Why American Construction Costs Are So High
pedestrianobservations.com
pedestrianobservations.com
I think the inability of politicians to have a real conversation about costs is a big part of high construction costs. Without this sort of difficult conversation it's hard to plan and try to mitigate things that might cause ballooning costs because you need to pretend that don't exist in the first case.
One other piece I haven't seen mentioned yet: large construction projects that take years to complete are incredibly hard to estimate accurately, because unpredictable economic swings can cause the cost of items to vary quite a bit between when the estimate was produced, and when the work was actually being performed and purchased.
This was one of the reasons why the Big Dig's estimates were so far off. Although there are a dozen other factors with that particular case as well.
How does such a person know what's "too much"? Absent a reasonable working model of costs involved in infrastructure projects, it's all going to sound like too much.
And past a certain point on a spectrum of temperamental tendency to attribute laziness or wastefulness to other people, the working assumption is going to be it's boondoggles all the way down.
The only way to fix this -- if it can be fixed -- is reinforcing narratives about the value of projects and measured collective values.
Costs above initial estimates should only happen when there's an unknown (e.g, digging discovered a really hard rock layer that nobody knew about). Or weather issues beyond prediction (like tornadoes or hurricanes).
How, other than by buying everything you need up-front, finding a place to store it until you need it, and hoping that it is still usable when you do?
The transbay terminal is one of the biggest rip-offs ever. It cost the revenue of sales taxes of the city for years. And it doesn't even work, while the "transient" station that must have cost almost nothing works perfectly fine.
Every single tax dollar can be raised to relieve poor sick children of their ailments.
In both situations, the person on the street is stuck with a broken station and paying an extra dollar for coffee everyday.
Oh, Willie Brown did that too. He appointed his lover to two state commissions (he was the speaker of the California Assembly at the time), then helped her become district attorney in San Francisco.
or rather, is it even ironic? it seems totally germane to a forum full of geeks with a wide spectrum of interests, many (most?) of whom are software devs.
What do high construction costs have to do with HN?
It's like having a post about how ecologically unfriendly the fast food industry is on Exxon's website.
i think what willie brown describes here is also part of the problem providing estimates for the time required to complete software projects: if we gave more honest answers as devs, bosses and people signing contracts would blanche, so instead of standing firm, we go lower, or cut corners, or both.
i think the two things compounded together (inherent difficulty of estimating large unique projects, aversion to seeing real costs) are why estimates so often skew too low when we're trying to predict how long it will take to write a thing.
But doing a feasibility study that gives an estimate is much different from doing a full plan, which is still quite diferent from having fresh surveyed maps and ready to build blueprints, and all of that is just before doing the first strike with a backhoe.
And it's no wonder everything seems so complex, because the people who are able to cut through the bullshit are usually ignored, because people don't like to accept the fundamentals. They cling to their biased beliefs about costs, project management, design, estimation methods, etc.
Robert Moses is quoted as saying the same thing. Once you start, there is no choice for the public but to push on and finish.
The cost of using a more expensive method ($750M per station vs $110) of building in order to prevent disruption to car traffic is almost always attributed to the cost of public transportation. But it seems to me like it at least partially should be considered a cost of maintaining car infrastructure.
I had no problem walking into shops at metro station construction sites in Copenhagen or Budapest.
starting a restaurant is risky enough, forgoing a month and a half of profit while staying open is just a disaster. I had a crush on one of the waitresses, and she told me she had gotten close to the family that owned and operated the place and they were heartbroken, furious but powerless.
Progress!
Of course it stated knowing this, so rather different from starting with a parking provided street and then seeing that change.
Plus there's a minor surplus of business provided by the construction workers who have to stand around in groups of five for 7 hours a day in between lunch breaks...
How does bus rapid transit take so many years to build?
