Cost-Plus Contracting is Good
Because I write a lot about government waste, I get to interact with people who complain a lot about government waste, which exposes me to a range of views, some more reasonable than others. The less reasonable views themselves range from unhinged rants to things that sound like they could be true, that may even be true for parts of contracting other than public transportation or infrastructure megaprojects. It’s one of the latter views that I wish to talk about here. It’s all too common, in my experience, for people who complain about government waste in the United States to speak ill of cost-plus contracting, which they claim (incorrectly but plausibly) is a form of a waste and even (much less plausibly) fraud, in which contractors get paid regardless of how poor the job is. In truth, the only good way to build infrastructure megaprojects is with itemized contracts and with generous public-sector assumption of risk; this isn’t called cost-plus in the literature but itemization, but is close enough that from the perspective of citizen-activists it should be viewed as a cost-plus variant.
Itemization versus fixed-price contracting
Contracts can, broadly, be either itemized or fixed-price, the latter also known as lump-sum. A fixed-price contract has a single cost line for the entire project; an itemized contract instead prices each section, and certain elements that are agreed to be outside the contractor’s control, like materials, are adjusted automatically if prices on the world market change.
There are also mixed models. For example, in Stockholm, some contracts are fixed-price, some itemized, and others use an intermediate system called fixed price with adjustable quantities, in which some elements are itemized but others are not. Turkish construction contracts itemize about 65% of the costs in detail, covering the civil infrastructure, and then take each of the main sub-items of the other 35% (at the detail level of ventilation, power design, sewage, etc.) as a fixed-price contract.
In Southern Europe and Turkey, the items are public, published transparently by the government, as an anti-corruption measure. These are detailed, and take different costs of living into account, and thus in Italy the prices, published by the state, may differ by region. If the itemized prices are unrealistic, then the contractors are allowed to demand more, but those itemized lists help ground the contract.
This system far outperforms fixed-price contracts. We have standard references on this, namely Ryan (1, 2) and Bolotnyy-Vasserman, finding that itemization for power plants (in Ryan) or road maintenance (in Bolotnyy-Vasserman) leads to reduced overall costs, by about 20%. The reasons are that fixed-price contracting leads to increased friction in change orders, and that, relatedly, fixed-price contracting imposes risk on the private contractor, leading to higher bids for compensation. For this reason, all low-construction cost environments we’ve investigated itemize, to a significant extent. The Nordic countries are moving from itemized to fixed-price contracting under the influence of British practices and the requests of large international firms that are used to doing business in English-speaking countries or in other high-cost countries, and as they do so, their costs are moving from low to medium, in addition to other bad reforms.
So why do people think itemization is bad?
The big multinationals are just used to fixed-price contracts. In New York (where it’s usually not big multinationals), an additional issue is that the contractors prefer to be paid upfront, due to delays in payment under itemization. But more commonly, the contractors just don’t like having to give exact specifications, and are used to environments where they don’t and don’t notice how the costs in those places are much higher than in places that don’t govern in English.
But government contractors are hardly a popular figure among people who complain about government waste. So what gives?
I suspect that this is about the sight of the government assuming risk for something a private contractor does. The sight of a contractor complaining about a problem that the government then has to pay extra for is repulsive to the general public, which assumes that something shady is going on, regardless of whether it is. This leads to political pressure to insulate the public sector from unexpected changes.
The problem is that there is no way to fully insulate the public sector. Once the megaproject has been decided, the political cost for the government of walking away is larger than the economic penalties for the concessionaire. In practice, every attempt to privatize risk will get contractors to bid higher, while still not protecting the public from the risk of large cost overruns. Turkey is somewhat exceptional in this, but it still itemizes, and the way it enforces the maximum 20% cost overrun is by having so many contractors that it’s easy to blacklist malefactors; this is not available in richer countries with fewer, larger firms.
