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In our environment of cost cutting and "fiscal conservatism", I don't see any other way to fund a large public works project. If the first estimate had been $4

by exelius 11y ago

In our environment of cost cutting and "fiscal conservatism", I don't see any other way to fund a large public works project. If the first estimate had been $4 billion (assuming we're taking $6.5 billion in 2015 dollars and working back to 1998 dollars), the project never would have gotten off the ground. The government would have said "fuck no" and asked for another bid. It would have been mired in discussions, argument, etc for years before eventually settling on a $1 billion price tag -- that will eventually balloon to $7 billion or so anyway, because the winning bidder intentionally underbid because it was the only way it would get approved. The only way to build large public projects like this is to take advantage of the sunk cost fallacy (or "bait and switch".) Government contractors will get their cut, and the regulatory tack-ons added by local governments to put their stamp on it (and get some operating budget!) also add money.

jerf 11y ago
And if $250million tags consistently turn into $6billion price tags, eventually we won't believe the $250million estimates either. Those billions aren't coming for free, they're coming out of the social capital of various entities, entities that you'd probably rather weren't blowing billions of dollars worth of social capital like that. The other way to build large public works is to figure out why they are so expensive and actually fix it, and then build things for less than 24x the original estimate in the first place. And if that can't be done, maybe it actually shouldn't be built. (I mean this in general, not about this specific case. But it is always something. And that is indicative of a problem on it's own.)
- exelius 11y ago
  But this is already the case -- nobody believes the price tags put on big government projects, at least in the US. You simply can't build something like the Bay Bridge for $250 million. And the reason public works projects are so expensive is usually because they're big, things go wrong, and there's a political element. You can't predict everything that will go wrong, and you'll never remove politics from it. The problem isn't that huge public works projects cost a lot of money, it's that the estimation process is more about politics than reality. People building the Bay Bridge knew they could go find comparable projects and build an estimate that way -- they didn't do this because they were trying to come in at a certain price point, which means throwing a defendable methodology out the window. I'm not saying this is the way it SHOULD be done, but it's the way things are done. And if you try to do it differently, someone else will just underbid you and raise the price later.
dockd 11y ago
Oregon and Washington looked at replacing the I5 bridge across the Columbia River also known as the Columbia River Crossing. $175 million was spent on the problem before the whole project was cancelled, http://www.oregonlive.com/business/index.ssf/2013/07/columbia_river_crossing_spends.html http://www.oregonlive.com/business/index.ssf/2013/07/columbi.... The estimates were about $4 billion. I believe the project never went anywhere because the states didn't want to put in their chunk of that $4 billion.
- PhantomGremlin 11y ago
  The saddest part of that story is that there was a directly comparable bridge just a few miles away. That entire bridge cost $170 million, about 30 years previously. https://en.wikipedia.org/wiki/Glenn_L._Jackson_Memorial_Bridge https://en.wikipedia.org/wiki/Glenn_L._Jackson_Memorial_Brid...
  - exelius 11y ago
    $170 million adjusted for inflation ends up close to $1.2 billion in 2015. Add in the additional safety regulations (not just on the design of the bridges themselves, but also the added costs of safety rules for construction crews, truck drivers, etc.) we've come up with since the 70s, and $4 billion isn't a completely batshit insane number. Big projects are expensive. Also, don't underestimate the effect inflation can have on large public works projects. Inflation over the course of a 10 year project can be as high as 35% - even if inflation stays under Fed's targets. When stating dollar numbers, projects almost always do so in current, nominal dollars because that's what gets you the lowest number. And all of this is before taking into account the financing costs of a large public works project (municipal bonds are tax-exempt, but they aren't free).

by exelius 11y ago

jerf 11y ago

And if $250million tags consistently turn into $6billion price tags, eventually we won't believe the $250million estimates either. Those billions aren't coming for free, they're coming out of the social capital of various entities, entities that you'd probably rather weren't blowing billions of dollars worth of social capital like that. The other way to build large public works is to figure out why they are so expensive and actually fix it, and then build things for less than 24x the original estimate in the first place. And if that can't be done, maybe it actually shouldn't be built. (I mean this in general, not about this specific case. But it is always something. And that is indicative of a problem on it's own.)

exelius 11y ago
But this is already the case -- nobody believes the price tags put on big government projects, at least in the US. You simply can't build something like the Bay Bridge for $250 million. And the reason public works projects are so expensive is usually because they're big, things go wrong, and there's a political element. You can't predict everything that will go wrong, and you'll never remove politics from it. The problem isn't that huge public works projects cost a lot of money, it's that the estimation process is more about politics than reality. People building the Bay Bridge knew they could go find comparable projects and build an estimate that way -- they didn't do this because they were trying to come in at a certain price point, which means throwing a defendable methodology out the window. I'm not saying this is the way it SHOULD be done, but it's the way things are done. And if you try to do it differently, someone else will just underbid you and raise the price later.

dockd 11y ago

Oregon and Washington looked at replacing the I5 bridge across the Columbia River also known as the Columbia River Crossing. $175 million was spent on the problem before the whole project was cancelled, http://www.oregonlive.com/business/index.ssf/2013/07/columbia_river_crossing_spends.html http://www.oregonlive.com/business/index.ssf/2013/07/columbi.... The estimates were about $4 billion. I believe the project never went anywhere because the states didn't want to put in their chunk of that $4 billion.

PhantomGremlin 11y ago
The saddest part of that story is that there was a directly comparable bridge just a few miles away. That entire bridge cost $170 million, about 30 years previously. https://en.wikipedia.org/wiki/Glenn_L._Jackson_Memorial_Bridge https://en.wikipedia.org/wiki/Glenn_L._Jackson_Memorial_Brid...
- exelius 11y ago
  $170 million adjusted for inflation ends up close to $1.2 billion in 2015. Add in the additional safety regulations (not just on the design of the bridges themselves, but also the added costs of safety rules for construction crews, truck drivers, etc.) we've come up with since the 70s, and $4 billion isn't a completely batshit insane number. Big projects are expensive. Also, don't underestimate the effect inflation can have on large public works projects. Inflation over the course of a 10 year project can be as high as 35% - even if inflation stays under Fed's targets. When stating dollar numbers, projects almost always do so in current, nominal dollars because that's what gets you the lowest number. And all of this is before taking into account the financing costs of a large public works project (municipal bonds are tax-exempt, but they aren't free).