California HSR for example went to solicit bids from foreign operators and selected Deutsche Bahn/German Railways. But AFAIK the initial design work/RFP/proposals were done by California and domestic engineers, who obviously wouldn't have much, if any, experience in designing or managing HSR construction.
Would an experienced team be able to overcome a very different regulatory and political environment to make a difference in cost and time?
Orders of magnitude smaller in scale but in my observations, even things like urban sidewalk, sewer and road construction seem to be conducted entirely differently in Germany, for example, vs North America.
Is the difference in construction specs? Formal vocational education of trades and apprenticeships vs the US? I don't know, but the final products seem to be much higher quality than public projects in the US and I doubt they're spending multiples more.
In many places in the US, these smaller infrastructure projects are done by city crews, not contractors. These crews employ friends and friends of friends hired by political managers, not people who know what they are doing. Where I live for example, the quality of any street paving done by the city vs. done by a private contractor is markedly inferior.
In reality local government has almost zero transparency and people don't care about local government as much so it's a massive exercise in grift. Money disappears, contracts are given out to someone's friend at a jacked up price, a few officials can block a project completely, safety specs are ignored, etc. etc. etc.
If a project ordered at the state or federal level ever makes it into existence you can guarantee hundreds of hands have squeezed every dollar out of it for themselves or their friends long before a shovel ever broke ground.
Of course this backfires when the NIMBY folks don't want anything built, and those who are okay with the idea want it done cheaper. (So the unions are not going to be happy.) So the project stalls.
As an outsider it appears to me that this "we're the best in the world!"/"our unique freedoms" propaganda is drummed into people from a young age without anyone ever questioning it. Its no wonder there is this pervasive "what could we ever learn from them? We're the best." mentality.
The other common excuse is size. "Oh no, we can't have trains like that! We just such a big state that won't work here!" Japan is roughly the size of California. EU is roughly 10x the size of California. Both are criss-crossed by high-speed rail.
We built schools, hotels, restaurants, you name it.
Whenever we had a government project, like a building for the county, a jail, new secretary of state/dmv office...we went way over budget and way over schedule. EVERY. SINGLE. TIME.
We'd have a 'groundbreaking ceremony' and then not be able to actually dig at the site for 12 more days because permits got tripped up. How can the government not approve their own permits on time?
It's also not like this doesn't happen in the private sector. A company bough some land on the main road where I am, razed the building, graded, and then stopped for almost 2 years now because the board won't change the zoning for them. (Which is the right decision imho.)
Of course, building permits are one thing and demolition permits are another. What municipality happily countenances the destruction of high-density housing without seeing the plans for what's coming next? That is even more crazy.
> here is no rational set of preferences that would prefer both non-housing and dense housing to less-dense housing. At some point the meddlers have to stop second-guessing the market.
While I agree that anything productive is better than vacant lots, I do think we need some more dense housing, especially since there are already a couple of other apartment buildings, transit, and high demand for housing in that area.
I also think that it's a bad precedence that a developer can just get the zoning changed by holding their breath and stamping their feet. That said, I often think that zoning laws are a bit to restrictive and could use a broad rethinking _in general_.
I would personally like to see a mixed-use building, with retail on the first floor, but that's another issue entirely.
> Of course, building permits are one thing and demolition permits are another. What municipality happily countenances the destruction of high-density housing without seeing the plans for what's coming next? That is even more crazy.
We moved in after the buildings were demolished, but my understanding was that the buildings weren't in the best condition and may have been demolished by the previous owners. However, there has been a good deal of grading and site prep work going on when we moved in, and all work has ground to a halt since then.
That makes no sense. Sure maybe they though they can pay the right people and push it through the council by then... but not this time.
I'd consider a positive to see that the government does not get to take shortcuts, but has to abide by the same rules as everyone else.
I'd wager that "internal customers" aren't buying donuts to accompany their permits and doing all the other borderline corruption type things you need to do in order to get government do work with you in a timely manner.