Pedestrian Observations 
“the only good way to build infrastructure megaprojects is with itemized contracts and with generous public-sector assumption of risk; this isn’t called cost-plus in the literature but itemization, but is close enough”
Itemization isn’t called ‘cost-plus’ because it isn’t. In itemization the itemized costs are agreed to up front (either as part of the contractors bid, or mandated by the government [your Italian example, I think?], or just negotiated) but in cost-plus the contractor presents the costs after the fact, and then gets a fixed percentage markup on top of it. This of course gives the contractor every incentive to drive up the “cost” because not only do they get that extra money but they get a greater markup too. This is more similar to time-and-materials work (also known as work on tags). Both are terrible contracting practices. They have their place (time or performance critical activities where money is no object like national defense in war; or small unique work with high risk that cannot be bid normally) but should generally be avoided. Overcharges on T&M or cost-plus work can of course be fought by the government (“did all ten workers on this tag really work on the change order?” “did you really spend this much on concrete?”) but doing so is expensive for the govt and if you build a reputation for fighting costs too much your costs will end up higher as contractors avoid you or or price the risk of being paid late/not at all.
Itemization in contrast makes contracts and change orders easier to process because the unit quantities are usually easily determined and then cost is a simple calculation, as you have noted.
Note that instead of being different than fixed price/lump sum contracts, itemization is actually the same, just with greater detail on the fixed prices instead of one fixed price for the whole contract. Alternatively you can look at itemization as fixed price on a unit basis (a fixed price for cubic meters of dirt removed, cubic m of rock removed, days of excavator on site, etc.) rather than a performance basis (a fixed price for earthworks, for plumbing, etc.). Either way you are correct that itemization is very good because it removes risk from the contractor; instead of guessing how many cubic m of excavation is ultimately required, they know that if it is 10% more than predicted they will be paid 10% more. But that isn’t cost-plus as understood in the contracting world.
Interesting point Onux. I primarily study defense acquisition, so I read this with great interest. I had not been familiar with itemization specifically, though I see the point Onux is making on differentiating it from cost-plus as I typically understand it. I think a key factor that Onux flags here is whether itemization includes a line item for labor / time. For defense acquisition and other forms that emphasize development, this is inherent with the standard argument being that it’s difficult to predict the total effort required for inventing something new.
That said in a disagreement with Onux, at least in the U.S. federal acquisition system, cost plus fixed fee is only one form of cost plus contracting. Other forms include award fee (with performance measures, though in practice these can be hard to implement) and incentive fee (which gives higher profit for coming in below cost). One seminal piece of internal DoD analysis, using data not available to the public, found that fee structure could matter more than the cost or fixed base.
In practice, itemization with public-sector assumption of risk is cost-plus: the contractor says what the items are, but if changes are needed due to meter-scale geology, then either the public sector assumes the risk or there’s a fixed maximum leeway (20% in Turkey, enforced by brutal competition among the contractors).
These terms have specific meanings already, and it’s awkward to try to re-define as you go along:
1: Cost Plus. A contract where the work is paid for on the basis of actual cost (with invoices, paystubs, hourly cost of equipment based on independent analysis, etc. to demonstrate actual cost) plus profit negotiated in advance. The profit could be a percentage of the cost or a fixed ammount.
2: Time and Materials. Similar to Cost Plus, except that the profit is built into the cost, as a markup on hourly labor, invoices, etc.
3: Itemized. The work is broken up into a series of items, each item to have a physical unit of measure (for example, square yards, tons, lineal feet). The contractor provides a unit price for each item in their bid. There may be provision for renegotiating unit prices if the quantity of actual completed work is significantly different from the estimate. Ideally the bid items are standardized within an agency or industry which helps the designer with cost estimation and the contractor with bidding. Note that the unit price does not necessarily reflect the contractor’s actual cost – there’s almost nothing to prevent the contractor from bidding low on one item and making it up on another item. There’s lots of reasons to do so, including shifting risk to/from items with Liquidated Damages or market price adjustments, and also to take advantage of potential quantity busts (“unballanced bidding”).
4: Lump Sum. A single price negotiated for a completed item of work, irrespective of the quantity of materials involved in constructing it.
Cost Plus and Time and Materials can be done without a bidding process, since the basis of cost can be independently determined. The drawback is that there’s an incentive for the contractor to do the work inefficiently and thereby maximize the cost. Cost Plus with fixed profit may help with that.
A typical design-bid-build project will have most costs itemized, but may include some Cost Plus or Time and Materials work (“Force Account”) and some lump sum items (mobilization is often lump sum even when all other costs are itemized). Force Account is handy for work that can’t be reasonably foreseen prior to the start of construction (for example, repairs to a bridge deck after removing an overlay), but the total amount has to be kept to a small percentage of the total contract value in order to preserve the strength of the bidding process.
