has nothing to do with his type of consultant. And I’m not necessarily the first stone thrower: if I was given a blank cheque, would I be angelic and honest?

        • Alon Levy

          The expected answer varies. Sometimes the governor or the mayor wants them to say that the project is unaffordably expensive, so they find ways to make the costs look higher; this is really common in Boston because the governor is a moderate Republican, i.e. a do-nothing manager. Sometimes it’s the other way around, so the consultants are expected to find intangible benefits and to keep costs under wrap, if not under control; in GLX, there was political pressure on the cost estimator to come below $2 billion, so the official estimate was $1.992 billion, while the real cost ended up being what the estimator told the honchos in private, around $2.2 billion.

          Another important political demand is not to piss off anyone. If some white flight suburb wants a trench or a noise wall, they get the trench and the noise wall. This was a big cost driver in Toronto, even though electrification = less train noise. This ends up as pure surplus extraction – any project with a high benefit-cost ratio gets saddled with these extras, because even with the extras the benefit-cost ratio is acceptable. Then future projects have to get the extras too out of habit or out of outrage that rich areas got them and therefore do not pencil out.

          The extras can also come not out of NIMBYism, which was not significant in California, but out of local agency turf battles. Richard can tell you exactly how the California HSR proposal got compromised by LA-area power brokers wanting to use the train as a fast commuter train to new development in Antelope Valley and by Silicon Valley-area power brokers (i.e. Rod Diridon) insisting on palatial infrastructure in San Jose (whose main station is named after Diridon). The rub is, at French costs, LA-SF would be around $20 billion in today’s money, which is an insanely high value proposition. So on top of extras glorifying local politicians, there was just no interest in cost control; the plans for ROW sharing with commuter rail at both the LA and SF ends were extravagant, e.g. a random $1.5 billion tunnel in Millbrae so that BART can keep its 3-track terminus running a train every 15 minutes, and the design standards for the physical infrastructure had way bigger viaducts than are normal here or in France.

        • Tunnelvision

          Well here’s the thing. When we bid a DB project, we are typically on a lump sum, fixed fee with the Contractor as part of his price. Our price will be based on certain assumptions based on the Owners reference documents and the process outlined in the Technical Provisions for design submittal and review. We certainly don’t have a blank check, we have to take the proposal design through to final design and released for construction drawings for the price we developed in some cases 2 to 3 years before the work is done. Right now on one of the projects we have a 25% overrun on our original proposal (that was over $30m) that I doubt we will ever recover, which is mostly due to the Owners behavior. If we do recover this it will be after spending considerable amounts on litigation. No one in their right mind would price DB in the US, if you price the risk, you don’t win the work, all owners want is to shed liability to the DB contractor, they are not interested in design innovation, cost or schedule, its all about liability. The idea that DB is some panacea to costs is complete BS. Maybe outside the US, but right now no infrastructure in this country should be procured using DB.

          Oh and the article by Rosenthal that keeps getting quoted, I contributed to that article. Costs in the US and NY are driven by many different issues, do sandhogs overman the machines and have low production rates compared to other countries, yes. Are real estate costs higher in NY, yes, are material costs higher, yes, are engineers salaries higher, yes. Were these the drivers for high costs partially, for East Side Access a significant driver was the lack of access to the worksites, working in Manhattan and muck leaving in Queens, supplies coming from the Bronx, no truck access in Manhattan. Another driver that never gets mentioned, the lack of AMTRAK and LIRR railroad resources to support the work in Harold Interlocking…….

    • Owen Evans

      This – a thousand times this. The screening process used during Alternatives Analysis is deeply, profoundly broken, and rotten to the core. It is so subjective and open to manipulation that it just doesn’t work. The criteria used can be set and weighted however they want, and the results can be so arbitrarily uncoupled from reality, in order to yield whatever predetermined outcome is desired. You only have to look at Cuomo’s LGA Air Train to see perhaps the most egregious recent example of this, but even an Alternatives Analysis where there isn’t some finger on the scale in some obvious way is literally a unicorn. Occasionally an AA still winds up at the correct result, but we all know the phrase about stopped clocks being right twice a day.

      I’d really like to see an example of what an Alternatives Analysis from Italy, Sweden, or Japan looks like. Do they make huge, profoundly impactful decisions regarding scope and cost at a stage like this where there is so dreadfully little information available, and it is so susceptible to interference through politics and corruption?

  10. Henry Miller

    The tricky thing here is you always want your final contractor to be capable of design-build. Even if you give them a design, you want them to know enough to have designed it themselves. This costs more upfront, but it saves money because they know enough to ask questions before doing something obviously stupid.

    You want a contractor to feel empowered to notice when a door if built to plan won’t meet ADA requirements and get clarification. You want the foreman to look at the dirt for know it is unstable and you need to call in pile drivers before building. These things should be done in the design phase, but they are details that can easily be missed. In the second example (get a pile driver) doing soil samples of your whole city to find out in the design phase might not be worth it, but if the contractor has enough geology to look know that changes everything!

    The low cost contractor always plans on making a profit on change orders. Even when building spec houses where you have already built 100 of the same blueprint: there will be enough change orders for the low bid contractor to make a killing on change orders. The higher bid contractors are more flexible to making trivial changes without increasing prices.

    The above is probably what is captured in technical score that some low cost areas use to evaluate contractors. I don’t know though as all I know is technical score is important to them, not how they evaluate it.

    • Alon Levy

      Yes, and in Spanish design-bid-build, this is what happens. The system is designed around easy changes: design-bid-build means the builders are not psychologically wedded to the design, and itemization means change orders do not require litigation.

    • Matthew Hutton

      A great argument for outsourcing both design and construction but not doing it in a stupid way like the Anglo Saxons do.

    • Alon Levy

      Yeah, these are two different clusters of countries. Good corona control: Asia-Pacific; bad corona control: Europe and the Americas. Low construction costs: Scandinavia, Southern Europe (inc. Turkey), Korea; high construction costs: Anglosphere, most poor countries.

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.