U.S. Taxpayers Are Gouged on Mass Transit Costs
bloomberg.com
bloomberg.com
Compare to the new Seoul Bundang line which is 32.8km with 28 stations in some of the most dense urban areas on the planet. It'll run a bit under $400 million to build or about 1/17th the cost.
Once open, it'll probably cost riders under a dollar for most trips, compared to over $3 on the DC Metro.
No matter how you figure it, cost of labor, eminent domain, legal, whatever, there's simply no way to figure the D.C. costs as making sense when a world away a similar line, in another developed country with far more difficult construction issues is much cheaper in every way possible.
http://www.theage.com.au/victoria/south-morang-finally-gets-... 1/2 a billion for extending the line 3km and building 1 station. (All in the suburbs - where there used to be a train line that was ripped up)
Ins't that the solution to every legislation problem? Do it better next time?
Where are you getting that cost from?
It could just be for the 17km most recent portion but still...the cost per km is a fraction.
> 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.
This is an excellent point. When the US Federal or a state government agency decides they need to link point A and point B with a transportation project, the agency typically only provides a basic outline of project requirements. Outside contractors are used to develop the more detailed requirements, and even the RFP for design and construction.
This creates a situation where big engineering firms try very hard (and often succeed) in creating RFPs that only they are qualified for. Yes, this really happens. In fact, whenever I read an RFP the number one question on my mind is "is this written so that only XXX firm can win it?" The answer tends to be "yes" in many cases and we don't bother bidding on it.
The obvious solution would be to prevent companies that write RFPs from bidding on the project. The problem is that no one (or at least no one good) would want to bid on the RFP prep work! If given the chance to win a $250,000 RFP preparation project, or a $500 million general engineering contract/$10 billion construction contract, the highly qualified firms will wait to take a shot at the larger work.
It doesn't happen all the time, but it happens a lot.
often times, the particular govt office/personal have a working relationship with a contractor, or have done business with them in the past [..] it may be the most effective way to accomplish a task
I've been on both sides of this issue and it's difficult to navigate, like you imply. Do you pick the low-bid firm who is likely to screw up the project, resulting in increased costs down the line? Or do you pick the more expensive firm who will do the job right the first time, but may subject you to "fraud, waste and abuse" criticisms?
I want to second this so it doesn't sound like conspiracy theory or sour grapes. Speaking from the perspective of somebody who worked for the state, and went through the process of putting out RFPs and final selection, at least half of RFPs are put out as a technicality after the deal has already been made informally with somebody's quid-pro-quo-friend/drinking buddy/nephew. It's the art of adding bizarre requirements to straightforward jobs, until you find a set that only one known vendor could satisfy - and using those to eliminate all of the other proposals before they ever get to the selection.
(The first time I was involved in writing an RFP for our own product, we kept on cringing as we piled more and more obscure features of the system into it. Anything that had any practical use at all was fair game. And in the end we were congratulated by the customer for how neutral and fair we'd made the RFP look like. I still boggle at the thought of what the unfairly restricted version would have looked like.)
The worst case is if the project is truly one-of-a-kind not-repeatable not-transferrable. That's why the US gov't pays qualified defense contractors for some projects at the rfp stage. e.g. the last fighter contract paid for full flying prototypes from two final competitors.
--Interesting data point, just order of magnitude.
For a transit project, this technical agency would need expertise in the following areas (at a minimum):
- vehicle procurement
- infrastructure procurement
- construction management
- geology and geotechnical engineering
- noise & vibration
- pest control
- air quality
- fire safety
- dust control
- archeology
- animal migration
- water quality & watershed
And you would need enough staff in those areas to handle the workload. I would support such an agency, but many folks would not.
But things don't have necessarily to be so: Serving the common good is a very motivating goal for many people; not everybody just goes after the biggest paycheck. At least where money isn't the only measure for everything.
Personally, I wonder if the best way to keep the system at a higher efficiency would be to have a public works departement which is allowed into bidding alongside private companies. The public works department would intentionally be kept too small to handle all the work needed, but would serve as a similar competitive check as a regulatory agency. Because it's in competition with private bidders, regulatory capture is more difficult, and technical competency is maintained because they're actually executing projects.
I would really love to see a setup like this for mobile broadband too.
That's kinda what happens with commuter rail in the US. Many commuter rail systems might be owned by the transit agency but the agency subcontracts the operations to firms like Keolis. One of the common applicants for these operations bids is Amtrak, which is about as close to a "public option" as we can reasonable get.
Also, US taxpayers may be making up for it by paying more upfront but less per ride (unless you live in DC or San Fran):
City Cost per Ride
Mexico $0.15
Beijing $0.29
Seoul $0.55
Moscow $0.69
Tokyo $1.68
Barcelona $1.76
NYC $1.96
Boston $2.00
Paris $2.25
Chicago $2.25
Toronto $2.37
Berlin $2.95
DC $3.08
San Fran $3.18
Stockholm $3.96
London $4.41
Regarding Oyster vs. paper tickets, I believe the non-Oyster prices are deliberately inflated to coerce people into using Oyster, as it is much better for the system if they do (especially on buses, where Oyster payments make stops so much quicker).
No ticket booking. No queueing. No hassle. Lowest/discounted prices.
But of course the government won't countenance actually organising something that might be better for rail users, not to mention that as soon as it was mentioned the unions said it was just a way to reduce staffing (may or may not be a side effect) at stations and made moves to stop it.
Perhaps the vast infrastrucutre, subsidies and resources could be repointed at really useful services, but some unions in some industries ( and the RMT is one) are so reactionary it gives Lenin a good name, and some management in some industries (and British railfranchisees are one) are so rabbit-in-headlights dumb and hemmed in by pensions regulations and on subsidies for life support that oh brother I throw my hands in the air and go looking for a cab
And yes, you're being exceedingly pedantic, given that the vast majority of users of the underground system never pay the cash price. When a "discount" applies to the vast majority of journeys, it is that price which matters when discussing the price.
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Tunneling in any dense urban environment is an expensive proposition, but the $5 billion price tag for just the first two miles of the Second Avenue subway cannot be explained by engineering difficulties. The segment runs mainly beneath a single broad avenue, unimpeded by rivers, super-tall skyscraper foundations or other subway lines.
See Manhattan Community Board 8 at http://en.wikipedia.org/wiki/List_of_the_most_densely_popula...
Similarly, the Muni in San Francisco is $2. BART is commuter rail, despite its name, so I don't think its fares should be counted as "subway" even though some of it is underground.
Finally, Tokyo has a zoned system, ranging from 130 yen for short JR trips to more than 1000 yen for Tokyo<->Chiba trips.
And none of this includes monthly passes, 10 ride discounts, or the MTA's 7% "bonus".
Tokyo for one. E.g. the very recently built Fukutoshin line, deep tunneled subway underneath some of the busiest areas of the city (the tunneling is complicated in part because it had to dodge myriad existing subway lines), including very elaborate and expensive stations, had a cost-per-km about 1/4 that of the SAS. The Fukutoshin line is also overbuilt in various ways because it will be interlined in the future with the Tokyu Toyoko line (an extremely high-ridership suburban line).
A number of recently built subway lines in the Tokyo area had many problems, and were considered extremely expensive—but they were still much cheaper than the SAS...
So it isn't "complexity," it isn't "density," and it isn't high wages (Japan is not a low-wage country!). It's not fares—Tokyo transit fares are roughly on par with NYC; they're distance-based, so sometimes higher, sometimes lower, but it works out to roughly the same thing. Arguably it isn't even unionization, as Japanese industry is heavily unionized, although of course Japanese unions are rather different than U.S. unions.
One difference may be that Tokyo actually keeps building subway (and other rail) lines, and thus has has kept around the necessary in-house organization and knowledge for doing so, and has a wide selection of competent contractors available. U.S. cities typically have none of these things, and end up relying on consultants (and may not even have the competence or freedom to choose the consultants well), and a limited selection of contractors. [The NYC contracting situation is reportedly pretty dire, with a very few contractors having figured out how to game the system.]
I did some research: the cost per mile to move a person on AC Transit was ~ $1.50 (total cost including subsidies, not what you pay). Compare that to a cost to pay for a cab to take you one mile of ~ $3.00.