A design-build is essentially lump sum, although there are typically pseudo-items/milestones for the purpose of progress payments.
Good summary. As for Force Account, there are different interpretations, it can mean work performed by a railroad or other utility to support the project, or it can be work directed by the owner to be performed on a reduced multiplier, I’ve also seen that described as “dayworks”, provisional items, provisional sums, allowances etc. all reimbursed on a T and M basis typically without the need for a change order to be processed. Either way if its contractor work you would aim to keep it below 5% of the overall value to as you say to not skew the bid.
@SNP
Excellent summary.
“In practice, itemization with public-sector assumption of risk is cost-plus”
Except it is not. Under cost plus, if there is an extra 1,000m3 of hard rock to remove, and it costs the contractor $1M, then you pay them $1M plus the markup for overhead and profit. If it costs them $1.5M, then you pay $1.5M plus markup. Compare to itemization, where if you negotiate, or accept a bid for, $500/m3 of rock, then the same 1,000m3 will cost you $500K. There is obvious incentive in cost-plus for the contractor to drive up costs, either through corruption (claiming people to do the work when really they work on the main project), soft corruption (renting a really expensive piece of equipment from your cousin’s company and presenting a fully auditable invoice for the ‘cost’), or just to drive up the markup if calculated as a percentage.
With itemization the incentive is to drive costs down, because while you have insulated the contractor from the risk of unforeseen conditions, you have not insulated them from the risk of inefficiency. If it costs them $600K to remove the rock they are stuck, they will only get the $500K. Inefficiency is of course exactly the kind of risk you want contractors to take on.
Note in this regard, as SNP pointed out, itemization may not be “cost plus” because if it costs the contractor less they get to pocket the difference. If the 1,000m3 of rock is removed after $400K spent, the contractor still gets $500K. Good competition will limit the extent of overbidding on unit costs, but the fact remains in an itemized contract the builder does not have to show you wages and invoices to prove they add to $500K; if you have negotiated $500/m3 then once both sides agree the obstacle is 1,000m3 the contractor is getting a guaranteed $500K regardless of actual cost, which is the opposite of cost-plus mechanics.
Hey Alon sorry to thread-jack but something has happened to the Transit costs website. Did the MTA hire someone to hack it?
There was an attack but it was two weeks ago. I think the site just went through a reset two days ago (when you wrote this comment); it works now.
Thanks!
One of the challenges with this is that I think we have explained the high London costs without looking at the contracting model.
With the Northern Line Extension, well £160m of contingency wasn’t spent in the end. As per Wikipedia £240m of cost, was due to the developer proposing an overly generous plan over the top of Battersea Power station tube station. Then if you allow £150m each for the connection to the existing Northern Line by hand and the additional connecting tunnels at Kennington then you are looking at around $250m/km for the remaining costs that can be compared to other projects.
Given the (excessively) large stations and the run on tracks beyond Battersea that really isn’t awful as a cost per kilometre.
The same with the Jubilee line extension, you have the large numbers of interchanges to other lines and the multiple tunnels under the Thames which you had to do. Then you have the large stations and the bus stations and upgrades to other lines that are arguable. Plus you also had the tunnel collapse at Heathrow requiring a health and safety delay and the electrical worker strikes. Once you take all that into account I think you have probably explained all of the extra costs over a more moderate project.
This will sound like a silly question but what are the practical differences when the private sector assumes risk vs the government? Like what does this actually mean?
The private sector will needito overbid costs to atcount for the worst case. If that soil is more rock then expected they would go bankrupt charging what seems like a fair price.
Some risk the private sector should take, they should have reliable mechines. but much of it is things not in anyone’s control. By the government taking that risk prices can be more reasonable as the worst case won’t happen ever in reality.
The value of a construction company is lower than the face value of the project they work on, thus if a company bids for the reasonable case but runs into a 10-20% cost overrun, that tends to kill the entire company (and the project may or may not be completed by the company). Cost overruns of such size, which are contractor-killing but not project-killing (i.e. almost certainly the project still makes sense in retrospect) are simultaneously not so rare that contractors would be willing to play Russian roulette with them, yet not objectively common. Let’s say that they happen to 10% of projects.