Edit: Having the person at the desk remember your company as "the one that brings donuts" and the mid-level manager remembering your company as "the one that sponsored my son's little league team" don't has the potential to make a massive difference. For a company that does a lot of business with government spending a few grand a year making sure the people of government see you in a positive light is well worth it.
“Trade unions, which have closely aligned themselves with Gov. Andrew M. Cuomo and other politicians, have secured deals requiring underground construction work to be staffed by as many as four times more laborers than elsewhere in the world, documents show.”
Source: https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-...
http://gothamist.com/2017/06/28/new_south_ferry_subway_stati...
A huge reason the US doesn't have universal healthcare is Labor Unions who preferred that they got good healthcare benefits from their work.
A huge reason we have major infrastructure problems in the US is because of the absurd cost of labor. Nothing gets built in most big cities unless Labor Unions are involved and they rip everyone off. This makes public transit unworkable, cities unlivable and unaffordable, ect.
It's because there isn't a proper bidding process. Politicians just give sweetheart bloated contracts to the same contractors every time, and those contractors then "donate to their campaign". If they instead used things like sealed bids and had contractors compete against eachother, it wouldn't cost $1B per mile for NYC's 2nd avenue subway, absurd.
NY Governor Cuomo surprisingly called this out recently, describing it as a "transit industrial complex": https://nypost.com/2019/01/04/mta-officials-are-fuming-over-...
In Germany, labour unions are strong, but things like union security agreements are unheard of (and I was amazed something like that would exist when I first heard of it). The stories you read about corruption in US labour unions (admittedly subject to selection bias) are unheard of over here.
There are strong laws and customs around arbitration processes, and a culture of unions considering survival and success of the business above pushing through maximal demands. E.g. in a prolonged strike, if employers and union are unable to resolve the conflict, after some time arbitration by a generally respected elder statesman kicks in. They hear both sides, and then make a binding decision, which usually is generally accepted. It all seems a bit more balanced.
I'm not sure how much that transfers to other European countries. France famously has a different culture around strikes and unions, but doesn't seem to be representative (https://www.etui.org/Services/Strikes-Map-of-Europe).
This strange example of market failure points to us having insufficient information to understand the real transactions. MTA must get something else too from the unions to abide by their rules. (Allegedly it's Cuomo himself who benefits, thus he pressures the MTA.)
(They should have thrown in another billion to rebuild the Sheridan stop. Now that's a narrow platform.)
https://pedestrianobservations.com/2019/01/08/meme-weeding-u...
1. Construction unions in New York, specifically, cause horrific and unjustifiable cost increases.
2. But unions in most of the country aren't in New York, and don't have the same power that NY unions do.
3. The problem is that New York is responsible for a lot of construction, and more sensible areas unthinkingly copy New York's awful, union-driven policies -- those other areas don't need to do things New York's way, but they don't have enough construction experience to know better.
The author goes on to say that union-busting politics as they exist in the US won't solve the problem, but obviously believes that unions are responsible for significant parts of it. (And in fact says in so many words that in the absence of particularized US politics, union-busting would be somewhere from neutral to productive.)
An immediate implication is that if you're worried about getting things built in New York, you should be trying to break up the unions there.
- His line about the DART Orange Line is mixing three different projects (the actual Orange Line, the Trinity River Expressway, and the Dulles (VA) Metro extension)
- He is mixing actual project costs with projected costs, as if the comparison is equivalent
- The biggest problem, though, is that he is using "Right to Work" to mean "no unions", which is ridiculous. He even doubled down on that in the comments with the asinine statement "But in places with zero union density, like Texas".
Those are just the problems I saw from ~10 minutes of research on the subject. Considering that, I don't put a lot of faith in his arguments.
With some hyperbole, I once read this story about how for a simple job someone had to get three different unionized workers, because each one only can do certain work. At our company we are currently building an automated machine to do quality control on a manufacturing line - we had to deliberately design it in a way that doesn't actually reduce the number of people needed for the job.