So if you have two people in a cab, that cab is just as economically efficient as a bus. Literally, a car that waits for your call, comes right to your door, and chauffeurs you around, is as economically efficient as our bus system. This is crazy! We could replace AC Transit with a fleet of cabs.
Also, I've heard that the "Nextbus" system which makes those predictions for when the next bus is arriving makes most of their money fixing the next bus sensors. The reason the sensors are broken is AC Transit employees continually sabotage them because they hate being tracked.
Truly, it is an incredibly screwed up system. Anyways, I was too busy to run for the board of directors, but someone really need to fix AC Transit!
I recall that when San Francisco retrofitted its city buses so that all are accessible to people using wheelchairs, an economic analysis showed it would be cheaper for the city taxpayers simply to provide free taxi service to all wheelchair users. The reason for putting people who use wheelchairs on city buses seems to have been wholly political--to mainstream such persons into a form of transportation that makes them more visible to other members of the public (at least, the members of the public who use buses).
I have both an emotional reaction and a rational reaction to this policy trade-off. On the one hand, my own late father was confined to a wheelchair as a quadriplegic (after a slip-and-fall accident on an icy parking lot here in Minnesota) for the last six years of his life. So I totally get why friends and relatives of persons who use wheelchairs want public places, and by extension public transportation, to be accessible to persons who use wheelchairs. That allows many more family outings with grandparents and their grandchildren than might otherwise be possible, for example. But my rational reaction is still that we all have to work hard to pay our taxes, so "public" money (money derived from taxation) should still be spent responsibly. If devoting taxi service (and, I hope, someday a self-driving car service) with public subsidies helps needy members of the population more than bus service, so be it. Spend the least money to get the positive externality is generally the way to go in public policy.
However, I don't think that should be the general bus system. Loading/unloading a wheelchair can take several minutes each way throwing the bus off schedule. Furthermore, to accomodate the disabled you need more stops. So you have stops ridiculously close together (like 40 meters in some cases). This further slows down the buses a lot.
I think we need some sort of parallel taxi/bus service for the disabled and to focus on making the main bus service fast and on time. How to fund this though or make it work. I don't know.
I think the idea is not to make disabled people go from point A to point B, but to integrate them into society. There is nothing worse for an injured/disabled person than to be isolated, they will get clinically depressed. It's not one of those "man up and tough it out, soldier" situations - societal acceptance is crucial to mental health. Yes, we should spend money responsibly and not spend more than needed to reach the goal, but the goal must be stated inclusively.
A self-driving car is the exact opposite of what is needed.
Put another way, the city I live in (Denver) has what is essentially a taxi service for disabled folks (http://www3.rtd-denver.com/elbert/accessARide). I know a couple of folks in wheel chairs -- and they use it a lot! I've never once heard them say they felt isolated because they weren't standard bus routes full of people. On the contrary, not being able to go where their friends were going is what would be isolating.
And then, spatial mobility is also very important. For example, I felt absolutely trapped by my relatively benign broken foot problem.
I have not found this to be the case in major cities outside the US (eg Mexico City, Prague, Amsterdam). I do not know why.
http://www.fardtjansten.sll.se/sv/Information/Information-pa...
Does that include the cost of increased congestion from the increased traffic?
The reason I dug through this was to explore possibility of building an entire city where all motorized transportation is under ground, and surface area is reserved for pedestrians, wheelchairs, and bicycles. IIRC, the cost of tunneling came out comparable to the cost of housing, so it's not a completely unreasonable idea. Imagine a 10km grid of 20-40 story residential buildings spaced out with trees and parks and bike/walk paths among them for miles on end? And an underground entrance every 1000 meters. No cars on the street, no noise, no traffic lights - go/ride where you please. Now if only I had the budget to build a brand-new city I would start now. :)
I personally don't enjoy living in high-rises. If I had to design city, it'd be more like San Francisco: buildings 5-6 stories high, tops. Lots of walkspace, lots of trees, definitely a lot more greenways as you describe.
But I don't see the point of having all that greenspace if the majority of people will be 20+ stories away from it.
My concept is to build a city as a 10,000m square with building spaced out at 100m from each other in a grid for a total of 10,000 buildings, each one of 20 stories, 4 flats per story, each flat 12 meters to the side, three persons per flat. This way I could fit 2.4 million people in lavish 1400sqf condos in the city size of 10km to the side, and have the bus to cross the city in 10 minutes through underground tunnels with no traffic light stops.
Large population density creates huge opportunities for development of arts, as there is more audience and a bigger chance of there being enough supporters for a given new art thing in one place.
Not much more than a mile away from the former site of Cabrini-Green, in Chicago's Near North neighborhood, is Cabrini's urban-planning counter-example: Carl Sandburg Village. This series of mid-century high-rises and low-rises shares a lot of design concepts with Cabrini, but was privately built, with better architecture and higher quality, and following a conversion from rentals to condos, has been carefully maintained over the decades by its owners.
While Sandburg Village's residents are not the city's poor, they aren't necessarily affluent either: The place has a reputation as an affordable area for first-time buyers as well as retirees.
In all seriousness, if you are going to build a city with no vehicles on the surface, Towers in a Park is not the way to do it. There are many successful examples of medieval cities with high enclosure, and no successful examples of modernist cities with low enclosure. People are very sensitive to distance, and the only way they will ever walk from one of those towers to another is if there is also something interesting or useful for them to look at every 20-30 feet along the way.
Does it make sense? I am trying to avoid a situation where some parts of the city are much more popular that others for people at large, and I think that does not contradict that some part of the city would be more attractive to a subset of people.
In most places in Europe costs of mass transit projects are notorious for spiraling out of control, and unlike the Madrid example other Western countries tend to do exactly the opposite and usually spend a lot more money on prestigious design and architecture of public works than is common in the US.
And that's okay, because besides the notoriously crappy and corrupt management of these projects by government officials, the results are worth it.
Now, compare this to the new Silver line in DC. It's monstrously over-engineered, even though it runs on a dedicated right of way. Instead of running the train on a simple embankment in the middle of the road or on a simple raised platform, it runs on a huge elevated concrete platform: http://transportationnation.org/wp-content/uploads/2012/09/0...
And this is in a low-density suburban area!
Compare this to the El: http://marcel-marchon.com/img--117945132--Chicago-El-train--...
Transit does not need to cost a billion dollars per mile. Just build elevated metal-framework tracks above the existing roadways. It's cheap, durable, and actually much more pleasant for riders than going to a stifling underground subway station.
http://www.esquire.com/print-this/world-trade-center-rebuild...
Oh that's right, Bloomberg is the Mayor and would rather give the contract to someone more cough _deserving_.
Yes, government purchasing and management of projects is a disaster. I have first hand experience in this realm. As a taxpayer you almost want to cry when you see it happen. I won't get into the nitty-gritty of the details. I saw, as an example, a government agency pay DOUBLE what they would have paid for a commodity computer accessory. They had bids (mine, among others, I am sure) that cut their costs in half. Yet, they went with the bid that doubled their costs. Why? Because those doing the buying were so incompetent and insecure that they wanted one supplier to provide all the components rather than allowing the best suppliers to come in and provide them with competitive pricing. It was "cover my ass" at it's best.
Let's not even mention the ridiculous rules that make it nearly impossible for small businesses to participate and expensive for others to do so.
To make matters worst, this particular contract was awarded to a foreign supplier. The funds came from Obama's "American Reinvestment and Recovery Act". Money that was supposed to create jobs in the US went out of the country. When confronted with this reality they came back saying that the company in question had sales offices in the US and that they had formed a corporation in the US and that this qualified them as a US entity. Holy crap!
I firmly believe that we'd do far better if government wasn't involved in most of this stuff. I'm not sure how that can happen, but the idea is appealing to me.
I said that the article is one-sided because it completely ignores on of the real reasons why these construction projects are so expensive and take so long: unionized workers. To put it plainly, their purpose in life is to rape the US taxpayer for as much as they can get and, in the process, provide themselves with as much pay, benefits, vacation and short work days as possible. And we keep paying for them once they retire in the form of ridiculous lifetime pensions. The real cost of that tunnel is probably far greater once you take into account having to pay those workers' pensions for life.