Under the lump-sum model, the parties say “contract: 1 metro line in exchange for $xyz”. If the contractor doesn’t want to go bankrupt to a geology surprise with 10% probability, they have to put in a 10-20% contingency, but because it is not labeled as such, they get to keep it in the 90% case.
Under the buyer-risk model, the idea is to act almost entirely as if the buyer was doing the project in-house — as if the government went and leased excavators and hired drivers — but because that would be a headache, they use the contractor as their pseudo-in-house crew. In a rough approximation, this would round to “contract: X bulldozers (with crew &c.) in exchange for $uvw per day, for however long the project will turn out to take”.
To be fair when you get a quote for work on your house it assumes that things are as expected. If it turns out the plasterboard comes off with the tiles or something you have to pay more money.
Basically, if the agency retains the risk for say ground conditions as they should then if the ground conditions are different than expected as outlined in the Geotechnical Baseline Report (which is a risk allocation tool and not an actual correct geotechnical interpretation) then if those changed conditions result in additional costs and time the Agency pays that to the Contractor. In theory, this retention of risk should result in lower initial contract prices as the Contractor should not price everything as if the worst should happen, thereby making large profits should the worst not actually happen……. its a nice theory.
I wonder how much of that could be captured in the contract. List in the known likely mixes of sand/clay/rock/water/archeological… and bid the cost for each section. Then the contractor just punches in the soil mixture as is changes and the contract price updates. Most of the soil conditions you can encounter are known upfront, so we should be able to bid them. In theory you could pay someone to do a survey of the entire line to arbitrary precision and then avoid that, but it generally isn’t cost effective.
Well thats what you do, although you don’t necessarily define the soil/rock type. In non TBM driven tunnels its typical to use the so called “Q” value to define the ground types. This was developed by Nick Barton of the Norwegian Geotechnical Institute and is essentially an empirically based ground classification system that has been used pretty much everywhere, although sometimes Bienawksi’s RMR (Rock Mass Rating) is used. The two can be used alongside each other if you want a comparative system. For example during the Site investigation phase you will use the rock cores, outcrop mapping, and understanding of the regional geology to derive a set of estimated Q values along the tunnel alignment which you can then turn into expected lengths of tunnel where various Q values will be encountered. Based on this you will develop a set of support classes, for example if Q is greater than 10 you will need spot bolting, if Q is less than 1 you should expect to install steel ribs, rock bolts, shotcrete etc. Then during construction you undertake face mapping to verify the Q value and hence support class and hence payment. Typically you will have separate itemized pay items for each ground class for excavation and then support. In addition, you will have individual pay items for rock bolts of various lengths, shotcrete, ribs, spiling, mesh etc. that will get triggered if it is agreed that some form of supplemental support over and above the standard support for each ground type is needed. On top of that you can if necessary provide a Geotechnical Interpretative document that describes the rock/soil properties so the COntractor can understand the rationale behind the support class designs. Its a relatively simple system and can be used wherever you are as rock properties such as number of joint stes and angle of joints etc. are universal and free of language constraints. When you tie this to the payment mechanism you have probably the most equitable way of paying for underground work and some form of this used to be used in the UK when Bills of Quantities were in vogue and the Norwegians have used something similar for years, I’ve used this in Turkey, Hong Kong and to a lesser degree in the US.
For pressurized face TBM driven tunnels where the ground is rarely seen this gets more complicated as its difficult to actually verify the ground conditions encountered, access to the cutter head is limited and may have to occur under compressed air, you can do something similar by defining “reaches” of ground conditions based n the geotechnical investigation and modelling. In this case, your going to be be identifying for example abrasivity of sands, and stickiness of clays, boulders, groundwater etc. so the CONtractor can understand the impact the ground will have on the TBM performance in terms of cutting tool changes which is where many a TBM-driven tunnel has run into problems. You can identify these reaches and then explain the ground conditions through a Geotech Baseline or Interpretive report so that the Contractor has a fighting chance of understanding how the conditions will impact performance. So you can establish unit rates for excavation within these reaches but you have to find a way to measure whether the ground conditions expected have actually been encountered. This is difficult as you can’t map the face. There are other ways to do this, you can request the contractor to provide detailed cycle time evaluations including penetration rates for TBM advance and receive all the TBM operating data to analyze to see whether the expected performance parameters are being met or not, but its a lot less empirical than for non-TBM tunnels.
