7 ms·

I've seen quite a few articles and studies that say that government projects aren't actually more expensive than private projects. The impression is created be

I've seen quite a few articles and studies that say that government projects aren't actually more expensive than private projects. The impression is created because (a) the media will report on a government-run project over budget because they actually get that data (unlike private cost overruns), and the public cares more about these projects. And, (b), government projects are more likely to start with an initial estimate that is too low, because that's beneficial to getting a project approved. Speaking to your argument about accountability: Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas? Politicians are plenty accountable. And for something like the federal government, projects are managed by employees, who are managed by agency heads. The latter get a budget and have to work within it. Say you're the head of the National Park Service: If your new visitor centre at Yellowstone gets swallowed in a geyser, will you not face exactly the same consequences as someone at Disneyland tasked with building a new ride?

TeMPOraL 9y ago
> Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas? Politicians are plenty accountable. This actually suggests the opposite - that both politicians and CEOs are not accountable enough!
BjoernKW 9y ago
I don't think government projects being more expensive than private projects simply is an impression created by the media. Sure, private project failures aren't bandied about as much (though sometimes they still are, especially if a failure simply is too spectacular not to be talked about), simply because they often aren't interesting to the general public. However, save for downright cover-ups project failures are usually known to the stakeholders. Government projects starting with too low an estimate is a well-known but deeply unethical practice. Everyone involved knows that the finished project will be above budget yet there's a silent agreement to not say anything because once the public realises there's a problem it's already too late to cancel the project and the project has to continue whatever the final costs may be. That's the common argument anyway. It's a bit like the 'too big to fail' fallacy. So, we keep throwing good money after bad because we're afraid of the consequences of admitting failure. It's exactly that kind of unethical behaviour that should be punishable by disciplinary action in order to disincentivise civil servants from going down that road in the first place. Finally, I suppose the larger the organisation the more lack of accountability becomes a problem. You see that with larger companies where projects often regularly are over time and budget as well. However, I still think that those in leadership positions in larger private organisations are more accountable. While there are misaligned incentives in these organisations, too (like CEOs getting a bonus or a generous severance package even though they performed badly) there are two crucial differences here: A company goes out of business if it runs out of money. It's also much easier to hold you both civilly and criminally liable if you overstepped your boundaries. When was the last time a state or city went out of business due to lack of funds? When was the last time a politician actually did time for embezzling and deliberately wasting tax money?
- bluGill 9y ago
  The problem is time an materials - when the contractor is ethical - is the cheapest option. Anything else means that someone needs to overbid and make "excessive profits", or risk they underbid and have to make up millions of dollars to finish the contract. However ethical is a key part of this, and we know from experience that not everyone is ethical and we have no way of knowing who will be until it is too late. They get around this by carefully fixing the work to be done - which seems like a great idea, but in construction there are always something you don't know about until you get there. What happens is they bid for standard dirt work and when they start moving the dirt they go back and say "We bid to dig down 3 feet as standard, but there is a sink hole here: do you want us to complete the job as bid knowing the road will collapse there within a week of of finishing or pay extra to fix the sinkhole" (there are millions of variations of this). Of course the only sane thing to do is pay for the design change so it is done right.
  - losteric 9y ago
    I don't understand why we don't negotiate a fixed rate and spec for each project, with financial incentives for early completion. The contractor takes some risk, but the risk can be mitigated with better research and uncertainty factored into the bid.
- pascalxus 9y ago
  Here's what I don't understand. Why on earth do they get paid more than their estimate? That's rediculous. They should get paid precisely the amount they estimated and not a penny more. This would get rid of ALLL the underbidding.
  - mikepurvis 9y ago
    It would probably get rid of all bidding period, and it would create an unnecessarily adversarial relationship between parties who need to work together productively across multiple projects. Also, if you follow this logic through to it's conclusion, you end up with a bankrupt contractor, a project that's still unfinished, and embarrassed politicians. It's usually still a better deal (within reason) for the person already doing the work to be the one to finish the work.
Torwald 9y ago
> Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas? Maybe not, but then again I wouldn't consider the CEO of GE as somebody leading a private entity in the sense of the argument.
- obstinate 9y ago
  When speaking of public vs. private in the government vs. not-government sense, the CEO of GE would definitely fall into the private category. That's what's under discussion here. In what sense do you mean private?
  - Torwald 9y ago
    I mean 'private' in a very strict sense. I think this is important here, if we want to reach a meaningful distinction between 'public' and 'private.' The free market and personal responsibility can very well drive prices down and maximise efficiency. But a CEO of a public traded company is operating with other people's money and he is strongly regulated by a government. Both factors that hinder the optimisation by the above mentioned forces. 'Private' would mean at least that every penny wasted is out of the personal pocket of the people doing the work; in a very direct sense.
    - obstinate 9y ago
      > 'Private' would mean at least that every penny wasted is out of the personal pocket of the people doing the work; in a very direct sense. That is an odd sense of the word. It's a state that basically doesn't exist anywhere except in your back yard when working on DIY projects. Even in startups, the people doing the work only lose a fraction of a penny for every penny wasted, according to their share of ownership and liquidation preferences. It's not a useful concept for talking about issues like infrastructure projects, because there will never be a case where the people doing the work are the ones who suffer 100% of the consequences of loss, or even close to it. I would suggest you stick to the generally understood meaning of the word when having conversations with other people, but I'm an internet commenter, not a cop, so do what pleases you.
smokeyj 9y ago
> Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas? But CEOs are motivated to perform because their options will be worth more, and they might have vested shares that will disappear if the board fires them. What motivation does a mayor have? You'd think being president of the US came with a end of term bonus to incentivize good performance. How much would that really cost? Say the payout is $100million * national approval percentage. That'd be enough to motivate most everyone who isn't a billionaire.
- dlp211 9y ago
  > What motivation does a mayor have? Re-election.
KekDemaga 9y ago
Can you cite some of those articles and studies?