Examples of ridiculous union behavior abound. If you've ever had to work with or within a unionized system you've probably experienced the state of disbelief most rational people experience when they realize what's going on.
Take, as an example, doing a trade-show in NYC. I have dozens of examples of union bullshit, but I'll just mention one. We did a show where we needed to have a light turned off above our booth. That's it. The request was that simple: Please turn off the light above our booth. Of course, a union electrician had to do this. The fee? $368. Three hundred and sixty eight dollars for the guy to go over to the breaker panel and flip a switch.
OK, here's another. You are not allowed to plug in your devices into the electrical system. You know, what you do at home and at the office all the time. Nope, a union electrician has the necessary expertise to install an extension cord and plug in your computer into the AC outlet. I forget what the fee was for that, but it was ridiculous.
Our solution? We did all of our booth setup work at night. The union workers in the night shift are lazier than shit. They don't want to work. So, they let you do almost whatever you want as long as you let them sleep on the job. Sometimes you'd have to slip someone a hundred dollar bill to be left alone. Far better than dealing with their bullshit.
I have not had to work with unionized construction crews. I can only imagine how much worst the whole thing must be.
The best thing that could happen to this country is if unions were outlawed. Of course, that will never happen. I'd sure be nice though. Imagine, people actually having to work for a living. And, produce, behave, be responsible, be capable, compete, etc. What a concept.
Dont' get me started about the planned California high-speed rail. It's a $68 billion money grab designed to feed unions and keep politicians who favor them in power. The money will never be recovered. The line makes no sense whatsoever. Sick.
As an engineer I have to be good at my job. If I suck at it I either get fired, or, as a business owner, loose my ass. This simple reality does not exist in the unionized ecosystem. You can completely suck at your job and have a job for life. Not only that, you can retire and continue to earn a pension for life. Does that represent the values of our country? Is that what we think this nation is about? The land of the most incompetent and lazy? I think not. Take unions out of the equation and see how the incompetent go away or, all of a sudden, decide to actually work 'cause they'd have something to loose. Unions do nothing good for our country today. Don't buy union products if you can help it.
Here are some of the demands of the Chicago teachers union:
Smaller class sizes.
More playgrounds, recess time and physical education classes.
More art, dance, theater, music and foreign language instruction.
More funding for libraries.
Healthier school lunches.
An end to the “apartheid-like” Chicago Public School system today and to “discipline policies with a disproportionate harm on students of color.”
Guarantee pre-K and full-day kindergarten for all students.
Higher teacher salaries and more teacher “autonomy.”
Better bilingual and special needs programs.
Higher-quality school facilities.
From here - http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/09/13...
I think that you claiming that the Chicago teaching union don't give a shit about the kids is basically a deliberate slur to try and further your own political stance against unionisation in general.
The plural of anecdote is not data. And the singular of anecdote is definitely not data. The GP does not, of course, have any idea whatever about whether Chicago teachers care about kids.
Read all of it, is only ten items. Increased salaries was eighth on that list.
Also, shouldn't teachers be highly paid? How much do you think they should make? Should they not be making "salaries comparable to others with their education and experience"? That quote comes from the list of 10 points from "The Schools Chicago’s Students Deserve" at http://www.ctunet.com/quest-center/research/the-schools-chic...
Do you honestly think that if the teachers don't get a pay raise but do get the other 9 points from that list of 10 then they will continue to strike?
What the market is willing to pay them.
I'd rather teach history but I get paid more as a programmer. Let the free market decide their pay.
Also, given that teachers are a highly desired resource with strong limits on growth, at least in the short term (i.e. it takes ages to properly train a teacher), I suspect that a completely free market would result in lots of tutors for the very rich and a few schools for the wealthy. Which historically seemed to be the general pattern in countries where education was not socialised to some degree.
They are doing a much more useful job than almost any of us here.
"...we found that the average weekly pay of teachers in 2003 was nearly 14% below that of workers with similar education and work experience (p. 13), a gap only minimally offset by higher non-wage benefits in teaching. Though teacher earnings have fallen below that of the average college graduate in recent decades, we showed that teachers lost considerable ground during the late 1990s, as earnings of college graduates grew 11% relative to 0.8% growth in teaching."
Okay, so you don't want any teacher making 60K plus. Of course, a teacher is often required to have a bachelor's degree and many have graduate degrees. (I see that 60+% of Chicago teachers have at least a master's degree.)
The market says (from a 2011 CNN report) "Students who will graduate this spring are receiving job offers with starting salaries averaging $50,034 per year, up 3.5% from last year, according to a survey from the National Association of Colleges and Employers." On the low end of the listed salaries, "Offers for business administration/management graduates slipped slightly to $44,171."
So someone with no work experience but with a college degree can make $44K/year, and you want the upper limit, even after 25 years and for teachers living in an expensive city, to be $60K/year. This is not reasonable.
Ahh, but you say that teachers "spend time talking about interesting things", while you don't, and those joys in life should be sufficient compensation for not pulling in the big bucks. The average salary for 'Programmer V', with 8-10 years of experience is $104K. Do you think that being able to talk about Hemingway is worth $40K/year in lost wages? Don't you think that grading papers, and preparing curriculum around standardized tests, and dealing with misbehaving students is the actual comparable to 'Out of Memory' errors?
And as for complaining about unstable job security in your field - if you're that jealous of what the teachers have managed, why don't you unionize and advocate for more job security in your own field?
Also, you only do programming for the money? Strange. I started programming because it was fun, and only later did I find out that people would pay me a lot of money to do things I found fun. Like tracking down bizarre segmentation errors. I guess I should take a pay cut because I find my work to be interesting.
What? To say that I want them to make no more than 60K shows you're not even reading what I wrote.
>> I guess I should take a pay cut because I find my work to be interesting.
What again? You clearly don't get that what I'm saying, which is that people in ivory towers should not be making decisions on what people make, the market should.
I am replying specifically to those points. Okay, you're complaint is that they are complaining that they don't make enough as you do. Well, cry me a river. They can complain all that they want. Part of the free market says that they can use whatever strategy they find most effective. If one of their 10 complaints is to point out that by paying under market rate means that the best and the brightest are more likely drawn into dumb-ass programming jobs where people moan about memory leaks all day, rather than help teach the next generation of citizens what it means to be a citizen, then I say fine, they should go for it.
Yes, you get to complain all you want about their complaints. But as you have no evidence to back up your claims that listening to teenagers talk about Hemingway is part of the job satisfaction worth a $40K difference in pay, then I don't see see the problem, and you aren't worth listening to.
But since you like the free market so much, isn't unionization part of a free market? Aren't strikes a perfectly valid free market way to achieve the goals of the members of the union? Or is a collection of workers, organized into a union, not part of the same free market as a collection of owners, organized into a company which protects them from personal liability claims?
And therefore aren't laws preventing certain labor actions, like Taft–Hartley's prohibitions on certain types of strikes, also a piece of anti-free-market legislation?
I disagree with the argument that teachers should get paid as much as software developers because some view them as having more worth to society. The market should decide what someone is worth.
The market isn't great and sometimes sucks big timetime, but it beats the ivory tower.
So what is the middle ground?
Or, if we are feeling ambitious, something new that works better?
Does the single non-union person have the free choice to work in a shop without being in a union? Do the other 150 people have the free choice to demand, as part of their work contract, a closed shop? Do the union members have the free choice to strike, should a non-union employee be working there?
In so-called 'right-to-work' states, the answer is that employees do NOT have the ability to require a union shop, and do NOT have the right to strike in that case. No one in those states has the ability to choose to work in a union shop, or even to buy from a union shop instead of a open shop.
Closed shops can appear in a free market. Laws prevent closed shops. The government has "chosen" the winner, and done so in favor of non-union businesses.
Are you a big enough fan of the free market that you want to take away existing prohibitions on union power?
For the matter, the free market allows child labor. It's those silly labor laws which prevent people from having the choice to send their children to work in the fields and bring in some money. Indeed, anti-truancy laws say that we don't even have the choice of letting the children stay home during the day.
Are you a big enough fan of the free market that you want to take away existing prohibitions on child labor?
No. In fact I'm voting for Obama because I think we're at risk of losing the middle class.
