Feb
28

Thoughts on the construction cost conundrum

By

The vast majority of New York’s transit experts, advocates and enthusiasts think the city has a cost problem. We have the world’s two most expensive subway stops — in Fulton St. and the World Trade Center PATH Hub — under construction; we have the world’s two more expensive subway lines — in the 7 line and the Second Ave. Subway — under construction; and we have the mess that is East Side Access currently in progress. For over $20 billion (and $10 billion in cost overruns), we’re not getting a lot for our money these days.

From where I sit, the cost of these projects is the biggest problem facing future transit expansion. The costs are why ARC was canceled; it’s hard after all to believe that ARC wouldn’t have come in well above when everything else is trending that way. The costs are why New York has to fight tooth and nail for any dollar and why we talk about prioritizing badly needed projects instead of building everything at once as quickly as possible. The costs are why we’re inching outward instead of striding toward expansion.

One of the other problems is that no one knows why everything cost so much in New York City. The easy way out is to claim New York exceptionalism. Things cost more in New York because it’s New York. That is, after all, why people pay more to live here than the vast number of Americans would think reasonable, and that is the argument Michael Horodniceanu put forward during his talk on Tuesday night. It’s not a very satisfying answer, and while the MTA Capital Construction president vaguely mentioned work rules, he seems to believe that New York’s costs are reasonable.

At Next City yesterday, Stephen Smith further explored this part of the story. Do MTA officials think these costs are acceptable? Smith writes:

Horodniceanu gave a number of answers throughout the evening. He blamed, for example, the byzantine work rules that construction unions have negotiated for themselves — something nobody with a passing familiarity of the work rules that MTA management toils under on the operations side would doubt. One reporter with TunnelTalk visited the East Side Access tunnels and came away with the impression that the sandhogs “worked for the Union rather than the contractor.”

Horodniceanu also blamed New Yorkers’ intolerant attitudes toward disruption at the surface, which has certainly been a problem in the past, even in unpopulated Central Park. But many of his answers were not so credible, and left me with the distinct impression that not only does the MTA misunderstand why its projects are so expensive, but that the agency doesn’t even necessarily see the high costs as a problem that needs fixing in the first place.

“Do you think that it’s a problem?” I asked Horodniceanu of the high costs, after his talk was over. “Is it a problem?” he replied. “Is is a problem that an apartment in New York costs a lot of money?” It was the same answer he gave Grynbaum when on stage.

Additionally, Smith recounts a statement from MTA CEO Tom Prendergast who told him that “the cost of construction is what the cost of construction is.” Neither man has a particularly satisfying answer, but in a way, there is an element of politics involved. The MTA Chairman and the head of Capital Construction can’t bemoan high costs on the one hand while asking the state to support a $25 billion five-year capital plan on the other. The optics would be horrible.

Still, if New York is serious about transit expansion, the costs have to come down. We can’t support the current regime, and hopefully, behind closed doors, someone smart is working on this problem. We need more of the Second Ave. Subway, but how much are we willing to pay for it?



Categories : MTA Construction

43 Responses to “Thoughts on the construction cost conundrum”

  1. adirondacker12800 says:

    …yet water tunnel 3 which is being built in Manhattan, is being built at a reasonable cost, is on schedule and on budget. You wouldn’t want Water Tunnel 3’s schedule but it’s on schedule and on budget. Something is wrong…

    • al says:

      Not quite. Its above $100 million/mile of water tunnel (22′ diameter). The Gotthard Base tunnel is $145 million/mile rail tunnel (29’+ diamter). With all the trackage, electrical, fire/smoke detection, lighting and signalling involved with a electrified rail tunnel, the water tunnel is comparatively expensive. It is somewhat cheaper than the $145 million/mile tunnel (22′ diameter) bored for the Phase 1 2nd Ave Subway.

  2. Eric says:

    Labor unions aren’t the reason for high costs. If we assume there are 1000 workers on the project at one time, and each one earns a super high salary of $200000/year, that’s just $200 million in labor costs per year. East Side Access has been under construction for about 6 years, which means a total of $1.2 billion according to this calculation. Yet somehow the project cost has ballooned past $10 billion. The only possible explanation for this is corruption on the management level.