TeMPOraL 9y ago

> Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas? Politicians are plenty accountable. This actually suggests the opposite - that both politicians and CEOs are not accountable enough!

BjoernKW 9y ago

I don't think government projects being more expensive than private projects simply is an impression created by the media. Sure, private project failures aren't bandied about as much (though sometimes they still are, especially if a failure simply is too spectacular not to be talked about), simply because they often aren't interesting to the general public. However, save for downright cover-ups project failures are usually known to the stakeholders. Government projects starting with too low an estimate is a well-known but deeply unethical practice. Everyone involved knows that the finished project will be above budget yet there's a silent agreement to not say anything because once the public realises there's a problem it's already too late to cancel the project and the project has to continue whatever the final costs may be. That's the common argument anyway. It's a bit like the 'too big to fail' fallacy. So, we keep throwing good money after bad because we're afraid of the consequences of admitting failure. It's exactly that kind of unethical behaviour that should be punishable by disciplinary action in order to disincentivise civil servants from going down that road in the first place. Finally, I suppose the larger the organisation the more lack of accountability becomes a problem. You see that with larger companies where projects often regularly are over time and budget as well. However, I still think that those in leadership positions in larger private organisations are more accountable. While there are misaligned incentives in these organisations, too (like CEOs getting a bonus or a generous severance package even though they performed badly) there are two crucial differences here: A company goes out of business if it runs out of money. It's also much easier to hold you both civilly and criminally liable if you overstepped your boundaries. When was the last time a state or city went out of business due to lack of funds? When was the last time a politician actually did time for embezzling and deliberately wasting tax money?

bluGill 9y ago
The problem is time an materials - when the contractor is ethical - is the cheapest option. Anything else means that someone needs to overbid and make "excessive profits", or risk they underbid and have to make up millions of dollars to finish the contract. However ethical is a key part of this, and we know from experience that not everyone is ethical and we have no way of knowing who will be until it is too late. They get around this by carefully fixing the work to be done - which seems like a great idea, but in construction there are always something you don't know about until you get there. What happens is they bid for standard dirt work and when they start moving the dirt they go back and say "We bid to dig down 3 feet as standard, but there is a sink hole here: do you want us to complete the job as bid knowing the road will collapse there within a week of of finishing or pay extra to fix the sinkhole" (there are millions of variations of this). Of course the only sane thing to do is pay for the design change so it is done right.
- losteric 9y ago
  I don't understand why we don't negotiate a fixed rate and spec for each project, with financial incentives for early completion. The contractor takes some risk, but the risk can be mitigated with better research and uncertainty factored into the bid.
pascalxus 9y ago
Here's what I don't understand. Why on earth do they get paid more than their estimate? That's rediculous. They should get paid precisely the amount they estimated and not a penny more. This would get rid of ALLL the underbidding.
- mikepurvis 9y ago
  It would probably get rid of all bidding period, and it would create an unnecessarily adversarial relationship between parties who need to work together productively across multiple projects. Also, if you follow this logic through to it's conclusion, you end up with a bankrupt contractor, a project that's still unfinished, and embarrassed politicians. It's usually still a better deal (within reason) for the person already doing the work to be the one to finish the work.

Torwald 9y ago

> Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas? Maybe not, but then again I wouldn't consider the CEO of GE as somebody leading a private entity in the sense of the argument.

obstinate 9y ago
When speaking of public vs. private in the government vs. not-government sense, the CEO of GE would definitely fall into the private category. That's what's under discussion here. In what sense do you mean private?
- Torwald 9y ago
  I mean 'private' in a very strict sense. I think this is important here, if we want to reach a meaningful distinction between 'public' and 'private.' The free market and personal responsibility can very well drive prices down and maximise efficiency. But a CEO of a public traded company is operating with other people's money and he is strongly regulated by a government. Both factors that hinder the optimisation by the above mentioned forces. 'Private' would mean at least that every penny wasted is out of the personal pocket of the people doing the work; in a very direct sense.
  - obstinate 9y ago
    > 'Private' would mean at least that every penny wasted is out of the personal pocket of the people doing the work; in a very direct sense. That is an odd sense of the word. It's a state that basically doesn't exist anywhere except in your back yard when working on DIY projects. Even in startups, the people doing the work only lose a fraction of a penny for every penny wasted, according to their share of ownership and liquidation preferences. It's not a useful concept for talking about issues like infrastructure projects, because there will never be a case where the people doing the work are the ones who suffer 100% of the consequences of loss, or even close to it. I would suggest you stick to the generally understood meaning of the word when having conversations with other people, but I'm an internet commenter, not a cop, so do what pleases you.

smokeyj 9y ago

> Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas? But CEOs are motivated to perform because their options will be worth more, and they might have vested shares that will disappear if the board fires them. What motivation does a mayor have? You'd think being president of the US came with a end of term bonus to incentivize good performance. How much would that really cost? Say the payout is $100million * national approval percentage. That'd be enough to motivate most everyone who isn't a billionaire.

dlp211 9y ago
> What motivation does a mayor have? Re-election.

KekDemaga 9y ago

Can you cite some of those articles and studies?