I wrote what I did because I don't think comparing public teachers to private sector jobs is an apples to oranges comparison, and partly because I like to play the devil's advocate ;)
It's like trying to build a Silicon Valley somewhere outside of Silicon Valley. The environment is different. Some have tried, but it is hard or nearly impossible.
Unions in the US are a cancer that is killing this country. I don't know what the solutions is. I, for one, avoid buying any products that come from unionized work forces whenever I can. Sometimes there are no choices. I have to drive on the roads as they exist, for example, but, as much as it hurts me, you will not find me buying an American car.
And that's not to say that unions are always "good". I for example have many misgivings about unions here in Italy, but saying that all problems come from them is just trying to find a scapegoat imho.
Convincing low waged people that the unions are in some way anti-american is just pure evil genius and took an amazing amount of chutzpa by the politicians who claim to represent them.
Could you explain this claim, possibly providing some citations?
I'm unaware of fraud playing any significant role in the recently ended recession. Regulatory capture, maybe - the regulators certainly gave frannie/realtors/construction/homeowners whatever they wanted. A speculative bubble also played a major role. But fraud? Could you explain this claim?
http://rwer.wordpress.com/2012/05/26/mortgage-and-securitiza...
Criminals attempting to rip off banks via schemes involving mortgages != fraudulent accounting in the financial sector.
I personally think it was fraudulent/criminally negligent. The fraud was them making these things out of garbage and claiming to customers that they were AAA in aggregate when they had good reason to believe that they were not.
They also didn't lie about the fact that if house prices went down, purchasers of CMOs would probably lose money. The purchasers made the same assumptions about house prices never going down that banks and regulators made, but how is that fraud?
Are the banks now responsible for convincing institutional investors, hedge funds and other banks not to make the same assumptions they themselves make?
Ericd on the other hand is saying that he interned as a quant/trader at Citi and has direct personal experience of what was going on and that in his professional opinion it was probably fraudulent.
Unless you can start to demonstrate some profound level of insight or experience of the situation being discussed here, I don't think you are likely to get all that far in trying to rubbish someone who was directly involved in it.
To my understanding, it was fraud, because the organisations involved were not blind to the fraud lower down the chain, and were directly profiting from this fraud by helping package it for them and then sell it on to people who were unaware.
Is like saying that a professional fence isn't responsible for the fact that the goods they sell are stolen.
I'm simply asking Ericd to describe the specific mechanics of fraud. The only factual claim he made was that assumptions were made (hint: they always are), and in his opinion this constitutes fraud.
I'm just asking for more detail. Specifically, who was lied to? What action did they take as a result of the lie? What did they lose as a result of that action?
You know, standard questions about how a fraud might actually work.
Many of the banks have claimed that since the regulators rated these things well, why should they be held accountable? The buyer is supposed to be educated if they're playing in this league, caveat emptor (this is a pervasive attitude in banks). I think that's bullshit, because when the banks securitize this stuff, they're abstracting away the underlying layers, and it's effectively closed source. But people seem to have bought into it.
To answer your questions, pension funds and others poured hundreds of billions into CDOs as a result (many legally wouldn't have been able to unless the banks got them to AAA). A huge percentage of these assets lost a huge amount of value. One of the net results was an extremely large wealth transfer from pension funds and governments to bank employees.
You skipped over one of the important questions - who was lied to, and about what?
As for the "closed source" nature of CDOs, it's irrelevant. I've read a few CDO prospectuses. They all are pretty clear about the fact that the purchaser is taking out a long position on housing. If you lost money on securitized debt, it's because the instruments behaved exactly as they were supposed to: housing goes up and you win, housing goes down and you lose.
CDOs are also explicitly not closed source - the purchaser gets a detailed listing of every single item it's value is derived from and the exact set of rules that will be applied to determine who gets a payout.
After that, the salespeople sold them as AAA. That implies to the person buying that it's extremely unlikely to default, generally less than 1% risk. Given that the bankers structuring these had very good reason to suspect that that wasn't true, I'd say that counts as a lie. You're making it sound as though this was supposed to be a risky bet, and that the pension funds simply lost the bet. That's not at all what AAA means. Funds were sold exploding lemons by people who should have known and probably did know that they were lemons.
For CDOs based on other, well understood securities, you're right. In the case of CMOs, most of them did not contain more than cursory information about the underlying mortgages, if that.
If you're looking for a specific instance of a lie, as in Person X told Person Y XYZ, I don't have that for you, and if I did, I wouldn't share it with you. But based on how these things work, there's little doubt in my mind that these things were knowingly misrepresented by a large number of people, which I believe is the definition of fraud.
I love how these nonsensical connections are made: "Schools are better in Finland because it has 70% union membership". Right. If only it were that simple.
The point I was making is that high union membership has not hindered this, given the results.
The gap between Finnish students and immigrants, for example, is more than twice as large as the same gap in the US.
http://super-economy.blogspot.com/2010/12/amazing-truth-abou...
One of the groups with the highest union membership in the public sector in the US, is the fire department. So if the argument about union members is right, then presumably the fire departments are full of some of the laziest low quality workers around, and you should be able to map union membership by the length of time that the cities are just left to burn.
In particular, we're looking to understand why transit construction is so much more expensive in the United States than Europe or Asia. You posit that it's due to unions. But this can't be the explanation, at least not without something more, because many of the countries with cheaper transit construction costs have stronger unions and higher levels of unionization. So your explanation doesn't have much going for it, at least as it stands. Is there some reason American unions are particularly cancerous in comparison to French, German, or Scandinavian unions, all of which are stronger than American unions? If so, what can we do to move American unions more in the direction of German unions? Perhaps strengthen labor laws and increase rates of unionization, to aim towards a more consensus-based and less adversarial framework?
If I were hazarding an explanation, however, I'd guess something to do with the U.S.'s court-based regulatory framework and federalist style of government, that dumps everything into agency decisions and lawsuits, and has that all happen at multiple levels. When Denmark approved a new Copenhagen metro line, the details were negotiated for some time (including with the unions). One the plans were agreed on, the project was wrapped into a law passed through the national parliament, which authorized the construction. It was then, by statute, definitionally legal in all aspects (unless it somehow contradicted the constitution). It was impossible to sue over the construction, because the metro-construction plan was itself written into the law, superseding any laws that might otherwise conflict. By contrast, in the U.S., new metro lines have to go through a series of agencies at many levels of government (local/regional/state/federal), and can be challenged on the basis of any number of existing laws.
Unions do suck, but even more so in the government sector where they hold the taxpayer hostage and its the government that gives in to their every demand (since they always take the easy way out) with almost no alternative for recourse, vs in the private sector where alternatives can and do pop-up and are routinely considered.
The difficulty would just be in smoothly scaling back from this 21st century behemoth of a government that has gotten just so goddamn big, bigger than anyone ever imagined a hundred years ago regardless if it was the pro-State or pro-Federal government people you were referring to.
I had an interesting conversation with this ex-union worker a few months ago. He worked in the printing industry all of his life. He told me the story of how his union effectively destroyed the company he was working for because they kept wanting more and more at a time when the printing industry was changing. He fought hard to push for compromise but he union would not relent. The end-result was that they went bankrupt. Everyone lost their jobs. And their pensions went to hell. This guy had a late realization that unions are really bad organisms that eat their host. He was sad to listen to. He'd been taken out of the cave by share force.
Why didn't management just make all employees joint owners of the company?
Because that's what unions do. If you were a union leader you'd have to deliver more pay and benefits to your union members every so often in order to stay in your cushy job. They are doing exactly what they are supposed to be doing: Getting more for their members. The problem is that, taken to the limit, this eventually kills the goose.
> Why didn't management just make all employees joint owners of the company?
In what virtually reality does one go from "employee" to actually being entitled to own a piece of a company? These kinds of ideas come from people who've never started or run a business. I've done it several times. If an employee is willing to make the investment, lay it all on the line, take the risks, make the commitment, responsibility, stress and place their own family's and children's very livelihood and future on the line as well as accept all else that comes with launching, running and growing a real business, well, then they are investors and partners, not employees. I have taken trips to the hospital due to the stress caused by business issues. None of my employees ever missed a paycheck or had to worry about where payroll money would come from. Every.
What nonsense.