    • anon_coward says:

      part of it is under estimating the costs
      part is land acquisition. to build the 7 train as an example the MTA had to buy land

    • Andy K says:

      sounds like speculation.

      Someone should be able to tell what exactly the $ are being spent on. I’m tired of the guess work.

    • Bolwerk says:

      Unions themselves aren’t the problem, but how we deal with public sector labor unions is a big problem. Nobody can ever say no to these cats. Anything they want has the presumption of rightness and fairness. Would it kill the state to negotiate with them? The MTA tries to negotiate with them, and then some arbiter or legislator comes along and pisses away any hope of even maintaining the status quo.

      The same goes for contractors, of course. They put out their bids, and we either accept or don’t do the work. We can’t negotiate a reasonable middle ground.

      • Nathanael says:

        The PEB nonsense (“oh, you can pay more to the workers by borrowing money to meet payroll”) is a perfect example of government boards giving the unions totally unreasonable concessions.

        Unions are great if there is a countervailing management power — but that’s what they’re there for, to counteract management power. If management has no power…. well, then either the union steps up to the plate and acts like a co-operative, or the union kills the goose that laid the golden eggs. In the case of the MTA they seem to go for the “kill the goose” choice.

        The contractors are even worse. I don’t know how they get away with it, but the MTA seems to have no power over them whatsoever.

        • Bolwerk says:

          As government procurement goes, I think it’s usually effectively illegal to negotiate with contractors. You have to accept the lowest bid that meets your criteria. That might even work well if there are hundreds of contractors, but in transportation there are probably only a handful and they all know it. The same problem exists in healthcare.

    • Nathanael says:

      Eric, it’s not the salaries. The work rules are out of this world, so the projects are terribly featherbedded. Way more than 1000 workers…. working way slower than you think….

      The same applies to the contractor end of things, who are “management”, but not MTA management. They get away with all manner of crap: underbid, then rack up the change orders and run late.

  3. Larry Littlefield says:

    Forget system expansion. What about ongoing normal replacement?

    When I worked in capital budgeting at NYCT, I showed told the top signal engineer there that based on the cost of the most recent signal replacement project (not a CBTC pilot project), and the rate at which the signal system needs to be replaced (about 60 years), replacing the signal system on an ongoing basis would cost New Yorkers one percent of their total personal income for that year.

    Not for transportation. Not for transit. Not for subways. Not for operations. Just for ongoing signal replacement. So the system doesn’t collapse.

    The average state and local tax burden in the U.S. is typically, with minor variations from year-to-year, is ten percent. That pays for roads, schools, Medicaid, welfare, parks, libraries, cops — well less and less of those things but also pensions and debt service. In the most recent data year, NYC’s tax burden was already 52.6% above average, so increasing it is painful.

    http://larrylittlefield.wordpr.....n-fy-2011/

    And what if you can’t afford it and borrow for it instead? Then it becomes doubly expensive for the next generation. Which no one thought was a problem either.

    • Larry Littlefield says:

      That’s one tenth of percent of personal income EVERY year, just to clarify. A cost of $300 million per year vs. total personal income of NYC residents at $300 billion. That’s just one component. Buying subway cars on an ongoing basis is another $300 million. Etc.

    • Nathanael says:

      Meh. Reasonable tax levels. Most functioning countries pay about half their incomes in taxes, on average; we pay less.

      The reason it sounds like a lot of taxes is because we in the US put the tax burden on the poor, rather than on the rich.

      The person earning $10,000/year can’t afford 1% of his income. The person collecting $20,000,000/year can easily afford 90% of his income.

  4. The ARC tunnel was not cancelled because of projected cost overruns. Christie wanted to fund the repair of the Pulaski Skyway without raising taxes. That’s where a good portion of the ARC money wound up.

  5. BoerumHillScott says:

    It will be interesting to see what cost the Los Angeles subway expansion comes in it.
    I am pretty sure it will be the first US subway construction in an dense urban area other than New York in 20 years.