Interesting topic. And this goes to the heart of project pricing, risk assumption and how Agencies are required to procure projects. Cost plus is really not a good way to do business though, as Onux has highlighted, and also for many agencies it’s not a useful model as they have no certainty of cost outcome. My personal experience on multiple tunnel projects around the world for different agencies and under different jurisdictions is that a good old fashioned Bill of Quantities-based remeasured contract still takes a lot of beating in terms of cost control. During preparation of the final design the designer (agency/consultant) prepares a detailed Bill of Quantities based on the final design drawings. Now this BoQ is typically for the permanent works only as that is relatively easy to measure from the drawings, especially in these days of 3D model-based design. The BoQ forms the basis of the cost proposal from the Contractor who enters unit rates against each bid item. Allied to the BoQ is a Method of Measurement that explains what is to be included in the rate build-up. During construction each month the amount of work performed against each bid item is measured and paid for at the unit rate included in the proposal. This method does require a little more on site supervision by the owner to ensure that the quantities claimed are correct but its not a particularly burdensome process to verify the quantities. Another good thing about this is that if a change order is needed you usually have the basis for pricing the change order already in the contract. During bid analysis, you can also directly compare the unit rates entered by each bidder to see where each bidder sees the risk and you can challenge high and low rates before award. This was how projects were priced and managed when I started in the industry in the UK in the 1980’s, and how projects I worked on in Denmark, Hong Kong and Turkey were priced and administered. Turkey was the only place where escalation clauses were used to recalculate the unit rates monthly due to the chronic inflation in the country just after the Lira was decoupled from the US$. But this requires and places a certain amount of liability on the engineers preparing the BoQ’s but thats not always a bad thing, I remember for the Melen project in Istanbul we had to prepare bar bending schedules that itemised the rebar to the nearest kg so the Contractor could price the project. Some charges could not be itemized such as Site Offices, power, etc. and these were calculated on a monthly basis by the contractor, and as the owner you can always ask for the detailed breakdown and escrow these documents. But everything else could be itemized using Ground Classification and support classification together with providing items for additional rock bolts etc. to be paid on an as needed and agreed basis. For TBM tunnels with segments similar unit rates can be established. The move towards target cost style contracts has undermined this form of contract, as has the lemming-like rush to design build.
The US is a completely different bucket of eels though.
The real problem is – as always – fraud. Everyone (including you!) will look for ways to increase their profit. This will happen, you can do things to prevent it, but people are innovative and will eventually come up with something you hadn’t thought of and thus didn’t prevent. Even if you think of an issue, mitigations to prevent it can sometimes be higher costs than just paying for some fraud – but this sets a bad example.
Delhi for example is a lot more corrupt than New York City, yet costs are ~1/10th of New York correcting for PPP.
Is Delhi really more corrupt, or is it just that NYC is better at hiding corruption in thing that are maybe legal but still unethical corruption.
When I was there Delhi was so corrupt rich people whose houses were burgled couldn’t get the police to show up. They could write in the newspaper about it though. I don’t think that would happen in New York.
I really think the issue is the lack of political responsibility. Khan in London has to do a good job or he will lose reelection because mostly the Conservatives run someone vaguely moderate – or he could lose to the Greens and/or Lib Dem’s – especially if they work together. That isn’t true in New York City. Especially at the level below the mayor.
Also I think perhaps it matters how much people care about public transport – maybe they value it less in New York City compared to Europe. https://nationalhighways.co.uk/our-roads/a428-black-cat-to-caxton-gibbet/ Is £95m/mile for a 4 lane road in the countryside with one major junction, that feels like a lot.
I believe this is the right answer–there is shockingly little political accountability in New York City. It’s one of the few places where old-style machine politics really never went away, to the extent that very popular, cheap programs with broad citizen support–such as dedicated-bus-lane redesigns–get completely quashed by the mayor’s unelected “fixer” when local institutions (the New York Botanical Garden) or local business interests (Broadway Stages) get involved. City council members are not shy about holding closed-door “town hall” meetings for business owners only, ordinary voters to be turned away at the door. It’s virtually impossible to fire anyone in charge of NYPD. Et cetera ad nauseam.