We've overwhelmingly fallen into the view that union members are greedy bastards out to soak the companies for all its worth. This is not what unions do, at least, not the definition of what unions do. As others pointed out, there are countries with high union membership. For example, "Finland has one of the highest rates of union membership in the industrialized world, with 80 per cent of employees organized in trade unions." Yet they don't seem to have the same management/union conflicts as here. And especially not the view that union's are basically a drag on the system.
Why don't we also have the view that company owners are greedy bastards out to soak the employees for all they're worth - and out to cheat the customers as much as they can get away with? (cough locksmith scammers cough). Why is it that Gordon Gecko's "Greed is Good" is admired for Wall Street but not for employees? I read that "Brokerage executives at one Wall Street firm, Jefferies Group, have threatened to leave the company if their bonuses aren't up to par with other firms" - why shouldn't teachers be able to make the same threat if their salaries don't at least keep up with inflation?
In the startup world? Legal practices?
> I have taken trips to the hospital due to the stress caused by business issues.
Same here, but as an employee. And I didn't end up owning a company in the end.
> None of my employees ever missed a paycheck or had to worry about where payroll money would come from. Every.
None of them ended up filthy rich either. I'm in my 30s and am reluctant to get married and have kids because of uncertainty over my future. My industry is flooded with labour, pay keeps going down and management keeps getting more unreasonable.
> What nonsense.
Enjoy your company's bankruptcy then.
Yes and both of these places require all/most of the things he listed in order to get to a director position.
> Same here, but as an employee. And I didn't end up owning a company in the end.
Do you think it would have been more or less severe if you were had the extra responsibilities and commitments that came with being in a controlling position of the company?
> None of them ended up filthy rich either.
So? They didn't sign up for that. I don't expect to get paid $200k a year when I sign a contract saying I will get paid $50k.
> I'm in my 30s and am reluctant to get married and have kids because of uncertainty over my future.
Wouldn't being put in a controlling share of a company only make that situation worse?
> My industry is flooded with labour, pay keeps going down and management keeps getting more unreasonable.
Maybe because the economy is currently tanking and has been tanking for the last 4 years. Don't worry im sure Obama's recovery will kick in as soon as he gets in office.
v0cab challenged the idea that employees aren't actually "entitled to own a piece of a company" unless they go through these great hardships. This is obviously incorrect because some companies provide shares as part of employee compensation, making those employees also part owners of the company - they are 'entitled to own a piece of a company.'
You cannot now switch this to mean 'to get to a director position'.
"Do you think it would have been more or less severe ..."
In the first startup I worked for, I think it didn't make a difference. I took on responsibilities that weren't part of the job, and unlike the management, who were at least 15 years older than I was, I didn't have the experience to separate myself from my work. I felt that I, personally, had to work harder so that the company wouldn't fail.
And I got paid under market wages for it. (Did I mention that I was completely inexperienced?)
While the management of the company had enough experience to demand compensation which was more commensurate with their market rates, with good insurance, and definitely enough that they had more stability in their respective futures.
"Wouldn't being put in a controlling share of a company only make that situation worse?"
It depends on the company, doesn't it? If I had a controlling share of, say, Microsoft, then I think I could guarantee a very comfortable financial future for myself.
BTW, when you say "controlling share", you mean here ownership, not management, yet earlier you talked about management ('director position'). I don't understand why you changed the topic.
I don't know. Is being a shareholder particularly stressful? Do Scandinavians find that their unions sitting on work councils and having a say in major company decisions increases job stress?
> So? They didn't sign up for (being filthy rich). I don't expect to get paid $200k a year when I sign a contract saying I will get paid $50k.
Contracts can be renegotiated.
> Wouldn't being put in a controlling share of a company only make that situation worse?
Depends on the situation. I believe that the current state of research indicates that people are more stressed by situations outside of their control. I guess the company would have limited liability, so not too much financial risk and much to gain financially. Of course, financial worries are a major source of stress for most stressed people.
So your story is nice, but that's all it is--a story to set up your attack on unions.
By the way, one of the single greatest expenses of the Afghanistan/Iraw war is a private company with non-unionized employees. You may have heard of it: Halliburton. And the type of stuff they've done to their fellow Americans (i.e., Jamie Leigh Jones et. al.) makes union shenanigans look like high school pranks).
The bit about union thuggery at trade shows is 100% true, and I've experienced it firsthand in Chicago. Union electricians must be hired (minimum one hour) to plug in a simple power strip. If your booth requires more than two hours to set up, you are required to hire (glacially slow) union laborers. We made it under the rules with one of those presto-setup tinkertoy-like lattice structures, only to find in the morning that someone ran over part of it with forklift. There are absurd rules about who can stand on the floor exhibiting; salaried employees only, otherwise you have to hire "professionals" out of their union pool.
Trade shows are a scam. Now that I'm an entrepreneur, I will never exhibit my business at one of these events. They are a huge distraction, there's no way the ROI is positive, and giving money to extortionists does not sit right with me.
You've mentioned a few other issues seen at trade-shows. And, as you say, yes, all of it is true. Union thugs will destroy --DESTROY-- your exhibit if you don't play by union rules. They will run stuff over with forklifts. Drop boxes with electronics and cause damage. They'll cut-off your power. And the list goes on. So, you have to learn to work within the system and enjoy the shafting.
For those claiming that "socialist Europe" is fine and they are highly unionized. Well, I've done trade-shows in Europe as well. Night and day when compared to the US., particularly if you compare to union-heavy towns like NYC and Chicago. Exhibiting in London, Munich or Amsterdam (all of which I have personally done) is a dream compared to what you can go through in NYC. For lack of a better description, there's a sense of having a common mission: having a successful show for all involved. In addition to that, I found exhibit hall workers in Europe to be far more polite, willing and able to help than their American counterparts. And, above all, I have never, EVER, seen exhibit hall workers sleeping on the job in Europe whereas I have seen that many times in the US (quite literally dropping to the floor in the middle of a booth to take a nap).
It's interesting how people voice all kinds of opinions until they actually experience reality. As you say, now that you are an entrepreneur and you've seen, first-hand, how fucked-up things are your opinion of trade-shows has changed.
I tend to agree with you with regards to ROI. I have personally spent upwards of $150,000 per exhibit about twice a year for a few years. In certain industries it's an arms-race of sorts. This was certainly true before consumers learned that the Internet could provide a very good buying experience. For a while, if you did not exhibit at key shows you didn't exist or potential customers would question the quality, size or viability of your business. Little did they know that the money burned at trade-shows would be far better utilized in product development. The ROI on these shows sometimes takes years to produce. I had one particularly interesting case with an Italian customer. I'd must have seen him at six trade-shows over three years before he bought anything from me. When he finally became a customer I asked him why it took so long to choose our products. He simple said that he needed to make sure we'd be around before making a commitment. How do you calculate the ROI on that.
But, I agree, today, trade-shows can be hard to justify. I have not done one in three or four years and love it. I have product that sells over the Internet with zero dollars dedicated to marketing through any medium (other than simply having a good website).
Either they have to be dissolved by simple making them illegal or they have to change the way they operate. This will either happen by law or by union leadership realizing that they are on a collision path with the non-union citizens of this country, a collision they will not survive.
The first option is unlikely to happen. However, the second scenario is in play right now. Politicians can try to confuse people all they want, but reality is reality. Eventually it comes down to simple math and, as many cities in California have discovered, math is a bitch. You just can't hide from it and you can't bullshit your way around it. Enough of this happens and unions will self-destruct from the inside out.
I live in a nice middle-class neighborhood. I know quite a few of our neighbors. All hard working people. Times are tough and you can feel it when you talk to them. However, there's one neighbor that is living an alternate reality. He is a fireman. Unionized, of course. He barely works. He is always home. And he is the only one on the block with motorcyles, boats, jet-ski's, campers, multiple trucks, quad ATV's and all manner of "toys" that are obvious and ostentatious. OK, this is one data point and it might be skewed, but it is not lost on the people who see it. I know other government union workers around town and, again, they are living in an alternate reality that is completely isolated from what is actually happening to the country.
If you want to talk about the one percent-ers, well, I'd rather talk about the ten-percenters: government and private unions who are living the life at the expense of everyone in this country. That's a crime.
What you're seeing is because of the firefighter bit, not the union bit. A common work schedule for firefighters is 24 hours on, 48 hours off. That actually works out to quite a bit less time at home than what you get on a normal work schedule.