    It would also be interesting to compare consturction cost of large commerical and residential buildings in NYC to other cities.

    • JJJ says:

      The gold line in LA has an underground portion and was built just a couple of years ago, including underground stations.

      The silver line in Boston is mostly underground. 2004. Bus, but not significantly different from rail in terms of underground construction.

      San Francisco is currently tunneling with their new underground t line.

      They also have multiple highway tunnel projects.

      http://sanfrancisco.cbslocal.c.....t-to-open/

      $439 million bought two 30-foot wide tunnels over 4,000 feet long each. Not in a dense area of course.

      A similar price bought them this last year.
      http://www.caldecott-tunnel.org/

      I believe Pittsburgh is working on an underground subway extension.

      There is plenty of data to look at.

      • BoerumHillScott says:

        Those are all light rail or bus.
        While the cost of the actual tunnel will be similar for all modes, the cost of stations is widely different, and station costs are what drive subway expansions more than tunneling.

        Station costs are driven both by the length of the platform, since that determines the length of the excavation, and the expected passenger load, since that drives the width of excavation and more importantly the number and size of portals to the surface.

        Even in LA, the subway trains are only 450 feet long instead of 510 or 600, but that is still far greater in terms of length and potential passenger load than a typical 200 foot long light rail train.

      • Henry says:

        They’re not really that comparable, since road tunnels don’t have stations (the most expensive part of any project) and light rail trains have narrower profiles and less need for large stations.

        There are, of course, many comparisons to other projects around the world, and the general consensus is that American projects are way too expensive. The Dulles extension of WMATA’s Metro is about as expensive as your average subway construction everywhere else.

        • Nathanael says:

          The other American projects can be reasonably compared to the projects in NYC….

          …and NYC is way more expensive. Despite having *easier geology*.

    • Alon Levy says:

      The cost projections in LA are about $300 million/km for the Wilshire subway (dense, but not infill, so no need to cross under older lines) and $450 million/km for the Regional Connector (downtown, crossing the Red Line). Both numbers are from memory, and I reserve the right to be off by $100 million/km in either direction.

      • Nathanael says:

        FWIW, LA’s ground is full of oil-bearing tar, making it particularly difficult tunnelling. NYC is easy by comparison.

  6. AMM says:

    hopefully, behind closed doors, someone smart is working on this problem.

    Depending upon “smart” people “behind closed doors” has not worked out well in the past. Think: Enron (“The Smartest Guys in the Room”) or the Vietnam War. Or Wall Street over the past 20-30 years. “Smart” people are never as smart as they (or everyone else) think they are, and besides, they’re usually in it for themselves, not for the common good.

    The problem here is likely due to competing interests and the fact that decisions are done “democratically”. It’s easier to say “yes” to everyone who yells and threatens than to confront people with the unpalatable truth that you can’t always get what you want. Most of the mega-projects of the past only happened because they were driven by someone with enough power to steam-roller over anybody in their way (think: Robert Moses.)

    It’s one of the reasons the NYC ended up with an “elected dictator” form of government — given the various interest groups’ unwillingness to compromise for the common good, it’s the only way to get anything done.

    • John-2 says:

      …even with the ‘elected dictator’ system, things only get done if you get a person in there not afraid of being labeled an a-hole, not just by the people who voted against him but in some cases by people within their own ostensible coalition. Mayors who care about people liking them or who show any type of softness get rolled by the city’s various political coalitions and are rendered ineffective.

    • Rob says:

      ‘Depending upon “smart” people “behind closed doors” has not worked out well in the past. Think:…’ — and much more recently, the Unaffordable Care Act.

    • Nathanael says:

      “Behind closed doors” is the worst part. You can have very smart people, who are really smart, but if they’re behind closed doors, they start succumbing to groupthink, they never get notified of important things which they’ve overlooked, etc. etc.

      Smart, well-meaning people need to work in public. The public feedback is what keeps them smart.

  7. Brandon says:

    Wow, really disconcerting to hear that none of the people in charge will say that this is a challenge worth dealing with, even worse that they pull out the New York exceptionalism argument.