So I wouldn’t say people don’t care about public transport–quite the contrary!–but the whole system is highly insulated from public opinion. And seeing the effort that would be required to break this, most citizens make the individually-rational choice to disengage (hey, people got kids to feed)–thereby further entrenching the problem.
I mean to be honest that sounds like the level of political accountability in Qatar/Hong Kong/Singapore which are the sorts of other places that have extremely high costs.
A word that got my attention was “competition”. If a DOT wants work done on a surface roadway, the contract probably has four or six responses from qualified paving contractors. It is my understanding that many US rail transit contracts get one bid, or perhaps two bids that are both 30% higher than original estimates.
Paving it the step just before painting lines. There is a long complicated process before that.
Most of building a railbed – at grade or elevated – is the same work as building track. So contracts in the US should be dig, level, and fill with gravel to the following specs (the specs are generally stricter than a road, but it is a matter of degree). The a different contract to place the ties and tracks and electronics which are the only different parts. you can get a lot of bids for the hard parts from those who build roads. What is left is a level bed to put tracks on and there is little that can go wrong from there (the costs come when you discover the local soil isn’t what is expected.
Or course many times we put trains in tunnels. that is very rare for roads, so I’m not surprised it is hard to find contractors for that.
Then again, from what Alon has suggested elsewhere, the cost of American rails isn’t building track. They seems to blame most of the problems in oversize stations, and over spending in the design phase – building rails itself isn’t out of control. So probably the above mitigation isn’t needed. So long as the bid is reasonable one bid is fine (you want more than one bid just because this is the easiest way to verify the bidder isn’t too large)
Only problem with having multiple contractors touch the same piece of a linear project is which one of them ultimately is responsible for the final product. You’ll be handing off a partially completed product from one contractor who has prepared the ground works to another to install the ballast and track and then maybe another to install the systems. It can be done, providing the agency doing it understands the risks inherent in handing off work, and also is clear where liabilities and performance warranties lie. For a tunnel project, this may well cause schedule issues as it’s a linear project with limited access points and it’s never a good idea to have multiple contractors in the same space at the same time, unless it’s a CMGC type contract…… as for the stations being too large I would be inte4rested in seeing Alon and his friends come up with a station design for NY that complies with all the relevant standards, including NFPA 130, the NYS Building and Fire Codes that would get approved by the NYFD Fire Marshall, and not just say because Istanbul or wherever has shorter stations so can New York……
I mean the New York government could change the codes right? They could use European codes if they wanted, and they clearly let you build a subway line for ~$250m PPP a kilometre or less.
Not really. If you want to build in New York you have to comply with the New York City Building code, or in MTA’s case as it’s a State Agency the New York State Building Code, If you don’t you cannot get a Certificate of Occupancy and you cannot then operate your shiny new transit system, building etc. This idea that you can pick and choose different standards and codes to reduce cost is sheer fantasy. Materials in the US are tested according to ASTM standards, there are standard specifications across the industry known as the CSI specs and pretty much every State DOT, DEP and MTA will likely have their own Standard Spec Books and design standards that you will be required to comply with. Where something simply does not exist you can sometimes reference a non-US-based document, we have referenced the EFNARC standards for shotcrete and TBM additives on some projects BUT its not easy to get acceptance for this approach from the agencies. Most concrete, reinforcement, structural steelwork standards and design codes around the world are pretty similar, reinforced concrete works in the same way pretty much anywhere you are and there is significant interaction around the world on this stuff as there is in the tunnel construction and design world, for example, tunnel segment design is not vastly different wherever you are, although the US with its liability issues did lag a little in the adoption of fiber reinforcement, although that is now becoming more common. Where codes and standards do differ are when it comes to what is and is not acceptable for fire life safety, especially in NY where FDNY’s experience of the Deutsche Bank fire where firefighters lost their lives due to inadequate fire suppression systems during construction. There’s not much MTA can do about those issues.
Does the code actually require any of this, or is it just interpretation? Because in Washington, the fire department in one suburb, I believe Bellevue but don’t quote me on this, refused to certify a light rail tunnel section that complied with the code, because it wanted the line to go above and beyond state standards, and the state refused to coerce the municipality on this.