In i.e. Germany this doesn't seem to be so weird. Here, the unions are way more involved in running the company, it's way more about partnership, doing good for the company, then in making sure to keep privileges.
Obviously it's also not perfect, there are other problems for sure.
News outlets calling themselves unbiased is not invoking free speech at all. Anyone can declare themselves anything - it's called lying.
Do any other politicians have systemic incentive to control costs? If so, how?
Theresa May, the Prime Minister, is facing questions and tremendous public pressure on a daily basis for her austerity led decisions to cut the police budget (something that would be unheard of in the US).
They have tremendous incentives to cut costs. In fact, the UK, which was also booming (growth which has slowed since the Brexit vote, however) over the past 5-6 years, continues to be engaged in austerity measures.
Clearly something there is incentivizing UK politicians to pay attention to costs. I think part of the reason is that in the UK you have (a) a populace that believes that government should be providing services where it is effective, and as a result, considers reductions in services a major negative against the government, and (b) you have actual ministers who ar directly responsible for specific areas, such as transport, who can be held accountable by the public. Not being able to control costs means not being able to provide services effectively, which in turn leads to the government failing in elections.
In the US, there isn’t a transport minister to point to when the California HSR fails, which means responsibility and blame is diffused. Maybe that’s where the difference lies.
Also, contrary to what some believe, most people who believe in government providing certain services don’t believe in the government being inefficient in doing so, and will hold that inefficiency against the government since it means they get less, or substandard services.
(The land that you build it on is another matter.)
Real construction costs are 50% higher than they were in the 1950s, according to our analysis.
So basically.... Apples to apples it hasn't gone up. It's simply that people are buying more construction in urban areas.
Compare this with subways and train stations in Japan which often have shops in the mezzanines and sometimes at the platform. There are always at least vending machines at the platform. I don't think this is unique to Japan, I recall there being shops in the station in Korea, Taiwan, and London too.
Why do the stations in our supposed capitalistic society not have any shops?
In the U.S. they are built as public works projects and owned in the end by some local municipal authority. Since they are public property, there's no incentive/ability to conduct commerce there. It would be like having a McDonalds inside of a library.
And funny you should mention libraries; my local public library has a private café inside (not in the reading area, of course).
In the U.S. at least it's pretty rare to see shops of any kind inside of subway stations or libraries. There's a few news stands in some NYC subway stations, but not many. I've been throughout much of Europe and don't recall seeing many stores in most of the subway systems -- but maybe I wasn't paying attention.
But there will be some kind of place to get a bite in many train and even bus stations.
I found that odd about BART, too - initially I thought this was due to crime (BART seems pretty sketchy, and opening up a shop there would be an invitation to robbers and thieves), but then I realized "safer" metros don't have them either.
It is certainly worse in America, but it's not great in Canada either. The issue is this: There is no incentive alignment at multiple levels of these projects.
For example, I've worked with a couple great unions[1] but overall unions slow things down. There have been times where I've been reprimanded for lending a utility knife to open a pallet to a unionized worker.
It's too adversarial here and it really does slow things down. I've seen countless work-arounds to the rules just so employers can pay people that work harder more. For example, only valued employees are offered snow plowing work in the winter when construction is slow, but these tactics don't scale.
Then, on the other side, we do not pay our public servants enough and nor do we have high enough standards for their work. There are good public servants, to be true, but that's essentially random chance. It isn't because we've intentionally created a culture of achievement or excellence in our public works departments.
In both cases firing someone is too difficult. I'm not saying it should be easy, but I've known people that show up for work at 10:30am and leave, no joke, at 2:00pm. It's completely ridiculous.
Then there is the issue of building for the first time versus expanding or maintaining. First time construction is much easier. Standards are lower, there is less stuff in the way, everyone in the city is excited for the new thing so people make sacrifices. A new subway or sports stadium brings in business to the surrounding area, so part of the cost can be pushed on to local property owners in the area. Thirty years later when the soffit is cracked because subsurface water wasn't as expected there is none of that stuff. Just some angry commuters and shop owners wondering why it is taking so long.