    New York is not physically or geologically exceptional compared to Paris or Tokyo or any other city. This is a ridiculous argument.

    • SEAN says:

      Wow, really disconcerting to hear that none of the people in charge will say that this is a challenge worth dealing with, even worse that they pull out the New York exceptionalism argument.

      It’s an ego thing. Things are the way they are simply because we are New York. That is the thaught process – agree with it or not.

  8. John-2 says:

    There are a number of different factors that account for the cost, stemming from the current realities of New York to it’s past history. So it’s not just union costs, it’s the limited subset of companies the MTA can get to do the jobs that inflates the job prces, and it’s not just the inability since the early 1970s to do any sort of cut-and-cover work, it’s the fact that even the deep tunnel construction results in costly/delaying NIMBY lawsuits, and the NIMBY suits themselves on projects that are needed are a reaction to the successful efforts starting in the late 1950s to constrain Robert Moses in his efforts to do projects of questionable merit. You can’t even do a one-stop modernization of the 1 train without facing a major fight over temporary tree displacement in Battery Park, and the result is a station that costs half a billion in part to satisfy them, leaks like a sieve and is so careful to step on as few toes as possible in disrupting the area it forgets the area its in, and includes no flood remediation plan despite being the lowest point in the South Ferry area’s rail tunnel complex.

    (The ‘bottom up’ efforts of the past 55 years of NIMBYism could be considered the ‘little guy’ standing up to government, but in many cases the ‘little guys’ today — especially in Manhattan — are people with millions of dollars and easy access to high-priced lawyers and big media outlets to make their cases. So aside from the preserved trees at the Battery, we end up with things like the ongoing Yorkshire Towers lawsuits and why any hope of ever reactivating the LIRR Rockaway Branch will face a battle royale with homeowners and others between Queens Boulevard and Metropolitan Avenue on the western edge of Forest Hills.)

    • SEAN says:

      (The ‘bottom up’ efforts of the past 55 years of NIMBYism could be considered the ‘little guy’ standing up to government, but in many cases the ‘little guys’ today — especially in Manhattan — are people with millions of dollars and easy access to high-priced lawyers and big media outlets to make their cases. So aside from the preserved trees at the Battery, we end up with things like the ongoing Yorkshire Towers lawsuits and why any hope of ever reactivating the LIRR Rockaway Branch will face a battle royale with homeowners and others between Queens Boulevard and Metropolitan Avenue on the western edge of Forest Hills.)

      This sounds like community activism running amuck. Some how the movement has spread into the reaches of suburbia where nothing is ment to change. If it was good enough in 1957, it’s good enough now. If you try to alter our little utopia in any way shape or form, expect to feel the rath of the community.

      • Boris says:

        More like, if it was good enough yesterday, it’s good enough now.

        Talking to people after Sandy, I found that all they wanted to do is to go back to the day before the storm. They didn’t want to hear about even potential improvements to their neighborhoods the storm allowed. And this continued for long after the initial shock has subsided.

        The typical city dweller has a very short memory for change, and thinks that the way it is now is how it has always been. Even if they grew up in the area and, when pressed, admit that years ago it was different, they always say it’s impossible for things to change now.

  9. Bolwerk says:

    The costs are why ARC was canceled; it’s hard after all to believe that ARC wouldn’t have come in well above when everything else is trending that way.

    More like: costs were a convenient excuse for canceling ARC.

    If there is a sense that someone is working on this problem in NYS behind the scenes, I’d really love to know who you think that is and where they are. DiNapoli would be a logical candidate, but he doesn’t seem to give a sweet damn.

    Mind you, there is Chris Christie is in charge in NYS too. Our Chris Christie might be less authoritarian and pugnacious, but on fiscal matters and transportation policies there is little difference.

  10. Great post. I completely agree and I feel that excessive capital costs are by far the biggest problem for transit in New York. I think that getting these costs under control should be the most important campaign for transit advocates in the city.