Codes establish the minimum requirements that have to be met, x number of exits from a room, bathrooms per sq ft of space, minimum widths for fire exits between the handrails, and much else. The International Building Code, on which most State, City, and municipality building codes are based are updated regularly to attempt to ensure that occupied spaces be they residential, commercial or transit provide a tenable environment in the event of a fire or other emergency and preferably stop a fiore from occurring in the first place. The same building code that governs how I lay out the electrical system in my house is also applicable to a transit station, although the occupancy class will be different! But Codes only establish the minimum, any entity involved in issuing a certificate of occupancy can add requirements over and above those minimum code requirements. For example, the local Fire Marshall who is typically the Authority Having Jurisdiction (AHJ) for fire life safety-related issues can if they so wish impose additional requirements over and above the Building/Fire Code, NFPA130 and for highway tunnels NFPA 502. Now hopefully that discussion is had with the Fire Marshall before a project hits the streets for construction but it can happen during construction. As the local fire marshall will report to the State Fire Marshall its not that easy to “overrule” them. For Federal and State funded projects your usually dealing with the State Fire Marshall anyway. We are currently dealing with this on the Hampton Roads Bridge Tunnel Project where a new State Fire Marshall has been appointed and now wants to revisit the entire design of the tunnel ventilation system because he “does not like what he’s seeing” even though the design meets and exceeds all the local, State and NFPA Codes. In this case, it’s about how the first responders coming in to deal with a vehicle fire in the tunnel will be kept separate from the folk who are evacuating their vehicles, an issue we deal with in every highway tunnel where every vehicle is a potential bomb, hence a deluge system allied with multiple banks of jet fans and a pressurized egress/access corridor together with visual message boards and guidance systems to assist folk in evacuating. The client VDOT cannot simply ignore him because at the end of the day without his certification the project does not open, so now we are going back to square one to demonstrate to him that all of the above has already been reviewed, resolved and is in the process of being constructed and the operational plans of VDOT who will operate the facility provide the separation he and his predecessor are/were looking for.
If the design meets the standards, why does the fire marshal make the state less governable. If he chooses to resign, will anything get worse?
That’s such an ill informed comment. Its rare that a fire marshall will ask for more than the design and the codes but they can. And given the fire marshall’s role in enforcing fire regulations etc. across all facilities and not just transit facilities I would hazard a guess that many more people would die in fires if building owners were left to their own devices.
If in the private sector the fire marshal tried to enforce something above code he would be sued over it.
On the other hand, the idea that people do pick and choose standards and codes to maximize cost is sheer shit reality.
“Standards” don’t come out of nowhere. If there were anybody – anybody at all – with the slightest, even most glancing and peripheral, interest in cost effectiveness or social benefit involved, then perhaps there would be the slightest chance that “standards and codes” might partially and occasionally serve the public interest. But as it is, everybody who actually has any voice in this is absolutely united, “solidarity forever!”, in promoting can-never-be-too-hasty = encumbrance = cost explosion = sweet sweet overheads + profit.
Even if we take civils contractors out of it (the big ones, that is, the ones who have a seat at the table, though ethical minnows may enjoy crumbs falling from the table), it’s just a fact, that nobody is allowed to even whisper, that “FDNY”, just as your example, is an interest group, and the interests of the guild members (American Heroes! 9/11! Overtime! Pensions!) of interest groups aren’t necessarily aligned with those of society as a whole, and that American Heroes can usefully serve varied masters in varied ways, depending on who’s asking and who’s paying. Sometimes they act ethically! No question. No question at all. Sometimes their interests and yours and mine might be aligned. Sometimes! But some other times, … maybe not so much.
The whole point of two exits from a safety perspective is to avoid a repeat of https://en.wikipedia.org/wiki/King%27s_Cross_fire. Obviously now people don’t smoke that is unlikely to reoccur. Plus in the first place it only happened once. Plus from a navigation perspective two exits helps you as more people are closer to an entrance.
Three exits is just excessive. Fundamentally the voters in general are anti red tape.
@TunnelVision Are you referring to the Deutsche Bank fire of 2007? The FDNY summary I saw (http://www.thefirehousetribune.com/blog/2022/8/18/xa0kkw1pnrna76phii4617t2xvaz9d) suggests this was due to issues with ongoing *demolition* that required simultaneous asbestos abatement measures, not construction. None of the circumstances highlighted there seem practically relevant for future construction work, other than the timing of installation of fire suppression equipment (which is a trend that’s set to change in the construction industry anyway). Though I think we can stipulate that FD tends to be conservative about risk–even though reasonable risk is actually the job.