I'm starting to think that capital projects, especially subterranean ones, are inherently worse than smaller alternatives. They're so expensive to maintain and once they're in there is no going back. I'd rather have lots of bike lanes or streetcars than subways. We could build a lot of bike lanes for the same cost of a subway, and even have them covered so snow and rain wouldn't be annoyances.
[0] I worked on lots of stuff for the TTC, including subway stations, and some stuff for the City of Toronto.
[1] Electrical worker union IBEW Local 353 was especially great because they pushed their employees to work hard. In exchange, they were able to negotiate default conditions like nine-hour, four-day work weeks. It fostered a sense of pride in their trade and work.
Meanwhile in Brazil, China and India curiosity reigns.
We recently added a new station for the GO regional railway transit system that currently has two trains a day and I think it was something like $50 million Canadian. I can understand needing an elevator for disability, but it could have started as something simple besides that.
https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-...
So... a hypothesis?
There were multiple problems along the way. It ultimately ended up costing $22 billion. People were also upset about this.
At the end of the day? It was an awesome project. They completely buried a highway that cut through the city, and added a ton of green space downtown (The Greenway).
The city is better for it. Taxpayers would never have allowed it if they had their way.
We need a similar program to revitalize the MBTA. It should be done regardless of the cost. I will happily pay more real estate taxes and highway tolls for the rest of my life to support it.
That's not the problem people complained about though -- the project's eventual quality/utility.
The problem people complained about is the cost of the project -- and especially for overpaying for something that could be done for less.
And that (overpaying) is a big problem for several reasons:
1) The money could go to other projects to better the city.
2) The money could be spend on future maintenance of the Big Dig itself.
3) The past history of such costly projects (fat margins and corruption-driven extras) nips the public appeal and political will to build new infrastructure in the bud.
If the Big Dig could be had at 4B, or 8B as promised, or, heck, even 10-15, and ended up costing $22 billion, that's a huge problem -- regardless if it was cool once completed.
Especially if the completed project is only $8B cool, and not $22B cool, and the extra money went not in improving it, but in delays, corruption, and other BS.
Otherwise what you're saying is:
"If a project can be built the same for N, it doesn't matter if we pay 2xN or 3xN due to over-charging/corruption, as long as the project is useful".
As if the extra money don't come with lost project opportunities of their own...
People complained before ground was even broken. Looking at the scope of the project in retrospect, as well as the known unknowns, I'm surprised anyone thought it would cost $8bn ($22bn seems too high, but I'm just an interested layman).
People here are VERY untrusting of any government projects because of this project. See the Olympic bid that was supposed to have all sorts of public sector improvements rejected (well who rejected who is another story)
But traffic on 93 (the tunneled highway) is back or worse than pre-upgrade levels (some of the worst traffic in the country here in Boston), the public transit promised as part of the project is finally being worked on (green line extension) but it all seems like its not enough. Housing prices in the Boston area are at SanFran/NYC levels.
We need more infrasturure in boston. We have good proposals (North-South rail link, south shore rail) but lack a governor /politicians who will be honest and tell people they need to pay for this stuff.
Public transit is so bad here that a running club raced one of the green line trolleys (I'll let you guess who wins)
https://www.bostonglobe.com/metro/2017/01/04/race-pits-runne...
please, <municipality>, take my money. build me a decent public transit system and provide high quality services.
It's impossible to pay for everything. The way you talk you want unlimited funds spent on public transportation - but then what happens to all the other expenses? Just don't fund them?
> but who don't want to pay taxes to fund better infrastructure can shut the fuck up.
Or maybe, they want limited funds spent. There is nothing at all wrong with that.