    I do think it’s important to not get sidetracked as with Calatravamarblegate. Cities around the world hire big name architects to design their stations and use high-end materials like marble. Plenty of office towers are wallpapered with marble and granite. New York’s problems may magnify the costs associated with more elaborate design, but architects and materials are clearly not the root of the problem. Even the most utilitarian projects in New York, like the new South Ferry station, end up with costs that are an order of magnitude higher than in other major world cities. Blaming people like Calatrava or the choice of materials lets the people and forces that are actually responsible off the hook.

    • Ralfff says:

      co-signed

    • Chris C says:

      I agree.

      Architects work to a brief provided by the client. It is up to the client to accept (or not) the resulting designs and specifications and to scale back any possible excesses that weren’t in the original brief.

      But clients often make changes post design and during construction and at that stage it just bumps up the costs.

      For example it was the PA that increased the number of spines on the porcupine part of the station (I think to reduce the amount of glass that was thought to be a ‘security’ risk should anything untoward happen at the station) but are they getting blame for the extra costs (and time delays)? No because it is easier for everyone just to blame the architects than for the client to accept responsibility for changes that they initiated.

    • Alon Levy says:

      Do first-world cities hire Calatrava to design train stations a lot? In Madrid at least they don’t because they want to cut costs. Elsewhere I’m not sure if they even build signature stations nowadays. Berlin Hauptbahnof is the biggest exception I know, and it was designed by architects that I’d never heard of (which doesn’t say much, but still).

      • Chris C says:

        Well according to the list pf projects on his wiki page Caltrava has designed a number of stations plus several other transport projects so it is not as though he is inexperienced.

        Am looking at Crossrail here in London and most of the stations are underground and functional and there is no space above ground for anything too fancy or grandeous.

        The Canary Wharf station is a basic box station funded by the project but the above ground commercial developments is funded by a private developer so they are bearing the costs of any architectural ‘extravagance’.

        http://www.crossrail.co.uk/rou.....ary-wharf/

        And at the end of the day the ‘extravagance’ is approved by the client who is funding the project.

      • Calatrava has designed stations for Lisbon and Liège in recent years, plus Lyon Saint-Exupéry back in the day. If you check them out, they’re all much bigger and more elaborate than the Path station. He’s also got an HSR station under construction in Italy. In terms of architecture, Stuttgart 21 is at least as elaborate as Berlin Hbf. Waterloo International station was designed by Nicholas Grimshaw. The original Bilbao Metro stations were all designed by Norman Foster, who is also designing the Canary Wharf Crossrail station. He also designed the Jubilee Line station. North Greenwich was Alsop. Elaborate architecture and/or starchitects seem to be, if not then rule, than at least very common in Europe for major rail projects. Calatrava has done multiple rail projects that are, by all accounts, at least reasonably successful. I’m sure his design isn’t helping with the PATH overruns, but to blame him entirely would let a lot of people/practices off the hook that are much more responsible.

        • Now that I think about it, given Lisbon, Liège, the TAV station in Italy, Lyon, and a few other smaller projects, I don’t think it would be unreasonable to say that Santiago Calatrava is one of the top 5 architects in the world in terms of rail design experience.

  11. johndmuller says:

    Interesting that no one has mentioned money being eaten up by unethical and/or downright illegal means. Is everyone so confident that there is sufficient oversight to prevent any hanky-panky. If this were a TV show, there would probably be several independent scams going on in each segment of each of these giant projects.

    Is the reason that our materials cost so much because they are absolutely, positively, 100% up to specs; our labor so pricey because the craftsmen are nonpareil; our timelines exceeded only because our tireless quality inspectors cannot bring themselves to pass on anything less than total perfection?

    If these projects are so laxly managed and there is so much money being thrown or given away, why is it at all difficult to find plenty of contractors willing to offer a bid to get on board the gravy train?

    • Nathanael says:

      Because the way the gravy train works, you have to be dishonest to collect the money.

      The way it works is that contractors lowball the bid and then skimp on details doing the absolute minimum required by the contract and cutting corners everywhere else.

      *Honest contractors don’t want to play that game*. An honest contractor wants to provide what the client wanted (not merely the minimum legal specs), and bids accordingly.

      But then the MTA is required, by antiquated state laws, to take the lower bid of the scummy contractors. Why would the honest contractors even bother to bid?

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