Well there’s your problem right there. Don’t give veto power to unelected officials with no cost accountability. *Especially* don’t give them *retroactive* veto power. To the extent this is not politically possible, that is a massive failure of democratic governance.
If the code is not adequate to ensure fire safety, change the code. But how can any planning work in any environment where there’s no written standard for what is “enough” and you have to design and build to satisfy the possible future gut feeling of someone who’s not even in the picture today?
In Bellevue, WA, the fire department did demand excess infrastructure beyond code, even after the FFGA, and got it. It’s not supposed to happen, but many things aren’t supposed to happen and do.
You will be managing multiple contractors on any such project anyway. Sure an electrician could run a scraper, but you probably wouldn’t have that – not only does they tend to charge more per hour, but they are less productive than someone experienced. Likewise the scraper operator could hook up wires but someone experienced is more productive. (odds are you also have union and licensing rules that prohibit this)
It makes project management harder, but Alon has been advocating doing this in house. Note that my specific example of separating out rails from bed preparation is specific to building at grade, I wouldn’t expect it to apply to a TBM where there isn’t ballasted tracks.
Whatever you are building you need to figure out what the right contractor separation is. Part of this is also building up contractors so that you can get competitive bids, which is a complex topic I don’t know enough about to comment on (evidence suggests nobody else does either based on how rare it is for contractors to jump levels of project sizes). Part of this is finding who the possible contractors are and ensuring the contracts are written so they will bid.
Not necessarily. Most agencies prefer a single contractor approach, means the contractor has to deal with interface and you have a single point of blame which the agencies prefer.. And in any case the General Contractor is going to hire a whole bunch of specialty sub contractors to do the specific work items, and be constrained in some places by Union CBA’s. IN the US a constraining factor on how large a project a Contractor goes after is its bonding capacity, agencies often require a 100% bond so a contractors ability to “jump” contract sizes is directly linked to the surety and bonding markets and the risk levels those folk see in the contractors ability to manage larger and larger projects. As a result there has been a multitude of take overs of medium size contractors by the behemoths, for example Group ACS the Parent company of Dragados also owns John Picone, Schiavone Construction in New York. This gives them access to more bonding capacity and lines of credit. Obviously for the really big projects Joint Ventures are used to spread the risk and the bonding capacity, or increasingly you are getting a few mega contractors bidding, with the local medium size contractors being sub contractors to the behemoths. Increasingly in the US its the French (Vinci, Bouygues), Spanish (Dragados, OHL, FCC, Accionne) and Italians (WeBuild) who are starting to dominate the megaproject market with an occasional appearance by Skanska, Kiewit and others. The likes of Traylor Brothers and Obayashi two of the best soft ground tunnel contractors in the US are increasingly subsumed into such JV’s
And believe it or not contractor outreach occurs to do exactly what you are suggesting in your last paragraph
I really think the main reason our governments have delivered badly on these projects is because they aren’t building up proper expertise in-house.
If you don’t have proper expertise in house you don’t know which of the extra costs are legitimate because of unique circumstances and which are total nonsense.
The US for example has more urban sprawl and the legacy track into its cities is probably in worse condition. Both of those might affect costs.
And yeah having a few experts lying around on $100k a year who don’t have a full workload is annoying. But HS2 costing $100bn more than it should is much more annoying. It’s like wasting $10k because you didn’t want to spend 5 cents a year to keep something going.
How are is the price of the items determined in an itemized contract?
In my opinion, the best use case for actual cost-plus is either:
1) where the work is so unique it’s hard to bid without putting in a lot of risk ,or
2) The task is a small amount of work compared to the bid and proposal costs of putting together a quote.
Itemization sounds like it would be a good idea to me where things are standardized (which is probably the case with most transit things) but for things that are more unique (maybe a bridge or a tunnel with unique geology) a different contracting approach may be appropriate.
By the Contractor, but typically most countries/cities/agencies have rate books so the reasonableness of the unit rates developed can be assessed. Itemization or Bill of Quantities with a remeasureable contract works well for every type of construction.