The steep costs of capital constructionBy
Apologies for the silence on Monday. I was out of town for the weekend and forgot to put up a note on Friday’s post along with the service advisories. I did get to experience the rains and storms along the outer bands of Tropical Storm Isaac. It’s dumping an impressive amount of rain down south.
So over the years, as I’ve followed the progress of the MTA’s current (and future) megaprojects, I’ve returned regularly to the issue of cost. It’s no secret that the current subway and rail construction costs in New York City are out of control. The projects are billions of dollars over budget as well as years behind schedule, and that doesn’t even begin to account for the fact that these budgets are bloated to begin with.
Here’s a sampling of the problem: On Manhattan’s West Side, we’re getting a one-stop subway extension from 41st St. and 8th Ave. to 34th St. and 11th Ave. (with some tail tracks) for $2.1 billion. The project is set to wrap up a few months late, and we lost a golden opportunity to build a station at 40th St. and 10th Ave. over half a billion dollars. The Second Ave. Subway promises to deliver two miles of subway for nearly $4.5 billion. It is up to four years late depending upon which scoping document you read. East Side Access is an unmitigated cost disaster.
Meanwhile, New York’s projects are orders of magnitude more expensive that similar projects throughout the globe. Forgetting China where costs have crept up, New York’s subway construction costs trump any other comparable city’s. So why? That’s the question Stephen Smith tried to tackle in a piece on Bloomberg View last week. It’s worth a full read, but I’ll excerpt.
A huge part of the problem is that agencies can’t keep their private contractors in check. Starved of funds and expertise for in-house planning, officials contract out the project management and early design concepts to private companies that have little incentive to keep costs down and quality up. And even when they know better, agencies are often forced by legislation, courts and politicians to make decisions that they know aren’t in the public interest.
Comparing American transit-construction practices with those abroad yields a number of lessons. Spain has the most dynamic tunneling industry in the world and the lowest costs. In 2003, Metro de Madrid Chief Executive Officer Manuel Melis Maynar wrote a list describing the practices he used to design the system’s latest expansion. The don’t-do list, unfortunately, reads like a winning U.S. transit-construction bingo card.
Perhaps the most ostentatious violation of Melis’s manual of best practices is expensive architecture in stations. “Design should be focused on the needs of the users,” he wrote, “rather than on architectural beauty or exotic materials, and never on the name of the architect.”
American politicians have different priorities. The Port Authority of New York and New Jersey is spending $3.8 billion on a single subway station at the World Trade Center designed by Santiago Calatrava, a Spanish architect known for his costly projects. If New York could build subways at the prices that Paris and Tokyo pay, $3.8 billion would be enough to build the entire Second Avenue subway, from Harlem to the Financial District.
So that, you might be saying, is nothing new. What about the causes? Smith pinpoints a number of culprits. First up is the problem of a conflict of interests. U.S. transit agencies love their consultants, and the consultants can then bid on their own projects. Cross-pollination, in which transit officials move back and forth between the private sector jobs, also leads to inflated budgets and excess spending. Finally, lowest-price bidding systems often lead to project budgets that do not and cannot align with reality or a lack of quality control. Somehow, the new South Ferry station cost $500 million and is already still leaking. No one can be held responsible without timely and costly lawsuits.
Escaping this morass isn’t easy. It will require a full-scale overhaul of the contracting system and contracting laws. Plus, Smith doesn’t even touch work-rule laws in the piece which are clearly another source of extraneous spending and bloated budgets. Larry Littlefield, a frequent SAS commenter and former Transit budget analyst, sees some hope, albeit just a faint glimmer. “Remember how fast and how cheap they rebuilt the 1 train after 9/11? That’s what they’re capable of,” he said. “But it just doesn’t happen otherwise.”
In times of crisis, the MTA can do it right. The 1 train returned to service far faster than it should have, and the IND 8th Ave. line was up and running after far quicker than otherwise expected following a 2005 signal fire. But the big-ticket items that we need to improve transportation throughout the region are suffering. Bring down the costs, and the system can expand. It’s not an easy path to follow.