I suppose it's easy to fixate on the number of days they don't go in to work and fail to realize how long it is until they'll be back home on the days they do.
Part two of the article (the link was at the bottom) deals with unionized workers:
http://www.bloomberg.com/news/2012-08-27/labor-rules-snarl-u...
For example: "When asked by transit blogger Benjamin Kabak about its high construction costs, Michael Horodniceanu, president of the New York City Metropolitan Transportation Authority's capital construction division, gave a two-word answer: 'work rules.' Citing the example of the city's revered sandhogs, he said the MTA employs 25 for tunnel-boring machine work that Spain does with nine."
Maybe it has to do with Supply and Demand? Because Europe and Asia invest substantially more in their public transit networks, there's more of a market, more companies that build the networks, more competition, more experience, and more tried and true cheaper methods. While in the USA, we've got less public transit, less experience building it, a smaller market for building it, less companies that construct networks, and less competition between them, thus the cost is higher due to it being a specialty that few companies understand.
[1] http://www.economist.com/blogs/gulliver/2012/07/amtraks-high...
Maybe this explains the difference between the US and Asia/Europe rationally, rather than as some major difference in philosophy given the same facts in each place.
Short summary, it's not clear, in LA at least, if the GM/Goodyear "intentional destruction" scenario really did the Red Line in. The ridership had been decreasing for several years before the purchase of the Red Line. Long-time residents say predictable things -- autos were more convenient and faster than streetcars.
Short of doing your thesis on this, it will be hard to separate the truth from the legend on this story.
(Not a public transit hater.)
This is how corruption works here in USA. Cheaters move between government management positions and overpaid contractor positions. This happens all throughout the country, from local governments up to the vice president.
--Citation from the article.
The gouging doesn't stop once the infrastructure is built. U.S. transit is also expensive when delivered (it costs over $100 per person round-trip to go from New York to Harrisburg, PA; for two people, it's cheaper to drive). Finally, we pay again through exorbitant real estate prices because our transport infrastructure, in this country, is so poor.
As someone who works on transportation projects, I find this to be incredibly unfair. Yes, there are a few shady contractors out there, but there are a lot of things that can happen during design and construction that can increase costs through no fault of our own. For example: change orders. A project gets designed and approved, the contractor gets his contract and starts digging. Two weeks into excavation, the project engineer tells the contractor "oh, that tunnel needs to be built 20 feet deeper and moved 15 feet to the south." Why? It could be for any number of reasons, maybe construction uncovered a gas line that couldn't be moved, maybe some politician wanted the line moved further (or closer) to a friend's business, etc. There are also the inevitable lawsuits, environmental issues and so on.
One of my big beefs, and one of the factors that IME increases costs for architectural/engineering consultants like me are the hoops we have to jump through to demonstrate that we're not ripping off taxpayers. There are all sorts of audit requirements (including the dreaded DCAA audit), insurance requirements and so on that increase our costs and so we have pass on those costs to the taxpayers. Recently we had an issue when negotiating a contract for transit design project - my firm's is relatively new, and we don't have a revenue history with which to develop audited rates, so we intentionally set out rates low in an attempt to convince accountants that our lack of audited rates wouldn't be a problem. We spent a munch arguing with the prime's accountants who wanted our audited rates to we could demonstrate that our profit on the job wouldn't exceed 10% (they were obsessed with the 10% profit number), depsite the fact that our rates were 40-50% lower than other similar contractors. We had to get someone from the Federal government to step in and tell the prime that our rates were fine as-is.
Insurance requirements are the other big issue. General liability isn't so bad, but E&O can be costly for big engineering projects, even if you're exposure is low. However many projects have a "one size fits all" with respect to insurance requirements and require everyone to carry $10+ million in general liability and $5+ million in E&O. If you're the general contractor responsible for digging up streets which can have all sorts or negative effects, that's probably reasonable. If you're the graphic designer responsible for creating the signs for the project, that's probably a little excessive.
It's not that all or most contractors are bad, it's that the least honest tends to win the bid.
Considering what is behind this article, and its audience, you might even feel heartened about prospects for some progress on the conditions.
>For example: change orders. A project gets designed and approved, the contractor gets his contract and starts digging. Two weeks into excavation, the project engineer tells the contractor "oh, that tunnel needs to be built 20 feet deeper and moved 15 feet to the south."
But I think it's worth pointing out that change orders are probably THE primary mechanism of gouging used by contractors in 'lowest-bid-wins' scenarios, as you should know.
What often happens is that contractors lowball, knowing that they will make up the margin on the change orders which are not competitively bid. A well designed RFP can mitigate this somewhat by requiring menu pricing on add/deducts for the most common in-field changes, but it can't account for everything, and bidding contractors look for open ended RFPs and exploit them.
There may only be a few 'shady contractors' out there as you say, but a)low-bid systems bring them to the top of the short list, and b)I'd wager almost every 'reputable' contractor's change order margins are higher than for the exact same work that was competed in a public RFP.
Just my thoughts on that. Raised an eyebrow since change orders are the primary mechanism for inflating post-award margins.
Edit:
Also want to point out that my use of the word 'gouging' is kind of a loaded term:
>But I think it's worth pointing out that change orders are probably THE primary mechanism of gouging used by contractors in 'lowest-bid-wins' scenarios
Are these contractors gouging? They are not doing anything illegal, but it can fall into questionably ethical territory. But from many contractor's point of view, they are stuck bidding on a system that is designed somewhat unethically. From a systems standpoint, when the only factor in winning a bid is lowest cost on the delivery of a product that will unquestionably have change orders, you get a scenario where the following is actually happening.
1)Firms provide goods and service for margin 'a+b' which is averaged over the life of the project
2)Only margin 'a' is competed
3)Margin 'b' is projected but undefined and can be adjusted by the Firm after the award based on margin 'a'
Is it ethical to even ask a Firm to submit a bid based on margin 'a' set equal to margin 'b' knowing that the system is designed to produce competing bids distributing the total product margin unevenly between the two variables, weighting 'b' much more heavily and minimizing 'a' in order to win the bid and work at all?
I don't think so, and what happens is you get a system that is almost explicitly designed to inject increased total project costs and increased variability.
I think that under this system, it's an incredibly gray area on the how ethical increased post-award margins on change orders are. Just the fact that an increase occurs does not strike me as unethical, but there is absolutely zero doubt that some of the margin increases are absolutely unethical and drive the total product margin up well past what it would have been if bid under a possibly more efficient system (throw out high and low bids for example).
If gouging is going to happen, it's going to happen on a change order, but it's not so black and white.
This comes down to how well the contract is written. The Big Dig was getting screwed pretty early on by contractors doing exactly what you described, but learned from the experience and started tightening up those contract terms. As a result, some contractors continued to try to play that game, and when they couldn't make up for lowball bids using change orders, they went out of business. Other contractors learned their lesson and started pricing things more realistically.
Yeah. Unfortunately, this also adds to the cost of projects massively. One of the reasons I like the practice of throwing out the lowest and the highest bids. That method doesn't work in every scenario, but when you have enough firms competing it can really protect the owner, as well as the winning contractor.
I used to drive in the Boston area in 95-98 and dealt with the Big Dig daily for years. Shudder.
It would be much more effective to have the response to being screwed be, "We have the option of saying you are not allowed to submit bids on public projects in the future." Then you don't have to legislate every last detail of when that happens.
This is what happens in the private sector. I do not have to do business with you if I don't want to, and I don't want to do business with you if you've screwed me in the past. If you're not planning on screwing me, this is not a problem. If you are, it is only a problem for me..once. And a problem for you going forward.
This happens in the public sector as well. Case in point: Parsons-Brinckerhoff is persona non grata when it comes to bidding on MA projects (MA tried to legislate the ban and weren't able to, but I know firsthand that PB has been thrown off several teams bidding for MA projects when the team was told they would have no chance of winning the project with PB on board).
That goes in both directions in the IT services world. I run into plenty of procurement departments that are far less ethical than many contractors I've worked with. I have caught procurement officers flat out lying to me on what they have as competitive offers, playing incredibly puerile alpha dominance games, pulling bait and switch by tacking on a new deliverable as an afterthought in an email without prior discussion after a verbal agreement at the end of exhaustive negotiations, acting rude and imperious as if that was their sole strategy to browbeat me instead of negotiating like a professional business person...the list of eye-popping, unprofessional behavior would have been unbelievable to me when I started in business.