It's the I got mine and fuck the rest mentality. People always ignore that infrastructure benefits everyone (and in this case public transit improvements are MASSIVE for the lower classes).
I've worked downtown for years now and it's a pleasant place to be.
Yes. Everything green here was once under a highway. It completelpely changed a major portion of the city and opened up routes for other parts of the city to become more developed.
The Big Dig in Boston was originally estimated to cost $8 billion.
It ultimately ended up costing $22 billion
At the end of the day? It was an awesome project.
The Big Dig cost almost triple what the entire Panama Canal project did (adjusted for inflation). There's nothing to be proud of there.
This parent poster is pointing out the fallacy by hypothesizing that the Panama canal in Boston would be way more expensive than the Panama canal in Panama, thereby showing the error in the grandparent post's reasoning.
Also, we have tolls on the tunnels & bridges around Boston for the locals, but those who live in southern NH (presumably avoiding MA taxes) and are pounding up and down 25 miles of I-93 every day don't pay anything. They probably don't even buy their gas in MA.
Put electronic tolling on I-93 & Route 3 just south of the NH line. That would raise funds for the MBTA and spread the cost to those actually using the roads.
There's also a huge amount of inequality in Boston proper due to the removal of the elevated Orange Line (which is inadequately serviced by the Silver Line and other busses). The most used bus routes (which mostly serve Roxbury and Dorchester) should be converted.
Agree on the NH front too. I don't envy the people who commute from NH to Boston every day, but they should absolutely be tolled.
I think more radical traffic easing will need to happen eventually. Do we really need hundreds of thousands of people commuting in to sit in some cubicle downtown from 9-5? Shit no. I'm not sure what needs to happen there... reducing property taxes on business that shift their working hours or let their employees work from home X amount of days per week? I hate reducing corporate costs, but what else would convince them?
There's little to be gained by politicians saber-rattling and telling people to not use cars when there are no practical alternatives. If you don't live within the inner 1-2 city ring around Boston and you're not on the commuter rail, you have no choice but to drive.
Right, but how many people are driving who live within that ring? Just eliminating those commuters would likely solve the congestion issues...
Interestingly, plenty of people who live in towns on the commuter rail do use it, but they all complain about packed trains, crappy service when it snows and of course if you miss one, you're waiting another hour for the next.
I'm less than sanguine about the fact that you and your people compel others to bear the burden of your personal value choices.
As well as paying for the burden of the corruption involved in Bostonian construction projects that (at least) doubled the cost of what it should have gone for.
Is there evidence of this? Everyone says it but it always seems extreme (Seriously? $11bn to corruption?). I think there's credence to the fact that these projects often go to the lowest bidders, and in this instance there was a lot of rework done to compensate for cheap materials and poor workmanship.
>you and your people compel others to bear the burden of your personal value choices
New Hampshire is an hour away if you don't want a tax-supported public infrastructure.
This increases costs due to risk of lawsuits/challenges and excessive amounts of money put towards mitigating this risk. This continues from procurement through design and through construction. Environmental concerns have ironically been coopted into this category by NIMBY folks.
> the political system favors NIMBYs and really anyone who complains. Infrastructure construction takes a long time and the politician who gets credit for it is rarely the one who started it, whereas complaints happen early. This can lead to many of the above-named problems, especially overbuilding, such as tunneling where elevated segments would be fine or letting agency turf battles and irrelevant demands dictate project scope.
Why do you believe that's the true reason? I have no idea if it is or if it isn't, I'm just wondering where you got that from.
From that point it becomes a battle of easement/property acquisition during procurement and with each easement or third party agreement comes promises that must be made to that third party. This translates into design mandates which need to be held and designed around which translates into additional design costs and then additional construction costs. If we don't hold to these agreements then litigation ensues, and so we would rather overdesign to reduce the risk profile and position the project better for the inevitable lawsuit.
Other countries do not have similar litigation risks. Or at least, that's what my European contemporaries tell me when they come to work in America.