Somehow, This Comes as No Surprise

Photo credit: Richmond.com

Photo credit: Richmond.com

Here’s the latest news about the proposed Richmond Pulse project: The expected cost of the project, which would extend Bus Rapid Transit service along 7.6 miles of Richmond’s Broad Street, has just increased by $11 million.

In other words, the contract to design and build the project came in 32% higher than estimated. “Unfortunately, there are estimates, and then there’s the market,” remarked Jennifer Mitchell, director of the Virginia Department of Rail and Public Transportation, according to Robert Zullo writing in the Richmond Times-Dispatch. The price does include a $3.5 million bonus for completing the project on time.

It’s not clear where the state will find the extra money. But it’s clear from Zullo’s article that the money will be found, and that the state will cover it. The federal government has promised $25 million, the city $7.6 million and Henrico County $400,000. The total project, which includes the purchase of natural gas-powered buses and the removal of 300 parking spaces, originally had been estimated to cost $50 million.

Bacon’s bottom line: This sort of thing happens with such regularity that it is entirely predictable.

Step 1: Create a low ball estimate for a transportation project.

Step 2: Generate a lot of support based on that low ball estimate, and work the project through the elaborate, years-long approval process, creating enough commitment and buy-in from stakeholders that backing out would seem unthinkable.

Step 3: Put out the project for bids, discover the real price of the project, and fund the inevitable shortfall with money from somewhere.

Step 4: Never, ever admit to taxpayers the way the game works.

I support mass transit (though only under the right conditions, not as a universal proposition) as an integral part of a well-functioning transportation system. I have seen this Lucy-pulling-away-the-football-from-Charlie-Brown scenario play out so many times now that I have no faith whatsoever in official cost estimates. If mass transit advocates want to win the trust of taxpayers and gain broader political support, they need to stop this travesty.

I have reached the point where I assume cost estimates are low, the only question being by how much and whether the underestimate was the result of deliberate subterfuge — nod, nod, wink, wink, Mr. Consultant, give us an estimate we can sell to the public — or just systemic incompetence.

Once upon a time, road-and-highway cost projections were equally unreliable, but the Virginia Department of Transportation has done a better job of delivering projects on budget and on time in recent years. As for ridership and traffic projects, I distrust them all equally, whether for roads or transit. Political elites and business leaders continually lament the sorry state of Virginia’s infrastructure. Maybe they could gain political support for more investment if they did a better job of winning the public’s trust.

— JAB

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10 responses to “Somehow, This Comes as No Surprise

  1. Anyone who has ever bid out and built major infrastructure projects knows that, at the end of the day, the chances of getting the project built on time and on-budget is solely dependent on the competence and toughness and integrity of one who is paying out the money for the work.

  2. Sobering assessment. It would be interesting to see the data to back up your intuitive sense of inevitable cost overruns for infrastructure and compare the cost performance against construction projects in general.

    In the past couple of years, we have been seeing bid costs for institutional buildings regularly coming in 20-30% higher than budgets. Prior to that, during the recession, the same types of buildings regularly came in lower than budgets. Same companies, same clients, same contractors, same type of construction, different market forces.

    • The difference is surely competence and ethics. Public projects are now fair game to be ripped off. As no one is held accountable.

      As I have stated many times, in my view, the watershed event that burst open the damn so that today everyone does it if only to compete in fraudulent games of cronyism, arrived with the nearly Trillion Dollar Stimulus package to fund non existent shovel ready projects, and also with the buying of the health care industry to bribe them into supporting Obama Care. After the very same companies had defeated it a decade earlier.

      Hence the collapse of ethics and competence in spending more than half a billion dollars to set up a web site that did not work, the product of a company that in an earlier iteration knew far better.

  3. As an engineer I tend to agree selling projects in the early stage does require a little salesmanship on cost. But for the final go/no-go decision we should be at a conservative position. For final start-up we should be downplaying to control expectations, and hopefully only then will a successful start-up speak for itself, and people will realize it was not oversold and it performed “as-advertized”.

  4. And I remember a meeting with MWAA quite a few years ago, where the public was promised that Phase 1 of the Silver Line would come in at, or below, budget. We presented the results of a public study that indicated virtually every publically funded, large transportation project significantly exceeded costs projections. It was pooh-poohed, of course. But so long as there are DTR drivers to pay the costs, who cares? It’s bipartisan crony capitalism.

    • the thing about MWAA and any mass transit of that scale is this.

      how many have been shut down as just too expensive?

      surely somewhere in the world – the costs exceeded the value, right?

      and yet… it seems to be one of those things – that is too valuable to get rid of.

      • You are correct, Larry. We don’t shut down big projects because they are too expensive. Silver Line, Phase 1 did not meet federal funding guidelines because the benefits of moving people to transit did not satisfy the benefit/cost test – even under the grandfathered, weaker standard. But bi-partisan lobbying on behalf of landowners in Tysons and the contractors, led by Bechtel, won the day. Government and private officials lie to get taxpayers or in this case, DTR drivers to pay huge subsidies.

        But since the line is built, it’s sunk costs. We need to make the best of it. And hope, on Judgment Day, there is a special place in Hell for those crony capitalists who scammed the public, as well for the politicians who helped them. I’m sure Dante’s masterpiece has a spot or two for them.

  5. this is one of the fundamental differencesbetween govt and the private sector and perhaps is a “marker” of sorts for some who believe the govt should do only what the private sector cannot or will not.

    when Dominion seeks bids to build offshore wind and the bids come in high – it stops and reassesses and makes changes including downsizing or even cancelling – all is within the realm of a decision.

    If a homeowner wants a new garage or solar panels – but finds it costs more than they thought – often they don’t do the original plan.

    but when govt finds a weapon system or bus rapid transit costs more than thought – they often automatically “re-think” where to find more funding and not the other possibilities.

    that’s because when a govt guy believes he/she has a mission – well – they have a mission and saving the govt money is usually not an option cuz that means then the govt employee doesn’t have a mission anymore.

    😉

    There are exceptions to the rule – both sides but in general – that’s the game.

    I will say this – the National Park Service does know how to squeeze a dime – and they know what to do if they get extra funding – they already have a plan – for any amount!

  6. Pingback: Pulse Has a Pulse after All | Coalition for Smarter Growth

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