These customers go onto our blacklist that we graciously introduce to our less-capable competitors.
Why not keep them? Doesn't sound like anything that can't be addressed. Insert language defining scope as only in contract with verbal, email, and other communications besides formal change orders not binding.
Rude? Imperious? Browbeating? Fine with me. As long as I can lock you down on paper I'm fine with it. You can corral most customers like that and shrug of the distasteful personalities...as long as they are paying their bills. That's the deal breaker right there. Even lying on what they have for competitive offers. It doesn't matter what they say as long as you know your margins and make your decisions based on that. Psychologically it can be painful to know that you took money off the table for what turned out to be non-existent competition, but it won't bite you as long as you are negotiating with a solid grasp of your costs and profit potential. This type of behavior is so standard that it doesn't even bother me. Really, they wouldn't be doing their job if they didn't do this in a lot of cases from one point of view.
If you suspect your customer is lying about competing bids and you feel your margins are dipping close to below acceptable levels, try a large increase in margins on a smaller sized order or project to test the waters every once in a while. It really gives good feedback that you can use to make decisions when confronted by that behavior in the future. I have a couple clients who like clockwork, ALWAYS try and talk the price of a quote down after submission. I look at my margins and decide if I'm willing to do it based on that alone, but every once in a while when we're really busy and I get a quote request from them for a medium or small sized job, I will increase the margin to 20% past my ideal rate to see if they bite. They usually do. So now when they try and talk me down on a larger project I just 'see if my distributor can move at all on the pricing'. Turns out he can't. Sorry. I tried.
Most of those games are rare though. Our firm is often subcontracted out, and I openly discuss my margins and those of my customer that is requesting a quote. Being open, honest, and transparent really goes a long way. I'll often send a quote along and follow up with a phone call that goes something like this: "Hey xxxx, I just sent that number in. Take a look at it. I've got about 20 points on it, -how much were you planning on marking my number up, -is that going to leave you enough margin?" 9 times out of 10 they say yeah, and appreciate me asking if they are set on their margin. When they ask for a price reduction, it's usually with the sense that we're both in it together, and they aren't looking at me as an adversary, and they are more honest about what number from me is the HIGHEST they are comfortable with. That information is golden, because I am usually bidding against other firms (at least to start). I've had many contractors stop competing my bids just because of this type of communication (as well as the execution of our firm as well).
This might be the difference between our experiences and responses. Most of my work is direct, corp-to-corp, B2B. We're steadily climbing up the value chain each year, and find that we have to directly interact with procurement departments more often.
For me, it is not a matter of what we can negotiate and lock them into terms we can live with; I've done that before, but fortunately now we aren't in the cash position to have to do that. It really comes down to the unavoidable reality that these customers' procurement methods cost us a ton of sales time that we could more profitably spend elsewhere on customers that more appreciate our value props. As for transparency on margins and per hour rates, we avoid that because we price on business value: if your business benefits by $X+N from spending $X with me, we both win. I've concluded from experience that sharing this information simply opens you up for piecemeal negotiation and commoditization in the future, which doesn't currently fit into my company's business model, but certainly YMMV.
Add to that the fact State laws are often rigged in various ways to give preference to union shops, and all of the sudden someone is low-bidding a $10,000 toilet seat.
1) Built a new town hall because they were double-desking at the old one. Lowest bid wins, realistic and competent bids lose. They lay the sidewalk outside while it's below freezing out. Official in town who's managing the project shows up, "What the hell are you doing! You can't lay concrete while it's freezing." "This is the only way we can do it on the budget, sue us if you don't like it." Cracked, shitty sidewalk, would be cheaper to rebuild it than sue. Shitty sidewalk persists.
Built a school, too. Lowest bid. HVAC system is so noisy that several classrooms are unusable, and the floors are all fucked up through half the school. $1.5 million in legal fees later, we settle for $500k in damages, not enough money to fix the defects.
But what would the best practice be to determine that the realistic and competent bids are objectively evaluated? How do you solve that problem in the real world (and not even talking about any other conflicts or issues)? Employ consultants or? My anecdote would relate to government bidding for some mfg. projects. It was very clear that the people evaluating the bids (at least in the small area I was involved with) took into account the reputation of the bidder in awarding the contracts.
Minor example: Town AV girl needed a new video camera. She knows what she's doing, researched, found the best model as far as pricepoint/features and a good place to buy it. We had to convene 2 subcommittee meetings and make her go way out of her way to find that model offered 2 other places so we had 3 bids, and document them, before just doing what she wanted to do anyways. Probably wasted an additional 10 hours of salary on the taxpayer dime. This is all by statute, it wasn't us being a bunch of bureaucratic morons.
1. Town Hall. Instead of building a new building, rent office space somewhere else that was privately built.
2. Public School. Same deal -- taxpayers pay more per pupil for public school than they do for private school, so send the kids to private school and close the public school.
There's no point in getting on to Government for being inefficient in a system like the US, but we can get on to them for doing the NIH thing by default. When the private sector does something better, LET THEM DO IT.
In very small towns I've seen that done, but that makes less sense for medium to larger towns and cities for a variety of reasons.
taxpayers pay more per pupil for public school than they do for private school, so send the kids to private school and close the public school.
A large part of that is because private schools don't have to admit (or can expel) students with special needs and behavioral problems. Force the private schools to have to deal with those students, and chances are those costs will increase.
Exactly.
I always find it interesting (and this isn't a critique of the parent) just an observation that when people use an example such as "In <insert country> <insert thing> costs <insert percentage> less than in the US therefore...". This is always tossed around with healthcare for example.) Things are never equal and can't be. It's like comparing heating costs in San Francisco vs. Montana w/o considering the temperature. Details matter and rarely in a casual observation of the on the surface facts can you account for why something might be possible in one circumstance but not another.
Private school teachers, at least in one case that I am familiar with, got paid less than the public school teachers in the same district. They were of a younger age group and were only doing it for a short period of time before moving on to bigger things. Also the fact that they had much smaller classes and a different student population made the job less stressful. And a host of other factors that would be difficult if not impossible to scale to a public environment.
It would also prevent private schools from specializing, which is hardly a good thing.
A better way would simply be to pay a different price for different children - i.e., $7k for a normal child, $13k for juvenile delinquents, $16k for retards, etc. Different schools (both public and private) could specialize and cater to different varieties of children.
One size fits all is generally a dumb idea.
Also, your use of the word retard as an epithet in this context probably means that your views on education policy should be treated with the utmost suspicion, at best.
If you want to apply the ad-hominem fallacy on this basis to dismiss an unrelated point, be my guest.
So how do you know in advance that a given kid will never achieve anything?
To be slightly less flip at some point you reach the point of duminishing returns where the money could do more good elsewhere. Also, the overwhelming majority of education interventions don't scale.
And there's the other point - do you really want to live in such a dog-eat-dog society?
That said, I think that the largest effects would seem to be having high educational standards required to be a teacher, coupled to a high degree of autonomy to do their jobs and a massive public budget for resources across all levels of education, from kindergarten, right the way through adulthood. If you have that covered then you can get good results and have streaming based on ability, if you like.
http://super-economy.blogspot.com/2010/12/amazing-truth-abou...
If we want to cherry-pick some more, Germany performs well (marginally better than the US and far better than Denmark) and does segregate schools based on ability.
You know, you could make exactly the same argument with income if you like and then argue that the figures would be higher if it wasn't for all the poor people.
It is my belief that the US is marginally better than Denmark at educating people of European descent. The data supports this belief.
I have no data on whether the US is better or worse than Denmark at educating people from other groups. If you have data on income I'd love to see it.
I don't know what you mean by "education problem". The main "education problem" in the US is cost, and this has little to do with the quality of the students.
I partly agree with you there, the administration costs are atrocious. However, as a percentage of GDP you are low down the list on education spending even while you are near the top on spending per capita, so economically the US could afford to spend a lot more while at the same time what is being spent seems to be spent rather badly.
Personally I suspect spending a fair bit more, but firing three quarters of the management staff would be not a bad start. I also think that raising both the wages and required qualifications of teachers would be a good idea, with paid for education available to current teachers who don't yet meet those standards, and job reviews and some redundancies for those teachers who really can't hack it.
Teaching at a state school should be a very well paid, highly sought after, difficult to get into and thoroughly respected profession.
The objection I'd make is that unless non-white Danes are a small fraction, "white Americans" vs "all Danes" should be instead vs "white Danes" (that is, the motivation in slicing out a subpopulation of the US is not to exclude the poor, but to control in a coarse way for the influence of genetics, via the proxy "European" (really, "white").
They are a small fraction.
Also, claims of genetic intellectual differences between the races are dead as a dodo. No real genetic difference has been found, and if there was any, it is so small that it's utterly swamped by cultural issues. Claiming that you want to cleave off a different race to 'make the comparison fair' is tantamount to saying 'blacks are intellectually inferior to whites'.
Poverty, crime, and broken homes are presented as the thesis for poor performance in school, then the author removes a large amount of those people from the US results citing this rather racist "but, genetics!" idea.
These memories come to mind because the author, who is raised in the Swedish system, uses this same definition of 'foreign;' and it's a view I find rather un-American.
So when I read that essay, which excludes from consideration the rather large sub-population of people whose distant ancestors came to the US as slaves in the 1800s, who are by now fully part of the American system, with basically zero language or cultural ties to any ancestral lands, I can't help but think "so what?" I don't care if there's a sub-population which did better ... and why is race used in one place and immigration status used in another? Is the correlation with relative income more significant? It's easy to see how doing just one simple factor analysis isn't enough on its own to be anything more than suggestive.
BTW, the re-analysis on that blog shows that "the mean score of Americans with European ancestry is 524, compared to 506 in Europe, when first and second generation immigrants are excluded." Because the original analysis shows that Europe overall did better than the US, then I think it's equally reasonable to interpret the re-analysis as saying that Europe does a much better job of educating its first and second generation immigrants than the US does at educating its citizen with non-European ancestry.
In other words, since most of the excluded populations are black, the US seems much worse at educating citizens of African descent than of European descent. I would like that to change, so that all children have access to a good education, as well as to social services to help with nutrition, health, housing, and other factors that strongly affect the education and well-being of children.
I define immigrants here as those with a parent born outside the country, so it includes second generation immigrants.
then
In the case of America, 99% of the population originates from other countries, be they England, Italy, Sweden, India, Africa, Hong-Kong or Mexico.
So if you're saying that 99% of the US population is first- or second-generation, that means that amount of population have come here in the last two generations. The baby boomers are retiring now, so lets use them as an easy 'oldest' generation.
The US currently has 300 million people. So according to this guy, just before the boomers, there were only 3 million people.
Truly, it is a testament to the industriousness of the American public how with only 3 million people, they managed to send 16 million to serve in the military in WWII, and still have enough people left over to manufacture military hardware to supply the Allies.
The guy has a point about home environment being important, and that endemic poverty for blacks in the US is a problem, but you can't just carve those out of the results. For a start, those blacks are still American, born and bred for generations. Secondly, every country has sections of entrenched poor. In the US it's much easier to divide along race lines. In the UK, you have a ton of whites that come from equally crime-riddled, poor neighbourhoods, but they don't get excised from the tampered data.
The author starts out with a reasonable concept, but horribly mangles the philosophy and method to isolate the numbers.
No one besides you is saying this.
Incidentally, race is highly predictive even holding income reasonably close to constant. For example, Asian Americans tend to have income comparable to Europeans Americans, yet their test scores tend to be considerably higher (in the same range as other Asian nations).
http://super-economy.blogspot.com/2011/01/how-well-do-above-...
Now, you are correct that given more granular data, a better comparison could be made. Do you have more granular data?
In the context of the article, these two quotes are right next to each other. The author is saying this. He's trying to paint cultural homogeneity with the parent country, which is reasonable with first and second generation immigrants, but it's a sloppy way to exclude blacks from the American scores.
Let's be very clear here with another quote:
So similar to my comparison of GDP levels, let us compare Americans with European ancestry (about 65% of the U.S population, and not some sort of elite) ... We remove Asians, Mexicans, African-Americans and other countries that are best compared to their home nations.
The author is removing all blacks as they are 'best compared to their home nation' as he has defined them as 'immigrants'. (he's also exluding hispanics, apparently, despite a lot of them already living on land that was acquired by the US in the 19th century - how these are 'immigrants' is beyond me)
The thing is, blacks in the US don't live like their West African forebears, nor raise their kids like West Africans. They live like Americans and raise their kids like Americans. They are Americans and have been for multiple generations. To exclude them on 'American' scores is pretty racist.
--
Also, how can you really make a representative argument when you cut out one third of your subject pool? If the system only 'works' if you exclude them, then that means that the system is not working so well for that particular country.
If the tests were structured so that the average score was 10 out of 100, one genius who scored 100 would be worth 9 people who scored zero.
I think this is a more realistic way to score education; would you rather have the median of the population go from grade level 7 algebra, to grade level 7.1? or would you rather have 20% more utter geniuses in your society? Both have value, obviously, but breakthroughs are made at the edges, and only need to be made once.
All this is to say that we should focus on where the returns are greatest.
Also, high quality education is not the same as teaching advanced courses, although obviously advanced courses should be taught to a high quality. High quality education is about the ability to bring standards up across the board, not just the production of geniuses, which educators largely can't take credit for anyway.
Less ideological and way smarter -- just the way I like things.
In opposition to your town hall example: The first (first!) thing I'd expect the free market to do would be to charge a premium to the government to lease to them. After all, where else are they going to go? It's a small enough market that you can cartel the ever-living shit out of it--assuming they can even pay amounts enough to push out other tenants, say a law firm or something.
In fact, it makes even more sense for the government to get a "deal" with the landlord, and maybe help contracts for their other tenants go through faster. Priority lane for occupancy permits and whatnot, sure. This is not a good idea.
If you want to have non-corrupt government, you need to make sure it can function decently without being overly influenced by the greed and selfishness characteristic of modern capitalism.
Wait, what? Town official witnesses substandard work and just let's it go on? How was that not grounds for at least withholding payment from the contractor?
we settle for $500k in damages, not enough money to fix the defects.
No retainage?
Shitty contractors to be sure, but in a properly-executed contract agreement, there should have been ways to mitigate the poor performance.
You don't bring in your generalist town counsel on retainer to handle a million dollar construction lawsuit. Would've been nice to get all that work for free, mind you, but he's not in the construction lawsuit business and didn't have 1.5 million of free time that year, or any expert witnesses laying around.
Town official witnesses substandard work and just let's it go on? How was that not grounds for at least withholding payment from the contractor?
Withholding payment means a more expensive lawsuit than the sidewalk was worth. We wound up just dealing with the shitty cracked sidewalk. Don't get me wrong, he reamed them out on the site, but they basically told him to get lost and when we explored our options, turns out we had to just take it.
Why would counsel get involved? Retainage is a pretty common practice for exactly this kind of situation. In fact I'm still waiting on payment for work performed two years ago for the exact situation you described.
The way the contract was structured (apparently 'standard'), we retained about 2% of the total. Hard to retain more because the GC does have to pay subcontractors, or at least that's what we were told. We withheld, they sued, we countersued.
2% retainage seems really low. Contracts I've been involved with had retainage of at least 5% and as high as 10%.
Hard to retain more because the GC does have to pay subcontractors
Someone fed your town a load of horseshit. Retainage may apply to just the prime, or so everyone on the team. If it applies to just the prime, the contract should have language telling the prime not to screw the subs (I was involved in a project where the prime had retainage and I as a sub was not subject to it - the prime got fired from the job, and the agency contracted me directly to make sure I got paid in full). If it applies to everyone on the team, everyone's check arrives 5-10% light, again that's pretty standard.
Not even enough to cover legal fees. Would have been cheaper just to fix it.
If you really want to talk about "gouging" the taxpayer, instead look at highway funding and regulations that practically enforce sprawl by requiring parking spaces, and multi-lane streets through urban cores.
The author isn't trying to say that the cost isn't worth it- he's just saying that it could be done much cheaper if the system wasn't so screwed up.